As the number of COVID-19 cases around the world continues to rise, governments are ordering people to self-quarantine at home to limit the spread of the disease. Businesses therefore are suffering a disruption in their operations, as they are being forced to make difficult decisions about sending essential employees to work, as well as facing disruptions with regard to their relationships with customers.
These disruptions have led to new trends in class action lawsuits citing COVID-19 as the underlying cause. The article below summarizes some of the key class action lawsuits we have seen in the United States in the past few weeks, as well as trends we expect to see as the pandemic progresses and continues to impact businesses and customers alike.
Class actions alleging price gouging - Class action lawsuits have been filed against companies for price increases to products during the pandemic. For example, a state-wide class action lawsuit was filed in Florida against Amazon, accusing the online retailer of price gouging in response to COVID-19's rapid spread and the urge for citizens to buy personal hygiene and disinfecting products in bulk. The class action suit accuses Amazon of "preying upon the public's fear of a surging epidemic and using COVID-19 as an opportunity to pad profits by way of unlawful price increases."1 The plaintiff, who paid $99 for a 36-pack of toilet paper and $199 for a two-pack of one-liter hand sanitizer bottles, claims that it is illegal to charge unconscionable prices for goods and services following a declared state of emergency. This and similar lawsuits will likely test the boundaries of platform liability under Section 230, a topic which will be covered in a forthcoming article in this series.
Class actions alleging damages for canceled events - Companies that have had to cancel events because of the virus are also facing class action lawsuits. In Los Angeles, music festival attendees have filed suit against festival organizers for refusing to issue refunds of festival tickets, after government orders prohibiting large public gatherings required they cancel the events.2 Here, the terms and conditions of ticket purchases included "all sales are final" and "no refund policy" provisions. The plaintiffs are asserting causes of action against the organizers for: (1) rescission under Cal. Civ. Code § 1689; (2) violation of California's Consumer Legal Remedies Act; and (3) violation of the California Business and Professions Code for allegedly engaging in deceptive and misleading acts and practices by including unconscionable terms. It is still too soon to appreciate how these types of claims will fare in court, but defenses common to these types of claims (e.g., force majeure, impossibility, impracticability) will be discussed in the next article in this series.
Class actions by employees for being deemed "essential" - We can also expect a trend in class action lawsuits by employees of companies that have been deemed "essential" and asked to continue operations amidst the pandemic. As an example, in Alaska, a labor union is seeking injunctive relief based on the state's failure to protect union members from the health and safety risks posed by COVID-19.3 There, like in nearly all other US states, the state "shelter in place" order exempts certain critical workers, including state agency employees. The plaintiffs have asked the court to require the state to provide a safe work environment, and are seeking their costs and fees incurred in bringing the suit. The plaintiffs allege that the state employer failed to follow its own safety policies and health mandates, failed to follow CDC and Health Department guidelines, and otherwise failed to take adequate measures to protect employees from the virus. The plaintiffs further complain that some were denied the ability to work from home; shift schedules and work environments were not adjusted to allow for social distancing; employees were still required to share breakrooms, elevators, stairwells, restrooms, etc.; public-facing employees were not provided personal protective equipment; and inadequate steps were taken to clean office environments.
Class actions alleging negligent responses - Another example of a COVID-19-based class action is the lawsuit filed against Princess Cruise Lines by a couple who was quarantined in their cabin off the coast of San Francisco, along with other passengers and crewmembers who were stranded on the cruise ship. The plaintiffs claim that the cruise line knew of at least one passenger from a prior trip who had symptoms, yet the cruise line concealed this information and proceeded with the voyage, keeping 62 of the passengers from the prior voyage onboard, and inviting 3,000 new passengers onto the already infected ship. According to the complaint, "Defendant Princess chose to place profits over the safety of its passengers, crew and the general public in continuing to operate business as usual, despite their knowledge of the actual risk of injury to Plaintiffs, who are elderly with underlying medical conditions."4 The plaintiffs are also alleging that the cruise line was negligent in failing to maintain appropriate screening protocols before boarding passengers.
Class actions against government entities - Lawsuits have been filed against government entities for allegedly "causing harm" or "increasing the risk of harm" presented by the pandemic. For example, a group of Florida residents filed a federal class action lawsuit under the Foreign Sovereign Immunities Act against the People's Republic of China, as well as other Chinese governmental entities for "damages suffered as a result of the coronavirus pandemic." According to the plaintiffs, "[t]he PRC and the other Defendants knew that COVID-19 was dangerous and capable of causing a pandemic, yet slowly acted, proverbially put their head in the sand, and/or covered it up for their own economic self-interest."6 Among the acts and omissions cited, Defendants allegedly censored doctors from speaking about the outbreak, downplayed the dangers to the public, withheld scientific findings, and continued to hold large public gatherings despite knowing about the ease of spread. Plaintiffs allege that because of this conduct, they will suffer physical illness or death, as well as emotional distress, from the effect of the outbreak. The lawsuit seeks to recover billions of dollars in compensatory damages due to the Chinese government's failure to properly contain the virus.
A similar lawsuit was filed in the United States District Court for the District of Nevada against at least six separate Chinese governmental entities, including The People's Government of the City of Wuhan, China.6 The plaintiffs, a number of small businesses, including a restaurant, a flower company and real estate companies, amongst others, alleged they have suffered a substantial reduction in income and profits because of the coronavirus originating in Hubei province. According to the complaint, the Chinese government engaged in a campaign of misinformation in order to cover up the "severity of the health pandemic" by "intimidating doctors, scientists, journalists and lawyers." According to the complaint, over one million small businesses in the United States have been forced to close or substantially reduce their operations.
These are just a few examples of some of the class action suits filed in the United States since the onset of COVID-19. The combined economic climate and health crisis is a recipe for class action lawsuits, as many will look for opportunities to recover from an economic or personal loss. Consumer industries in particular are likely to face class action claims related to whether the companies took appropriate steps in order to contain the spread of the virus and protect customers. Businesses will face challenges responding to the lawsuits on the grounds of their reasonableness in responding to the pandemic, or by relying on contract terms, force majeure clauses and other "impossibility" and "Act of God" defenses.
As the contagion increases and the economic impact spreads, class actions are likely to rise. Stay tuned for parts two and three of this series where we discuss strategies to avoid and defend class actions.
1 Armas v. Amazon.com, Inc., Case No. 104631782, 11th Cir. in and for Miami-Dade County, Florida.
2 Rutledge et al. v. Do Lab, Inc., Case No. CNS Temporary No.E124175132v, Los Angeles Superior Court Central District, California.
3 Alaska State Employees Association, Local 52 v. State of Alaska, Case No. 3AN-20-05652CI, Anchorage Trial Courts, Alaska.
4 Ronald W., et al. v. Princess Cruise Lines Ltd., Case No. 2:20-cv-02267, U.S. Dist. Court for the C.D. of California.
5 Logan Alters, et al. v. People's Rep. of China, et al., Case No. 1:20-cv-21108-UU, U.S. Dist. Court for the S.D. of Florida.
6 Bella Vista, LLC, et al. v. v. People's Rep. of China, et al., Case No. 2:20cv574, U.S. Dist. Court for Nevada.