Coronavirus Litigation: The Week In Review

By Celeste Bott
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Law360 (April 15, 2021, 7:51 PM EDT) -- Walmart has allegedly refused to pay for more than $15 million worth of orders of hand sanitizer, 19 attorneys general say a lawsuit alleging Tyson Foods mishandled a COVID-19 outbreak at an Iowa plant belongs in state court, and Apple wants to escape claims it suppressed competition by refusing to offer a developer's virus-tracking app in its App Store.

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 litigation across the country.

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

Hospitality

Princess Cruise Lines passengers have asked a California federal court to deny Carnival Corp.'s bid to ax their demand for a jury trial in their suit claiming the companies let passengers board a ship even though they knew people on a previous voyage had COVID-19 symptoms.

The passengers on Monday opposed Carnival's argument that they are not entitled to a jury trial because admiralty is the only basis in their suit for federal jurisdiction. They countered that the Seventh Amendment of the U.S. Constitution guarantees their right to a jury trial in common law matters, that they have brought common law claims with a diversity of citizenship, and that maritime law doesn't expressly forbid a trial by jury.

And a National Labor Relations Board regional office has hit Red Rock Resorts Inc., Station Holdco LLC and Station Casinos LLC with a complaint claiming they took unilateral actions during the COVID-19 pandemic to undermine unions.

Region 28 said in its press release Tuesday that the complaint alleges Station Casinos laid off and fired employees, got rid of their recall rights and benefits, and implemented new health and safety standards without bargaining with their unions both during and after Nevada's shut down of gaming establishments.

The complaint, which also mentions 10 affiliated casino hotels in Las Vegas, says that the actions were executed "in a selective and discriminatory manner that was calculated to dilute union support among their employees," the release said. Further, Station Casinos suggested to workers that the unions dropped the ball on representing them when they weren't timely told about changes or given the chance to bargain over them, the complaint claims.

Public Policy

The Supreme Court of Wisconsin in a split ruling Wednesday said Democratic Gov. Tony Evers did not have the authority to set capacity limits on bars and restaurants to combat the COVID-19 pandemic, saying his emergency order in October is unenforceable because the Legislature didn't approve it.

Evers, along with former Department of Health Services Secretary-designee Andrea Palm, erred when issuing Emergency Order 3, which limited the size of indoor public gatherings to 25% of a facility's permitted capacity or to 10 people in venues without an occupancy limit, according to the 4-3 ruling from the conservative-controlled court.

Chief Justice Patience D. Roggensack wrote the opinion saying that Evers' order — issued when coronavirus cases were spiking around the state — wasn't validly enacted because it meets the definition of a rule and is thus subject to the state Legislature's rulemaking process.

A Pennsylvania federal judge has declined to lift the state's COVID-19 indoor dining restrictions, finding that a brewpub's constitutionality challenge is unlikely to succeed because the Keystone State's orders are "rationally" related to its goal of limiting death and hospitalizations.

U.S. District Judge Christy Criswell Wiegand rejected a motion to enjoin the enforcement of the state's restrictions, ruling that Robert McCafferty, owner of North Country Brewing Co., has failed to show that the restrictions are being applied unequally.

McCafferty had argued that Gov. Tom Wolf's mitigation orders violated the equal protection and due process clauses of the 14th Amendment, claiming, among other things, that the rules unfairly target bars and restaurants. On Friday, Judge Wiegand said McCafferty did not introduce evidence to support the claim that other businesses facing different restrictions, like grocery stores, barbershops and gyms, are "similarly situated" to bars and restaurants in terms of COVID-19 risk.

The speaker of the New Hampshire House of Representatives isn't immune from a suit challenging his ban on virtual votes during the COVID-19 pandemic, the First Circuit said, reviving federal claims by older Democratic lawmakers in the Granite State.

Still, the three-judge panel acknowledged that immunity of another sort — vaccination against the novel coronavirus — could soon moot the case targeting House Speaker Sherman Packard. Remanding the dispute, the appeals panel tasked the lower court to consider whether "changing circumstances," including more widely available vaccines, have snuffed out any live controversy between the parties.  

