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‘What we are confronting now is really unprecedented.’ Coronavirus-related lawsuits are about to flood the courts

At least 917 federal and state lawsuits have been filed in relation to the pandemic, according to one count

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By Andrew Keshner


MarketWatch photo illustration/iStockphoto
The coronavirus pandemic is already generating a wave of lawsuits from consumers, businesses, health-care workers, college students and more.

Nurses and retail workers are suing their bosses for allegedly subjecting them to unsafe conditions during the coronavirus outbreak.

College students are demanding tuition money and consumers want their cash back from concert ticket vendors, gyms and airlines.

Businesses allege insurance companies are trying to sidestep their coverage obligations and some people say they’re being deprived of stimulus checks.

And that’s only the beginning.

Major catastrophes and downturns can unleash a torrent of lawsuits, and the coronavirus pandemic is no exception. At least 917 federal and state lawsuits have been filed in relation to the pandemic, according to a database run by Hunton Andrews Kurth, an international law firm.

That tally is just starting, says Torsten Kracht, a partner running the project. “I can easily foresee litigation directly related to COVID-19 continuing to be filed for the next two, three years at least. It will be litigated for the next decade, likely.”

Disasters and downturns often spur litigation — but the pandemic is different

The 9/11 attacks spurred cases over issues like health coverage for first responders at Ground Zero and the real estate developer’s insurance policies. A victim’s compensation fund paid out more than $7 billion to survivors and families that agreed not to sue airlines.

The Great Recession triggered lawsuits against major financial institutions that allegedly misled investors and regulators. It also set off a wave of bankruptcies and foreclosures.

But the COVID-19 pandemic is different for the breadth and scale of legal issues, observers say.

The virus has killed more Americans than the Vietnam War, raising a host of public health issues about the workplace and reopening economies. It’s caused more than 30 million people to file for unemployment benefits and triggered a $2.2 trillion stimulus bill to help faltering businesses and households.

What’s more, the pandemic is a global event, so the reach goes far beyond one single place.

Just in the employment law context, ‘what we are confronting now is really unprecedented in scale, complexity and how heavily it depends on science.’

Joseph Sellers, a partner at Cohen Milstein

In employment law alone, “what we are confronting now is really unprecedented in scale, complexity and how heavily it depends on science,” said Joseph Sellers, a partner at the law firm Cohen Milstein who represents plaintiffs in civil rights and employment class actions.

Legal liability is becoming a major issue. Senate Majority Leader Mitch McConnell says businesses need protection from “the biggest trial-lawyer bonanza in history.” White House National Economic Council director Larry Kudlow also thinks it’s a good idea to confine businesses’ legal exposure. Businesses are making “an opportunistic attempt” to try weakening laws that protect workers and consumers, some consumer advocates say.

Here’s a breakdown of the cases already piling up in the courts:

Nurses are suing about a lack of personal protective equipment

Nurses are some of the “frontline” workers, so it’s not surprising their cases are at the forefront of the legal battle, especially in New York, the outbreak’s American epicenter.

For example, the New York State Nurses Association, a union with 42,000 members, alleged one hospital, Montefiore Medical Center, wasn’t providing it with sufficient protective gear — a charge the hospital denies. The union has two other cases pending alleging nurses aren’t getting the protective gear they need.

Meanwhile, a nurse is anonymously suing Good Samaritan Hospital in a county north of the city. She alleges she contracted COVID-19, but her bosses refused to get her needed equipment or re-assign her. The nurse said she had no choice but to resign and is pressing for at least $1 million in damages.

The nurse’s attorney declined an interview and the hospital did not respond to a request for comment.

Retail workers are suing their employers over workplace safety

Workplace safety is an issue in the retail industry too. The estate of a Walmart /zigman2/quotes/207374728/composite WMT -1.02%   worker who died from COVID-19 said the company failed to protect workers. The dead man, Wando Evans, 51, was healthy before he fell ill, his lawyers said.

Walmart officials were “heartbroken” about the incident, the company said in a statement. “While it may be impossible to determine where or how someone contracts the virus, we have taken steps across the country to protect our associates and customers.” The company says safety is a serious matter and it will “respond as appropriate with the court.”

