June 01, 2020

The First Wave of Class Action Litigation in the COVID-19 Crisis

3 min

While courthouses in many states remain physically closed, their figurative doors have been opened wide by a rush of class action litigation. Certain categories of cases have emerged as some of the first of what appears will be several waves of litigation related to the coronavirus health emergency: consumers seeking refunds for missed concerts and flights, consumers challenging product pricing and marketing, businesses seeking business interruption coverage, employees seeking compensation for safety risks and lost wages, and consumers seeking compensation for negligent exposure to health risks.

  • Memberships and Refunds. One area of class actions that emerged immediately following the issuance of stay-at-home orders was for refunds for cancelled events, travel, memberships, and even educational opportunities. Some prominent examples include fitness studios that did not freeze memberships automatically when local stay-at-home orders required them to temporarily close their doors, and educational institutions that were forced to switch to remote learning for their students. Intermediate platforms such as ticket resale companies and vacation home rental agencies also found themselves in a challenging position since they often immediately forward the money consumers pay to the venue, festival promoter, or other final recipient.
  • Marketing and Pricing. Consumer class action litigation also picked up in the product pricing and marketing sphere, though several of those cases have since settled. There are two main versions of these cases: alleged artificial price inflation of essential items like groceries or medical supplies and false advertising related to the purported health benefits of products. Specifically, a few different brands of hand sanitizer were sued for their claims regarding the percentage of germs they could protect against. The hand sanitizer cases have since settled, but we may well see similar claims emerge concerning other products marketed for their protective benefits against health risks.
  • Insurance Coverage. Businesses that share insurers are collectively challenging denials of business interruption claims. The participating businesses range from New York to California and from dentists' offices to grilled cheese bars, but they all seek coverage of their business interruption claims after their operations were severely restricted or shut down altogether when stay-at-home orders went into effect.
  • Employment. A variety of employment-related cases have emerged, including employee claims for hazard pay, claims for inadequate personal protective equipment, compensation for unfair layoffs, and unpaid earned wages. Given the skyrocketing unemployment across a number of business sectors, we may soon see claims for collusive and unfair hiring practices.
  • Negligent Exposure. Another area that may see increased prominence as businesses reopen around the country this month is claims related to negligent exposure to health risks. The first cases were against cruise lines at the very beginning of the pandemic, specifically those companies that persisted in operations after the initial stories began to emerge about infection in enclosed spaces. Particularly in the event of an additional spike in cases following reopening, it is likely that this sort of consumer class action may spread to engulf businesses like fitness studios and hair salons, or even restaurants making indoor seating available – any type of business offering more high-exposure services but seeking to reopen as quickly as possible in order to recoup some of the damage of the last few months' closures.

These are just a few examples of the hundreds of class actions that have emerged from the plaintiffs' bar since the start of the coronavirus outbreak. As the public health crisis shifts in scope and form, so does the litigation that follows it. Businesses must remain vigilant regarding this changing space, in the hope they can avoid adding defense against a class action litigation to any current financial challenges. Venable will be watching this space closely.