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Coronavirus Litigation: The Week In Review

By Celeste Bott · February 11, 2021, 8:49 PM EST

Medline Industries says it was scammed in a purchase of more than $15 million worth of personal protective equipment, Carnival has escaped some claims by cruise passengers who were allegedly exposed to COVID-19, and In-N-Out's insurer argues it's not on the hook for hundreds of millions in business interruption coverage.

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.

Public Policy

Florida's Miami-Dade County won dismissal Thursday of a strip club's lawsuit challenging a COVID-19-related emergency curfew when a federal judge found the measure was enacted in good faith and did not intrude on constitutional rights without adequate justification.

In his order closing the case brought by 7020 Entertainment LLC, owner of the KOD Miami club, and three employees, U.S. District Judge Robert N. Scola Jr. emphasized the ongoing impact of the pandemic on the nation and Florida in particular, and backed the need for "judicial humility" in reviewing elected officials' efforts to address the complex and changing emergency.

The Dec. 17 complaint, which was also filed by KOD employees Michael Coleman, bartender Briana Kravetz and exotic dancer Kala Majors, claimed that the curfew, which the county enacted in response to last summer's surge in COVID-19 cases and has renewed several times, has had a devastating economic impact while also infringing on their First Amendment rights to free expression through exotic dancing.

A Houston nightclub that has thrice had its alcohol permit suspended by the Texas Alcoholic Beverage Commission for allegedly violating COVID-19 protocols has sued the state's alcohol regulator, challenging its most recent 60-day suspension as unjust.

In a lawsuit filed in Harris County District Court on Tuesday, Spire Reception Hall LLC is asking the court to vacate the suspension, arguing it was based on an "isolated event" that constituted no continued threat to public safety.

Spire argues it was diligent in trying to line up security for a private birthday party it hosted on Jan. 17 — an event that featured musicians Trey Songz and Fabolous — but the Harris County Sheriff's deputies originally scheduled to work the show backed out, and calls to the Houston Police Department and a constable's office "were not returned." The club then hired private security, which allegedly allowed a crowd of "party crashers," who hadn't bought tickets to the private event, to breach the back doors and flood into the club, many of them "not wearing protective masks properly," Spire alleges.

Product Liability

Medical supplies distributor Medline Industries Inc. is suing a medical equipment supplier over more than $15 million in medical isolation gowns Medline had agreed to purchase, saying the supplier promised high-quality gowns but delivered ones that were unusable.

In a complaint filed in Illinois federal court Wednesday, Medline said that Amwear Safety Pro Inc. had initially given it design samples of the gowns that met Medline's standards and specifications, but the gowns that came off the production line had significant changes in design and manufacture, to the point that the intended customer refused to take them.

According to the complaint, as a result of the high demand for personal protective equipment created by the COVID-19 pandemic, Medline became interested in maximizing its supply, and was approached in August by Amwear, which offered to sell single-use isolation gowns to Medline for purchase by Medline's customers. Amwear assured Medline that its gowns would be high-quality and that it had a manufacturer in China affiliated with Amwear's owner that was ready to produce them, which Medline said in the complaint it later learned was untrue.

Employment

United Food and Commercial Workers International Union local asked a California federal court to let it intervene in a state grocers association's suit challenging a Long Beach wage hike due to the COVID-19 pandemic.

UFCW Local 324, which represents grocery store workers in Long Beach, said in a motion to intervene Tuesday that the court should let it help the city defend its "hero pay" ordinance providing a pay bump to grocery store workers against a challenge by the California Grocers Association. Local 324 argued that the group mentioned the union in its complaint, so the court should let the union defend itself. 

The lawsuit "seeks to punish Local 324 for engaging in constitutionally protected petitioning activity to pass legislation beneficial to the grocery store workers it represents and to discredit that legislation based on Local 324's advocacy," the union said.

And a Florida judge has refused to dismiss a lawsuit filed by the family of a Publix Super Markets Inc. deli worker who died after allegedly catching COVID-19 from a co-worker.

Judge Carlos Lopez said he would not dismiss the lawsuit filed by the family of Gerardo Gutierrez, who died at age 70 on April 28, 2020, from complications caused by COVID-19.

The family claims the Lakeland, Florida-based company breached its duty to keep its employees safe and not only knowingly failed to take proper precautions but also prohibited its workers from wearing gloves and face masks for fear such measures would "incite panic" among customers.

