Coronavirus Litigation: The Week In Review

By Celeste Bott
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Law360 (November 19, 2020, 4:37 PM EST) -- Governors continue to face legal battles over restrictions to curb the spread of coronavirus cases in their states, FEMA has been sued for moving forward with a disputed $48 million no-bid contract for COVID-19 testing services, and Amazon faces claims that its pandemic response disproportionately harmed workers of color. 

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.

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

Employment

A former Amazon Inc. warehouse worker hit the online retail giant with a putative discrimination class action in New York federal court, alleging that the e-commerce giant's response to the COVID-19 outbreak was inadequate and disproportionately endangered workers of color.

Christian Smalls, who has become one of the faces of the protest movement against Amazon, said that the company failed to provide personal protective equipment to its predominantly Black and Latino workers, subjecting them to inferior conditions compared to its predominantly white managerial workers.

Smalls, who worked at an Amazon fulfillment center on Staten Island, led protests in the earliest days of the U.S. outbreak after, he says, Amazon failed to provide workers with the proper gear and put in place a murky policy for workers exposed to the virus or experiencing symptoms.

And Florida bankruptcy firm Kingcade Garcia McMaken has reached a settlement in a federal wage lawsuit brought by a paralegal who claimed she was not paid overtime despite long workweeks and never received emergency sick time compensation when she had COVID-19.

Details of the firm's agreement with Mayra Santos-Urquiola were not immediately available Monday. The parties asked the court in a notice filed Friday to advise them on what information it will require when considering the fairness of the deal. They also indicated that the settlement requires either court approval or supervision by the U.S. Department of Labor since the case involves a claim for unpaid overtime under the Fair Labor Standards Act.

Santos-Urquiola claimed in her Aug. 17 complaint that the Miami firm violated the Fair Labor Standards Act throughout her 16-year tenure and, more recently, ran afoul of the Emergency Paid Sick Leave Act when she took time off after her COVID-19 diagnosis.

Food & Beverage

An Illinois appellate panel dissolved a temporary restraining order blocking the enforcement of an executive order by Gov. J.B. Pritzker that prompted a ban on indoor dining in four counties, saying the state's emergency management law gave him the authority to issue it.

The lawsuit by Fox Fire Tavern LLC is one of several recent challenges to the governor's emergency powers. The Geneva, Illinois, eatery sought a declaration to block both the governor's October disaster proclamation and an ensuing emergency order that would impose restrictions on bars, restaurants and others if coronavirus cases surged. But while a lower court granted FoxFire a temporary restraining order, the appellate court said it abused its discretion because the restaurant has failed to show a likelihood of success on the merits.

The Illinois Emergency Management Agency Act "plainly authorizes the governor to issue successive disaster proclamations stemming from one ongoing disaster," the panel said.

And a restaurant in a Puerto Rico mall that's behind on rent is seeking $1 million from its landlord in a lawsuit alleging that the closure of the building during the COVID-19 outbreak, subsequent failures to safely reopen, and the withholding of permission to sell its business violated their contract.

Vota Inc., operating as Casa Mofongo Xpress in Las Catalinas Mall in Caguas, lodged its suit in Puerto Rico federal court Thursday against Urban Edge Caguas LP and Urban Edge Properties. It also filed for Chapter 7 bankruptcy the same day.

In its case against its landlord, Vota not only said that it doesn't owe Urban Edge about $75,000 in back rent and utilities fees, but that the pandemic is a force majeure situation. It said that the mall operator should repay the restaurant and that its lease should be substantially changed or terminated.

Public Policy

A company that operates ghost tours in Salem, Massachusetts, filed suit on Wednesday accusing Gov. Charlie Baker of unfairly limiting such walking tours during the COVID-19 pandemic while allowing larger political protests and religious gatherings to continue.

Colonial Ghosts LLC, doing business as Salem Ghosts, and a related entity, Zaal Ventures Corp., argue in the suit that the state's pandemic restrictions on gatherings violate the First and 14th Amendments by treating historic walking tours differently from other kinds of gatherings. Citing large demonstrations and marches protesting police violence and racism, the plaintiffs argue that it is illegal to allow that type of speech to go on unfettered while limiting the tours to handfuls of customers on the same public streets and sidewalks.

A trade group for online merchants urged the Sixth Circuit not to unblock Kentucky's investigations into Amazon merchants, arguing that the state attorney general is trying to rewrite the law amid the COVID-19 pandemic to allow price controls across state lines.

