Jason A. Levine, Peter E. Masaitis, Alex Akerman, Gillian H. Clow, Debolina Das, and Kaelyne Wietelman, Alston Bird LLP
Welcome to our tenth litigation roundup post! Over the past several months, we have tracked over 1,000 business-related COVID-19 cases, and the filings show no sign of abating. On the contrary, they continue to pile up at remarkable speed. This past week had a major legal development involving OSHA and particularly colorful cases involving the Chicago Transit Authority, a fraudulent scheme to “sell” 900 billion N95 masks, and actress Reese Witherspoon. Par for the course in the world of COVID-19 litigation.
OVERVIEW
On June 11, the D.C. Circuit denied the AFL-CIO’s emergency petition for a writ of mandamus to compel OSHA to set an emergency temporary standard protecting workers from occupational exposure to the coronavirus. The court ruled that an emergency temporary standard was not necessary, given OSHA’s existing regulatory tools. This was a major win for the agency.
New last week was a case that sits squarely in the intersection of recent protest events and COVID-19. In Chicago, a bus driver was allegedly fired for off-duty discussions with other drivers about potential exposure to COVID-19 while driving police officers and arrested protestors. The Chicago Transit Authority (“CTA”) characterized the plaintiff’s conduct as a violation of workplace policy; the plaintiff characterized the CTA’s action as a violation of his First and Fourteenth Amendment rights.
In the realm of brand protection and price gouging, 3M continues to fight the misuse of its trademarks to sell counterfeit products at overinflated prices. In one new suit, 3M takes on a vendor that purportedly sought to buy (and re-sell) 900 billion N95 masks for underserved populations in Africa, despite lacking any actual ability to fund such a transaction and despite the non-existence of such a quantity of masks. 3M also sued an online vendor for allegedly selling counterfeit, damaged, deficient, or otherwise altered respirators, as well as an unlicensed distributor in Ohio for price gouging on its N95 masks.
Legally Blonde star Reese Witherspoon faces some real-life legal woes, after being named in a privacy lawsuit for allegedly violating California law. In the wake of COVID-19, Witherspoon’s fashion brand allegedly offered to donate dresses to teachers, but in the process required them to submit detailed personal information. The teachers allege that only a tiny number of the applicants actually received dresses, but they were all targeted for advertising. The complaint asserts breach of contract and privacy infractions, among other claims.
As the weather becomes warmer, we are also seeing new lawsuits by seasonal businesses that seek to reopen. For example, a water park in Washington has sought a preliminary injunction against the Washington Department of Labor with respect to the governor’s four-stage approach to reopening businesses in the state. If left intact, that plan would likely prevent the park from reopening at all in 2020.
Finally, we continue to see new examples of familiar categories of litigation, such as cases claiming a failure to protect, particularly on behalf of persons involuntarily placed in nursing homes who died from COVID-19. Cases dealing with broken leases and failure to pay rent are mounting as well. Two securities lawsuits were filed against a bank and a cruise line for alleged fraudulent misrepresentations related to COVID-19. And myriad cases for business cancellations and refunds continue to flood the courts.
Noteworthy COVID-19 Business Cases Filed Before June 10, 2020
REFUND/CANCELLATION (Bookmark)
Consumers continue to file actions against airlines, universities, conference centers, resorts, and entertainment venues for failure to refund monies paid for events cancelled due to coronavirus. This week, major amusement parks were targeted for allegedly refusing to refund the cost of season passes and memberships to the parks. Six Flags and LEGOLAND are facing breach of contract suits in New Jersey and California, respectively.
MISREPRESENTATION/FRAUD (Bookmark)
DOJ continues to be vigilant in policing fraud involving COVID-19 goods and services. This week brings a new case under a new theory. DOJ has brought its first criminal securities fraud case related to COVID-19, alleging that the president of a California medical technology company conspired to defraud investors and health care benefit programs by manipulating the company’s stock price and submitting more than $69 million in false and fraudulent claims for allergy and COVID-19 testing.
Additional cases surrounding hand sanitizer and masks proliferated as well. CVS Health is facing a false advertising class action questioning whether its own brand of alcohol-based hand sanitizer actually kills 99.99% of germs, as advertised. In a different case in New Jersey, a defendant has been accused of shipping counterfeit and improperly marked protective masks.
GOVERNMENT
This week brought another big victory for a small business. The Michigan Supreme Court has unanimously ruled that a barber had the right to work despite state orders prohibiting retail reopenings. The barber defied the state order to shut down his business. His win is mostly symbolic, however, as the state’s barbershops were already scheduled to reopen on June 15, 2020.
Another challenge to the pace of reopening highlights how the timing of a state’s plan can critically impact a seasonal business. A water park is seeking an injunction against the Washington State Department of Labor over Governor Inslee’s four-phase plan to reopen the state’s economy. Under the phased plan, the water park would not be allowed to reopen until after its season ends.
SECURITIES (Bookmark)
Wells Fargo is facing lawsuits from small businesses in California federal court for allegedly concealing its policy for administering federal Paycheck Protection Program (“PPP”) loans for small businesses struggling during the COVID-19 pandemic, causing its stock price to drop twice in two weeks. Carnival is also facing more lawsuits for allegedly artificially increasing the market prices for its shares through supposedly false representations regarding the safety measures taken in their cruise ships in connection with COVID-19.
FAILURE TO WARN/PROTECT
Lawsuits are mounting over failures to warn and/or protect from the coronavirus. In some cases, plaintiffs are filing on behalf of decedents for allegedly being exposed to the virus and dying because defendants allegedly failed to follow government directives (here). In one such case, plaintiffs are suing several defendants for allegedly forcing a decedent to live in a nursing home that resulted in fatal exposure to COVID-19.