Legal Industry

Five nonprofit legal service organizations sued the Los Angeles County Superior Court's presiding judge Tuesday, claiming he has violating the state constitutional rights of attorneys and litigants by requiring them to appear in person for traffic and eviction hearings when the county is the "epicenter of the coronavirus pandemic."

The lawsuit filed by Public Counsel and other groups seeks an order preventing Presiding Judge Kevin C. Brazile and the clerk of the court system from holding in-person traffic and unlawful detainer hearings during the coronavirus pandemic.

The decision to continue with the hearings while the Los Angeles area experiences one of the highest rates of COVID-19 deaths in the nation is creating "superspreader" events that disproportionately impact people of color and those with low-incomes, the legal groups said.

Personal Injury & Medical Malpractice

A federal judge in Washington State has partly granted Holland America and parent company Carnival's bid to dismiss a suit by cruise passengers who say they were exposed to COVID-19, ruling that they haven't shown the companies acted outrageously when deciding to set sail.

U.S. District Judge Thomas S. Zilly on Wednesday tossed claims for intentional infliction of emotional distress in the proposed class action lodged by passengers Leonard C. Lindsay and Carl E.W. Zehner. The judge said he wasn't convinced by their argument that Carnival Corp. and Holland America Line Inc.'s decision to sail the MS Zaandam in March was proof of outrageous conduct because the companies already knew the World Health Organization had declared COVID-19 a public health emergency.

Judge Zilly also dismissed Lindsay's claim for negligent infliction of emotional distress, saying he was persuaded by the cruise lines' argument that Lindsay did not allege any symptoms. The initial complaint was filed on June 24, when Lindsay and Zehner accused Holland America and Carnival of exposing more than 1,000 cruise ship passengers to COVID-19 on the vessel, which sailed out of Argentina on March 7.

In Louisiana, the widow of a deckhand who purportedly contracted a fatal case of COVID-19 from the captain of the ship he was working on has reached an undisclosed settlement with the ship owner, according to documents filed in federal court.

After being advised of the settlement, U.S. District Judge Eldon Fallon dismissed without prejudice a suit brought by Kathy Norwood accusing Rodi Marine LLC of causing the death of her husband, Michael Norwood, in April after he allegedly contracted the coronavirus from the captain, John Reed. Terms of the deal were not discussed in court papers.

And Celebrity Cruises on Monday urged a Florida federal court to toss a proposed class action lodged by a New York couple who say they caught COVID-19 onboard, arguing the couple cannot prove they were infected on the ship and cannot collect damages on claims for future health problems they might have stemming from the illness.

Celebrity said Fred and Marlene Kantrow do not allege in their suit when they first began to experience symptoms of COVID-19 and said they could have been exposed while traveling from New York to South America to board the Celebrity Eclipse. The claims for future physical injuries caused by contracting COVID-19 should be dismissed because "there is no factual, medical or scientific basis" for them, the cruise line added.

The Kantrows allege they contracted COVID-19 in March aboard the Celebrity Eclipse after the cruise line concealed the truth about the health of guests onboard and continued to hold events, including an elbow-to-elbow salute to health care workers. The Florida federal judge overseeing the case has dismissed the suit twice before but gave them one last chance to replead their claims.

Real Estate

The owner of two South Jersey malls has slammed Regal Cinemas with lawsuits alleging the company failed to pay more than $2 million in rent over the course of nearly a year that included a mandatory shutdown of Garden State movie theaters due to the coronavirus outbreak.

Two subsidiaries of Philadelphia-based Pennsylvania Real Estate Investment Trust — which filed for bankruptcy amid the pandemic — launched the suits Wednesday in New Jersey state court over Regal Cinemas' alleged nonpayment of rent owed for theaters at Moorestown Mall and Cumberland Mall.

The suits from Moorestown Mall LLC and Cumberland Mall Associates are seeking about $1.4 million and roughly $764,000 in unpaid rent, respectively.

Securities

A California biotech company and its CEO have agreed to settle a U.S. Securities and Exchange Commission suit alleging they lied to investors about the development of a blood test for the coronavirus.

In documents filed Thursday in San Jose federal court, Arrayit Corp. and its chief executive Rene Schena agreed to accept final judgment in the matter without admitting or denying the SEC's claims they misled investors about both the COVID-19 blood test and financial documents they earlier failed to file. In addition to the proposed judgment terms applied to both defendants, the CEO's agreement also states that she can't run a public company for three years. She'll also pay a $50,000 civil penalty in connection with allegations.

