Coronavirus Litigation: The Week In Evaluation
Email Celeste Bott
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Law360 (May 20, 2021, 5:52 PM EDT) —
Another lawsuit has been filed by landlords challenging the national eviction moratorium, Amazon workers told the Second Circuit that their COVID-19 workplace safety suit belongs in federal court, and Bank of America has been ordered to work out relief for public benefits recipients who had their accounts frozen during the pandemic.
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 litigation across the country.
Here’s a breakdown of some of the COVID-19-related cases from the past week.
Federal judges should be willing and able to assess COVID-19 workplace safety, counsel for Amazon.com workers told the Second Circuit Wednesday, after an appellate judge sympathized with the jurist who kicked their case to the Occupational Safety and Health Administration.
The back-and-forth came during a virtual argument before U.S. Circuit Judges Dennis Jacobs, Denny Chin and William J. Nardini in an appeal by Staten Island warehouse workers of U.S. District Judge Brian Cogan’s decision last year not to take jurisdiction over their claims that the retail giant directly exposed them and their families to the deadly virus. Judge Cogan said courts like his are “particularly ill-suited” to address the “evolving situation” presented by the coronavirus.
A federal judge has ordered Bank of America to provide preliminary relief to a class of California public benefits recipients suing the bank for freezing their accounts after failing to protect them from fraud, finding that the plaintiffs have a “strong likelihood of success” on their claims.
As California’s unemployment benefits administrator, Bank of America issued more than 8.2 million prepaid debit cards during the height of the COVID-19 pandemic. When benefits recipients began to notice unauthorized charges on what they call the “antiquated” cards, they say the bank froze access to funds instead of conducting a proper investigation.
The parties will work out terms and scope of relief in front of a magistrate judge next week, according to U.S. District Judge Vincent Chhabria’s Monday order. For the purpose of granting injunctive relief, the judge extended provisional class certification to all benefits cardholders who call the bank to report suspected fraudulent activity.
Food & Beverage
The owners of strip clubs in Pennsylvania, California, New Jersey, South Carolina and Maryland are suing the U.S. Small Business Administration in a Pennsylvania federal court, claiming the agency is freezing them out of relief funding for bars and restaurants hit hard by the COVID-19 pandemic.
Seven companies operating a total of eight strip clubs said the SBA’s rules improperly classified them as “prurient” and violated their First and Fifth Amendment rights by presumptively denying them access to Restaurant Revitalization Fund grants under the American Rescue Plan Act of 2021. They sought a nationwide injunction blocking the SBA from refusing them and similar businesses money from the program based on regulations that had not gone through the normal vetting and approval process.
And restaurant owners suing Grubhub in Illinois federal court on claims that it uses their trademarks without permission have urged a Colorado federal judge to deny a proposed settlement in a similar suit, saying the deal would effectively legalize Grubhub’s practice of listing 150,000 restaurants on its platform without consent.
Lynn Scott LLC and The Farmer’s Wife LLC, which are not parties in the Colorado case but are seeking to intervene in the suit, joined 30 other restaurant owners on May 7 to oppose a deal between Grubhub Inc. and Denver bar and restaurant Freshcraft that would end claims accusing the food delivery giant of falsely saying competitor restaurants are closed during the coronavirus pandemic. The owners in the competing proposed class action in Illinois claim their interests might not be protected in the proposed Colorado settlement.
The developer of a coronavirus-tracking app rebuked a New Hampshire federal court for granting Apple’s bid to transfer a case accusing it of violating antitrust law by barring the app from its store, arguing Saturday that the decision “is unacceptable and warrants immediate reversal.”
Coronavirus Reporter filed a four-page motion for reconsideration a day after the court agreed with Apple that the case belongs in the Northern District of California. The order stated in part that Coronavirus Reporter had conceded that before it submitted its application to Apple for distribution through the App Store, it entered a legal agreement that said litigation between the parties must take place in the Northern District of California.
