Unprecedented: COVID-19 Litigation Trends, Issue 11

Spilman Thomas & Battle, PLLC

This 11th edition of Unprecedented, our weekly update on COVID-19-related litigation, identifies news reports placing the number of COVID-19 filings at around 2,700, with insurance coverage disputes former the single largest category. And so unsurprisingly, one of the matters we report this week is the dispute over whether those insurance coverage disputes should be consolidated into multi-district litigation. Other matters include continued litigation over state shutdown orders, which has not abetted even as states open back up; labor and employment claims involving businesses’ COVID-19 responses; cruiseliners’ efforts to beat back personal injury disputes; and a pharmaceutical’s alleged roadblocks in bringing a COVID-19 vaccine to market. And present in all of these discussions is the broader dispute over businesses’ need for liability protections that is currently playing out in Congress and state legislatures.

We hope you find these cases, and the questions they raise, to be informative.
Will the rise in litigation continue?

As of May 4, 2020, almost 800 COVID-19-related complaints had been filed in the United States. As of last week, however, that number has risen drastically to 2,700 complaints filed in the United States. Presently, New York leads all states with 645 complaints filed, followed by California with 347. Florida, Texas, and Illinois follow thereafter. Broken down by subject matter, these represent 631 insurance complaints, 516 prisoner complaints, 486 civil rights complaints, 186 consumer complaints, and 177 labor and employment complaints. With the number of complaints rising swiftly each day, business groups are looking to Congress for relief in this time of uncertainty and exposure. For example, business groups are pushing Congress for a liability shield provision in the next COVID-19 aid bill, as well as retroactive immunity dating back to the start of the COVID-19 outbreak. It remains to be seen, however, how Congress will assist businesses dealing with the wave of lawsuits related to COVID-19. TNews coverage can be found here and here
Will parties continue to fight over multi-district-litigation for pending lawsuits?

In issue 9, we discussed recently-filed petitions to consolidate more than 100 business interruption lawsuits filed in federal court and assign a single judge to issue a ruling. The lawsuits, which have been filed by businesses and restaurants across the country, contend that insurance companies have wrongly denied coverage to policyholders for business losses related to COVID-19 closure orders. Now, more than two dozen briefs opposing multidistrict litigation have been filed by insurance firms, arguing that differences in facts, policies, and state insurance laws would overcomplicate a consolidated case. At least 10 briefs also have been filed by plaintiffs who likewise oppose an MDL. The plaintiffs on this side of the argument agree that grouping all business interruption lawsuits into one action would result in a delayed decision, which could mean life or death for some businesses. The MDL panel is set to consider the petitions to consolidate at the end of July. See news coverage here.
Banking giants like Bank of America and Wells Fargo are facing waves of litigation relating to their handling of loan applications for the SBA Paycheck Protection Program. Many of the lawsuits allege that the institutions prioritized loan applications seeking larger loans because such applications resulted in larger bank fees. As similar class actions are filed around the country, parties are jockeying to transfer and consolidate related cases for coordinated pretrial proceedings in the United States Judicial Panel of Multidistrict Litigation. But the question of where these cases will proceed remains. For example, on June 9, 2020, counsel for the plaintiffs in eight cases against Wells Fargo pending in various districts filed a motion to transfer the actions, as well as any tag-along actions or other actions asserting similar claims, to the United States Judicial Panel on Multidistrict Litigation in the Southern District of Texas. News coverage can be found here and here.
Will shutdown orders survive court challenges?

