The COVID-19 pandemic has disrupted all aspects of life, including business operations, in the United States and abroad. That disruption and the resulting economic consequences have fueled a large number of new class action complaints against companies in a variety of industries, including travel and transportation, events and entertainment, sports, food production and retail, pharmaceuticals and life sciences, and even higher education. The majority of these complaints assert claims for securities fraud, unfair business practices, breach of contract, or negligence. As discussed below, each of the theories of liability articulated by plaintiffs thus far presents its own challenges with respect to class certification and on the merits. For example, many of the plaintiffs' claims raise novel issues related to injury, causation, and defendants' knowledge of and liability for COVID-19-related risks, all of which could present individualized inquiries that predominate over common questions of law or fact. And these challenges will be complicated by the fact that many of the complaints seek to certify expansive classes. We summarize below many of the new COVID-19-related cases that have been filed to date, highlighting these key issues and challenges.

Securities Fraud

Plaintiffs have brought several securities claims against companies for representations or omissions made concerning their COVID-19-related business opportunities and risks.

Two cases rest on allegations that issuers overstated business opportunities in connection with COVID-19, thereby inflating share prices that subsequently dropped in light of contrary analyst reports. The first case alleges that Inovio, a biotechnology company, falsely claimed that it had developed a COVID-19 vaccine "in a matter of about three hours once [it] had the DNA sequence from the virus," and announced its plan to start human trials in April 2020.1 An analyst called the claim "ludicrous," and Inovio clarified that it had designed a "vaccine construct," not a vaccine.2

A similar case was brought against SCWorx, which "provides data content and services related to the repair, normalization, and interoperability of information for healthcare providers."3 Plaintiff alleges that SCWorx's share price artificially increased after the company announced it received a purchase order for two million COVID-19 rapid testing kits. The share price subsequently dropped after an analyst's report suggested that SCWorx's potential supplier of the tests has a history of fraud, and moreover, that the purchaser was unlikely to be able to handle such a large order.4 Plaintiffs allege that SCWorx failed to disclose these facts, and that SCWorx's positive statements regarding the purchase order were materially misleading and lacked a reasonable basis.5

The final case involves an alleged failure to disclose material information concerning COVID-19's likely effect on business operations.6 In Atachbarian v. Norwegian Cruise Lines, plaintiff alleges that Norwegian knew as early as February 20, 2020 that COVID-19 would have a devastating impact on the cruise industry, but instead of disclosing that risk, Norwegian "took steps to falsely induce potential customers to book trips" by downplaying the threat of COVID-19.7 Norwegian's share price dropped after news reports leaked Norwegian sales scripts that encouraged the sales team to downplay COVID-19; however, around the same time, Norwegian and three other major cruise lines had also announced that it would suspend all of its U.S. voyages for at least one month. This case and others like it may present challenges for plaintiffs seeking to establish a nexus between COVID-19-related omissions and subsequent share price deflation in light of industrywide losses.

While only a relatively small number of securities fraud cases have been filed so far, we anticipate an increase in securities claims as the pandemic persists and investors continue to scrutinize issuer disclosures.8

Unfair Business Practices

To date, two separate complaints have been filed alleging unlawful price increases charged by sellers of various goods during states of emergency triggered by COVID-19. Both complaints are brought under California state statute, and we anticipate may be brought under other, similar state statutes, potentially in conjunction with commonlaw claims of the type discussed below.

In a wide-ranging complaint, plaintiffs assert California state law claims against Costco, Whole Foods, Walmart, Amazon.com, Trader Joe's, and other egg producers, wholesalers, and grocers that allegedly "illegally marked up egg prices following [California Governor Newsom's] declaration of an emergency."9 California Penal Code § 396 provides that, for the 30 days following a state or national declaration of emergency, it is illegal to increase the price of certain products or services by more than 10 percent of the pre-emergency price. Plaintiffs allege the price of eggs "nearly tripled" following the California state of emergency declaration and "remain much more than 10 percent higher than they were prior to the declaration of emergency."10

Named plaintiffs each bought eggs from one or more defendant and seek to represent "[a]ll consumers who purchased eggs in the state of California that were sold, distributed, produced, or handled by any of the defendants" during California's ongoing state of emergency.11 Notably, plaintiffs do not allege an agreement or conspiracy between defendants to fix or raise prices or to restrict supply or otherwise interfere with the market for eggs in California. Indeed, the complaint states that "consumers such as plaintiffs lack access to information about which of the defendants . . . participated in the pricegouging."12 Among other challenges for plaintiffs, the complaint may present individualized fact issues as to each defendant's liability. Each defendant may avail itself of the Penal Code's safe harbor provision, which provides that a price increase greater than 10 percent is lawful if "directly attributable" to additional costs it incurred, labor used by the business, or seasonal adjustments in rates (if such rates are regularly scheduled or previously contracted).13 Here, the price that any particular consumer paid for eggs bought from any particular defendant may be a function of individualized market factors that could bring the allegedly increased prices within the safe harbor provision.

