Opportunistic plaintiffs’ lawyers have already filed over a dozen COVID-19-related lawsuits from class actions alleging violations of federal securities laws based on statements about the development of a vaccine for the virus to suits claiming that companies were negligent in responding to the disease outbreak. The COVID-19-related lawsuits that would interest the business community fall into the four causes of action discussed below (i.e., securities fraud, false advertising, negligence, and contract). While it remains to be seen whether any of these lawsuits truly have merit, there are still some lessons to learn from them. Accordingly, this post discusses the pending COVID-19 litigation and offers tips on how companies might avoid it—taking into account the allegations in the various lawsuits.

Securities Fraud

There have been two notable securities fraud suits so far. First, recent purchasers of a biotech company’s stock filed a putative class action.[1] Plaintiffs claim that the company violated federal securities laws by falsely claiming in televised interviews, including one with President Trump, that the company developed a vaccine to prevent the spread of COVID-19. In the other suit, recent purchasers of a major cruise line’s stock brought a class action against the company, alleging that it violated securities laws by falsely indicating in its public filings that the company could deliver a robust financial performance despite the COVID-19 outbreak.[2] Plaintiffs claim that discussions in leaked emails showed that the cruise line was suffering significant losses due to the outbreak. The plaintiffs in both securities fraud actions seek unspecified damages, including attorneys’ fees and expenses.

False Advertising

There are also two noteworthy false advertising suits. In one of them, people who bought an alcohol-based hand sanitizer filed a class action against the manufacturer, alleging that it violated California advertising and consumer protection laws by falsely claiming that the sanitizer can prevent the spread of COVID-19 and other viruses.[3] Plaintiffs claim there is no evidence that the defendant’s sanitizers can thwart the spread of disease. Similarly, a putative class of purchasers of another brand of hand sanitizer sued the manufacturer claiming that it violated state consumer protection laws by misleading consumers to believe that its products could prevent COVID-19 and other diseases.[4] The plaintiffs in both suits seek monetary damages and injunctive relief.

Negligence

The negligence suits all concern a company’s response to the virus. For instance, a putative class that includes US individuals and businesses brought a class action against China, alleging that the country was negligent in failing to, among other things, admit what it knew about the dangers of COVID-19 and provide adequate warnings about the disease.[5] Also, a pilot membership organization sued one of the nation’s largest airlines, alleging it was negligent in requiring the pilots to fly between United States airports and China.[6] They claim that other major airlines, on the other hand, did suspend flights to China. Lastly, spouses brought two similar lawsuits against a cruise line, alleging that it was negligent in continuing to operate after knowing some passengers and crew had been exposed to COVID-19, failing to have a proper screening protocol, and failing to warn passengers about potential exposure to the virus.[7] They argue that, because of the cruise line’s negligence, they were exposed to an increased risk of harm. While the plaintiffs in all of the negligence cases seek monetary damages and attorneys’ fees, the primary relief the pilots seek is injunctive.

Contract

We only found one contract case related to COVID-19 thus far, but we expect to see a wave of contract-based lawsuits as the pandemic continues. In the one case, a software company entered into an agreement with an entertainment group to secure the rock band, “The Killers,” to perform at the company’s summit; the event was scheduled for early March in Salt Lake City, Utah.[8]The software company canceled the event due to the COVID-19 outbreak and tried to reschedule The Killers for a later date. After the band refused to postpone its performance and insisted on full payment, the software company filed a lawsuit asking the court to declare the parties’ contractual obligations.

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There is, of course, nothing a company can do to eliminate the risk of a COVID-19 lawsuit. The main takeaway from the cases discussed here is that companies may, however, be able to mitigate their exposure to such lawsuits by being cautious with what they say and do.[9] More specifically:

  • Any internal or public statement related to the virus, whether it be, for example, the company’s response to COVID-19 or about the effect of the pandemic on its operations, should be carefully vetted to make sure the statement is entirely accurate.
  • Companies should closely track guidance on responding to COVID-19 from global, federal, state, and local government agencies, as well as how other companies are responding to the outbreak. Like it or not, how the government suggests companies should respond, and how others respond, will—as a practical matter—establish the standard for how every company should respond.
  • Companies should benefit from being reasonable when dealing with COVID-19-related contract issues. In these unprecedented times, many companies will be unable to satisfy their contractual obligations due to the virus, and terms of the relevant contract may not clearly excuse performance due to the outbreak. Nevertheless, trying to work with a party to cure a breach will many times be a better option than attempting to enforce the obligations in a lawsuit.

For more information about the topics raised in this post, please contact Charles E. Harris, II.


[1] McDermid v. Inovio Pharm., Inc., No. 2:20-cv-01402 (E. D. Pa. filed Mar. 12, 2020).

[2] Douglas v. Norwegian Cruise Lines, No. 1:20-cv-21107 (S.D. Fla. filed Mar. 12, 2020).

[3] David v. Vi-Jon, Inc., No. 20-cv-0424 (S.D. Cal. filed Mar. 5, 2020).

[4] Gonzalez v. Gojo Indus., No. 1:20-cv-00888 (S.D.N.Y. filed Feb. 1, 2020).

[5] Alters v. The People’s Republic of China, No. 1:20-cv-21108 (S.D. Fla. filed Mar. 12, 2020).

[6] Allied Pilots Ass’n v. Am. Airline, Inc., No. DC-20-01598 (Tex. Dist. filed Jan. 30, 2020).

[7] E.g., Weissberger v. Princess Cruise Lines Ltd., No. 2:20-cv-02267 (C.D. Cal. filed Mar. 9, 2020).

[8] Qualtrics, LLC v. SME Entm’t Group, LLC, No. 2:20-cv-00164 (D. Utah filed Mar. 12, 2020).

[9] For the avoidance of doubt, I do not intend to suggest and am not suggesting that the companies involved in the lawsuits discussed here were not deliberate and careful in their actions.

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