In several of our prior updates, we have discussed the conflict between Pennsylvania Governor Wolf and the Pennsylvania Senate over the development and administration of a waiver program for non-life-sustaining businesses. Last week saw the conflict between the Governor and the General Assembly escalate, with the General Assembly passing a concurrent resolution that purportedly terminates Governor Wolf’s disaster declaration.
Governor Wolf responded to the concurrent resolution the next day by asserting that it will not become effective until presented to him for approval—an assertion the General Assembly strongly disputes. And, Governor Wolf also argued that, even if effective, the concurrent resolution would not affect the guidelines for business operations, as those are set by separate orders issued by Secretary of Health Levine.
The General Assembly’s reply was to file a lawsuit against Governor Wolf in the Commonwealth Court of Pennsylvania, asking the Court to direct Governor Wolf to fulfill his allegedly mandatory duty to issue an executive order or proclamation ending the state of emergency. Yet Governor Wolf has now filed his own lawsuit, this one asking the Supreme Court of Pennsylvania to invoke its King’s Bench jurisdiction to hold that the concurrent resolution must be presented to him under the presentation clause of the Commonwealth’s constitution. The Governor argues that the concurrent resolution does not fall under the narrow exception to the presentment clause and, instead, qualifies as legislative action under the Supreme Court of Pennsylvania’s precedents. Like similar disputes in Michigan and Wisconsin, this showdown between the General Assembly and Governor Wolf is one worth watching both for its effect on the government’s response to the COVID-19 pandemic, but also broader issues relating to the separation of powers.
A group of Catholic priests and Orthodox Jews have sued New York Governor Cuomo, New York Attorney General James, and New York City Mayor De Blasio over shutdown orders that allegedly unconstitutionally infringe on their rights to freedom of speech, assembly, free association, and equal protection. Most interesting is that this case is among the first to contrast government responses to protests over George Floyd’s death, which largely have proceeded with tacit or explicit government approval, and government responses to religious gatherings, which have been shut down or limited. A copy of the complaint is available here.
Two lawsuits have been filed in Virginia, both of which challenge the constitutionality of Virginia Governor Dr. Ralph S. Northam’s and State Health Commissioner Dr. M. Norman Oliver’s responses to the COVID-19 crisis. One of the lawsuits, which was filed in the United States District Court for the Eastern District of Virginia, was filed on behalf of Mr. John Tigges, the owner of a Virginia company called Zion Springs LLC, which is a winery that derives substantial revenue from hosting weddings and other events. Tigges’s claim is essentially a due process claim, brought under both the Virginia and United States Constitutions.

Challenges to COVID-19-related executive actions are likely to proliferate as states continue shutdowns to attempt manage the spread of the virus. In mid-May, a Connecticut federal court rejected an early challenge to executive orders that closed down Connecticut bars and restaurants. The magistrate judge cited the state’s right to use its powers to protect public health and safety in emergencies. These types of cases are likely to turn on whether the scope of the “police powers” granted to a state governor are broad enough to allow him or her to unilaterally issue the type of wide-ranging orders that we have seen since the COVID-19 crisis began, most often without legislative approval. News coverage can be found here
Insurance lawsuits will continue, but will the claims look different?

In April, Ja-Del, a Kansas City, Missouri, barbecue chain, sued its insurer for wrongful denial of coverage under its commercial insurance policy, which Ja-Del argues was triggered by lost income due to the government-ordered shutdowns during the pandemic. What sets this lawsuit apart from other insurer suits across the nation is that Ja-Del also named its retail broker and wholesale broker in the suit. Ja-Del claims the brokers communicated inaccurate information about the coverage and did not procure wide-enough coverage.

In a motion to dismiss Ja-Del's claims, the brokers argued that the pandemic was unforeseeable and that brokers do not have a duty to advise policyholders of the amount of insurance needed to cover all potential losses. According to the brokers, customers must specifically seek information about pandemic coverage before a duty is established to advise clients on possible gaps in coverage. The outcome of this case could greatly expand the duties of insurance brokers, making it one worth watching. Click here for news coverage.
Will the cruise lines beat back the lawsuits over their COVID-19 responses?

We have been tracking the many lawsuits filed against Princess Cruises and Carnival. This past week, we saw the first substantive motion in any of its cases: a Motion to Dismiss filed in 13 different cases, arguing that plaintiffs could not recover emotional damages for merely fearing they could (or would) contract COVID-19. Princess Cruises and Carnival relied heavily on 1997 decision from the U.S. Supreme Court called Metro-North Commuter R. Co. v. Buckley, in which a pipefitter for a railroad sued for emotional damages and future medical monitoring costs under the Federal Employer's Liability Act ( 45 U.S.C.S. § 51 et seq.) after being exposed to asbestos in the workplace and developing a fear of cancer. The Supreme Court held that that the employee could not recover damages unless or until he manifested symptoms of a disease. In addition to this legal precedent, Princess Cruises and Carnival urged the federal district court to dismiss the cases because these fear-based COVID-19 lawsuits could "open the door" to unlimited liability against all types of businesses. This argument also has been used by business owners in general, who have urged lawmakers to provide liability protection from employee or consumer lawsuits alleging exposure to COVID-19. Princess Cruises and Carnival's Motion to Dismiss will be one of the first litmus tests related to COVID-19 litigation. We continue to track and report on Princess Cruises and Carnival's litigation, including this motion to dismiss and their other lawsuits regarding wrongful death, class actions, negligence, and shareholders. Click here for news coverage.
Will employment lawsuits gain momentum?

