Coronavirus Litigation: The Week In Review

By Celeste Bott
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Law360 (December 10, 2020, 7:54 PM EST) -- A distributor of personal protective equipment has lodged a $3 million suit over a botched medical gown order, the Chicago Teachers Union is trying to keep public schools from reopening without agreed-upon coronavirus safety standards, and a bid to block the New York governor's "food curfew" has appeared to sputter in the Second Circuit.

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.

Public Policy

Massachusetts' top court on Thursday upheld Gov. Charlie Baker's executive orders aimed at slowing the spread of COVID-19, ruling in an unanimous opinion that the sweeping measures do not run afoul of federal or state constitutional rights.

The Supreme Judicial Court held that the governor's use of the Civil Defense Act as the basis for the orders — which closed nonessential businesses and established a phased reopening plan — was proper because the pandemic falls under the phrase "other natural cases" as outlined in the Cold War-era statute. The top court also found that Baker has applied his orders in a way that is content-neutral and narrowly tailored.

A group of businesses sued Baker earlier this year, arguing that his exercise of authority under the CDA was unconstitutional and that the Public Health Act, which gives authority to local boards of health, should be the controlling law.

And a Brooklyn eatery's effort to stop New York Gov. Andrew Cuomo from enforcing a "food curfew" halting dine-in service at midnight seemed done for in the Second Circuit on Tuesday, with Circuit Judge Susan L. Carney saying an injunction could hamper the fight against COVID-19.

Judge Carney, who was joined by an equally dubious U.S. Court of International Trade Judge Richard K. Eaton at afternoon virtual appellate arguments, seemed thoroughly disinclined to disturb an October move by Brooklyn U.S. District Judge Brian M. Cogan to keep the policy.

The Graham, a bar and eatery near Brooklyn's Bushwick and Williamsburg neighborhoods, said in a September lawsuit that the cutoff is "arbitrary and unsupported by anything except speculation" that kicking diners out combats the spread of COVID-19. Cuomo's office has responded by saying that the rule exists because late-night service can encourage individuals to gather and mingle, increasing transmission risk.

Immigration 

A government attorney told a California federal judge that President Donald Trump lawfully barred noncitizens from moving to the U.S. on new green cards under a coronavirus-related order, arguing that the president's exclusion powers are sweeping.

U.S. District Judge Edward Chen fielded arguments over whether he should strike down Trump's green card ban, with government attorney Kimberly Robinson once again invoking the U.S. Supreme Court's 2018 decision to back Trump's previous ban on immigration by individuals from several Muslim-majority countries.

"The Hawaii court was quite clear," Robinson said. "Plaintiffs' counsel stated that the president's power is not limitless, but Justice [Ruth Bader] Ginsburg said that the president's power is sweeping."

The high court's split ruling upholding the so-called Muslim ban has been a cornerstone within the Trump administration's defense of his latest restrictions — the green card ban that came down in April, and a June order that extended the green card restrictions through the end of the year and instituted a temporary ban on certain work-visa holders. The late Justice Ginsburg dissented on the Muslim ban ruling.

Legal Industry

A New York federal court has granted the Empire State's bid to throw out a law firm's allegations that state officials abused their power by ordering the firm to stop doing business in-person due to the pandemic.

U.S. District Judge John Sinatra Jr. accepted the state's argument that HoganWillig PLLC's suit is moot because the executive orders it challenges have been lifted, dismissing the claims without prejudice, which allows the firm to file a new complaint.

The Western New York firm sued Gov. Andrew Cuomo and State Attorney General Letitia James in May, challenging executive orders the governor signed in March that restricted business activities.

The firm alleged that the orders violate the U.S. Constitution and that James' assertions that businesses will face civil and criminal penalties for not complying violate the firm's rights under the equal protection clause.

Securities

A California federal judge on Wednesday appointed Hagens Berman Sobol Shapiro LLP lead counsel in a proposed class action filed by investors alleging San Francisco-based biotechnology company Vaxart Inc. lied about its COVID-19 vaccine candidate.

Hagens Berman and its clients beat out three other investor groups for the lead role in a case that accuses the company of lying about its participation in the federal Operation Warp Speed initiative to develop a COVID-19 vaccine. In a one-page order devoid of detail, U.S. District Judge Vince Chhabria also appointed investors Langdon Elliott and Wei Huang lead plaintiffs.

Vaxart shareholder Kirk Himmelberg filed the suit in August, alleging the company "exaggerated the prospects of its COVID-19 vaccine candidate, including its purported role or involvement in OWS."

And Labaton Sucharow LLPLevi & Korsinsky LLP and The Rosen Law Firm are vying before a Florida federal court to serve as lead counsel for a proposed shareholder class action against Royal Caribbean Cruises Ltd. over its response to the COVID-19 pandemic and stock selloffs it faced earlier this year.

