Samuel L. Felker, left, and Matthew Mulqueen, right.

With businesses struggling to survive government-imposed shutdowns, an imminent tidal wave of litigation will compound their difficulties as consumers and injured parties seek compensation for COVID-related losses. The plaintiffs bar has overcome any perceived stigma from capitalizing on the pandemic, and the recent flurry of class actions filings, some right here in South Florida, may be the tip of the iceberg for what lies ahead.

Consumer Class Actions

Consumer class actions have been filed recently against businesses that continued charging dues and membership fees despite their business operations being substantially shut down or curtailed because of the pandemic. Blank v. Youfit Health Clubs, No. CACE2006161 (Broward Circuit, Fla.) involved allegations of deceptive trade practices when the gym continued to charge members monthly fees despite its facilities being closed due to the novel coronavirus outbreak. See also Delvercchio v. Boston Sports Clubs, No. 20-cv-10666 (D. Mass.); Jampol v. Blink Holdings, No. 20-cv-02760 (S.D.N.Y.); and Namorato v. New York Sports Clubs, No. 20-cv-02580 (S.D.N.Y.).  Similarly, in Hunt v. Vail, 4:20-cv-02463 (N.D. Cal.) the plaintiff sued Vail Resorts for refusing to refund passholder fees when it closed its mountain for the ski season.

Another common theme is that goods or products fail to protect against COVID-19 as represented. For example, two leading makers of hand sanitizers, Purell and Germ-X, were hit with class actions alleging the defendants falsely advertised their products as being effective at preventing the flu and other viral diseases. According to the complaints, there are no reliable studies to support these representations, which the plaintiffs claim allow the defendants to unlawfully increase their sales. See SGonzalez v. Gojo Industries, 1:20-cv-00888 (S.D.N.Y.) and David v. Vi-Jon, 3:20-cv-00424 (S.D. Cal.).

Lastly, cancelled or rescheduled events have led to a host of consumer suits and class actions over refunds and fees charged by organizers. Ticketmaster and Live Nation were recently hit with a class action over events postponed due to COVID-19, alleging they are making customers bear the costs of thousands of disrupted events by retroactively changing their refund policy, see Hansen v. Ticketmaster Entertainment, 3:20-cv-02685 (N.D. Cal.)

Failure to Warn or Protect from COVID-19 Exposure

In a variety of suits, plaintiffs allege businesses failed to adequately protect employees or customers from the virus, including failure to adequately clean and sanitize the premises, to provide protective equipment, to warn that other employees tested positive for COVID-19 and to screen workers for the virus. Among these lawsuits is a wrongful death case brought by the family of a deceased Walmart employee alleging the store failed to take steps to protect its workers, to cleanse and sterilize the store, to provide employees with personal protective equipment, and to promote and enforce social distancing and follow other CDC directives. See Evans v. Walmart, No. 2020L003938 (Cook County, Ill.).  Similarly, in Archer v. Carnival, No. 20-cv-02381 (N.D. Cal.) passengers of the Grand Princess who were quarantined at Travis Air Force Base filed a class action against the cruise line's operators. In the suit, the plaintiffs allege the cruise line owners failed to provide early warnings of the escalating COVID-19 health crisis aboard the ship, delayed cabin-based quarantine and the cancellation of large events, and waited too long to start increased sanitation procedures. This theme of inadequate response to the pandemic could play out in a range of scenarios as injured individuals and their families cast blame for contracting the virus.

Securities Class Actions

Not surprisingly, given the pandemic's immediate impact on the stock market, securities class actions are also part of this wave of litigation. Recent examples include a lawsuit claiming that Norwegian Cruise Line Holdings Ltd. made public statements promoting the company's financial performance at the outset of the crisis that artificially inflated the company's stock price Douglas v. Norwegian Cruise Lines, No. 1:20-cv-21107 (S.D. Fla.). Another securities class action alleges that a pharmaceutical company induced investors to acquire stock at artificially inflated prices resulting from misleading statements by the company's CEO that the company had developed a vaccine for COVID-19 McDermid v. Inovio Pharmaceuticals, No. 2:20-cv-01402 (E.D. Pa.). Similar suits may arise as companies make difficult decisions about how to address the impact of the crisis in public filings and through accounting decisions.

Financial Services Litigation

In Shuff v. Bank of America, No. 5:20-cv-00184 (S.D. W. Va.), homeowners facing foreclosure sought injunctive relief on behalf of a class, arguing that the public auctions allegedly required by the parties' contracts and West Virginia law could not be conducted because of the coronavirus outbreak. Several lawsuits have also been filed alleging that banks were discriminatorily prioritizing current account holders for extensions of loans under the Paycheck Protection Program.

Recommended Best Practices

Businesses must be ready to adapt quickly, as the federal government, states, municipalities and regulatory bodies are issuing new directives and guidance on a daily basis. It is imperative for businesses to follow best practices and directives from the CDC and local government authorities for managing the pandemic and dealing with employee and customer safety. To help quell costly litigation, tracking and addressing consumer complaints can identify problems before they turn into bigger issues. Finally, any business that has recurring charges for its clients and customers must assess whether value is still being provided despite limited business operations.

Sam Felker and Matthew Mulqueen practice with Baker Donelson and focus on class actions and complex litigation. Contact them at [email protected] and [email protected].