This 12th edition of Unprecedented, our weekly update on COVID-19-related litigation brings new developments in labor and employment cases, consumer protection cases, and civil rights litigation. Price gouging and fraud for personal protective equipment (particularly N95 masks) remain major focuses, with manufacturers, retailers, and governments all taking action. Wedding vendors have found themselves pulled into litigation over refunds as the summer wedding season is disrupted by the COVID-19 pandemic. And, lawsuits over government shutdown orders continue to be filed, with the more recent reflecting the broader political divisions over how to balance public health with a healthy economy. The only guarantee is that COVID-19 will continue to result in more litigation as the pandemic continues.
We hope you find these cases, and the questions they raise, to be informative.
How far will the shutdown litigation cases go?
We reported last week that Pennsylvania Governor Wolf and the General Assembly were in a stand-off after the General Assembly passed a concurrent resolution purporting to terminate the Governor’s state of emergency and, with it, the effectiveness of his shutdown orders. The General Assembly filed mandamus petition in the Commonwealth Court of Pennsylvania to compel the Governor’s compliance, whereas the Governor went directly to the Supreme Court of Pennsylvania to resolve the controversy, invoking that body’s King’s Bench jurisdiction. Although the substantive dispute remains pending, the Supreme Court of Pennsylvania has already resolved the jurisdictional battle—announcing its intent last week to hear the case. The case is pending at docket number 104 MM 2020.
If a lawsuit were not enough to convince observers that Governor Wolf intends to continue enforcing his shutdown orders, a lawsuit against Carlisle Events—organizers of a car show attended by up to 100,000 visitors—should have settled the matter. In its complaint, the Commonwealth alleged that Carlisle Events intends to proceed with the car show even after requesting and being denied a waiver to exceed the current 250-person limit for outdoor gatherings. Carlisle Events responded to news of the lawsuit with a statement arguing that Governor Wolf’s order was invalid and unnecessary to protect public health because the 100-acre event facility offers sufficient space for social distancing. The dispute seems likely to be short-lived, however, with the parties announcing a settlement after a hearing in which a Commonwealth Court judge grilled the Commonwealth’s counsel on why mass-gathering restrictions were necessary for Carlisle Events when Governor Wolf had marched shoulder-to-shoulder with protesters at a recent demonstration.
In Colorado, the State Department of Public Health and Environment suspended the license of a Denver-area restaurant in early May after it opened in defiance of Governor Polis’s shutdown orders. The restaurant responded by suing both the State Department of Public Health and Governor Polis, bringing state-law separation-of-powers claims and state and federal constitutional claims under theories of due process, equal protection, free speech, free association, and excessive fines. The case remains pending even after the State Department of Public Health lifted the suspension and reinstated the restaurant’s license. The restaurant argues that its economic situation had become so dire that it had no choice but to reopen.
This Colorado case is just one of many more playing out around the country, with increasingly political dimensions. In neighboring Utah, for instance, a group of businesses announced that they intend to bring a class-action suit against Governor Herbert and Lt. Governor Cox over the impacts that state’s shutdown orders have had on small businesses. And though recognizing the lawsuit will have a negative public relations impact on class-member businesses, one of the lead plaintiffs argues that it’s necessary for the state and public to understand the impact that the shutdown order had on Utah businesses.
And in Hawaii, Governor Ige and his administration are facing two lawsuits over the state’s shutdown orders. One lawsuit, brought by a group called For Our Rights and several individuals, alleges that Governor Ige’s shutdown orders violate state and federal constitutional rights to liberty, due process, interstate travel, and movement. The other lawsuit, brought by a Hawaiian wishing to travel to the mainland and three Hawaiians wishing to travel to visit their properties on the island, raises similar state and federal constitutional claims. Both raise the comparatively small numbers of infections and deaths in contrast to the economic impacts on businesses and individuals—focusing particularly on the effect that the quarantine component of Governor Ige’s shutdown orders has had on Hawaii’s tourism-dependent economy.
Will civil rights groups continue with PPP litigation?
A recent rule change to the Paycheck Protection Program eases restrictions on business owners with criminal records, according to the Small Business Administration ("SBA"). However, civil rights groups challenging the rules in court say the change is insufficient. The rule change reduced the program's "look-back period" from 5 years to 1 year for non-financial felonies for which the applicant has been convicted, pleaded guilty or no contest, or been placed on parole or probation. According to an SBA statement, the 5-year period remains for felonies involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance. Despite this loosening of restrictions, several civil rights groups remained unsatisfied and filed a federal lawsuit in Maryland, claiming the felony exclusions disproportionately affect black and Hispanic business owners. Examples of loan exclusions include parolees for drug convictions that are several years old and pending misdemeanor charges. The lawsuit asks the court to declare that the criminal-record exclusions are unlawful and cannot be enforced. News coverage can be found here.
What is the pushback with mask policies?
In Pennsylvania, a chain of grocery stores is facing several lawsuits alleging that the company has violated the Americans with Disabilities Act by refusing service to individuals who are not wearing a mask due to a disability. One lawsuit claims that a patron with a history of lung fibrosis, stroke, and vertigo that limits her breathing was asked to leave the store for not wearing a mask. Another lawsuit alleges that police removed an individual who experiences faintness, post-traumatic stress disorder, and a form of anxiety that makes it difficult to breathe when she wears a mask. Pennsylvania’s mask policy allows individuals who cannot wear a mask due to a medical condition to enter businesses without a mask and does not require the individual to provide documentation of the medical condition. News coverage can be found here.