WORKPLACE (Bookmark)
The U.S Court of Appeals for the D.C. Circuit issued an unpublished order on June 11, 2020, denying the AFL-CIO’s emergency petition for a writ of mandamus, which sought to force the Occupational Safety and Health Administration (“OSHA”) to issue an emergency temporary standard protecting workers from occupational exposure to COVID-19. Citing the considerable deference agency decisions receive on matters under their purview, the three-judge panel agreed with OSHA that the agency has many other regulatory tools to ensure employers provide hazard-free work environments, with the result that an emergency temporary standard covering COVID-19 is not necessary. The US Chamber filed an amicus brief in that case.
This week saw a new type of litigation emerging in the intersection of the recent police brutality protests and COVID-related concerns. In the Northern District of Illinois, a Chicago bus driver alleged that the Chicago Transit Authority (“CTA”) barred him from having off-duty discussions with fellow bus drivers about their safety and rights regarding orders to transport police to protests and transport arrested demonstrators, which potentially exposed the drivers to COVID-19. The complaint alleges that the CTA retaliated by citing him for several workplace violations, including a “wildcat strike,” and taking him out of service. The driver asserts that CTA had a systematic pattern of suppressing disfavored speech in violation of the First and Fourteenth Amendments.
In the District Court for Minnesota, an African-American plaintiff alleged that while bagging his paid-for groceries at a grocery store, a security guard stood directly next to him, claiming that he “look[ed] suspicious,” and refused to separate himself when plaintiff repeatedly asked the guard to stand at a distance due to concerns about COVID-19 exposure. The security guard allegedly proceeded to talk to a Minneapolis Police Officer parked in the parking lot, who then confronted the plaintiff at a close proximity with no mask. Plaintiff claims these interactions and the store’s failure to require the security officer to maintain social distance, limit the number of customers, require them to wear protective face masks, or provide any hand sanitizer constitute violations of the state’s Public Accommodations Act, Civil Rights Act, and public health laws, among others.
Wrongful termination and failure to protect employees also continue to be a wellspring of litigation. Last week’s targets included Microsoft Corp., which was sued by an employee claiming she was wrongfully fired for requesting leave because her child’s school was closed due to COVID-19.
LEASE/RENT
Restaurant chain Ruby Tuesday faces a $2.5 million lawsuit for allegedly breaching a contract to sell property to a property management firm and rent it back based on a 20-year lease. In a similar rental case, Simon Property is suing The Gap for over $65.9 million in damages for alleged defaults on store leases, with further shortfalls expected.
PPP/CARES Act (Bookmark)
As in the past several weeks, lawsuits continue to pour in from agents against banking institutions for failure to pay fees associated with processing PPP loans. A motion to consolidate these cases into an MDL was filed on May 22.
And in a novel PPP case, the Prairie Band Potawatomi Nation has sued the Department of Treasury in the District of Columbia, alleging that the Department applied a flawed metric to determine how to distribute the $8 billion allocated by Congress in the CARES Act for economic relief to tribes during COVID-19. A motion for a temporary restraining order is pending. Several other tribes have jointly filed a motion for leave to file an amicus brief in the matter.
INSURANCE
This past week featured more business interruption claims of the type we have been seeing across a variety of industries, from bars and restaurants, to eye doctors, and even sporting goods companies like Play-it-Again Sports.
PRIVACY (Bookmark)
Reese Witherspoon finds herself named as a defendant in a lawsuit brought in federal court in Los Angeles. Plaintiffs there bring a putative class action and allege that in April, in response to the COVID-19 pandemic, Witherspoon’s fashion label Draper James announced via an Instagram post that it would give teachers a dress for free. In order to accept the offer, teachers were required to provide their teacher ID information, work email addresses, and copies of their employee work badges – all of which the teachers now claim is highly sensitive and could be exploited by cyber-criminals or sold by defendants. After collecting this information, Draper James then allegedly gave away only several hundred dresses – despite over one million teachers applying – and supposedly subjected all the applicants to constant online advertising. The teachers assert claims for breach of contract, promissory estoppel, restitution, violation of the state’s Consumer Legal Remedies Act, and violation of the California Business & Professions Code.
TRADEMARK (Bookmark)
3M continues its efforts to combat the use of its trademarks, either to sell counterfeit products or to sell 3M masks at overinflated prices. In one lawsuit brought in federal court in California, 3M filed suit against a vendor who allegedly sold counterfeit, damaged, deficient, or otherwise altered respirators. 3M alleges the vendor falsely advertised the products using 3M’s trademarks.
3M also filed suit in the district of Minnesota alleging that defendant Matthew Starsiak, through his company, approached 3M with a purported offer to buy 900 billion N95 masks on behalf of the Bill & Melinda Gates Foundation, Elon Musk, and Richard Branson, to send to underserved populations in Africa. 3M alleges none of this was true, and brings various trademark infringement and false advertising claims against Starisak and his company.
And in Ohio, 3M sued over the sale of its N95 masks at overinflated prices by an allegedly unlicensed distributor attempting to make illicit profits. With these new cases, 3M has filed 12 lawsuits for counterfeiting, price gouging, and related wrongdoing over its N95 masks.
Jason Levine is a commercial and antitrust litigation partner in the Washington, D.C. office of Alston & Bird LLP. Peter Masaitis is a product liability and toxic tort litigation partner in the firm’s Los Angeles office. Alex Akerman, Gillian Clow, Debolina Das, and Kaelyne Wietelman are litigation associates at the firm.
