Coronavirus Litigation: The Week In Review

By Celeste Bott
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Law360 (October 15, 2020, 6:37 PM EDT) -- State Farm has been accused of charging excessive and unfair premiums during the coronavirus pandemic, Six Flags faces claims that it kept collecting monthly membership fees despite its theme parks being closed and a consumer advocacy group says the Trump administration is shrouding the federal government's billion-dollar contracts for COVID-19 vaccine development in secrecy.

While courts across the country are altering procedures, restricting access and postponing certain cases to stem the spread of the coronavirus, the outbreak has also prompted a wave of new litigation across the country.

Here's a breakdown of some of the COVID-19-related cases from the past week.

Commercial Contracts

A distributor of personal protective equipment to safeguard against the coronavirus sued two mask importers in California federal court, saying that it received $210,000 of worthless and defective KN95 medical masks from China.

Pacific Medical Products LLC, which serves the Washington state medical and health care industry, said in an Oct. 9 complaint that California Coco Tree Inc., Seven Bubbles Inc. and Wei Zhou, the vendors' shared president, provided it with possibly counterfeit certification documents from the U.S. Food and Drug Administration and misrepresented the origin of the masks, which allegedly had faulty nose clips.

And a capital management firm on Tuesday urged a Florida federal court to toss most of the claims it faces in litigation over a soured $57.5 million deal to buy protective face masks, arguing that a law firm should be the target for the suit's fraud claims.

Adventist Health System Sunbelt Healthcare Corp. has failed to establish that Tomax Capital Management Inc. conspired to defraud the company, according to the management firm's summary judgment motion, which blames attorney Michael H. Weiss and his namesake firm for allegedly taking approximately $2 million from an escrow fund that was part of the personal protective equipment agreement for N95 ventilator masks.

Consumer Protection

A Pennsylvania College of Technology student and his mother launched a class action Monday in state court seeking a refund after the school was forced to close down its campus in the spring as a result of the ongoing coronavirus pandemic.

Michael James Lawson Jr. and Tara Lawson said the Lycoming County college, which is an independent affiliate of Penn State University, was forced to pivot to an online-only model in mid-March and to largely shut down its Williamsport campus due to the pandemic. It offered a limited refund representing four weeks of room and board, but the school kept other fees related to on-campus instruction and activities, they claimed.

And Six Flags continued to charge hundreds of thousands of membership and season pass holders monthly fees even when its theme parks were shuttered due to the coronavirus pandemic, according to a proposed class action in Illinois state court.

Named plaintiff Ryan Strassburger, a Chicago resident who holds a monthly Gold Plus membership with Six Flags, says in a complaint filed Oct. 8 that the theme park giant kept charging his credit card for the full amount of that membership between March 2020 and at least July 2020, when he could not use its parks, and has not refunded him any part of those fees.

Employment

Amazon has revived policies for tracking worker productivity that it previously said it had suspended as a precaution against COVID-19, according to a letter filed in New York federal court Wednesday by an attorney for a group of Staten Island warehouse workers suing for better virus protections.

The letter argued that Amazon's about-face should give U.S. District Judge Brian Cogan reason to reject the company's bid to dismiss the workers' lawsuit that seeks more COVID-19 protections at the warehouse. With the reversal, Amazon can no longer credibly claim the workers' concerns that the company might prematurely bring back unsafe policies are "speculative," the letter said.

Amazon has also been slapped with a whistleblower suit in New Jersey federal court by a former employee alleging he was canned in retaliation for reporting that a shift manager at a Garden State facility flouted safety protocols aimed at curbing the spread of the novel coronavirus.

David J. Bailey, who was tasked with enforcing such measures as an Amazon.com Inc. learning ambassador, said he was fired in August soon after complaining that Kristopher Lauderdale refused to keep at least a six-foot distance from other workers, according to the complaint filed Monday asserting a violation of New Jersey's Conscientious Employee Protection Act. While working for the e-commerce giant and following his termination, Bailey said he realized that the company operated its business "unlawfully on a sustained and continued basis with regard to enforcing safety laws/regulations surrounding the COVID-19 pandemic."