The three firms' clients each entered motions to serve as lead plaintiff on the Monday deadline set by Miami-based U.S. District Judge Kathleen M. Williams, with each asserting that they believed they had the largest financial interest based on the respective losses they incurred on Royal Caribbean stock purchases made during the class period between Feb. 4 and March 17.

Food & Beverage

The Cheesecake Factory has agreed to pay a $125,000 civil penalty to the U.S. Securities and Exchange Commission to settle allegations the restaurant chain hid from investors that its finances were struggling amid the COVID-19 pandemic.

The SEC alleged the company violated reporting provisions of the federal securities laws when it said in press releases attached to its March 23 and April 3 filings that its restaurants were "operating sustainably" during the coronavirus pandemic, when in fact, it was losing about $6 million in cash per week and only had an estimated 16 weeks of cash remaining.

While The Cheesecake Factory omitted that information from its filings, it did share it with potential private equity investors or lenders when seeking additional liquidity, the SEC said.

Employment

The state of Illinois should stop the country's third-largest public school system from reopening classrooms until the city of Chicago and the Chicago Teachers Union agree on a COVID-19 safety standards, the union said in a request to the Illinois Educational Labor Relations Board on Monday.

CTU followed up on a previous motion for an injunction with a new request that the state force the Chicago Board of Education to bargain over safety standards before Chicago Public Schools starts to hold in-person learning again in January. The union said that such negotiations were required under the Illinois Educational Labor Relations Act.
 
"These actions create conditions that endanger the health and safety of the CTU's members," the union said in its motion.

A global transportation company has asked a Nevada federal judge to toss a suit from a union representing a Nevada bus system's employees, saying the union wrongly went to court instead of following their collective bargaining agreement's arbitration procedures amid a dispute over mask requirements for passengers.  

Keolis Transit America Inc., which operates Washoe County, Nevada's bus system, moved Tuesday to dismiss claims for immediate arbitration and injunctive relief from Local 533 of the International Brotherhood of Teamsters. The company told U.S. District Judge Robert Jones the union had sued instead of working toward an agreeable date for arbitration.

Keolis said a state directive requiring most people to wear face coverings during the COVID-19 pandemic applied to its operations but claimed the union wrongly interpreted the directive. The union had asked Keolis to require all bus passengers to wear masks, the company alleged, but the directive exempted some people from the requirement, including people with certain medical conditions, people experiencing homelessness and children.

And a nurses' union sued two Florida hospitals Tuesday, alleging they violated collective bargaining agreements by refusing to arbitrate grievances filed over changes to pay during the COVID-19 pandemic.

In two separate suits filed in the Middle District of Florida, the National Nurses Organizing Committee — Florida/National Nurses United AFL-CIO accused both St. Petersburg General Hospital and Northside Hospital of refusing to arbitrate a grievance filed over a "pandemic pay" policy that cut salaries in units with reduced volumes to 70% of employees' base pay without notifying the union.

The union also claims St. Petersburg General has violated the collective bargaining agreement by requiring nurses to "float" among units without fulfilling competency requirements and protocol. Under the agreement, nurses are not supposed to be required to float outside of similar units unless there is an emergency situation, according to the suit.

In Pennsylvania, a group of workers told a federal judge on Tuesday that the Occupational Safety and Health Administration's failure to enforce COVID-19 protocols at a Scranton-area meat processing plant underscored the importance of court intervention to ensure worker safety at the facility.

The workers told U.S. District Judge Malachy Mannion that OSHA's decision not to cite Maid-Rite Speciality Foods LLC for alleged violations of coronavirus-related safety protocols meant they should be allowed to move forward with a lawsuit aimed at forcing the agency to compel the plant into compliance.

The workers, along with the nonprofit Justice at Work, filed suit in mid-July claiming that at least half the plant's workforce had tested positive for COVID-19 as a result of lax social distancing on the production line, infrequent hand-washing breaks and a shortage of personal protective equipment.

Also in Florida, a former employee of a cleaning company told a federal court she reached a deal to end her lawsuit alleging the business fired her after she asked for paid time off because the COVID-19 pandemic shut down her children's school.

Deborah Kofler filed a notice Tuesday saying that she and Sayde Steeves Cleaning Service Inc. had settled a suit she lodged in June, which alleged retaliation under the Fair Labor Standards Act and the Families First Coronavirus Response Act. No settlement details were immediately available.

And a radiologist who was allegedly threatened and ousted after he requested remote work accommodations during the pandemic due to his autoimmune disorder sued his boss and the New York City public hospital system Monday, alleging violations of the Americans with Disabilities Act and state law.