A separate complaint against Amazon.com alleges violations of California's unfair competition law, negligence, and unjust enrichment concerning a variety of products sold by Amazon and by third-party sellers using Amazon's e-commerce platform.14 Plaintiffs allege that, in light of stayat-home orders due to COVID-19, consumers are more reliant on e-commerce for essential goods, and that Amazon has taken advantage of greater consumer demand by increasing its prices.15 Plaintiffs also argue that Amazon is responsible for all sales on its e-commerce platform, including products sold by third parties, because Amazon functions as the seller by controlling prices, creating the sales platform, and interacting directly with consumers.16 Finally, plaintiffs argue that, even if Amazon does not control third-party sellers that use its e-commerce platform, the alleged price gouging was foreseeable, and Amazon "has a legal duty to prevent foreseeable harm arising from the use of its platform."17

The proposed Amazon.com consumer class is vast. It includes all persons in California who purchased a protected product—including "all consumer food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels"—from Amazon.com at an inflated price as defined by the California Penal Code.18 In addition to raising the question of Amazon. com's liability for the actions of third-party sellers,19 this case raises individualized issues of liability similar to those in the Fraser egg price complaint, though on a significantly broader scale, given the number of industries and products at issue.

Breach of Contract

There have been a number of proposed class actions asserting breach of contract and consumer protection claims against businesses that have been prevented from providing services or that have had to significantly alter the services they provide, including businesses in the entertainment, sporting, travel, and higher education industries.

For example, plaintiffs have filed separate complaints against ticket merchants StubHub and Ticketmaster challenging alleged changes to the companies' refund policies. StubHub formerly refunded ticket purchasers for canceled events, but in light of mass cancellations, shifted to offering purchasers a voucher for 120% of their purchase price that can be applied to the purchase of any ticketed event within the next 12 months.20 StubHub still offers refunds to consumers where required by state law.21 In a separate case, plaintiffs sued Ticketmaster for no longer offering refunds for postponed or rescheduled events; refunds are only available when an event has been canceled.22

Plaintiffs in both cases claim that the refund policies were incorporated into their ticket purchase agreements, and that defendants' refusal to honor the prior refund policies constitutes breach and a violation of California consumer protection and unfair business practices laws.23 Both cases are brought on behalf of nationwide classes and potential subclasses.24 Each case may present individualized legal inquiries as to whether the defendant's changes to its refund policy constitute breach—and whether plaintiffs are entitled to refunds—under varying state laws that govern these issues.25

In other cases, plaintiffs seek refunds from merchants for specific events or services. For example, organizers of the popular festival South by Southwest ("SXSW"), the music festival Lightning in a Bottle, and a conference for nurses held at sea by Royal Caribbean all face similar claims for allegedly failing to refund consumers' ticket fees or deposits.26 Likewise, Major League Baseball, Six Flags, and Vail ski resorts face separate refund claims from season pass holders (and purchasers of single-use tickets) who claim they have overpaid for passes or memberships they cannot presently use.27 Many major airlines are defending similar claims by consumers seeking compensation for changed or canceled itineraries who allege that airline credits are insufficient restitution.28 In all cases, plaintiffs seek to represent nationwide classes, thereby posing commonality and predominance problems: courts may need to apply a patchwork of varying state laws to the nationwide class to determine which consumers, if any, are entitled to relief.

Finally, colleges and universities that have shifted to remote-only learning are facing suits from students and parents who allege they overpaid for an on-campus Spring 2020 semester experience that they did not receive.29 Some plaintiffs limit their claims to fees, e.g. for facilities or services that students cannot use while they are off-campus,30 whereas others seek broader relief in the form of pro-rated tuition refunds.31 The claim for tuition refunds in particular may not be susceptible to common proof at trial, considering that the value of an "on-campus" education as compared to remote learning may be subjective and based on myriad factors that vary by student. For example, the named plaintiff suing Cornell University alleges that "[t]he online learning options being offered to Cornell students are subpar in practically every aspect, from the lack of facilities, materials, and access to faculty. Students have been deprived of the opportunity for collaborative learning and in-person dialogue, feedback, and critique."32 The named plaintiff, an architecture student, offers some more tangible examples of her alleged injury: she cannot use Cornell's "laser cutters, 3D printers, wood and metal shops" that she argues are necessary for her particular field of study.33 Even still, it remains to be seen whether deprivation of "the opportunity for collaborative learning" constitutes a cognizable injury at all, and whether class members have suffered an injury may vary major-by-major and student-by-student.