A Boston Superior Court judge on Wednesday denied a bid by the city's teacher's union to shift to all-remote learning amid an uptick in COVID-19 cases, ruling that local health officials determined it was safe to have high-need students in their classrooms.

In a decision that came down just hours after a hearing on the Boston Teachers Union's motion for a preliminary injunction, Suffolk Superior Court Justice Robert Gordon found that the memorandum of agreement between the union and the Boston Public Schools allowed the Boston Public Health Commission to greenlight the school's reopening if the percentage of positive tests in the city eclipsed 4%.

The president of Indiana University of Pennsylvania has settled a former employee's lawsuit claiming he was improperly fired for warning colleagues of a potential case of COVID-19 in his department, a day after a Pennsylvania federal magistrate denied the executive's bid to dismiss the retaliation suit.

Even though former director of facilities operations Donald Woolslayer had used his official IUP account when he emailed staff in late March to notify them that an employee had been exposed to the virus by his wife, that warning fell outside his official duties and was therefore speech by a private citizen protected by the First Amendment, U.S. Magistrate Judge Patricia L. Dodge said Oct. 8.

And a former human resources staffer for the city of Houston sued her ex-employer on Tuesday, alleging she was fired for "going public" with concerns at a city council meeting in early April that staff were still being told to work from the office during the coronavirus pandemic.

Monica Garcia, a former senior human resources generalist who worked in the city's employee relations division, alleges she was fired in violation of the Texas Whistleblower Act because she expressed concerns at an April 7 council meeting that the city's telecommuting policy was being applied inconsistently between departments, "exposing inequity."

Public Policy

The Supreme Court of Pennsylvania agreed on Wednesday to consider before Nov. 3 whether county election officials can throw out mail-in ballots based solely on comparing voters' signatures on the outer envelope to the signatures on their voter registration forms.

Secretary of the Commonwealth Kathy Boockvar had asked the justices to exercise their "King's Bench" jurisdiction and fast-track the issue before the election after President Donald Trump's reelection campaign challenged her September guidance to counties saying that signatures alone should not disqualify ballots. The justices granted permission for the Trump campaign, the Republican Party of Pennsylvania, the Republican National Committee and the National Republican Congressional Committee to intervene and said all parties would have until Friday to submit any filings to be considered.

The Fifth Circuit on Tuesday temporarily suspended a permanent injunction requiring a Texas prison to implement a COVID-19 containment protocol in one of its units, saying a lower court incorrectly applied an exception to a law prisoners must follow to file lawsuits, and that the pandemic's threats "do not matter."

In a 16-page opinion authored by U.S. Circuit Judge Don R. Willett, a three-judge panel unanimously agreed to stay the injunction faced by the Texas Department of Criminal Justice until the department concludes its appeal of the injunction. The panel held that the injunction must be paused because the class of prisoners who obtained it sued before exhausting grievance procedures outlined by the Prison Litigation Reform Act.

In Florida, a federal judge chastised the state for its "half measure" attempt at a remedy after the state's online voter registration crashed just before the deadline for November's election, but wouldn't extend the registration deadline for fear of causing confusion and chaos in an election already made difficult by the coronavirus pandemic.

U.S. District Judge Mark Walker said Secretary of State Laurel Lee's corrective action — which extended the deadline to Oct. 6 at 7 p.m. after the system crashed late on Oct. 5 — was inadequate because it was not announced until noon on Oct. 6 and gave potential voters less than seven hours to become aware of the news and fill out voter registration applications.

And the League of Women Voters of New Jersey and the American Civil Liberties Union-New Jersey launched a state lawsuit Wednesday seeking a court order directing state election officials to electronically provide blank ballots to voters who have not received them via mail by Oct. 30.

Immigration

The Ninth Circuit on Tuesday slammed U.S. Immigration and Customs Enforcement for failing to provide safe conditions for detainees packed into a California detention center, ruling that a federal court acted within its authority when it directed the government to reduce the center's population.

However, the three-judge panel noted that the circumstances have "changed dramatically" since a California federal court issued the preliminary injunction in April, ordering the court to reconsider the specific measures included in the injunction on remand.