U.S. District Judge Gregory F. Van Tatenhove was "exactly right" to grant the Online Merchants Guild a preliminary injunction in June blocking Kentucky Attorney General Daniel Cameron from pursuing investigations or cases against Amazon retailers, the guild said Monday. Nor does the enforcer "seriously try to undo the district court's factual findings," according to the brief.

Pennsylvania's governor urged the Third Circuit in a brief late Wednesday to overturn a trial court's decision that restrictions imposed to help curb the spread of the newly resurgent coronavirus ran afoul of freedom of assembly and due process protections under the U.S. Constitution.

And a Florida attorney who has made waves appearing as the Grim Reaper across the state during the COVID-19 pandemic lost his appeal and could face sanctions over his suit that asked the courts to impose beach closures and a statewide stay-at-home order, a state appellate court said.

Santa Rosa Beach attorney Daniel W. Uhlfelder had argued to the Sunshine State's First District Court of Appeal that the trial court erred in dismissing his case, but in a one-page order Friday, the appellate court quickly disagreed.

Uhlfelder filed his suit March 20 in Leon County Circuit Court at a time when Gov. Ron DeSantis had issued an order banning large gatherings and requiring social distancing on state beaches, but was resisting calls to use his broad powers under the state's emergency management statute to close all state beaches and follow the example of numerous other states by issuing a "stay-at-home" order as the new coronavirus started to spread in the U.S.

Immigration

A D.C. federal judge on Wednesday halted the Trump administration's policy of expelling unaccompanied migrant children from the U.S. border under a public health directive aimed at controlling the spread of COVID-19.

Adopting the reasoning of a federal magistrate judge, U.S. District Judge Emmet Sullivan provisionally certified a class of unaccompanied migrant children who are or will be detained and subjected to the border expulsion policy, which was issued by the Centers for Disease Control and Prevention through a rarely used public health law known as Title 42.

Judge Sullivan found that the 1944 statute at issue does not authorize the government to expel foreign citizens from the U.S. The statute allows the federal government to "prohibit" the "introduction" of foreign citizens who may bring diseases into the U.S., but "the phrase does not encompass expulsion," the judge explained.

Native American

The Indian Health Service must immediately renew a tribal self-determination contract with the Navajo Health Foundation-Sage Memorial Hospital in northern Arizona or further compromise crucial health care services during a pandemic, the hospital has claimed.

In a complaint filed in New Mexico federal court, Sage accused IHS and the U.S. Department of Health and Human Services of violating the Indian Self-Determination and Education Assistance Act, which allows tribes to enter federal contracts to administer programs the government would otherwise manage directly.

The court must act quickly so the hospital can provide urgently needed care to the Navajo Nation without further cutting into its reserves, Sage claims. At stake is $1.8 million per month in operating costs, which is needed for the planned construction of a new hospital, Sage claims, as well as personal protective equipment from federal suppliers and a federal loan repayment program to attract doctors.

Insurance

The owner of five Broadway theaters asked a New York federal judge to hold that Chubb Ltd. subsidiaries should cover its COVID-19 related losses, arguing that the policy exclusions are ambiguous and do not apply.

Jujamcyn Theaters LLC's five Broadway theaters exhibited popular musicals including "Hadestown," "The Book of Mormon" and "Frozen" and hosted up to 48,000 patrons per week before being ordered to shut down due to the pandemic.

And a group of Goddard School franchisees have launched a string of lawsuits in Pennsylvania state court accusing Philadelphia Indemnity Insurance Co. of wrongfully refusing to cover financial losses they have sustained as a result of the ongoing coronavirus pandemic.

The eight Goddard School locations across Pennsylvania and Ohio said that Philadelphia Indemnity had wrongfully denied claims for coverage citing policy language barring claims related to viral or bacterial contamination.

A Louisiana state judge has denied a bid by a group of underwriters at Lloyd's of London to subpoena an opposing attorney they alleged had influenced a COVID-19 shutdown order from the mayor of New Orleans in order to secure business interruption coverage.

The Lloyd's underwriters told the court in a motion filed Nov. 9 that Roderick "Rico" Alvendia of Alvendia Kelly & Demarest LLC — representing the owner of Oceana Grill, Cajun Conti LLC — had contacted the attorney of Mayor LaToya Cantrell before Cantrell's March 16 shutdown order to ensure the order included language saying the virus caused physical damage to property because it attached to surfaces. According to the Lloyd's underwriters' motion, Cajun Conti relied almost exclusively on the text of that order in its suit seeking coverage for business interruption losses stemming from efforts to contain the virus. The underwriters sought documentation of Alvendia's communications with Cantrell's attorney.