In Saturday’s filing, Coronavirus Reporter took issue with the court construing its first amended complaint as its operative pleading and for denying its second amended complaint. The court had said Coronavirus Reporter did not seek leave or ask for Apple’s consent, as required under Federal Rule of Civil Procedure, to file a second amended complaint.
Personal Injury & Medical Malpractice
A Southern California nursing home where a 77-year-old man died of COVID-19 last year has asked the Ninth Circuit to reverse a district court’s order remanding the case back to California state court.
Glenhaven Healthcare LLC is arguing that because it was acting in accordance with the Public Readiness and Emergency Preparedness Act it was effectively made a federal officer entitled to a federal forum.
Solar panel infrastructure company Array Technologies Inc. has been hit with a proposed securities class action alleging that as it held a series of public offerings in the past eight months, the company failed to disclose that increasing prices for steel and freight transportation would decrease its margins in 2021.
In the suit, the Plymouth County Retirement Association said Array, which had touted its cost and supply chain management strategies in offering documents, “shocked the market” on May 11 by reporting that “unprecedented” increases in steel and shipping costs had had a negative impact on its quarterly results and its expectations for its 2021 financial performance overall. In several instances, the company attributed the spike in costs to the coronavirus pandemic.
The pension fund claims the news prompted analysts to downgrade their ratings for the company and that within a trading day of the announcement, trading prices for the company’s shares had fallen from $13.46 to $11.49 apiece.
A California federal judge asked Pasadena and the organization behind the Rose Bowl Game during a hearing why they are in court fighting over who has control of the famous annual college football game, and asked if the century-old partners could resolve the issue on their own.
During a remote hearing over the city’s motions to toss the suit, U.S. District Judge André Birotte Jr. asked the Pasadena Tournament of Roses Association to explain what relief it hopes to win from the court, pointing out that the parties don’t dispute that the organization owns the trademark associated with the Rose Bowl Game.
A. John P. Mancini of Mayer Brown LLP, an attorney representing the organization, told the judge there is a dispute over whether Pasadena has the right to block the organization from moving the football game to another location during a force majeure event, like the coronavirus pandemic. The organization contends it had a right to move last year’s game to Texas because of social distancing constraints in California.
Florida realtors have filed suit in federal court seeking to overturn the U.S. Centers for Disease Control and Prevention’s national eviction moratorium prompted by the COVID-19 pandemic, slamming the measure’s “terrorizing terms” and saying it could cause them to lose tens of millions of dollars.
In a 28-page complaint filed Monday in Tampa, the Florida Association of Realtors and a Gulfport agency claim the measure exceeds federal power and is not backed by evidence that a prohibition on evictions of tenants who are unable to pay rent stops interstate transmission of the disease. Additionally, they said the threat of severe monetary and criminal penalties for violations has left realtors who own and lease their own properties or serve as property managers afraid to enforce their remaining rights.
In a similar dispute, the Biden administration fired back at a group of landlords looking to block the nationwide eviction ban, telling a D.C. federal judge Wednesday that the government’s new guidance on mask-wearing doesn’t warrant vacating a recent order pausing the property owners’ earlier win.
Attorneys for the CDC and the U.S. Department of Health and Human Services made this argument in a five-page brief rebutting the landlords’ assertion that they failed to inform U.S. District Judge Dabney L. Friedrich about the “dramatically improved” public health crisis before she granted their request for a stay, pending the appeal of her May 5 order gutting the eviction ban.
Also on Wednesday, a Tennessee federal judge rejected a white male restaurant owner’s bid to stop the Small Business Administration from paying out COVID-19-related relief to restaurant owners unless the agency did so without regard to the race or gender of the applicant.
U.S. District Judge Travis R. McDonough ruled that Antonio Vitolo, who owns Jake’s Bar and Grill LLC, can’t get a temporary restraining order because he has failed to rebut the government’s showing that it has a compelling interest in stopping the effects of historical discrimination. As a result, the judge said, he has not shown a likelihood of success on the merits.