Individuals detained at the Adelanto ICE detention center sued in April, claiming that their confinement there is a "death sentence." Later that month, the district court provisionally certified a class of 1,300 individuals at the facility and ordered the federal government to reduce the center's population by 100 before April 27, and by another 150 three days after that deadline.

Native American

The Shawnee Tribe has urged the D.C. Circuit to overturn a lower court ruling dismissing the tribe's bid for more coronavirus relief funding under the CARES Act, saying the Treasury Department didn't have the discretion to base the tribe's funding on data showing its population as zero.

The tribe, which is headquartered in Miami, Oklahoma, is seeking reversal of a D.C. federal judge's Sept. 10 decision that Treasury Secretary Steven Mnuchin's use of Indian Housing Block Grant population data to allocate $8 billion under Title V of the Coronavirus Aid, Relief and Economic Security Act wasn't reviewable under the Administrative Procedure Act.

In its opening brief to the D.C. Circuit, the Shawnee Tribe argued that U.S. District Judge Amit P. Mehta "overlooked key, mandatory and discretion-limiting Title V language" and that his decision ran afoul of the D.C. Circuit's determination in another case dealing with the law that "nothing in Title V precludes review of the government's spending decisions."

Insurance

A California cafe has filed a proposed class action against State Farm for allegedly violating state law by charging "excessive, unfair premiums" during the COVID-19 pandemic, generating "a windfall" in the process.

Boobuli's LLC runs a cafe located inside an office building in Walnut Creek and said in the lawsuit it is struggling to stay afloat amid the pandemic while operating at a reduced capacity that "rarely" reaches 25% of its pre-pandemic levels of business. The cafe argues that State Farm is in violation of California's Business and Professions Code by charging it and other business in similar situations premium rates that do not acknowledge how COVID-19 has severely altered the landscape.

And Arch Insurance Company urged a New Jersey federal court Wednesday to toss a suit by Minor League Baseball teams seeking coverage after the COVID-19 pandemic cancelled their season, arguing that business interruption coverage must be triggered by property loss or damage.

The owners of the Everett AquaSox and Asheville Tourists never actually claimed their properties were contaminated by the virus or a person infected with it, Arch argued in a dismissal brief. Nor did the teams allege that they took any efforts to decontaminate their properties, the insurer said.

In California, a preschool is suing Markel Insurance Co. over its denial of the school's COVID-19 business interruption claim, saying the insurer didn't investigate properly and the denial "distorts" information from the claim.

In a complaint filed in September but removed to the Southern District of California on Tuesday, Baldwin Academy Inc. said that it shut down operations on March 16, after finding out that a parent of one student had tested positive for the disease. Within the week, the academy put in a claim to Markel and responded to the insurer's request for information, but was denied coverage in a letter dated April 20, which the preschool says "materially distorts" the information it sent to Markel.

Insurance broker Arthur J. Gallagher & Co. failed to get communicable disease coverage for its client, NetDiligence, whose networking summits aimed at those in the cyber risk insurance industry were canceled due to the pandemic, NetDiligence said in a New York federal court suit filed Tuesday.

Network Standards Corp., which does business as NetDiligence, says it asked its broker of 18 years to procure the infectious disease coverage but was shocked to find that it was not there after the coronavirus outbreak forced the cancelation of several of its summits. The suit, which seeks unspecified damages, asserts claims of negligence, negligent misrepresentation, negligent supervision and breach of fiduciary duty, and names both AJG and the "inexperienced" AJG employee who NetDiligence says is responsible for the error.

And a retail chain with 138 furniture stores has sued a group of nine insurance carriers, demanding almost $45 million in damages due to the insurers' alleged failure to cover the retailer's claims of hefty losses amid the COVID-19 pandemic.

Raymours Furniture Company Inc., which owns 16 furniture retail stores in New York City and over a hundred stores across seven Northeastern states, said the group of insurers failed to cover its losses due to state-mandated closure orders during the pandemic, according to a suit filed in New York state court on Friday. The furniture company is asking the court to hold that the insurers should pay over $44.8 million in damages.

