Jason A. Levine, Gillian H. Clow, and Giles Judd, Alston & Bird LLP
OVERVIEW
This week’s top developments in COVID-19 litigation include: certification of a class action against Hyatt Corporation by furloughed workers seeking additional compensation; a motion to dismiss a securities class action by Zoom Corporation; and a new class action regarding flight-cancellation refunds against Philippine Airlines. We hope our readers had a good Memorial Day weekend.
1. California Court Certifies Classes of Workers Furloughed Due to COVID-19 in Underpayment Suit Against Hyatt
Overview:A federal judge in the Central District of California certified three subclasses of former Hyatt Corporation workers, comprising furloughed employees who allege that they were improperly denied compensation for unused vacation time, vested nondiscretionary hotel room bonuses, and overtime pay when the hotel chain instituted “temporary layoffs” due to COVID-19.
Background: In March 2020, amid growing concerns surrounding the pandemic, Hyatt temporarily released more than 6,000 employees with no specific return-to-work date. Hyatt gave employees the option to receive accrued vacation pay, and, if requested, paid out accrued vacation wages, earned vacation wages, and floating holidays in the next pay period. Plaintiffs in the California case assert that Hyatt “failed to pay all wages on discharge or layoff.” Further, plaintiffs claim that although full-time Hyatt employees receive up to 12 hotel room nights per year as a nondiscretionary bonus, Hyatt failed to “pay out the unused hotel room bonus on termination” and did not consider them “wages” when determining overtime pay.
Decision: In his decision granting class certification, U.S. District Judge Dale S. Fischer concluded that these claims could be adjudicated on a classwide basis because allegations about the immediacy of payment would apply to all class members and, with respect to the hotel rooms, it could adopt an average cost of hotel rooms to Hyatt for all class members to determine value. He further rejected Hyatt’s contention that certification should be denied for public policy reasons given that the suit was based on novel treatment of furloughs, finding it “highly unlikely” that the decision would, as Hyatt claimed, “create nightmare ramifications for every employer in California and the United States.”
Our Take: Although the merits of the case have yet to be decided, this ruling may embolden plaintiffs’ attorneys to file lawsuits against employers that instituted layoffs or unspecified furloughs due to the pandemic without paying out the value of vested nondiscretionary employee benefits.
2. Zoom Moves to Dismiss Investor Fraud Lawsuit
Overview: Zoom Corporation has moved to dismiss securities claims brought by investors who assert that the company failed to adequately warn them of security issues.
Background:The motion argues that as the COVID-19 pandemic began, Zoom rapidly changed from a business application into a household name, with increased media scrutiny over its security and privacy features that led to “a brief fluctuation of the stock price.” Plaintiff filed a securities fraud suit alleging that Zoom misled investors by stating that it was “end-to-end” encrypted and failed to disclose that it sent user data to Facebook, allowed access to users’ public LinkedIn profiles, and installed a particular web server on Mac computers. Zoom’s motion argues that the complaint fails to allege any false or misleading statement because plaintiff cannot show that his preferred definition of “end-to-end” encryption is the only definition. It also argues that Zoom’s privacy policy does not contain misstatements or omissions, and that plaintiff failed to plead either the requisite scienter or loss causation.
Our Take: If successful, Zoom’s motion to dismiss should caution investors against seeking to capitalize on representations – such as “end-to-end encryption” – that have more than one meaning. But regardless of whether the case survives, it is a good example of the increasing interest of the media and public on privacy policies and public disclosures.
3. New COVID-19 Flight Cancellation Class Action Filed Against Philippine Airlines
Overview: A new lawsuit was filed against Philippine Airlines in California’s Northern District. The complaint alleges that the airline violated its Contract of Carriage by failing to provide timely refunds for flights cancelled in the spring of 2020 as a result of COVID-19.
Allegations: The complaint asserts that the airline cancelled a flight to the Philippines in April 2020, and that despite repeated calls to the airline, the named plaintiff still has not received a refund nearly a year after she was told that it had been processed. Plaintiff claims a breach of the airline’s Contract of Carriage on behalf of herself and the putative class. The complaint argues that the Contract of Carriage provides for refunds in the event of involuntary or voluntary cancellations, and the airline breached it by failing to provide any refunds.
Our Take: This is not the first case we have seen filed against an airline over cancelled flights. Earlier cases against Southwest Airlines and British Airways have survived the pleading stage, though the available remedies for breach of contract have been limited to compensatory damages. This case simply reinforces the uncharted territory that airlines experienced in spring 2020 as they grappled with how to operate and handle cancelled flights.
Jason Levine is a commercial and antitrust litigation partner in the Washington, D.C. office of Alston & Bird LLP. Gillian Clow and Giles Judd are litigation associates at the firm.
