The United States and much of the world are still in the worst of the global COVID-19 pandemic. Businesses and schools remain closed and the daily death rate remains high. Notwithstanding, plaintiffs' attorneys have begun rapidly filing class actions for alleged breach of contract when business services were impacted due to COVID-19. For example, multiple cases have been filed against airlines for refund claims arising out of flight cancellations; against ticket sellers and marketplaces for refunds following cancelled events; against gyms and fitness facilities for the charging of monthly membership fees while facilities are closed; and against universities and other facilities providing room and board.

In these cases, plaintiffs may attempt to portray companies as shifting losses to consumers, exacerbating the financial hardship of the COVID-19 pandemic. The plaintiffs also may ignore the steps certain defendants have taken to make customers whole or minimize any inconvenience or loss resulting from a situation that largely is out of defendants' control. Defendants will want to navigate these cases carefully from a public relations standpoint.

From a legal perspective, many defenses may be available but will be fact-specific, based upon the language of the respective contracts and service agreements. Additional strategies also may exist to defeat class certification or the plaintiffs' attempt to control venue or application of particular law (thereby creating challenges in a plaintiffs' case). It is worthwhile to consider some or all of the following issues:

• Enforcement of arbitration provision and class action waiver. It is not uncommon for user agreements and service contracts to require resolution of any disputes by arbitration and to prohibit class and representative actions, particularly when the contracted-for goods and services individually are for relatively small sums. Arbitration agreements under the Federal Arbitration Act with class action waivers have been upheld in light of the Supreme Court's holding in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011).
• Personal jurisdiction. Under the Supreme Court's 2017 decision in Bristol-Meyers Squibb v. Superior Court, 137 S. Ct. 1773 (2017), each plaintiff in a mass joinder must show a connection between the forum and his or her specific controversy in order to establish specific personal jurisdiction over defendants. Application of Bristol-Meyers Squibb to class action lawsuits is jurisdiction-dependent. Nonetheless, defendants should consider whether such a basis exists to challenge specific personal jurisdiction.
• Choice of law and state law variations. Breach of contract actions often are accompanied by tort claims (e.g., conversion, negligent misrepresentation) or claims for violations of statutory business practices and consumer protection provisions (e.g., unfair or unlawful business practices, false advertising). As a result, presiding courts may need to grapple with determining what law should apply to non-contract claims. While agreements often include a choice of law provision that will apply to any claims arising out of an alleged breach of contract, that law may not necessarily also apply to all non-contract claims. And pursuant to the Supreme Court's decision in Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), the law of the jurisdiction where a class action proceeds does not presumptively apply to every plaintiff. Relatedly, in complaints that seek certification of a nationwide class action, the presiding court may be forced to reconcile variations in pertinent laws of all 50 states.
• Lack of standing. Because the situation surrounding COVID-19 is extremely fluid, and shelter-in-place and shutdowns have occurred on a rolling basis, potential standing arguments may exist. In a breach of contract action for alleged failure to perform, an important question is whether performance has been withheld altogether. For example, in a suit for ticket sales, has an event been cancelled or simply postponed? Or in a suit involving contracted-for ongoing services, has an adequate substitute service been provided (e.g., unlimited virtual exercise classes as opposed to limited in-person physical training)? At bottom, there may be arguments that no injury has occurred.
• Lack of class commonality/typicality. Defendants to breach of contract class actions should consider whether the legal and factual variations are sufficient to defeat class certification. For example, legal variations may exist, such as different user agreements for relevant time periods or different contracts used with proposed class members. Similarly, there may be factual variations in performance of the bargained-for services sufficient to defeat class certification. Using again the example of a breach of contract action involving ticket sales, do some class members hold tickets to events that were cancelled altogether while other class members hold tickets to events that merely were postponed? Or, was a benefit otherwise derived by some class members but not others?
• Limitation on liability and economic loss rule. While plaintiffs may seek an unreasonable or unrealistic amount of damages despite contractual provisions to the contrary, defendants should assess any contractual limitation of liability or disclaimer of liability for special or consequential damages. Particularly for service contracts, it is not uncommon for liability to be limited to the value of the services. In addition, the economic loss doctrine may work to limit any damages to the contractual remedies.
• Force majeure. Successful reliance on a force majeure provision is highly dependent on the precise contractual language and facts at hand. Consequently, a defendant to a breach of contract class action will want to examine the specific force majeure provision of the contract at issue to determine first whether the circumstances from COVID-19 fall within the contractual scope of a force majeure event and, if so, the impact of force majeure to excuse performance under the contract. For a more detailed discussion of force majeure provisions, please visit the Orrick COVID-19 Resource Center: Does the COVID-19 epidemic constitute a force majeure event that excuses contractual performance?
• Contract impossibility of performance or frustration of purpose. Even where the contract in question does not include a force majeure provision, the common law defenses of contractual impossibility or impracticability or frustration of purpose may be available to a defendant. The availability of these defenses and scope will vary by state and, of course, will require assessment of the terms of the contract. For a greater discussion of contract impossibility/impracticality and frustration of purpose, please visit the Orrick COVID-19 Resource Center: What if my contract does not have a force majeure clause?
• Contract unenforceability due to change in law. A valid contract may otherwise be unenforceable when a contracting party is compelled to act—or not act—under authority of law. Under the present circumstances, many businesses (and the public in general) have been under order or direction to shelter in place and operate under social distancing guidelines. As a result, it may not be possible for some businesses to provide certain contracted-for services while such orders are in place. A change in law could give rise to one of the contract defenses discussed above, or provide another basis for finding the contract unenforceable.
• No breach. As in any breach of contract case, in COVID-19 breach of contract class actions, the language of the agreement is paramount. Does the contract in question allow the contractor the ability to make changes to relevant policies during the term of the agreement? Has the defendant offered a substitute service or reparation for equal to or greater than the contract price?
• Defendant was not the cause of the injury. For non-contract causes of action included as part of the suit, plaintiffs must establish a nexus between the alleged conduct and the injury. Defendants can look to point to the pandemic itself and government mandated-shutdowns or other intervening causes as contributing factors to the alleged injury.

While many class action claims ultimately may lack merit, businesses nonetheless will be required to defend against them, using time and resources that are ever more valuable during the current health and economic crisis. There are, however, potentially meritorious defenses available and the lawsuits, if handled appropriately, can be an opportunity for businesses to improve their public image and be seen as a good corporate citizen in the face of challenging times.

Diana Fassbender is of counsel in Orrick, Herrington & Sutcliffe's IP litigation practice. Marc Shapiro is a partner in the firm's commercial litigation and appellate practices, and Paige Pavone and Alex Lilly are associates at the firm.