Negligence

Finally, crewmember and passenger plaintiffs have brought separate actions against cruise line operators for negligence as COVID-19 spread onboard their vessels.34 In Nedeltcheva v. Celebrity Cruises, the crewmember named plaintiff asserts Jones Act35 negligence and unseaworthiness claims. The named plaintiff alleges that Celebrity Cruises failed to take appropriate measures to protect thousands of its crewmembers across its entire fleet, despite having actual or constructive knowledge of the risk of COVID-19.36 In support, plaintiff points to early reports of COVID-19 aboard non-Celebrity vessels, including the Diamond Princess in Japan, and guidance issued by the U.S. Centers for Disease Control and Prevention.37 Despite these developments in mid-February 2020, Celebrity Cruises allowed crewmembers to board and embark on several voyages in early March. Celebrity Cruises allegedly failed to take preventative and responsive actions to limit the spread of COVID-19 aboard its vessels, including because it failed to (1) screen or test individuals when they boarded; (2) enact social distancing measures; and (3) warn crewmembers as to the risks of COVID-19 and educate them on methods for reducing their exposure to the virus.38

In Archer v. Carnival Corp., passenger named plaintiffs bring a narrower suit on behalf of all passengers onboard a single voyage of the Grand Princess cruise from February 21, 2020 to March 10, 2020.39 Plaintiffs sue Carnival for negligence and gross negligence, alleging that it failed to warn and take preventative action to protect the class after learning that at least one passenger aboard the Grand Princess's prior voyage sought medical treatment for "acute respiratory distress" on February 20.40 On February 21, some of the passengers from the first voyage (to Mexico) disembarked, but 62 passengers and over 1,000 crew members remained aboard the vessel and new passengers boarded for the second voyage (to Hawaii).41 Carnival allegedly "did not initiate effective measures to sanitize or disinfect the vessel in-between voyages, and did not implement any procedures for screening or testing existing or new passengers boarding the ship for the Hawaii voyage."42

In both cases, plaintiffs seek to represent classes comprised of individuals who actually contracted COVID-19, as well as individuals who were merely "at a heightened risk of exposure" to COVID-19.43 Regardless of how the plaintiff class is defined, negligence claims based on these theories are likely to raise thorny questions regarding what constitutes an injury and what is required to establish causation in these circumstances. For example, plaintiffs alleging that they were "exposed" to COVID-19 must establish that exposure by itself is a cognizable injury, and plaintiffs that actually contracted COVID-19 will need to demonstrate that their injury is traceable to defendants' negligence. These questions are difficult enough to answer in any particular case, let alone in a class action where plaintiffs will need to demonstrate injury and causation on a class-wide basis despite individualized issues such as class members' particular health circumstances and non-voyage activity that may have exposed them to COVID-19.44

Footnotes

1 Class Action Complaint ¶¶ 4–5, McDermid v. Inovio Pharms, Inc., No. 2:20-cv-01402-GJP (E.D. Pa. Mar. 12, 2020), ECF No. 1 ("McDermid Compl.") (emphasis omitted); see also Verified Shareholder Derivative Complaint, Beheshti v. Kim, No. 2:20-cv-01962 (E.D. Pa. Apr. 20, 2020), ECF No. 1.

2 McDermid Compl. ¶ 6 (emphasis omitted).

3 Class Action Complaint ¶ 2, Yannes v. SCWorx Corp., No. 1:20-cv-03349 (S.D.N.Y. Apr. 29, 2020), ECF No. 1 ("Yannes Compl.").

4 Yannes Compl. ¶¶ 3–6.

5 Id. ¶ 8.

6 Class Action Complaint, Atachbarian v. Norwegian Cruise Lines, No. 1:20-cv-21386-CMA (S.D. Fla. Mar. 31, 2020), ECF No. 1.

7 Id. ¶¶ 22–24.

8 See also Complaint, Wandel v. Gao, No. 1:20-cv-03259 (S.D.N.Y. Apr. 24, 2020), ECF No. 1 (alleging that a Chinese apartment management company prepared defective offering materials in connection with its IPO by failing to disclose business risks associated with the onset of COVID-19 in Wuhan, China).