Congress reviewed evidence showing that an initial government response to the pandemic — Paycheck Protection Program loans — disproportionately failed to reach minority-owned businesses, Judge McDonough said. So when, in March, as a part of the American Rescue Plan Act of 2021, Congress created a $28.6 billion Restaurant Revitalization Fund, it also opted to give preference in certain instances to businesses owned by women or by those who are “socially and economically disadvantaged.”
U.S. Interior Secretary Deb Haaland and the Cheyenne River Sioux Tribe have urged a federal judge to reject South Dakota Gov. Kristi Noem’s bid to go ahead with a July Fourth fireworks display at Mount Rushmore, with Haaland saying the government explained its public safety and tribal cultural concerns for denying a permit and that it’s too late to change course.
Noem sued in late April asking the court to order the U.S. Department of the Interior’s National Park Service to issue a permit to allow fireworks at the sculpture in South Dakota’s Black Hills. The governor argued that the agency’s refusal was based on unfounded concerns about coronavirus spread, tribal opposition and environmental impacts, and that the Biden administration made no attempt to justify its “abrupt about-face” from the Trump administration’s approval of fireworks in 2020.
In her response Tuesday, Haaland said the permit denial wasn’t an arbitrary and capricious agency action because a DOI official “clearly explained” in a March letter that the denial was based on risks to “the health and safety of the public and employees during a pandemic,” “concerns related to a tribal cultural preservation survey requested by affiliated tribes,” construction at the site and potential environmental hazards.
Ohio pressed on Wednesday with its challenge to a federal law prohibiting states from using coronavirus aid to offset tax cuts, saying that a recent proposed rule from the U.S. Department of the Treasury didn’t render the law constitutional.
The American Rescue Plan Act’s provision that bars states from using federal aid to offset net revenue reductions or risk having to return the funds remains unconstitutionally ambiguous and coercive despite Treasury’s May 10 interim final rule on the provision, Ohio argued in a brief filed in federal court. Ohio asked the court to issue a permanent injunction against that provision and to declare it unconstitutional.
And in a similar dispute over the provision, Missouri has appealed to the Eighth Circuit over a recent federal court decision that dismissed the state’s bid to bar the U.S. government from enforcing it.
The state’s two-page notice of appeal followed a federal court’s May 11 finding that Missouri lacked standing and that the case wasn’t ripe for review. The lower court, siding with arguments made by the U.S. Department of the Treasury, found Missouri hadn’t shown it has suffered any injury, because the only way the funds are recouped by the federal government is if the state uses them toward net tax cuts.
The American Civil Liberties Union has taken aim at private prison contractor CoreCivic in its latest suit over conditions in immigration detention facilities during the COVID-19 pandemic, claiming that staff at a New Mexico facility pepper sprayed peaceful hunger strikers in a filmed confrontation.
According to the complaint, filed by the ACLU and the New Mexico Immigrant Law Center on the first anniversary of the alleged encounter, men who were housed in dormitory 2A of the Torrance County Detention Facility, which is run by CoreCivic under a contract with the county, allegedly stopped eating to protest inadequate health and safety measures at the facility.
Video of the May 2020 encounter obtained by the NMILC through a public records request and reviewed by Law360 shows approximately 12 facility staffers wearing smocks and gas masks over their uniforms and carrying plexiglass shields enter the dormitory ahead of the person filming, who identifies himself as Officer Harrow.
After a brief verbal confrontation with the detained men, most of whom appear undressed from the waist up, five officers fog the room over a low wall that separates the sleeping area where the men are corralled from the recreation area. When the men attempt to move away from the yellow fog — which CoreCivic identified as oleoresin capsicum — into the recreation area through one of the two breaks in the room divider, guards rushed over to block them.
Entertainment giant Live Nation has urged a California federal judge to allow its COVID-19 business interruption suit against Factory Mutual Insurance Co. to proceed, arguing that its communicable disease coverage policy is a “different story” from typical property insurance.