The consent agreements were filed on the same day that the SEC filed its suit against the pair, claiming they're liable for pandemic-related misstatements that drove the company's trading price up in the early days of the virus' spread across the U.S.

Insurance

Affiliated FM Insurance issued "talking points" to its employees instructing them on how to deny coverage of business losses due to the COVID-19 pandemic, according to a lawsuit filed in Pennsylvania state court by the owner of Planet Fitness gyms in four states

The memo allegedly told employees at AFM and its parent company FM Global to point to a "contamination" exclusion in its policies as a reason for issuing blanket denials of coverage for business lost to the coronavirus or the government closure orders intended to slow its spread, which Keystone PF Acquisition LLC — a company that owns Planet Fitness gyms in Pennsylvania, Delaware, North Carolina and South Carolina — says constitutes bad faith and a breach of contract.

The gyms' parent company, also known as National Fitness Partners, seeks a declaratory judgment from the court that its losses should be covered.

Travelers Casualty Insurance Co. of America urged the Ninth Circuit on Monday not to revive a San Francisco retailer's lawsuit seeking coverage for its financial losses due to COVID-19 shutdown orders, saying its property insurance policy only covers physical damage to property and excludes loss or damage caused by a virus.

Travelers urged the appellate court to affirm U.S. District Judge Jon S. Tigar's September ruling dismissing children's store Mudpie Inc.'s proposed class action complaint, which accused the insurance company of wrongfully denying its claim for pandemic-related business interruption losses, as well as those of other policyholders. Travelers said Mudpie was looking for coverage that does not exist in its property insurance policy, saying the store's losses were not covered by a fire or other physically damaging event, but by a virus, which is expressly excluded from the policy.

A group of Minor League Baseball teams also asked the Ninth Circuit to revive a pandemic-related insurance fight Monday, arguing that the lower court misapplied a virus exclusion and that the exclusion does not contain an anti-concurrent clause.

The teams, led by JetHawks Baseball LP, said in a brief that the lower court "incorrectly presumed" that all of their losses were caused by COVID-19, while their three Nationwide insurers never demonstrated that the virus exclusion should fully apply to bar coverage. The teams said the virus exclusion does not have an "anti-concurrent causation," so the lower court had no reason to conclude that all of the teams' losses were caused directly and indirectly by the virus.

And Federal Insurance Co. has sued a major New York luxury hotel operator, arguing that it does not have to cover business losses the company suffered because of government-mandated restrictions during the coronavirus pandemic.

The insurer told the New York Supreme Court on Friday that BD Hotels LLC's policy did not cover pandemic-related losses because its properties did not suffer direct physical loss or damage. In a five-page complaint, Federal Insurance said that more than a dozen luxury accommodations BD Hotels operates are not covered by its $151 million insurance policy, including the Bowery Hotel in the East Village and the Jane in Greenwich Village. 

In California, Zurich American Insurance Co. asked a federal court to throw out In-N-Out's claim for hundreds of millions in COVID-19 business interruption coverage, saying the burger chain did not sustain any loss or damage of property that would trigger coverage.

The insurer told the court on Monday that government-mandated pandemic restrictions did not cause physical damage to In-N-Out's restaurants that would entitle the company to coverage under its $250 million "all risk" policy with Zurich. The Southern California burger chain filed a breach of contract suit in May after Zurich denied its claims.

And a New York state judge has ruled that a Great American Insurance unit doesn't have to cover a movie theater's losses due to COVID-19 shutdown orders, while also dismissing the theater's claim that its insurance brokers negligently purchased it a policy with insufficient coverage.

Judge Timothy S. Driscoll dismissed all of Port Washington-based Soundview Cinemas Inc.'s claims against Great American Insurance Co. of New York and the insurer's wholesale broker Jimcor Agency Inc., as well as those the theater leveled against its own insurance brokers, Five Star Coverage Corp. and Wilkinson & Krause Agency Inc.

--Additional reporting by Bill Wichert, Emilie Ruscoe, Jeff Sistrunk, Nathan Hale, Daniela Porat, Mike Curley, Joyce Hanson, Lauren Berg, Max Kutner, Michelle Casady, Craig Clough, Daphne Zhang, Eli Flesch, Matthew Santoni, Carolina Bolado and Y. Peter Kang. Editing by Alanna Weissman.

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