The Texas Supreme Court has held that a Dallas salon owner won't have to go back to jail to finish out a seven-day sentence for operating her business during the statewide coronavirus shutdown in April 2020, finding the temporary restraining order that's the basis of her punishment is invalid.

In a per curiam opinion, the state's high court said the city of Dallas' requested restraining order against salon owner Shelley Luther, which prohibited her from conducting in-person services at her salon "in violation of State of Texas, Dallas County, and City of Dallas emergency regulations related to the COVID-19 pandemic," didn't include the proper specifics required under Texas Rule of Civil Procedure 683.

And Georgia Gov. Brian Kemp is asking a state judge to dismiss a challenge to his COVID-19 executive orders, saying complaints by the business owners who sued are vague and that they haven't specified which orders they are challenging and why.

In a 71-page motion filed in Fulton County Superior Court, Kemp also argued the business owners are barred from suing the governor and seeking monetary damages under the sovereign immunity doctrine and they should have named the state as a defendant instead of the governor. Kemp says the COVID-19 orders issued in November don't violate the due process rights of the business owners.

Also this past week, the U.S. Supreme Court issued an unsigned opinion striking down California's restrictions on in-home religious gatherings over the dissents of the three liberal justices and Chief Justice John Roberts, marking the fifth time the high court has weighed in on the state's COVID-19 rules since the start of the pandemic.

Food & Beverage

Restaurants suing GrubHub for false advertising in Colorado federal court have joined the food delivery giant in opposing a bid by eateries in an Illinois suit to get in on a proposed settlement, saying they can state their case later if the deal wins approval.

The proposed classwide settlement reached between GrubHub Inc. and lead plaintiff Freshcraft, a Denver bar and restaurant, would provide "significant, sweeping relief" to the class and resolve their claims accusing the online food-ordering company of falsely stating that competitor restaurants are closed during the coronavirus pandemic, according to Freshcraft's brief opposing the Illinois intervention bid.

The lead plaintiffs in the Illinois case — Lynn Scott, the owner of Antonia's restaurant in North Carolina, and the California-based Farmer's Wife restaurant — have failed to show how they're entitled to intervene in the Colorado suit on claims that their interests might not be protected in the Colorado deal, Freshcraft asserted.

Employment

A group of 19 attorneys general from 18 states and the District of Columbia are stepping in to urge the Eighth Circuit to keep a lawsuit alleging Tyson Foods Inc. mishandled a COVID-19 outbreak at its pork plant in Waterloo, Iowa, in state court there.

In a brief filed Monday, the attorneys general told the Eighth Circuit that allowing the case to proceed in federal court would undermine states' ability to enforce their own laws, and allow nearly any company to pull state law claims against it into federal court by arguing that they were working under federal guidance.

The two lawsuits at the center of the case were filed in Iowa state court before being transferred to the Northern District of Iowa. One lawsuit was filed by the estates of three deceased Tyson workers, and a second was filed by the son and estate of plant worker Isidro Fernandez, who died from COVID-19 in April 2020. The lawsuits accuse the company, its top executives and its Waterloo plant's managers and supervisors of repeatedly lying to their employees and knowingly risking their health in March and April of last year. 

A Pennsylvania hospital used layoffs at the outset of the COVID-19 pandemic as a pretext for firing a nurse who had taken time off for parental leave, the ex-nurse claimed in a federal lawsuit filed Monday.

Maria DiMattio said she had used the Family and Medical Leave Act to take parental leave from her job as a nurse anesthetist at Penn Highlands Healthcare's DuBois Regional Medical Center in early March 2020, but she was informed in mid-April that she was among several nurses being permanently laid off due to the pandemic. DiMattio claimed in her federal discrimination complaint Monday that the company kept less-qualified male nurses doing the same work and paid them more per hour to temporarily fill her duties before replacing her with someone whose duties were identical to hers.