A lawsuit filed against four McDonald's restaurants in the Chicago area is going to proceed after the judge denied the restaurants' recent motion to dismiss. Plaintiffs include several McDonald's employees and their live-in family members, who allege the restaurants created a public nuisance in failing to provide its employees with personal protective equipment, adequate cleaning, training on COVID-19 prevention measures, social distancing, or notification when employees tested positive for the disease. The restaurants' Motion to Dismiss was predicated on jurisdiction -- it argued that the court couldn't hear the case because claims regarding workplace safety must be heard by OSHA, a federal agency. This jurisdictional argument (whether lawsuits should proceed in courts or be resolved in federal or state level work safety agencies like OSHA) is common for COVID-19 workplace litigation, with results being split. In this case, the judge denied the motion to dismiss and allowed the case to proceed in court, rather than handing it over to state or federal agencies. The court next began hearing testimony regarding the plaintiff's request for a preliminary injunction to force the restaurants to comply with CDC safety regulations. Remote testimony on the injunction was interrupted when the judge encouraged lawyers from both sides to speak privately, with the hope that a resolution could be worked out amicably. News coverage can be found here
An employee at a car dealership in New Jersey has filed a retaliatory discharge claim alleging that her employment was terminated because she complained that the dealership failed or refused to follow social distancing guidelines imposed by the state’s Office of Emergency Management. The employee claims the dealership failed to enforce occupancy limits, improperly accepted walk-in customers, and neglected to sanitize vehicles after test drives. According to her lawsuit, the employee was discharged from employment three days after returning from furlough and after expressing safety concerns each day she was back at work. News coverage can be found here.
Will prisons find a remedy against COVID-19 exposure lawsuits?

The ACLU and the State of Connecticut have reached an agreement regarding a lawsuit over protections from COVID-19for incarcerated individuals. The agreement, which has not yet been accepted by the court, requires the Department of Corrections to test all inmates for COVID-19 and encourage staff to get tested. The DOC Commissioner will have discretion to release inmates, with priority being given to individuals over age 65 or who have underlying health conditions. Newly admitted inmates will be quarantined for two weeks, and individuals who test positive for COVID-19 or show symptoms will be medically isolated. The settlement also creates a five-member monitoring panel that will continually review the DOC’s response to the pandemic and provide recommendations for any necessary changes to the DOC’s practices. The terms of the agreement will be in place until the end of the year. Connecticut could serve as a model as other states respond to the issues that prison systems face as a result of COVID-19. News coverage can be found here.
Will the effort to be the first to develop a COVID-19 vaccine be an issue for pharmaceutical companies?

Inovio filed suit against its contract development and manufacturing organization, VGXI, to obtain proprietary information necessary to manufacture its COVID-19 vaccine. Currently, Inovio’s vaccine is the only DNA-based vaccine in human trials within the United States. Inovio developed this vaccine around VGXI’s manufacturing process with the intention of producing 1 million doses of this vaccine in 2020. Yet, VGXI only has capacity to produce 55,000 doses in 2020. The party’s contract allows Inovio to use other manufacturers if VGXI is unable or unwilling to produce Inovio’s products, and obligates VGXI to transfer necessary information to allow the third-party manufacturer to produce the vaccine.

According to Inovio’s complaint, filed in the Court of Common Pleas of Montgomery County, Pennsylvania, VGXI is now refusing to release this critical information. Without this information, Inovio alleges that it must redesign its manufacturing process with its new manufacturer, Oblogy. This delay makes it extremely unlikely that Inovio will be first to market with a COVID-19 vaccine. Inovio filed suit to recover this invaluable technical information that would allow Inovio’s new manufacturer to produce the vaccine in accordance with the product specification currently in Phase I of human trials. More information related to this litigation may be found here and here.
Will nursing homes continue to have liability issues?

During the early days of the COVID-19 pandemic, New York dramatically decreased the liability of nursing homes and assisted care providers. First in an executive order issued by Governor Cuomo on March 23, later included in the state budget passed in April, immunity for these facilities was implemented and expanded. The protections shield facilities from liability for deaths caused by anything other than gross negligence, recklessness, willfulness, or criminal conduct, and also prevent suits alleging willful misconduct due to staffing and resource shortages.

Now, State Assemblyman Ron Kim and Sen. Alessandra Biaggi have introduced legislation that would not only roll back those protections moving forward, but would retroactively strip the immunity that facilities gained over the past few months. Assemblyman Ron Kim explained to the press that his staff has found, as of May, that 70 percent of U.S. COVID-19 deaths have occurred in states that offered "early corporate immunity," and that he believes that such measures sent "the nursing home facilities the wrong message" that they would not be held accountable for providing negligent care. Senior adviser to Gov. Cuomo, Rich Azzopardi, argues that had such immunity not been created, the state would have been unable to secure sufficient front-line workers to staff medical facilities. News coverage can be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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