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Law360 (April 2, 2020, 9:17 PM EDT) -- The suddenly ubiquitous conference service Zoom has been hit with a lawsuit over privacy concerns, investor allegations are mounting against Norwegian Cruise Lines over its response to the coronavirus pandemic, and companies like Bed, Bath & Beyond are seeking court orders to preserve pending mergers and acquisitions amid the outbreak.
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.
Privacy
Zoom has quickly emerged as the de facto platform for digital communication during the coronavirus pandemic, as millions of Americans have been ordered to shelter in place and work from home if possible. But on Tuesday, Zoom Video Communications Inc. was sued on allegations that it failed to protect those users' personal information.
According to a proposed class action filed in California federal court, Zoom violated California's Unfair Competition Law, Consumers Legal Remedies Act and Consumer Privacy Act by collecting and disclosing personal information to third parties such as Facebook "upon installing or upon each opening of the Zoom app."
Zoom released a new version of the app on March 27, according to the complaint, saying it would no longer send information to Facebook. But plaintiffs say the company neither blocked previous versions of the app, nor assured users that information already collected has been deleted.
Mergers & Acquisitions
Flower and gift company 1-800-Flowers can't use the COVID-19 crisis to breach a firm deadline to close on a $252 million purchase of PersonalizationMall.com, Bed Bath & Beyond told Delaware's Chancery Court on Wednesday.
The retailer argues that the Feb. 14 equity purchase agreement among the companies required a closing regardless of most economic, social or geopolitical calamities unless the effects fell disproportionately on the buyer.
Despite the contract barriers to claiming a defensible, deal-killing "material adverse event," 1-800-Flowers reported on March 23 that it would not close by the deadline and requested postponement until April 30, without committing itself to closing on the later date, Bed Bath & Beyond said in the complaint.
On Thursday, a Houston dine-in movie theater chain made a similar plea to a Texas federal court, saying a Mexican cinema company was attempting to use the coronavirus pandemic as an excuse to back out of a deal to acquire the theater chain.
Omar Khan asked a Southern District of Texas judge to enforce his deal with Mexican company Cinemex and its U.S. subsidiary, Cinemex USA Holdings Inc., arguing the company can't rely on the global health crisis as an excuse to not follow through because the parties discussed the coronavirus at length during negotiations, according to a complaint.
In fact, citing the pandemic, Cinemex was able to negotiate a 10% discount from its initial non-binding offer, the amount of which was not disclosed in the court documents. If the deal falls through, Khan said, it would not only hurt the goodwill and reputation of his company, Star Cinema Grill, but also his more than 1,000 employees and their families, according to the complaint.
Insurance
Restaurants and other businesses are taking their insurance carriers to court, saying the insurers have wrongly denied coverage for work interruptions resulting from a state-mandated shutdown of their businesses to help slow the spread of COVID-19.
In Chicago, a group of restaurant and theater owners told an Illinois federal court that Society Insurance Inc. has denied them coverage without undertaking required inspections and investigations, sometimes only hours after they have made claims.
The closures were through no fault of the businesses, they said, pointing to an order from the governor of Illinois forcing all restaurants, bars and movie theaters to close on March 15, with an additional order to close all nonessential businesses five days later, according to the complaint.
A sports bar in Florida filed a similar action against Lloyd's of London in federal court Thursday after the insurer denied coverage for its state-mandated closure in response to the COVID-19 pandemic.
Business Disruption
A Pittsburgh-area shopping center said Monday it could fold under the strain of coronavirus-related business shutdowns if Wells Fargo and a Starwood Property Trust subsidiary follow through on an "outrageous" threat to seize the rent payments being submitted by the strip mall's tenants.
According to the federal lawsuit filed by North Hills Village LLC — which operates the 600,000-square-foot shopping center in Ross Township, Pennsylvania — loan servicer LNR Partners LLC had demanded a "cash sweep" that would divert all the rent payments from North Hills Village tenants directly to LNR and Wells Fargo to service a loan with a final payment due in December 2021.
North Hills Village claimed that LNR and Wells Fargo had breached their loan and cash management agreements, and it sought an injunction to stop the cash sweep and a declaratory judgment from the court that the demand was improper, since the mall had fixed the potential vacancy that triggered the rent grab.
The cash sweep would be especially damaging in a time of state-ordered shutdowns of nonessential businesses and stay-at-home orders to prevent the spread of the COVID-19 coronavirus, North Hills Village said in its lawsuit.
Hospitality
Norwegian Cruise Line Holdings Ltd. was hit with a second proposed securities fraud class action in Florida federal court on Tuesday, adding to growing allegations that its shareholders were hurt by the company's response to the coronavirus pandemic.
Individual investor Abraham Atachbarian has accused the company and two of its executives of attempting to staunch the company's losses by downplaying the seriousness of the novel coronavirus in its public filings and in its pitches to prospective customers.
Another lawsuit filed last month points to the company's recent securities filings and press releases, which he said presented a misleading positive outlook, and news reports that featured leaked internal communications and anonymously quoted Norwegian employees who said managers had pressured sales agents to mislead potential customers and provided scripted answers containing false reassurances about the growing pandemic.
But Atachbarian's suit adds allegations regarding a March 13 letter sent to Norwegian's CEO by U.S. Sens. Richard Blumenthal of Connecticut and Edward J. Markey of Massachusetts demanding that the company cease spreading false information and "suspend all operations until sufficient measures are in place to protect the health and safety of [its] passengers and crew members."
The company suspended all its cruises through Apr. 11 in response to the senators' letter — and Atachbarian claims that the price of Norwegian's shares subsequently fell $2.23, from an opening price of $13.33 to a close of $11.10.
Employment
On Wednesday, Uber drivers urged a California federal judge to issue an emergency order requiring Uber to classify drivers as employees, arguing that misclassifying them as independent contractors — with no paid sick leave — may cause infected drivers to keep working and exacerbate the spread of COVID-19.
Uber's recently rolled-out COVID-19 sick leave benefit for drivers is more stringent than the protections afforded to employees under the California labor code, the drivers argue, as it requires documentation of a COVID-19 diagnosis from a physician or a personal order to quarantine.
Without the sick pay mandated for employees under California law, many Uber drivers will be unable to get that doctor's note, and even if they do have access to health care, doctors' offices are overwhelmed by the pandemic, making it difficult to schedule a visit, they said.
--Additional reporting by Emma Whitford, Jeff Montgomery, Mike Curley, Katie Pohlman, Matthew Santoni, Emilie Ruscoe and Hannah Albarazi. Editing by Peter Rozovsky.
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