Litigation In The Time Of COVID-19

COVID-19-related Lawsuits

A variety of lawsuits have cropped up in the United States since the COVID-19 outbreak. At least four lawsuits have been filed against Princess Cruise Lines, whose three thousand passengers from the Grand Princess that docked in San Francisco, California have been forced into a two-week quarantine in military bases around the country.[1] The lawsuits, filed from March 9 through March 17, claim that Princess Cruise Lines allegedly let a cruise continue, while knowing a passenger from the prior journey had symptoms of COVID-19.[2] Each lawsuit claims over $1,000,000 in damages and was filed by the same Florida-based attorney, whose parents are the plaintiffs in one of the suits.[3]

In the wake of the outbreak, several companies have canceled or postponed planned events and gatherings. Qualtrics International, Inc. (“Qualtrics”) is one of those companies and filed a lawsuit to obtain a court ruling that its actions were proper.[4] According to its lawsuit, on March 3, 2020, Qualtrics announced that it was postponing its X4 Experience Management Summit (“X4”) scheduled to be attended by up to 16,000 people in Salt Lake City, Utah from March 10 to 13.[5] Qualtrics claims that it postponed X4 due to COVID-19 and the health risks posed by large gatherings of people. Qualtrics claims that while many of its presenters and participants were working with Qualtrics on the reschedule, SME Entertainment Group, LLC (“SME”) has refused to do so. In the lawsuit, Qualtrics alleges that SME, who was engaged to secure the participation of the band “The Killers,” refused to cancel or postpone the performance and insisted on full payment.[6] Thus, Qualtrics requests that the Court declare various rights under the parties’ agreement and find that Qualtrics properly exercised those rights.[7]

There have also been multiple securities lawsuits relating to COVID-19. Norwegian Cruise Lines (“Norwegian”), in addition to likely worrying about potential claims by passengers similar to those facing Princess Cruise Lines, is facing a securities class action lawsuit which alleges that Norwegian’s filings with the SEC concerning COVID-19 were false and misleading.[8] Specifically, the lawsuit claims that Norwegian’s relatively positive statements regarding its handling of COVID-19 in its Form 8-K and 10-K filings were false, as revealed by a news report from the Miami New Times which states that Norwegian encouraged sales persons to misrepresent to its customers that demand for its cruises (other than those in Asia) was high.[9] The lawsuit cites the decrease in stock price after the representations and misleading statements were revealed as the basis for damages.[10]

Another securities class action lawsuit was filed on March 12, 2020, this time against Inovio Pharmaceuticals, Inc. (“Inovio”). The plaintiff in that lawsuit claims that Inovio, through its CEO, made false statements about the company’s ability to develop a COVID-19 vaccine, which caused its stock price to increase and then fall.[11] The lawsuit alleges that Inovio’s CEO made the questionable statements on Fox Business News on February 14, 2020 and during a televised meeting with President Trump on March 2, 2020.[12] According to the lawsuit, after the announcements, on March 9, 2020, Inovio agreed to sell $50 million of its common stock on the open market and stated on its Form 8-K that it “plans to pursue an accelerated timeline for developing its DNA vaccine INO-4800 to address COVID-19, also known as coronavirus” and have human clinical trials in April 2020, followed by one million doses by the end of 2020.[13] Then, a Tweet by Citron Research challenged the veracity of Inovio’s claims about the vaccine. According to the lawsuit, the share price dropped from $19.36 per share on March 9, 2020 to $5.70 on March 10, 2020.[14]

The American Civil Liberties Union (“ACLU”) has sued the U.S. Immigration and Customs Enforcement in the Western District of Washington for the release of immigrants detained in Tacoma, Washington.[15] The ACLU claims that those individuals are at a high risk of serious illness or death in the event of a COVID-19 infection.

Even a COVID-19-related patent infringement lawsuit has been filed. Labrador Diagnostics, LLC (“Labrador”), a company that appears to simply hold patents, sued a company creating COVID-19 tests for patent infringement. Labrador alleges in the lawsuit that the COVID-19 tests infringe two of its patents (which were originally patented by the infamous Theranos).[16] After facing criticism for the lawsuit, Labrador has backed off of its position and states that it will allow third parties to develop the COVID-19 tests.[17]

On March 10, 2020, an individual filed a Florida class action lawsuit against Amazon, Inc. for the high prices charged during COVID-19.[18] She claims that Amazon’s actions violate the Florida Deceptive and Unfair Trade Practices Act (Nebraska has a similar law, as do many other states).[19] As examples of the unfair prices, she cites to paying $99.00 for thirty-six rolls of toilet paper and $199.00 for two 1-liter bottles of Purell hand sanitizer.[20]

Another class action was filed in West Virginia federal court against Bank of America, to stop foreclosures “during the national emergency caused by the spread of the COVID-19 virus” because, the plaintiffs allege, such foreclosures cannot be conducted at the appropriate times required by West Virginia law.[21]

A lawsuit was even filed against the People’s Republic of China for allegedly acting slowly in the wake of the COVID-19 outbreak.[22] The lawsuit claims to represent “[a]ll persons and legal entities in the United States who have suffered injury, damage, and loss related to the outbreak of the COVID-19 virus” and argues that the People’s Republic of China “had a duty to persons in the United States” and breached that duty by failing to admit their knowledge of the dangers of the virus and containing the virus in its early stages.[23] 

Other lawsuits in the near future may include nursing home liability,[24] demands for paid sick leave,[25] and more. 

Of course, the filing of a lawsuit does not mean the claims are meritorious, but the presence of such lawsuits adds another element of risk for companies navigating decision-making during this outbreak.

Contractual Disputes and Possible Defenses

Companies facing impossibilities or difficulties in fulfilling contracts (or threats from their contracting parties) at this time need to assess any applicable force majeure clause. Force majeure is a legal concept that may excuse a contracting party’s promised performance in the event that an unforeseen circumstance occurs, but only if a “force majeure” clause appears in the contract.[26] The effect of the force majeure clause—including what performance is excused—depends on the language of the contract.[27] Thus, whether COVID-19, or government orders stemming therefrom, trigger a force majeure clause depends on the wording of the contract. However, even if a force majeure clause does not apply or does not exist, the doctrine of impracticability may excuse performance. Please see the related Baird Holm article here, for more information on force majeure and the doctrine of impracticability with regard to COVID-19.[28] 

Please note that even if contractual performance is not excused, going against guidance provided by the applicable state or federal government (for example, in having large gatherings of people) may provide a basis for a negligence action—or at least the threat or filing of a lawsuit. In fact, plaintiffs’ lawyers have already made mention of such types of actions.[29]

Finally, companies facing difficulties should assess whether they have business continuity insurance or other applicable insurance, and determine whether that insurance covers viral outbreaks, such as COVID-19. 

The attorneys at Baird Holm remain available to assist you, including by reviewing your contracts for possible force majeure provisions, reviewing any relevant insurance agreements, and providing advice for real or anticipated disputes.