9 Class Action Complaint ¶ 1, Fraser v. Cal-Maine Foods, Inc., No. 3:20-cv-02733 (Apr. 20, 2020), ECF No. 1.

10 Id. ¶ 6.

11 Id. ¶ 55.

12 Id. ¶ 1.

13 Cal. Penal Code. § 396(b).

14 Class Action Complaint, McQueen v. Amazon.com, Inc., No. 4:20-cv-02782 (Apr. 21, 2020), ECF No. 1.

15 Id. ¶¶ 35–42.

16 Id. ¶¶ 58–73.

17 Id. ¶ 67.

18 Id. ¶ 77.

19 In the context of defective product claims, three circuit courts of appeals have analyzed whether Amazon.com is a "seller" and whether it is liable for actions of the third-party sellers that use its e-commerce platform. See Oberdorf v. Amazon.com Inc., 930 F.3d 136 (3d Cir.), reh'g en banc granted and opinion vacated, 936 F.3d 182 (3d Cir. 2019); Fox v. Amazon.com, Inc., 930 F.3d 415 (6th Cir. 2019); Erie Ins. Co. v. Amazon.com, Inc., 925 F.3d 135 (4th Cir. 2019).

20 Class Action Complaint ¶¶ 15–16, 22, McMillan v. StubHub, Inc., No. 3:20-cv-00319 (W.D. Wis. Apr. 2, 2020), ECF No. 1 ("StubHub Compl.").

21 Id. ¶ 23.

22 Class Action Complaint, Hansen v. Ticketmaster Entm't, Inc., No. 3:20-cv-02685 (N.D. Cal. Apr. 17, 2020), ECF No. 1 ("Ticketmaster Compl.").

23 Claims include: violations of the California Consumer Legal Remedies Act; conversion; unjust enrichment; false advertising; fraud; and unfair trade practices in violation of the California Business and Professions Code. See id. ¶¶ 40–99.

24 See id. ¶ 32; StubHub Compl. ¶¶ 56–57.

25 See, e.g., Mazza v. Am. Honda Motor Co., 666 F.3d 581, 593–94 (9th Cir. 2012) (vacating certification of nationwide class because "each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place").

26 See Plaintiffs' Class Action Complaint, Bromley v. SXSW, LLC, No. 1:20-CV-439 (W.D. Tex. Apr. 24, 2020), ECF No. 1; Class Action Complaint, Jimenez v. Do Lab, Inc., No. 2:20-cv-3462 (C.D. Cal. Apr. 14, 2020), ECF No. 1; Class Action Complaint, Nesis v. Do Lab, Inc., No. 2:20-cv-03452 (C.D. Cal. Apr. 14, 2020), ECF No. 1; Class Action Complaint, Mitchell v. NurseCon at Sea, LLC, No. 1:20-cv-21503 (S.D. Fla. Apr. 8, 2020), ECF No. 1.

27 See Class Action Complaint, Ajzenman v. Office of the Comm'r of Baseball, No. 2:20-cv-3643 (C.D. Cal. Apr. 20, 2020), ECF No. 1; Plaintiffs' Class Action Complaint, Rezai-Hariri v. Magic Mountain LLC, No. 8:20-cv-00716 (Apr. 10, 2020), ECF No. 1; Class Action Complaint, Hunt v. Vail Corp., No. 4:20-cv-02463 (N.D. Cal. Apr. 10, 2020), ECF No. 1.

28 See Complaint – Class Action, Ward v. Am. Airlines, Inc., No. 4:20-cv-00371-Y (N.D. Tex. Apr. 22, 2020), ECF No. 1; Class Action Complaint, Manchur v. Spirit Airlines, Inc., No. 1:20-cv-10771 (D. Mass. Apr. 21, 2020), ECF No. 1; Class Action Complaint, Alvarez v. Hawaiian Airlines, Inc., No. 1:20-cv-00175 (D. Haw. Apr. 20, 2020), ECF No. 1; Class Action Complaint, Bombin v. Sw. Airlines Co., No. 5:20-cv-01883 (E.D. Pa. Apr. 13, 2020), ECF No. 1; Class Action Complaint, TM Solutions USA LLC v. LATAM Airlines Grp. S.A. Inc., No. 1:20-cv-21552-JAL (S.D. Fla. Apr. 13, 2020), ECF No. 1; Class Action Complaint, Levey v. Concesionaria Vuela Compañía de Aviación, S.A.P.I. de C.V., No. 1:20-cv-2215 (N.D. Ill. Apr. 8, 2020), ECF No. 1; Class Action Complaint, Rudolph v. United Airlines Holdings, Inc., No. 1:20-cv-02142 (N.D. Ill. Apr. 6, 2020), ECF No. 1.