Also in New York, the owner of a major shopping mall in midtown Manhattan has filed suit against its insurer in federal court for refusing to cover a more than $3.8 million loss after commercial tenants including H&M stopped paying rent, saying its environmental policy covers business interruption.

Jemb Realty Corp., which owns Herald Center, a Manhattan retail mall that housed one of the world's largest H&M stores, alleged in the Tuesday complaint that its insurer Greenwich Insurance Co. breached its obligations under the $3 million environmental policy. The company claimed it suffered over $3.8 million in losses because multiple Herald Center tenants were not paying rent during the COVID-19 pandemic.

And one of the world's largest holders of rodeo events has accused Hallmark Specialty Insurance Co. of wrongfully denying its COVID-19 loss claim by asserting it suffered no physical damage to property, when government closure and quarantine orders specifically mentioned "the physical presence" of COVID-19 in its rodeo stadium in Houston.

Houston Livestock Show and Rodeo Inc., which organizes one of the largest rodeo shows in the world, says it had to close its 2020 season weeks early after the Houston Health Department issued a quarantine order to NRG park, its annual venue for the March rodeo shows, according to a suit filed in Texas state court.

Health Care

The Trump administration is stonewalling a consumer advocacy group's request for details about the federal government's billion-dollar contracts with pharmaceutical giants Moderna, Pfizer and others for COVID-19 vaccine development and manufacturing, according to a lawsuit filed Thursday.

Public Citizen's lawsuit, filed in D.C. federal court, stems from a Freedom of Information Act request seeking more information from the U.S. Department of Health and Human Services and the National Institutes of Health about the vaccine campaign Operation Warp Speed, which the government said is on track to deliver over 300 million doses of an effective vaccine by January.

In August, Moderna landed a $1.5 billion supply agreement with the DOD and HHS to manufacture 100 million doses of its COVID-19 vaccine candidate and nabbed $2.48 billion in government funds to get the potential vaccine off the ground, according to a statement from the company in August. The government has also made similar deals with Sanofi, GlaxoSmithKline and Johnson & Johnson.

Banking

Some of the nation's biggest banks have a "fundamental misapprehension" of the federal Paycheck Protection Program when they argue they're not required to pay fees to loan agents during the COVID-19 pandemic, the agents told a California federal judge Monday while fighting to keep their suit in court.

Agents who helped businesses apply for Paycheck Protection Program — or PPP — loans are owed fees for their services, as delineated in the Small Business Administration regulations, the plaintiffs argued in a filing Monday.

They were responding to a September motion to dismiss filed by JPMorgan Chase BankWells Fargo BankBank of AmericaU.S. Bank National AssociationLive Oak Banking Company and Harvest Small Business Finance.

Benefits

The Motion Picture Industry Health Plan's board can't be sued under ERISA for allegedly flouting its duties when it relaxed plan rules in response to COVID-19, a California federal judge has ruled, nixing a proposed class action filed by two cinematographers who still couldn't qualify for benefits.

U.S. District Judge R. Gary Klausner granted the board of directors' motion to dismiss Greg Endries and Dee Nichols' Employee Retirement Income Security Act suit accusing board members of breaching their duty to treat all plan participants fairly.

Endries and Nichols, members of Local 600 of the International Cinematographers Guild, said in July that the board left them and others "out in the cold" in its attempts to address the problems COVID-19 caused for plan participants. But Judge Klausner agreed with the board's contention that the case, which alleged a fiduciary breach, should be tossed because plan administrators don't act as fiduciaries when they amend health care plans.

--Additional reporting by Bill Wichert, Jeannie O'Sullivan, Kevin Stawicki, Daphne Zhang, Tim Ryan, Mike Curley, Michelle Casady, Matthew Santoni, Matt Fair, Chris Villani, Melissa Angell, Dave Simpson, Craig Clough, Hailey Konnath, Kevin Penton, Andrew Westney, Rachel O'Brien, Grace Dixon, Danielle Nichole Smith and Carolina Bolando. Editing by Emily Kokoll.

For a reprint of this article, please contact reprints@law360.com.

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