Live Nation Entertainment Inc. asked the court to reject FM’s bid to toss its suit, saying its FM Global Advantage policy specifically includes a communicable disease as a covered risk and defines “the presence of communicable disease as physical loss or damage.”
Cincinnati Insurance Co. has notched a win in Vermont after a federal judge tossed a dental clinic’s proposed class action seeking COVID-19-related loss coverage, making it one of the first pandemic coverage dispute decisions in the Green Mountain state. The judge found Associates in Periodontics PLC failed to show that either the COVID-19 virus or its related government lockdown orders caused any physical loss or damage required for coverage under the policy.
Also on Monday, a group of Ohio universities refiled their coronavirus coverage suit against underwriters at Lloyd’s of London, joining a group of colleges in Washington state court seeking coverage for the “devastating toll” of the pandemic on college campuses.
Denison University, Kenyon College, Ohio Wesleyan University and The College of Wooster said that physical damage they sustained as a result of the pandemic warranted coverage under their all-risk policies with the underwriters, but that provisions for communicable diseases would entitle them to coverage regardless of any damage.
At the Seventh Circuit, Cincinnati Insurance Co. urged the appellate court on Monday to uphold its win in an Illinois dental practice’s lawsuit seeking policy coverage for losses it incurred after state officials ordered all non-essential businesses to close in light of the COVID-19 pandemic.
Cincinnati argued in its appellate brief that a lower court had correctly sided with it over Sandy Point Dental PC’s claims that the dental practice was entitled to a policy payout to cover the financial losses it suffered as a result of Illinois Gov. J.B. Pritzker’s coronavirus-related shutdown orders.
And a Boston hotel investor group asked a California federal judge to throw out an insurer’s claims that it would only be responsible for two days of coverage during which the hotel hosted a conference later linked to over 300,000 COVID-19 cases worldwide.
The investors said Monday that Endurance American Specialty Insurance was ignoring the reality of the pandemic by asserting that coverage would end after two days, when the Marriott Boston Long Wharf finished cleaning its premises following a large biotech conference held in February 2020.
A Florida steakhouse has urged the Eleventh Circuit to revive its lawsuit seeking COVID-19 business interruption coverage from its insurer, criticizing a lower court’s reliance on an influential opinion in the circuit involving “direct physical loss of or damage to” property. A Georgia dental practice is also asking the Eleventh Circuit to revive its COVID-19 coverage suit against Cincinnati Insurance Co., saying a lower court misinterpreted the meaning of physical loss in its policy with the insurer.
Western Union has told a Colorado federal court that it doesn’t need to show the coronavirus physically altered its properties to qualify for pandemic coverage from a Chubb unit, likening the virus to a gas leak that the state Supreme Court ruled a covered loss. Responding to ACE American Insurance Co.’s bid to toss the case, Denver-based Western Union hit its insurer for giving “short shrift” to Colorado case law that it said showed physical alteration was not a prerequisite to coverage under policies requiring physical loss.
And an Atlantic City casino resort has hit Zurich with a $500,000 suit in New Jersey state court, alleging the carrier breached its insurance contract by wrongfully denying and reading its claim as seeking civil authority coverage while it did not.
Resorts Casino Hotel says that Zurich American Insurance Co. failed to cover its losses related to the COVID-19 pandemic and government closure orders. The casino said its Zurich policy specifically covers economic damages and financial losses in addition to property damage.
–Additional reporting by Y. Peter Kang, Pete Brush, Dave Simpson, Daphne Zhang, Khorri Atkinson, Andrew Westney, Joyce Hanson, Eli Flesch, Victoria McKenzie, Paul Williams, Jeannie O’Sullivan, Nathan Hale, Matthew Santoni, Lauraann Wood, Dean Seal, James Nani, Jennifer Doherty, Rachel Scharf, Lauren Berg and Emilie Ruscoe. Editing by Alanna Weissman.
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