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The REAL Trending Litigation Topics Regarding COVID-19: Issue 2
April 10, 2020
In the face of governmental orders shutting down businesses, redirecting business efforts and assets, and even seizing business property to redistribute to others, we see more and more questions about the limits of governmental authority and the remedies for affected people and businesses. Lawsuits already are being filed, and the courts undoubtedly will have to provide the answers. Click here for a more detailed discussion of COVID-19 and governmental takings.
 
 
Pennsylvania businesses and employees file takings claims and seek compensation for government-ordered shutdowns.
 
A Pennsylvania manufacturer of orchestral instruments and hand bells, together with two of its employees, filed a proposed class action lawsuit against Pennsylvania Governor Tom Wolf and others. The business plaintiff argues that spring and summer are critical times for the refurbishment portion of its business, and it will miss a season’s worth of revenue if the shutdown order is not lifted. The employee plaintiffs similarly argue they will be denied wages because of their inability to work during the shutdown.
 
The class action complaint raises Fifth and Fourteenth Amendment takings claims as well as due process and civil rights claims. It seeks just compensation, a declaratory judgment, and an injunction prohibiting enforcement of the shutdown orders. "[U]nless, and until, a mechanism is established to provide (a) just compensation for affected businesses and (b) appellate review of Governor Wolf's classifications determining whether individual businesses are 'life sustaining.'" Click here for press coverage. And click here for the complaint.  
 
 
Colorado plaintiff alleges government shutdown orders violate religious freedoms, free speech, and takings protections.
 
In a case out of Colorado, a pro se plaintiff seeks "an immediate, emergency hearing and preliminary injunction followed by a more comprehensive hearing" for a permanent injunction seeking to enjoin Colorado from enforcing its business closure, limits on gatherings and other orders relating to COVID-19. The plaintiff alleges the shutdown orders have impaired his free exercise of religion because his local church has ceased conducting weekly masses, ceased offering the Eucharist, and ceased hearing confessions. Similarly, the plaintiff claims an infringement of his right to peaceably assemble with his friends in further violation of the First Amendment.
 
The plaintiff also claims two uncompensated takings. He claims his employer's business was taken without compensation resulting in his loss of income. And he claims Colorado has taken his vehicle by prohibiting nearly all activities relating to its use, and he seeks compensation for the automobile incurred during the moratorium. Click here for press coverage.
 

First wrongful death lawsuit from COVID-19 filed against employer.
 
Despite Walmart taking extensive measures to protect "associates and customers, including additional cleaning measures, installing sneeze guards at registers, placing social distancing decals on the floors and limiting the number of customers in a store at a given time" the lawsuit filed in Illinois state court seeks to hold Walmart liable for the death of an employee from COVID-19. The suit alleges the store was not properly cleaned and employees were not given masks, gloves, antibacterial wipes or other protective equipment. Walmart stated it had conducted deep-cleaning of key areas, which passed a health department inspection and a separate third-party review.
 
According to the complaint, the plaintiff died on March 25, and another employee at the same store died four days later from complications due to COVID-19. One of the allegations of the complaint is that the store hired employees on an expedited basis and without "proper" screenings for health and COVID-19. But what qualifies as "proper screening" is subject to debate—and change—as our understanding of COVID-19 develops.
 
We previously have noted employers should challenge specific causation in these cases, and plaintiffs will have a very difficult time meeting their burden. Additionally, the COVID-19 pandemic has led to ever-shifting “industry standards” and regulatory guidance. What is the specific nature of any duty? What is a failure to meet that duty?
 
Because knowledge about COVID-19 changes rapidly, businesses must be nimble in their response. In the absence of specific federal or state regulations, businesses should follow CDC guidelines and have employees practice social distancing to the maximum extent possible. Reasoned and documented decisions for adopting or adapting the guidance for any particular situation is also recommended.
 
Click here and here for press coverage. We discussed the issues surrounding potential litigation and employee exposure during our webinar "Litigation and COVID-19: How to Protect Your Business in This Time of Crisis." Click here to view it.
 
 
Plaintiffs seek refunds from schools, fitness facilities, tour companies, and others.
 
Plaintiffs are suing businesses shuttered by government orders for refunds of prepaid membership fees or charges. The State of Arizona’s public university system, 24 Hour Fitness, and The EF Institute for Cultural Exchange Inc. have all been targeted, with some of the lawsuits also seeking damages.
 
