Jason A. Levine, Ryan Martin-Patterson, and Stephen Tagert, Alston & Bird LLP
OVERVIEW
This week’s top developments in COVID-19 litigation include: a securities class action against a solar panel company over its alleged failure to make certain disclosures about pandemic-related supply chain disruptions; a nuisance suit filed by business tenants against a landlord for supposedly flouting COVID-19 safety guidelines; and new litigation challenging the validity of the CDC’s recently-vacated moratorium on residential evictions.
1. Solar Panel Company Sued for Pandemic-Related Securities Violations
Overview:Plymouth County Retirement Association filed a proposed class action against Array Technologies, Inc., claiming the company failed to disclose in a series of public offerings that rising prices for steel and transportation would decrease its margins.
Complaint: Array produces steel supports, electric motors, gearboxes, and electronic controllers that move solar panels throughout the day to maintain optimal orientation to the sun. During 2020 and 2021, Array sponsored a series of public offerings but allegedly did not disclose that rising prices for steel and transportation would affect its margins. Additionally, Array supposedly painted a materially misleading picture of its business prospects. The company’s stock price has dropped significantly since the beginning of 2021, falling to below half its secondary public offering price.
Our Take:The pandemic has disrupted supply chains for many industries. Companies should carefully forecast the effects of these disruptions and disclose them where appropriate. As with prior pandemic-related lawsuits, we expect the securities plaintiffs’ bar to sue whenever similar disruptions cause publicly-traded companies’ share prices to drop.
2. California Landlord Faces Nuisance Suit Over Disregard for COVID-19 Safety Rules
Overview: On May 17, 2021, KW Fund V-Brand LLC (“KW Fund”), a landlord in California, was sued by one of its commercial tenants under theories of negligence, breach of contract, and common law nuisance for allegedly failing to follow local and federal safety guidelines related to COVID-19.
The Complaint: The plaintiff is a private security firm that rents office space from KW Fund in Glendale, California. It signed a lease for 2019 to 2025. Plaintiff alleges that when the pandemic erupted in March 2020, KW Fund did not comply with local and federal safety regulations. Specifically, KW Fund supposedly failed to follow guidance and emergency orders from the city of Glendale, the Los Angeles County Department of Health, and the CDC. Plaintiff alleges that KW Fund’s actions were negligent, created a private nuisance, and breached portions of the parties’ lease agreement that require it to provide “safe and useable” space.
Our Take: This case is likely not the last involving a landlord that allegedly failed to comply with COVID-19 guidance and regulations. Particularly during the first few months of the pandemic, businesses and landlords were subject to ever-changing and sometimes contradictory advice, guidance, and emergency orders. Given the volume of regulations generated by state and local authorities over the course of the pandemic, it would be no surprise if some landlords were unable to comply with every single mandate or piece of advice. Whether this will translate to civil liability remains to be seen. To that end, it is worth noting that the U.S. Attorney’s Office for the Northern District of Iowa recently settled claims for restitution of Medicaid funds based on a care facility’s alleged failure to comply with appropriate COVID safety practices for screening its employees. A very different context, but interesting to consider the potential avenues in which liability against businesses may be sought.
3. New Lawsuit Challenges the Validity of the CDC’s Residential Eviction Moratorium
Overview:We previously highlighted a decision by Judge Friedrich of the U.S. District Court for the District of Columbia vacating the CDC’s nationwide eviction moratorium. That decision has since been stayed, and the plaintiffs filed an emergency motion to vacate the stay pending appeal. Additionally, a group of Florida realtors have since filed an identical suit, presumably because of the stay.
D.C. Litigation Update:After finding that the CDC lacked authority to issue a nationwide residential eviction moratorium under the Public Health Services Act, the D.C. district court stayed its decision pending appeal, concluding that the federal government raised serious legal questions on the merits and satisfied the other factors for a stay. Plaintiffs filed a motion with the D.C. Circuit seeking to vacate the stay, arguing that the government was unlikely to show that it had the authority to issue the moratorium after the CARES Act’s original three-month statutory moratorium elapsed, and emphasizing that the CDC’s moratorium extended to all residential property, not just property connected to federal programs. The motion also argues that the government does not identify irreparable injury in the absence of a stay, and that equitable factors similarly do not favor a stay.
Florida Litigation:Meanwhile, Florida realtors filed suit in the U.S. District Court for the Middle District of Florida, seeking to vacate the CDC’s residential eviction moratorium, arguing that there is no evidence to show that it will prevent the spread of COVID-19. The realtors also highlight the millions of landlords who have suffered financially as a result of renters not paying rent during the pandemic and who have not otherwise received relief. The lawsuit raises legal claims similar to those asserted in the D.C. litigation: that the CDC exceeded its statutory authority and violated the non-delegation doctrine, and that the regulation is arbitrary and capricious.
Our Take:The eviction moratorium is currently scheduled to expire on June 30, 2021, but it may effectively end sooner if the D.C. Circuit vacates the current stay. If not, then there may be an uptick in residential evictions after the moratorium officially expires.
Jason Levine is a commercial and antitrust litigation partner in the Washington, D.C. office of Alston & Bird LLP. Ryan Martin-Patterson and Stephen Tagert are associates at the firm.