See's Candies can't toss a worker's suit claiming she contracted COVID-19 on the job due to lax safety standards and infected her husband, who later died of complications from the virus, a California judge ruled Tuesday, saying the worker's remedy is not limited to workers' compensation.

And a group of Virginians has hit the state's employment commission with a proposed class action in Virginia federal court, alleging the commission's "gross failures" and unconstitutional bureaucratic delays have denied them much-needed unemployment benefits during the pandemic.

In a 30-page complaint, a group of plaintiffs — Ashley Cox, Emily Dimond, Penny Williams, Amber Dimmerling and Lenita Gibson — allege that tens of thousands of Virginians have been waiting for months to learn if their unemployment benefits requests have been processed, despite federal rules requiring the state to determine eligibility within 21 days, and that others who have received unemployment had their benefits abruptly cut off without notice or explanation.

The benefits include both state unemployment benefits as well as "significant" federal aid from recent nationwide COVID-19 stimulus packages, like the $600 weekly unemployment payments, the suit says.

Commercial Contracts

An Illinois federal judge on Monday tossed a proposed class action filed by a Lewis University student seeking tuition refunds in the wake of COVID-19-related campus closures, saying she hadn't alleged that the university made a promise to provide in-person classes.

Dismissing named plaintiff Brianna Miller's claims for breach of contract and unjust enrichment against the Catholic university in Romeoville, Illinois, U.S. District Judge Matthew Kennelly said Miller's reliance on Lewis' marketing materials, its strategic plan and her spring 2020 course schedule aren't enough to sustain her lawsuit, which was first filed in September.

The school's promotional materials and advertisements, even if they highlighted in-person educational experiences at the university, can't become part of the contract between Miller and Lewis, Judge Kennelly said. As for the executive summary of Lewis University's strategic plan, which Miller points to to bolster her arguments, it similarly "contains no concrete statements committing the university to definite actions," the judge said.

Personal Injury & Medical Malpractice

An Illinois federal judge has ruled that a nursing home accused of causing a COVID-19 outbreak that resulted in the deaths of several residents can't escape twin suits because the residents' family members plausibly alleged violations of a state law governing nursing home care.

U.S. District Judge Manish S. Shah denied motions to dismiss lodged by SSC Westchester Operating Co., the owner of Westchester Health and Rehabilitation Center, a long-term care facility that had 44 confirmed cases of COVID-19 and at least 12 deaths. The suits claim the nursing home knowingly exposed residents to positive or symptomatic medical staff in violation of the Illinois Nursing Home Care Act.

Relatives of residents Lottie Smith and Rita Saunders, the latter of whom died of the virus, also alleged that Westchester failed to implement proper infection control protocols and negligently allowed symptomatic workers to treat patients without wearing personal protective equipment, in violation of federal health guidelines.

Competition

Apple told a New Hampshire federal court it had to ensure coronavirus-related apps were reliable and safe at the onset of the pandemic and was not trying to suppress competition by refusing to offer a developer's virus-tracking app in its App Store.

Apple filed a motion to dismiss on Monday in an $800 million case brought by Coronavirus Reporter alleging that rejection of its app breached its contract with Apple and violated antitrust law.

The motion argued that Apple's commitment to offering high-quality and reliable apps in its store took on added significance during the early days of the coronavirus pandemic and that this required the company to evaluate apps to make sure they were credible and "supported by established medical and scientific institutions."

Retail & E-Commerce

Walmart was sued Tuesday in Arkansas federal court by a supplier claiming the retailer over-ordered millions of dollars' worth of hand sanitizer after the outbreak of the COVID-19 pandemic, then ultimately refused to pay a $15 million bill for some of the product.

K7 Design Group Inc. says that Sam's Club, which is owned and operated by Walmart Inc., ordered tens of millions of dollars' worth of hand sanitizer in the immediate months following the outbreak of COVID-19 in March 2020, but has refused to take delivery of or pay for more than $15 million worth of those orders.

