The coronavirus pandemic has changed the way that companies must do business to survive. This change occurred over an extremely short period of time, with little notice, and while companies had limited resources. This unusual situation caused companies to make decisions on an expedited basis with limited opportunity for careful contemplation and forced them to set priorities quickly. As a result, some lawsuit advocates and plaintiffs are using this unfortunate dilemma to promote or bring related lawsuits.
The news and internet are full of stories about coronavirus lawsuits being considered, planned, promoted, and/or filed. Among those claims being filed or considered include those involving employment issues, passing off fake goods and trademark violations, travel/sports/entertainment refunds, failed service contracts, inadequate or improper provision of PPE, inadequate protection for employees and inmates, robocalls or junk facsimile under TCPA, tuition recovery claims, declaratory judgment to establish business interruption loss insurance coverage, the use of force majeure clauses in contracts, price gouging, personal injury caused by negligence, medical malpractice, consumer fraud or misrepresentation, lending and collection practices, securities fraud class actions, pandemic avoidance, and Constitution-based claims, among others. The categories are likely to grow as counsel refine and discover new types of claims. Many of these coronavirus-related cases might be attempted as a class action or consolidated MDL matter.
Putative class actions filed in federal courts in the U.S. are generally subject to F.R.C.P. 23. Many states have rules governing their state courts that are similar or the same. F.R.C.P. 23(a) & (b) provide:
Rule 23. Class Actions (a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:(1) the class is so numerous that joinder of all members is impracticable;(2) there are questions of law or fact common to the class;(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and(4) the representative parties will fairly and adequately protect the interests of the class.(b) Types of Class Actions. A class action may be maintained if Rule 23(a) is satisfied and if:(1) prosecuting separate actions by or against individual class members would create a risk of:(A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class; or(B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests;(2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or(3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include:(A) the class members’ interests in individually controlling the prosecution or defense of separate actions;(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and(D) the likely difficulties in managing a class action.
In order for the court to certify a class and change the nature of the matter from an individual action to a class-based, leveraged action (with the prospect of an award including counsel fees), the plaintiff must demonstrate that its proposed class action meets all of the F.R.C.P. 23(a) requirements and at least one of the F.R.C.P. 23(b) requirements. Many of the attempted class actions in the U.S. rely upon the F.R.C.P. 23(b)(3) option, so we will focus on that approach.
To sum up the requirements of a 23(b)(3) class certification, the lead plaintiff must demonstrate that:
This list of requirements provides a lot of opportunities for defense counsel to defeat a class. This is particularly so if the proposed class claims depend on some type of personal injury. In these instances, the analysis and proof of causation might be too individualized or contain too many variables to manage a “one size fits all” approach. This same concept will cross-over to other types of coronavirus-related claims.
Many of the proposed coronavirus-related class claims will likely have significant problems with the typicality, predominance, and superiority prongs that might make them poor candidates for class action or even possible consolidation. The job of defense counsel is to break down the proposed class claims and distinguish them among the class members. For instance, there has been a rash of college tuition or room and board reimbursement putative coronavirus-related class action claims filed in the U.S. Some plaintiffs allege that their college failed to deliver the value for which they paid because the college switched from physically-attended courses to online courses. Although some putative class actions are filed on behalf of a class of all who paid tuition, such class actions might have several difficult hurdles to overcome before a court could certify such a class. Defense counsel might argue that not all students and courses are equal. For instance, some courses may be more suited to online studies, such as a lower-level math course, than others that require a physical presence, such as a lab course. This distinction may result in a material variance in the relative strength or weakness of the respective claims. Moreover, there may be material differences for example in the amount of tuition paid, who paid the tuition (standing), who may or may not have received a refund or other accommodation, the number of damages, or whether room and board claims are involved. The potentially difficult process of determining who may or may not qualify as a class member could be problematic as well. These differences could have a serious impact on the suitability and manageability of a proposed class action.
There may be instances where similar class actions are filed separately in Canada, the U.S. or other jurisdictions against the same defendant for similar activity but involving different plaintiffs. The plaintiffs’ class counsel may do this to avoid the denial of a larger class based on the application of the laws of several jurisdictions (if warranted under a conflict of law analysis) which could doom certification as unmanageable. For instance, counsel may try to frame a class in the U.S. or in a state based on the application of U.S. or state law, and a class in Canada based on the application of Canadian law. In those situations, it will be important for the defendant to coordinate efforts between local counsel, to avoid duplication or inconsistency of position or rulings, and to determine whether both actions can/should properly proceed in tandem.
One subject that might be important to businesses as potential class plaintiffs is the denial of insurance coverage for business interruption losses. Many class actions to challenge these denials are already underway. Some carriers have denied coverage based on the argument that an infectious disease is not a covered physical loss or damage to property, that an exclusion for damage caused by an infectious agent applies, and that otherwise imposing coverage upon the carrier would be unconstitutional. See New Jersey Law Journal, Class Action Lawsuits Fight Denial of Business Interruption Coverage Over COVID-19 (May 6, 2020). Insureds counter that the loss of use of property constitutes a physical loss or damage to property and that the losses were caused by protective measures taken by government entities that were the “efficient proximate cause” of the loss. Id. There has already been an application to the Judicial Panel for Multidistrict Litigation to consolidate these types of suits into an MDL. Id. According to Chubb spokesman Jeffrey Zach, “… [t]he insurance industry estimates it will pay $100 billion or more in claims related to the pandemic making this the single largest catastrophe in history.” Id. Businesses are on both sides of the “V” in coronavirus class action litigation.
If you expect coronavirus-related claims or class actions involving your company, you should consult with counsel to determine if there are potential strategies for preventing them or mooting the claims in advance. If practical, and although the subject of debate, companies might even consider whether the applicable jurisdiction would consider a voluntary remedy to be superior to a class action. See generally, Eric P. Voigt, A Company’s Voluntary Refund Program for Consumers Can Be a Fair and Efficient Alternative to a Class Action, 31 Rev. Litig. 617 (University of Texas School of Law 2012).
This pandemic is not only an efficient plague on health but on workers, businesses, and the economy as well. Without government intervention and prudent, gatekeeper courts, the fall-out might be worse than the disease. If you have any questions about this post or any related matters, please feel free to contact me at firstname.lastname@example.org or tweet me at @NJProductsLaw. For other topics related to the coronavirus, visit our Coronavirus Thought Leadership Connection.
The information contained in this post may not reflect the most current developments, as the subject matter is extremely fluid and constantly changing. Please continue to monitor this site for ongoing developments. Readers are also cautioned against taking any action based on information contained herein without first seeking advice from professional legal counsel.
This blog entry has been cross-published with the permission of BCF LLP, 1100 René-Lévesque Blvd. West, 25th Floor, Montréal, QC H3B 5C9, Canada. A version of this blog is being published in the BCF Class Action NetLetter, Issue 17.