The investor group behind the Boston hotel that hosted the country's first superspreader event has opened a $40 million suit against its insurer in a California federal court, contending that it was wrongly denied coverage of losses related to COVID-19 given its policy's inclusion of virus-related claims.

Sunstone Hotel Investors is the latest in a slew of hospitality-related companies  to file lawsuits against their insurers for rejecting claims related to COVID-19. The group, however, said its policy with Endurance American Specialty Insurance Company is distinctive since it explicitly covers "biological agent conditions," which the group claims include "viruses and other pathogens."

And Las Vegas casino and resort Treasure Island LLC has fired back at Affiliated FM Insurance Co.'s bid to cap its COVID-19-related claim to the policy's $200,000 communicable disease provision, telling a Nevada federal court that the policy's contamination and loss of use exclusions do not apply.

On Monday, the casino argued that Affiliated FM cannot acknowledge that the novel coronavirus may implicate the policy's "communicable disease" coverage while at the same time asserting that the virus is subject to the "contamination" exclusion.

The contamination exclusion does not apply because it is in direct conflict with the policy's communicable disease coverage, Treasure Island said. And the policy's "loss of market or loss of use" exclusion is not triggered because that "would eviscerate the very purpose of business-interruption coverage and impermissibly make that coverage illusory," the resort said.

In Arizona, a federal judge has thrown out a suit by a number of Minor League Baseball teams aiming to secure coverage from three Nationwide units for business losses due to the cancellation of their season because of COVID-19, finding that a virus exclusion in the teams' policies bars any recovery.

U.S. District Judge Douglas L. Rayes granted a bid to dismiss the case by National Casualty Co., Scottsdale Indemnity Co. and Scottsdale Insurance Co., saying that while the teams, led by Chattanooga Professional Baseball LLC, tried to argue there were other causes for their loss, those causes all stem from the virus.

Health Care

A Maryland federal judge said Wednesday he was leaning against throwing out a wide-ranging suit accusing several interconnected laboratories and individuals of plotting to shut down an emerging COVID-19 testing business and steal its customers.

The suit by Annapolis-based Coastal Laboratories Inc. against four lab service corporations, a New Orleans doctor and four other people claims that after Coastal reached a deal to obtain coronavirus testing services, the defendants pulled the rug out from under it by cutting off an online test portal and contending it still owed money under the agreement. But the real goal, according to the suit, was to snatch away Coastal's business — customers such as Maryland nursing homes — by inviting them to instead sign up for COVID-19 tests with the defendants' labs, including Louisiana-based Cormeum Lab Services LLC.

A COVID-19 testing firm has accused the Federal Emergency Management Agency of wrongly pushing ahead with a $48 million no-bid contract for testing services amid a protest of the deal, saying the supposed urgency of the contract didn't exist or stemmed from FEMA's failure to act earlier.

There were no unexpected "urgent and compelling circumstances" to justify overriding the stay imposed on the rapid coronavirus testing deal by the U.S. Government Accountability Office, Comprehensive Health Services LLC said, urging the Court of Federal Claims to block the contract from moving forward while its protest plays out.

Hospital contractor SCWorx urged a New York federal judge Wednesday to let it escape a proposed class of investors' suit claiming it overstated or entirely fabricated its announcement in April that it would soon earn millions weekly by supplying COVID-19 rapid testing kits.

And California's health exchange unconstitutionally issued an emergency regulation requiring health plans to pay for COVID-19 testing and services, which eviscerated existing contracts between plans and providers, the California Association of Health Plans said in a state court suit seeking to scrap the regulation.

As the coronavirus pandemic raged, the California Department of Managed Health Care enacted a cost-shifting mandate that classified COVID-19 testing as a basic health care service for a broad group of "essential workers" and others, which made health plans foot the whole bill, according to a petition for writ of mandamus filed in California Superior Court.

But the health exchange bypassed the required notice and public comment period by saying the regulation was the "highest level emergency," even though it didn't make the case that the new rule was urgent, the lawsuit said.

Securities

The Financial Industry Regulatory Authority on Tuesday cast as misguided a broker-dealer's attempt to put on hold a disciplinary hearing process it faces and had earlier called "unfair."

In a Nov. 17 brief, FINRA told U.S. District Judge David Barlow that plaintiff Alpine Securities Corp.'s motion for a preliminary injunction of a FINRA hearing should be denied, noting that first and foremost, injunctions aren't appropriate when the matter in question doesn't pose "imminent and certain harm."

Alpine sued FINRA in Utah federal court on Nov. 10, alleging that it has "the right" to in-person hearings in a disciplinary proceeding FINRA instituted against Alpine in August 2019.