The Arizona public university system is subject to a class action lawsuit for, among other things, failing to adjust and refund fees paid for dormitory housing and meal plans. Click here, here and here for press coverage. Click here to read the complaint.
 
The EF Institute for Cultural Exchange is subject to a proposed class action, in part, because of its fluctuating position with regard to refunds. At first, it invoked a contract clause stating there would be no refund in the event of a public health emergency. Then, after addressing the concerns of a state's Attorney General, it refunded a portion of the fees paid for canceled tours. Click here for press coverage.
 
24 Hour Fitness is subject to its own class action alleging that, by charging customers up to $120 million in monthly membership fees while facilities are closed, it has engaged in unfair trade practices. Click here to read the complaint. Similar class actions have been filed against Town Sports International, LLC, which operates the New York Sports Club fitness centers, and Fitness International LLC, which operates the LA Fitness centers. Click here to read the New York Sports Club complaint and here to read the LA Fitness complaint.
 
 
Does COVID-19 negate finance company's prior settlement?
 
Northstar Education Finance has been accused of using the COVID-19 pandemic to renege on a prior class action settlement under which it would maintain a loan program providing borrowers with a credit for every on-time payment. The settlement arose out of prior litigation over the suspension of an undue hardship program and resulted in an apparent agreement to provide the credit for the life of the loan. But in the midst of COVID-19, Northstar once again suspended the operation of the program due to significantly changed economic conditions. This class action seeks to represent all those who currently hold loans subject to the suspension of the program. Northstar, of course, will undoubtedly argue that unforeseen and unforeseeable circumstances are out of its control and required the suspension of the program. Click here for press coverage. And click here to read the complaint.
 
 
Medical products sterilization business sues to stay open.
 
A medical products sterilization business has sued a county and its fire marshal, insisting a prior closure order be lifted. The company alleges its products and services are essential to fighting the COVID-19 pandemic and its reopening should be prioritized. Click here to read the press coverage. And click here to read the complaint.
 
 
Celebrity chef sues insurer over business interruption coverage dispute.
 
More restaurants are suing for business interruption coverage under insurance policies. In one of the most recent lawsuits, celebrity chef Thomas Keller is seeking coverage under the “business interruption” and “civil authority” endorsements in his restaurants’ "all risk" policies. As compared to earlier suits, this one offers a more fulsome argument for direct physical damage to the property. "According to the plaintiffs, the virus 'physically infects' and stays on certain surfaces for up to 28 days. To counteract this, the restaurants will allegedly be forced to undergo significant cleaning and fumigating processes as seen in China, Italy, France, and Spain." Click here for press coverage. Click here to read the complaint.
 
 
Guns rights organizations claim some shutdown orders violate the Second Amendment.
 
We have seen an uptick in Second Amendment lawsuits challenging shutdown orders that shutter firearms dealers and related business. The most widely publicized involves a challenge by the National Rifle Association and other gun-rights organizations to California’s shutdown order. Click here for press coverage. Click here to read the complaint.
 
 
Purell’s manufacturer sued for false advertising.
 
In a previous update, we noted lawsuits alleging false advertising claims against hand-sanitizer manufacturers even before the COVID-19 pandemic. A new class action lawsuit makes similar claims while noting the COVID-19 pandemic has greatly increased the demand for these products. Click here for press coverage. Click here to read the complaint.
 
 
Immigration detainees and prisoners seek release on public health grounds.
 
There have been more detainment cases relating to detention of ICE detainees and prisoners. People being contained in tight quarters are asking the courts to determine alternatives so they are not at unacceptable risks for exposure because of the inability to socially distance as directed by the government and health officials. Click here, here, here, and here for press coverage.
 
 
Department of Justice sues website marketing a cure for COVID-19.
 
The Department of Justice has filed its first enforcement action against COVID-19-related fraud. Click here for a press release. More enforcement actions are sure to come at both the state and federal level, and we will be closely monitoring these fraud claims.
 
 
Being informed can be the difference between success and failure. Spilman’s COVID-19 Task Force is monitoring litigation arising out of this pandemic to help keep its clients informed and in front of liability issues.
 
We recently conducted a webinar "Litigation and COVID-19: How to Protect Your Business in This Time of Crisis." Click here to view that now.
 
Contact us with any questions or requests for tracking particular types of litigation arising out of the COVID-19 pandemic.
 
 
Litigation Joseph V. Schaeffer
412.325.3303
jschaeffer@spilmanlaw.com Niall A. Paul
304.340.3874
npaul@spilmanlaw.com