he crisis resulting from the COVID-19 pandemic has set off a maelstrom of legal disputes stemming from forced business closures and allegations of fraud, among many other complaints. Class-action lawsuits, in particular, have been used to address some of the most egregious reports of misconduct.
These kinds of legal actions are perfect vehicles for frauds perpetrated on consumers and shareholders, where the wrongdoing alleged is so widespread that plaintiffs benefit from banding together.
“There is a tsunami of class-action cases in three principal areas,” Kent Schmidt, a California attorney who specializes in business and class-action litigation, explained to Newsweek. “These early filings can be indicative of the liabilities that companies should take into consideration and inform their practices now to avoid getting hit with one of these costly lawsuits.”
Consumer and shareholder fraud, in addition to violations of employment law, have become the most common harms committed during the crisis. Consumers and shareholders are often alleging that they were misled about the risks of COVID-19, and employees caught up in the ensuing economic downturn have objected to mass-scale firings.
Schmidt, a partner at the firm Dorsey & Whitney, has compiled a running count of the new COVID-19-related class-action suits.
One notable class-action case was filed in mid-March against Norwegian Cruise Lines by a shareholder, remarking how the cruise line represented “positive outlooks for the company in spite of the COVID-19 outbreak.”
Among the most startling accusations in the lawsuit, the complaint alleges that the company made “unproven” and “blatantly false” statements regarding COVID-19 in order to “entice customer to purchase cruises, thus endangering the lives of both their customers and crew members.”
Norwegian Cruise Lines did not return a request for comment.
“There is a duty not to misrepresent facts and not to underestimate a risk or overstate your capabilities,” Schmidt explained about these types of cases. “This is where it overlaps with the duties in communications with shareholders,” consumers and others.
While an influx of new legal action may be providing aggrieved plaintiffs with some method of accountability, it has also bolstered a cottage industry of COVID-19 litigation that may be very lucrative for some firms.
Some consumer protection statutes allow plaintiffs to collect punitive damages to deter future misconduct. In other cases, judges may be able to award attorneys’ fees, “including multipliers that are sometimes applied by a court,” further ratcheting up the collections.
Among the scores of COVID-19 plaintiffs seeking to hold alleged wrongdoers accountable is a Washington State civic organization that has filed suit against Fox News for what it claims were direct injuries caused by the company’s “representations that the [corona]virus is a hoax.”
Schmidt called that complaint “the silliest thing I ever heard,” in terms of its legal viability, owing to the multitude of First Amendment issues that come into play.
“I understand the impulse, but the same thing can be said of lots of different outlets,” he observed. “I just don’t think that could ever fly.”
In response to a request for comment about criticisms of her suit, Elizabeth Hallock, an attorney representing the Washington State organization, said anyone is “welcome to bring the defense that claiming a pandemic is a hoax is not harmful.”
“This is a consumer protection case under a remedial statute designed to protect the public from unfair practice and competition,” she added.
The emerging lawsuits pertaining to COVID-19, many of them class-action complaints, span a wide variety of industries. For instance, New York Sports Clubs has been sued for allegedly defrauding members during statewide gym shutdowns. In another case, Inovio Pharmaceuticals was sued for allegedly “falsely claiming that [it] had developed a vaccine” for COVID-19. And the state of Alaska was sued by a union of around 8,000 state employees for allegedly subjecting them to “health and safety risks” during the pandemic.
(A court denied the union’s request for a temporary, judicial work-from-home order, which the state’s attorney general applauded as a way to keep “the state functioning to provide essential services.”)
As employers across the country adjust to new work-from-home requirements, all sorts of new liabilities can arise that human resources managers have not traditionally had to consider. Interactions between workers and colleagues can suddenly appear more intimate, blending the home and professional settings in a way that isn’t germane to a standard, office workplace.
The sudden rise in employees making use of the telecommuting application Zoom, due to COVID-19 social distancing policies, has caused a re-examination of the program’s privacy protections. This, in turn, has led to another class-action lawsuit.
“I think we’re going to see these cases play out for years,” Schmidt remarked. While many court systems have instituted caseload reductions in order to slow their operations, “the filing of new cases does not seem to be impaired.”
“The number of cases we’ve seen in this time of crisis shows that plaintiff’s class-action lawyers see this as an opportunity,” he added.