Walmart is not the only major retailer K7 is accusing of sticking it with a giant hand sanitizer bill, as it also recently filed an $85 million lawsuit against The Kroger Co. and a $2 million suit against Five Below Inc., featuring similar claims and at times identical language, including that the suits all arise from an "enormous miscalculation" by the retailers in over-ordering hand sanitizer.

Securities

A Florida federal judge on Monday tossed a proposed class action alleging Norwegian Cruise Lines ran a "top-down" deceptive sales campaign downplaying the pandemic to stave off revenue losses, finding that the investors who filed suit did not show the company made material misrepresentations.

U.S. District Judge Robert N. Scola Jr. said the investors, led by Employer-Teamsters Local 175 & 505 Pension Trust Fund, failed to properly back up their allegations that statements made by the Miami-based cruise line and its executives about its marketing strategies, improvement in bookings and proactive safety measures were misleading or false.

The investors had alleged the cruise line's top executive ranks directed a "dangerously false" sales campaign, which was revealed by an "explosive" March 11, 2020, Miami New Times article detailing a whistleblower's account and leaked internal emails appearing to show a senior sales manager providing scripted responses or "one liners" that sales agents could use to discourage concerned customers from canceling their cruise bookings.

Banking

A group of companies that operate shopping centers around Pittsburgh and Ohio asked a Pennsylvania state court Tuesday to divide its lawsuit against its lenders and loan servicers so they can determine faster how much the banks must provide for the retailers' day-to-day operations.

The shopping centers owned by developer Ira J. Gumberg told the Allegheny County Court of Common Pleas that they wanted a separate trial over how much the banks must release for the companies' operating expenses and whether the lenders must approve their 2021 operating budget, as the shopping centers claimed they were struggling to stay afloat amid the COVID-19 pandemic with their lenders seizing all but a small portion of their tenants' rents to pay off $138 million in loans.

The Gumberg companies wanted the court Tuesday to use its powers under the Pennsylvania Rules of Civil Procedure to split the claims for operating expenses from their broader lawsuit over whether lenders and loan servicers — including KeyBank NA, Wells FargoDeutsche Bank and PNC Bank-affiliated Midland Loan Services — had breached their contract by instituting a "cash sweep," where the banks claim all of the shopping centers' rent proceeds and apply them directly to the companies' debts.

Insurance

The owner of LA Fitness has dragged 11 insurers to Washington state court, alleging the carriers should pay $500 million for pandemic-related losses after more than 1,200 of its employees tested positive for COVID-19.

Fitness International LLC, which owns over 700 gyms in the U.S. and Canada, says that its insurers, including Zurich American Insurance Co., Travelers Property Casualty Co. of America and AIG Specialty Insurance Co., wrongfully denied coverage and failed to acknowledge that the COVID-19 virus physically damaged its properties.

AmGuard Insurance Co. has urged the Ninth Circuit to reject a Los Angeles restaurant's proposed class action seeking COVID-19 related loss coverage, arguing that the eatery's alleged inability to operate its business inside the restaurant due to state closure orders does not satisfy the policy's property damage requirement.

In a brief, AmGuard said Plan Check failed to show its restaurant property experienced any tangible property change. The insurer said that the eatery's alleged loss of use of the property does not constitute a direct physical loss, a precondition for coverage, and that the policy's virus exclusion bars all losses relating to COVID-19.

A Texas federal magistrate judge has recommended tossing a lighting and production design company's COVID-19 business interruption suit against Cincinnati Insurance Co., saying the policy doesn't cover economic losses without property damage.

In a Monday report, U.S. Magistrate Judge Susan Hightower said ILIOS Production Design LLC failed to allege that the coronavirus was ever physically present on its premises, and that even if the virus were there, it would not have caused property damage because it can be cleaned and eliminated with disinfectant. Judge Hightower also recommended the court not allow the company to amend its complaint, saying it's clear there should not be coverage for the company under Cincinnati's policy.

