What will ​“Phase II” of COVID-19 Class Actions Look Like?

As we previously reported, ​“Phase I” of class action filings relating to the COVID-19 pandemic has become a significant contagion of its own with more than 500 cases being filed since March challenging refund policies, school closures, event cancellations, and marketing and pricing practices. As the economy gradually reopens, ​“Phase II”—how companies respond to these cases—is just beginning. Not surprisingly, defendants are fighting hard and early to defeat these claims, with many opting to file motions to dismiss rather than answering the complaint and entering into lengthy and expensive discovery.

Early Action in Cases Against Public-Facing Businesses

Public-facing businesses—such those in the retail, travel and hospitality industries—have been the first to re-open and are currently navigating a patchwork of state guidelines on how to do so safely. Compounding this burden, these same companies are facing a wave of lawsuits by customers and employees alleging negligence, breach of contract, and unfair business practices during the pandemic.

These industries are not new to class action litigation and many companies have included arbitration clauses and class arbitration waivers in their consumer contracts. These defendants have, not surprisingly, moved to compel arbitration, and plaintiffs have responded with unique (but likely ineffective) allegations of unconscionability, fraud and duress to try to stay in court. For example, in a case against Amazon, the plaintiffs alleged that the arbitration agreement was unconscionable because they were under duress during the pandemic and were forced to purchase products from Amazon. Amazon’s response was based on the black-letter principle that unconscionability is measured at the time of contracting, and not at the time of the challenged conduct.

Other companies have focused on substance, arguing that they complied with their contractual obligations and that their customers have not suffered damages. For example, in the case of recurring monthly payments for fitness club memberships, defendants have argued that their membership agreements do not mandate refunds for temporary closures, and therefore plaintiffs who filed suit within days or weeks of the initial closure did so too quickly.

An Uncertain Road Ahead for Failure to Protect Claims

Not surprisingly, courts that have ruled on early motions to dismiss have come to different conclusions. For example, an Illinois state court denied a motion to dismiss by McDonald’s in a negligence suit brought by employees who claimed that the company did not provide sufficient training and personal protective equipment to protect them from coronavirus, and entered a preliminary injunction mandating social distancing training and mask-wearing policies. In contrast, a Missouri federal court dismissed similar claims by employees of a meat processing plant pursuant to the primary jurisdiction doctrine, deferring to the Occupational Safety and Health Administration (“OSHA”). These inconsistent results will likely lead to even more filings, as many plaintiffs will use this uncertainty as leverage to try to obtain favorable settlements.

Cruise passengers have similarly alleged that the cruise companies knew or should have known that coronavirus outbreaks were likely, and that they failed to take sufficient action even after infections were confirmed on board. The first such motion to dismiss challenging these was decided – and granted - on July 14, 2020, disposing of a series of what a California court called ​“Fear Cases” against Princess Cruise Lines. These plaintiffs did not actually contract coronavirus during their March 2020 cruise, but sought to recover damages for negligent infliction of emotional distress arising out of their alleged fear of contracting the illness. Applying U.S. maritime law, the court found that the plaintiffs failed to satisfy the necessary ​“Zone of Danger” test because they did not sufficiently allege that they were in immediate risk of physical harm. This decision could provide support to public-facing businesses on land.

To help alleviate the uncertainty facing businesses as they reopen, state and local governments have begun to enact liability protections for businesses related to the coronavirus pandemic. But, these measures can vary both within and across states, causing business to adopt strict nationwide policies to protect their employees and customers while also insulating themselves from liability. For example, a number of national retailers (such as Krogers, Target, and Best Buy) have started requiring customers to wear masks at all of their stores, even where local ordinances do not require them.

But even a seemingly-conservative approach carries some risk. In Pennsylvania, a number of individuals sued retailer Giant Eagle for complying with a Pennsylvania Secretary of Health Order requiring customers to wear face coverings in retail stores. The complaint and subsequent motion for a preliminary injunction alleges that the policy violates both the Americans with Disabilities Act and the Pennsylvania order itself, which exempts individuals who are unable to wear a mask due to a medical condition. Giant Eagle’s response outlined the numerous efforts the retailer took to accommodate those with disabilities (including enhanced curbside service, home delivery and on-the-spot personal shopping) and emphasized the public health justification for the policy. Giant Eagle also pointed to social media evidence suggesting that one lead plaintiff did not suffer from a disability at all, and that his aversion to wearing a mask was political rather than medical. As more businesses adopt a uniform mask requirement, and as the issue becomes more politicized, we expect these types of claim to proliferate.

Given the uncertainty that lies ahead, companies should adopt and enforce reasonable and appropriate policies, and carefully document any incidents that could lead to claims that they failed to protect (or failed to accommodate) their customers and employees. Companies who take these steps will be better-positioned to prevail on the merits (or to reach an early settlement if desired).

The Price of Education

With the fall semester looming, many educational institutions are still reeling from the wave of class actions challenging universities’ decisions to close on-campus activities last spring. While student plaintiffs have an understandable point that online-only classes do not compare to the experience of being on campus, universities have moved to dismiss these claims on the grounds that there is often no contractual requirement guaranteeing the ​“college experience.” Force majeure clauses and contractual defenses of impossibility or impracticability often provide additional support for defendants’ arguments that they are substantially performing their obligations by providing virtual learning during the pandemic. Public universities have also relied on sovereign immunity and other procedural hurdles that plaintiffs must follow when suing state agencies.

At the same time, schools are struggling to define what classes will look like in the Fall, balancing the risk of potential spread of infection with the risk of additional litigation challenging remote learning. Schools are also facing new potential theories of liability—how to treat students (or teachers) who do not wish to return to campus.

Education-related class actions that survive the pleading stage face an interesting road to class certification. Students take different courses and utilize the resources on campus to different degrees. Students may place a different value on ​“in-person classes,” and some students may even prefer an online learning experience. Thus, satisfying the predominance requirement of Rule 23 will be particularly challenging. Moreover, constructing a class-wide damages model that fits plaintiffs’ theory of liability will be nearly impossible because it raises ambiguous, and perhaps philosophical, questions about the true ​“value” of education.

All of these COVID-related class actions raise fascinating and novel legal questions that courts will have to deal with in the not-so-distant future. We will be following these cases closely and continue to report on significant developments. For a more in-depth treatment of these cases and for a comprehensive collection of case citations, click here.

In conjunction with the launch of the our Advertising and Privacy Law Resource Center, we have been holding a series of webinars in 2020. Please join us next week for:

Cleaning Up From 2020: Guidance for Disinfectant, Germ and Virus Killing Claims July 29, 2020

California Consumer Privacy Act (CCPA) for Procrastinators: What You Need To Do Now If You Haven’t Done Anything Yet July 30, 2020