Richard Heiden claimed that his boss, radiology department chair Alan Kantor, wouldn't let him work from home even though his ulcerative colitis placed him at greater risk for COVID-19 complications and other hospitals were allowing radiologists to work remotely.

Commercial Contracts

A personal protective equipment distributor sued another distributor in Florida federal court Sunday, claiming only a fraction of the 1 million medical gowns promised in a $3.3 million contract were delivered.

In a suit filed in the Southern District of Florida, Cedarwood Capital LLC says USA Capital Fund LLC lied about its ability to provide 1 million Level 4 isolation gowns that are used in hospitals and other medical settings.

Cedarwood says USA Capital delivered just 422,000 gowns, all of which were Level 3, which Cedarwood says are "almost worthless" because only one smaller-volume client would accept those gowns.

And the University of Illinois system has been hit with a lawsuit in Illinois state court alleging it owes refunds to students who paid for access to its facilities, on-campus experiences and in-person instruction but didn't receive it due to coronavirus-related closures and restrictions.

The university system, which has campuses in Champaign, Chicago and Springfield, is the latest in a slew of colleges and universities to face putative class claims seeking refunds of tuition and fees in the wake of the pandemic.

Named plaintiff James Tullman, a New York resident whose daughter was enrolled as a student at the University of Illinois at Urbana-Champaign during the spring and summer 2020 semesters, says in a suit filed Dec. 2 that beginning in March, the system failed to deliver the services members of the proposed class previously paid for. That conduct amounts to inverse condemnation of property and violations of the takings and due process clauses of both the U.S. and the Illinois constitutions, he says.

Insurance

Hotel operator Procaccianti has sued Zurich American for failing to cover losses it incurred during statewide COVID-19 shutdown orders, arguing in Rhode Island federal court that the presence of the disease at its hotels entitles it to coverage under its $300 million policy.

In a complaint filed Tuesday, Procaccianti Cos. said that the presence of the novel coronavirus at its hotels has caused physical damage to the properties through transforming surfaces and air into dangerous potential vectors of illness. The presence of the virus, along with government-forced business closures and slowdowns intended to curb its spread, entitles Procaccianti to losses under its policy with Zurich American Insurance Co., according to the complaint.

Procaccianti said some of its employees have tested positive for the disease or exhibited symptoms, and there's a statistical likelihood that the virus has been present at Procaccianti's properties throughout the pandemic.

An Alabama federal judge axed Auto-Owners Insurance Co. from an ongoing COVID-19 coverage dispute involving a shoe company after the company voluntarily dismissed Auto-Owners as a misnamed defendant and dropped its negligence claim against the insurer in September.

U.S. District Judge L. Scott Coogler said Tuesday that Wagner Shoes LLC had agreed to dismiss its negligence and wantonness allegations against Auto-Owners with prejudice in a telephone conference held on Sept. 22. The judge's Tuesday order cemented the dismissal of Auto-Owners, leaving subsidiary Owners Insurance Co. as the remaining defendant in the case.

In Florida, a federal judge dismissed with prejudice on Monday a suit brought by a proposed class of Florida restaurants fighting certain underwriters at Lloyd's of London over business interruption insurance coverage stemming from the COVID-19 pandemic because it lacked allegations of physical damage.

U.S. District Judge Ursula Ungaro granted the Lloyd's underwriters' motion to dismiss and denied as moot all pending motions, pointing to recent orders in state and federal court finding that physical loss is needed to recover under policyholders' all-risk commercial property insurance. Judge Ungaro noted in her opinion filed Monday that federal district courts throughout the country "have dismissed substantially similar COVID-19-related lawsuits for failing to state a claim for business income coverage."

The El Novillo Restaurant group, which sued the Lloyd's underwriters in April, asserting that the policies don't contain an exclusion for a viral pandemic, incorrectly relied on the policies' exclusionary provisions in an effort to establish coverage, the judge said.

And an Arizona federal judge freed Chubb unit Illinois Union Insurance Co. from having to cover a resort's virus losses, finding that the carrier's "premises pollution liability" policy only covers environmental pollution but not the COVID-19 outbreak.

U.S. District Judge G. Murray Snow dismissed London Bridge Resort LLC's suit against the insurer, ruling that the resort cannot recover anything under its policy because COVID-19 does not fall within the policy's "pollution condition" definition.

COVID-19 is a type of virus and does not constitute traditional environmental pollution, the judge said, noting "a virus outbreak does not closely resemble the enumerated examples provided in the policy's definition."

--Additional reporting by Chris Villani, Lauren Berg, Alexis Shanes, Matt Fair, Amanda Ottaway, Theresa Schliep, Carolina Bolando, Daphne Zhang, Pete Brush, Nathan Hale, Max Kutner, Hannah Albarazi, Rachel O'Brien, Alyssa Aquino and Clarice Silber. Editing by Gemma Horowitz.

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

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