29 See, e.g., Class Action Complaint, Watson v. Univ. of S. Cal., No. 2:20-cv-04107 (C.D. Cal. May 5, 2020), ECF No. 1; Class Action Complaint, Schoening v. Seton Hall Univ., No. 2:20-cv-05566 (D.N.J. May 5, 2020), ECF No. 1; Class Action Complaint, Rojas v. Fla. Bd. of Governors Found., Inc., No. 2020 CA 000846 (Fla. Cir. Ct. May 4, 2020), ECF No. 1; Class Action Complaint, Doe v. Vanderbilt Univ., No. 3:20-mc-09999 (M.D. Tenn. Apr. 27, 2020), ECF No. 262; Original Class Action Complaint, Brandmeyer v. Regents of the Univ. of Cal., No. 4:20-cv-2886 (N.D. Cal. Apr. 27, 2020), ECF No. 1 ("Univ. of Cal. Compl."); Original Class Action Complaint, Miller v. Bd. of Trs. of Cal. State Univ., No. 2:20-cv-03833 (C.D. Cal. Apr. 27, 2020), ECF No. 1; Class Action Complaint and Demand for Jury Trial, Hassan v. Fordham Univ., No. 1:20-cv-03265 (S.D.N.Y. Apr. 25, 2020), ECF No. 1; Class Action Complaint and Demand for Jury Trial, Haynie v. Cornell Univ., No. 5:00-at-99999 (N.D.N.Y. Apr. 23, 2020), ECF No. 88 ("Cornell Compl."); Class Action Complaint (Jury Trial Demanded), Marbury v. Pace Univ., No. 1:20-cv03210-JMF (S.D.N.Y. Apr. 23, 2020), ECF No. 1; Class Action Complaint, Student A v. Bd. of Trs. of Columbia Univ., No. 1:20-cv-03208 (S.D.N.Y. Apr. 23, 2020), ECF No. 1 ("Columbia Compl."); Class Action Complaint, Dixon v. Univ. of Miami, No. 2:20-cv-01348-BHH (D.S.C. Apr. 8, 2020), ECF No. 1; Class Action Complaint, Rickenbaker v. Drexel Univ., No. 2:20-cv-1358-BHH (D.S.C. Apr. 8, 2020), ECF No. 1.

30 See Univ. of Cal. Compl. ¶¶ 8, 18–20.

31 See Columbia Compl. ¶¶ 4, 51-52, 80; Cornell Compl. ¶ 7.

32 Cornell Compl. ¶ 5.

33 Id. ¶ 8.

34 See Complaint and Demand for Jury Trial, Nedeltcheva v. Celebrity Cruises Inc., No. 1:20-cv-21569-UU (S.D. Fla. Apr. 14, 2020), ECF No. 1 ("Nedeltcheva Compl."); Class Action and Individual Complaint for Damages, Archer v. Carnival Corp. & PLC, No. 3:20-cv-02381 (N.D. Cal. Apr. 8, 2020), ECF No. 1 ("Archer Compl."); Complaint and Demand for Jury Trial, Turner v. Costa Crociere S.P.A., No. 1:20-cv-21481-KMM (Apr. 7, 2020), ECF No. 1.

35 Relevant here, the Jones Act extends the Federal Employer Liability Act to allow vessel crewmembers to sue employers for personal injury suffered in the course of their employment. See 46 U.S.C. § 30104.

36 Nedeltcheva Compl. ¶¶ 21–32.

37 Id. ¶ 31.

38 Id. ¶ 47.

39 Archer Compl. ¶ 1.

40 Id. ¶ 39.

41 Id. ¶¶ 41-42.

42 Id. ¶ 43.

43 See Nedeltcheva Compl. ¶ 15; Archer Compl. ¶ 63.

44 See AmChem Prods., Inc. v. Windsor, 521 U.S. 591, 594 (1997) ("Although mass tort cases arising from a common cause or disaster may, depending upon the circumstances, satisfy the predominance requirement, the Advisory Committee for the 1966 Rule 23 revision advised that such cases are ordinarily not appropriate for class treatment, and warned district courts to exercise caution when individual stakes are high and disparities among class members great."); but see Torres v. Mercer Canyons Inc., 835 F.3d 1125, 1136 (9th Cir. 2016) (rejecting argument that a "class is too broad because it includes a subset of people exposed to— yet ultimately not harmed by—a policy of non-disclosure," because it "merely highlights the possibility that an injurious course of conduct may sometimes fail to cause injury to certain class members").

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Originally published 15 May 2020

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