Will there be a call for more cancellation refunds?
Spilman has been tracking various kinds of COVID-19 litigation, including those filed against cruise lines, insurance companies, restaurants, and concert ticket vendors, and a new branch has caught our eye. The wedding industry has been stalled by COVID-19 restrictions on travel and gatherings, meaning the usually-packed summer wedding season is now rapidly emptying. Couples with anticipated weddings this year have canceled ceremonies and receptions, and they are seeking to recoup the money they paid to various vendors. Litigation has sprung up around the country where the vendors refuse. The scenario is usually the same: a couple had selected a vendor (i.e. venue, caterer, photographer), signed the contract, and paid before being forced to cancel the wedding without a refund or rescheduled date. With thousands of dollars (if not more) invested in a wedding, couples are seeking recoupment through lawsuits alleging breach of contract. Some vendor contracts include a force majeure or "Act of God" clause, which relieves the parties from performing their contractual obligations when certain circumstances beyond their control arise, making performance impracticable, illegal, or impossible. Others, however, do not address situations like COVID-19 at all. In both cases, courts are being called upon to determine the parties' payment obligations to one another. Given summer has just begun, it is anticipated that such wedding-related lawsuits to increase as we get further into the season. Click here for news coverage.
Will fraud and exploitation suits increase?
The Environmental Protection Agency recently issued orders calling for Amazon.com Services LLC and eBay Inc. to cease the sale, distribution, or offering of “unregistered, misbranded, or restricted-use pesticides, and pesticide devices that make false or misleading claims,” according to an EPA press release. The list of prohibited items includes products that have been falsely marketed as preventing COVID-19. The EPA orders require that the two entities remove the products from their website, and failure to do so could lead to civil penalties. EPA Administrator Andrew Wheeler explained that “[w]e remain vigilant against the claims of producers that falsely assert their efficacy and safety. Of particular concern are products that falsely claim to be effective against COVID-19. It is our duty to continue transparent communication with the public on unregistered products that may cause injury to consumers, and immediately remove them from commerce.” Similarly, the United States Food and Drug Administration and the Federal Trade Commission sent warning letters to companies believed to be selling or distributing false COVID-19 treatments. For news coverage on the EPA’s orders click here. For an EPA press release regarding the orders, click here.
Civil asset forfeiture has been roundly criticized by reform advocates, who argue that it has been put to oppressive use in minority communities. Now, however, civil asset forfeiture is being revived to combat fraud by foreign nationals taking advantage of the COVID-19 pandemic situation in the United States. The Virginia Coronavirus Task Force (“VCTF”), working in conjunction with the FBI’s Richmond Division, invoked civil asset forfeiture to seize more than $543,000.00 in bank accounts connected to Chinese individuals who had created fraudulent websites purporting to sell N-95 respirators and other PPE. According to the VCTF, defrauded parties included not only individuals but also several local municipalities across the United States. Now that these bank accounts have been seized, their owners will have to affirmatively prove that they had not committed any crimes before the money will be returned—a difficult burden of proof that is rarely seen in America’s “innocent before proven guilty” jurisprudence. Given that pre-COVID-19 activism caused a decrease in civil asset forfeiture, it will be interesting to see if the pandemic will mark a reversal—or at least a change in course. Criminal and social justice reform advocates, in particular, should keep a close eye on this situation. Click here for news coverage.
In yet another N-95 mask related lawsuit, 3M Co. has filed suit against an Amazon seller that allegedly sold 3M masks at extortionate markups, at times more than 20 times their actual value. In some cases, the seller also allegedly failed to provide the masks once they had been purchased. This type of profiteering behavior has already been banned by most mainstream auction and third-party seller sites, such as e-Bay. Amazon likewise does not permit extortionate pricing of such essential items, and acted immediately in shutting down the Amazon seller’s accounts and assisting 3M in combatting their actions. In response, the judiciary has generally been quick to issue restraining orders and preliminary injunctions in cases such as these. Click here for news coverage.
On June 12, 2020, the Attorney General for the State of Washington filed a lawsuit against North Coast Biologics, LLC and its owner, Johnny Stine, for offering for sale (on Facebook) an unauthorized coronavirus vaccine, heedless of the fact that it had undergone no studies to move towards FDA approval, nor been subject to any application for approval from the FDA. The Attorney General seeks both an injunction preventing further advertising and sales as well as maximum fines of $2,000 for each violation of the state's unfair or deceptive acts and practices consumer protection law. According to the complaint, Stine claims to have already injected about 30 residents of Washington, Montana, Arizona, and Texas with the "vaccine," which he claims delivers immunity. (Each $400 purchase apparently includes a primary vaccination with two boosts). Beyond the advertisements and sales themselves, the lawsuit also targets a number of vulgar comments posted by Stine and his company in response to their critics. News coverage can be found here.
Questions?
Spilman’s COVID-19 Task Force is monitoring litigation arising out of this pandemic to help keep our clients informed and in front of liability issues. Contact us with any questions or requests for tracking particular types of litigation arising out of the COVID-19 pandemic.
|