North Carolina franchisees of Hand and Stone Massage and Facial Spa can't get any relief under their communicable disease coverage with West Bend Mutual Insurance Co. for pandemic-related losses, a federal judge ruled Tuesday, saying the coronavirus wasn't present at their spas.

U.S. District Judge Richard E. Myers II threw out a business interruption suit by the owners of eight Hand and Stone spas in North Carolina. The massage and spa owners can't show that Gov. Roy Cooper's shutdown order triggered West Bend's communicable disease coverage, he said.

And Lexington Insurance Co. and Interstate Fire & Casualty Co. can't use contamination exclusions to escape a $1.25 billion federal coverage suit for pandemic-related losses, New York's biggest health provider has argued, saying the coronavirus wasn't a contaminant or pollution.

Northwell Health Inc., in a motion for partial summary judgment, said the two exclusions don't remove coverage for its losses under time element and communicable disease provisions. The health care provider with a network of 23 hospitals said it was hit hard by orders suspending ambulatory physician practices and elective procedures and transforming its property to accommodate COVID-19 patients.

In California, a group of insurance companies asked a federal judge to put an end to a proposed class action filed by the Menominee Indian Tribe of Wisconsin seeking COVID-19 business interruption coverage, arguing that their insurance policies clearly include virus exclusions that foreclose the tribe's bid for coverage.

In separate attempts to ax the suit, the insurers argued that even if the proposed class had alleged a direct physical loss or damage to their property, the virus exclusions preclude coverage for their claims. The insurers include Lexington Insurance Co., Endurance Worldwide Insurance, Allied World National Assurance Co., Arch Specialty Insurance Co., Evanston Insurance Co. and Hallmark Specialty Insurance Co.

A Chubb unit argued in Colorado federal court Tuesday that Western Union Co. isn't covered for business losses from closing its agent locations under government orders tied to the COVID-19 pandemic, saying the financial services company didn't suffer a physical loss or damage to its property.

ACE American Insurance Co., in Tuesday's motion, said the issue of "direct physical loss, damage or destruction" to property in the context of the COVID-19 closure orders hasn't been considered by a Colorado federal court or the Tenth Circuit. But the Chubb unit argued Western Union's suit should be tossed, saying the company's financial losses can't be shifted onto the $100 million policy.

Judges on an Eighth Circuit panel appeared skeptical Wednesday of an Iowa dental clinic's bid to force Cincinnati Insurance Co. to pay its losses due to COVID-19 closure orders, in the first appellate hearing on whether business interruption coverage applies to pandemic-related losses.

During a 30-minute video conference, two judges on the appellate panel challenged Des Moines, Iowa-based Oral Surgeons PC's counsel, Tyler S. Smith of Peddicord Wharton LLP, on his client's position that its "all-risk" property policy with Cincinnati covers the losses the dental clinic suffered when it was temporarily barred from conducting nonemergency procedures last year due to orders by the state's governor and dental board. Oral Surgeons is aiming to reverse U.S. District Judge Charles Wolle's decision last September dismissing its suit against Cincinnati.

Also on Wednesday, the Ohio Supreme Court agreed to certify whether COVID-19 causes property damage covered in business owners' insurance policies after a federal court asked it to step in. The state high court said it would answer the questions of whether the existence of the virus that causes COVID-19 on a property or an infected person's presence around a property constituted a direct physical loss or damage, a precondition for coverage under commercial property insurance policies.

--Additional reporting by Dorothy Atkins, Joyce Hanson, Shawn Rice, Danielle Nichole Smith, Daphne Zhang, Jeff Sistrunk, Craig Clough, Dave Simpson, Lauren Berg, Matthew Perlman, Mike Curley, Matthew Santoni, Melissa Angell, Matt Fair, Jimmy Hoover, Sarah Jarvis, Brian Dowling, Y. Peter Kang, Katie Buehler and Brett Barrouquere. Editing by Michael Watanabe.

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

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