According to Alpine, the hearings kicked off in February 2020. At the time, Alpine claimed, FINRA's Department of Enforcement was able to present six witnesses and Alpine only got to present one witness before the hearings had to be brought to an abrupt halt. FINRA and Alpine allegedly agreed in March to resume the hearings in person in late April, "but the COVID-19 pandemic rendered that impossible," Alpine said. Alpine said it was assured the hearings would resume in person, and a hearing date was scheduled for Nov. 30. But on Nov. 2, FINRA's chief hearing officer determined that the hearing would have to take place virtually, citing the "Zoom amendment" to FINRA's rules adopted at the end of August and effective Oct. 1.

Banking

Pointing to dismissals of similar suits, JPMorgan Chase Bank and First Republic Bank asked a California federal judge Monday to toss a putative class action that alleges it owes fees to agents that helped businesses file applications for the Paycheck Protection Program.

Like many businesses working as "agents" helping applicants with the federal Paycheck Protection Program — or PPP — loan program, M&M Consulting Group LLC sued the banks in July, arguing its agents are entitled to fees from the banks.

But as they have argued in other cases, JPMorgan Chase Bank and First Republic Bank said the PPP under the Coronavirus Aid, Relief, and Economic Security — or CARES — Act, doesn't require banks to pay fees to agents without an agreement to do so.

And an Arizona law firm shot back at JPMorgan Chase Bank NA's bid to escape a lawsuit claiming it improperly withheld agent fees to the firm for its work on Paycheck Protection Program loans, saying Monday federal guidelines clearly specify that lenders, not borrowers, are on the hook for such fees.

Radix Law PLC said Chase's October motion to dismiss filed in Arizona federal court "does a nice job of generally explaining the purpose of the PPP," but "ignores clear and unambiguous language requiring lenders to compensate borrowers' agents." Congress specified that lenders — not borrowers — would pay agent fees, including attorney fees, Radix said. Chase's failure to pay these fees makes the firm "an unwitting volunteer in a process that generated lenders billions of dollars while Radix did the bulk of the work," their response said.

Radix initially sued Chase in a county court in Maricopa County, Arizona, in August, citing a fact sheet issued in March and a final rule issued in April by the U.S. Treasury Department for the PPP. The case was removed to federal court in September. The law firm said in their complaint it was the agent for 10 Chase clients who got PPP loans totaling over $700,000. The program was established by Congress in March as part of the Coronavirus Aid, Relief and Economic Security Act.

Consumer Protection

A mortgage servicer on Monday removed to federal court a lawsuit that accuses it of violating the Fair Credit Reporting Act by reporting loans in forbearance as delinquent despite a federal pandemic relief law letting certain borrowers postpone payments.

The trip to California federal court is the latest in a proposed class action that named plaintiff Eric T. Mitchell filed against Specialized Loan Servicing LLC in state court in September. Mitchell alleges the mortgage servicer violated the FCRA as amended by the Coronavirus Aid, Relief and Economic Security Act by reporting loan payments subject to forbearance during the pandemic as late or deficient to credit reporting bureaus and other third parties.

Despite protections afforded by the CARES Act and an alleged contract with his lender, Mitchell argues that SLS reported his mortgage payment as delinquent, which negatively impacted his credit score.

Media & Entertainment

President Donald Trump's reelection campaign has settled a defamation suit in Wisconsin federal court accusing an NBC affiliate and political action committee of running an ad that falsely quoted him as referring to the coronavirus pandemic as a "hoax."

The Trump camp filed suit in the heat of the presidential race after station owner Northland Television LLC aired a spot from progressive group Priorities USA Action that, according to the campaign, used a "manufactured" quote that implied he called the COVID-19 pandemic a hoax. The campaign asserted that the "hoax" the president was referring to was his critics' allegation that he had handled the pandemic poorly.

The settlement, filed by all three parties with a federal judge, gets rid of the litigation but does not include an explicit admission that any side was wrong. The papers inform the judge that each has agreed to pay its own costs, attorney fees and expenses.

--Additional reporting by Dave Simpson, Matthew Santoni, Matt Fair, Emilie Ruscoe, Chris Villani, Daphne Zhang, Christopher Cole, Suzanne Monyak, Rachel O'Brien, Bryan Koenig, Mike Curley, J. Edward Moreno, Emma Whitford, Daniel Wilson, Melissa Angell, Kevin Stawicki, Nathan Hale, Diamond Naga Siu and McCord Pagan. Editing by Peter Rozovsky.

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

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