Employees working from home could sue over working too many hours

Other employment lawsuits are focused on other workplace issues, not just safety. When one Pennsylvania school closed, a single mother alleges she tried to figure out a work-from-home and leave arrangement, and was, she claims, fired from her $125,000 job when she asked for time off. She is now suing under the Families First Coronavirus Response Act. Congress passed the law in March requiring employers to offer paid leave for child-care as the outbreak worsened.

Workplace safety rules and questions about leave are just some the potential flash points. At-home workers could sue over not being compensated for supplies they buy for their home office, or being asked to work too many work hours, said Adam Karr, a partner at O’Melveny & Myers, where he defends companies against worker class-action lawsuits.

‘Every action will stand on its own facts. What I can say is many employers are doing everything they can do to do right by their employees in these particular circumstances.’

Adam Karr, a partner at O’Melveny & Myers

“Every action will stand on its own facts. What I can say is many employers are doing everything they can do to do right by their employees in these particular circumstances. … This is as unprecedented as anything could be.”

When many businesses reopen offices or re-start services, they’ll have to decide if they can return with the staff they previously had, or come back with a smaller head count. If those revised staff decisions leave out groups of workers who happen to be older or happen to have the same race or gender, that could open up a legal fight.

“Anything that may have a broad, sweeping impact on a particular group of people raises my interest,” said Shaylyn Cochran, a partner at Cohen Milstein representing workers.

Cochran hasn’t yet filed a case related to the outbreak. She said she proceeds carefully and says employees do too. “In this day and age, when people are uncertain, I don’t think people are waking up and thinking ‘let me see how I can sue my employer?’”

Travelers are taking airlines to court over refunds for cancelled flights

Government shutdown orders in March and April upended travel plans, nixed long-planned events and shuttered in-person college and university classes all over the country. Now, unhappy customers want their money back and some are suing to get it.

Some travelers who booked tickets with United Airlines /zigman2/quotes/205037281/composite UAL -3.61% , Delta Air Lines /zigman2/quotes/200327741/composite DAL -3.30%   and Southwest Airlines /zigman2/quotes/201071949/composite LUV -1.41%   filed class-action cases alleging they couldn’t get cash refunds and were offered vouchers and credits instead — even when the carriers’ terms of service required a refund under the circumstances.

Delta Air Lines, United Airlines and Southwest Airlines all say they are giving refunds.

A United spokeswoman told MarketWatch the company couldn’t comment on a pending case, but noted that United is letting customers change their travel plans without a fee. Eligible customers on domestic and international flights can ask for a refund “if their flights have been severely adjusted or service to their destination suspended either due to government mandates or United schedule reductions related to COVID-19,” the company said.

A Delta spokesman said the airline will give “full refunds to eligible passengers” and has processed more than two million refunds since March, totaling over $1 billion. The customers filing the class-action lawsuit have been refunded, a spokesman noted.

See also: Half of all Americans are canceling their summer vacations — what to expect in refunds from cruise lines, hotels and airlines

A Southwest spokesman said the company “will defend our policies accordingly as our focus is always on taking care of our customers, especially during these unprecedented times.” Refunds are one option for customers, he said.

Sports and music fans are suing ticket vendors

In one case, a Wisconsin man used StubHub for tickets to a hockey game. Between the man’s $120 purchase and his scheduled game, the NHL, like all major sports leagues, suspended its season. The class-action case alleges the man can’t get his money back because StubHub wrongly changed the terms of its refund policy.

A company spokesman declined to comment on pending litigation. The default option for a cancelled event is a StubHub coupon at 120% of the purchase price. Refunds are “available in jurisdictions that require it,” he said.

Meanwhile, another lawsuit claims New York Sports Club members are getting stiffed out of their money while its gyms are temporarily closed. Town Sports International /zigman2/quotes/203841852/composite CLUB +1.23% , which owns the fitness chain, has denied the allegations in court papers.

Consumer cases might hinge on what’s said in the fine print, which many customers usually skip.

Consumer cases may turn on the fine print in a company’s terms of service, said Jeff Sovern, who teaches consumer protection law at St. John’s University School of Law.

Some businesses may have put language in their contract to guard against refunds during a pandemic, and customers — who rarely read the terms and conditions anyway — may not have noticed it, he said.

Even without a contract, Sovern said businesses might also invoke a legal argument saying it was impossible to make good on their contractual obligations under the circumstances.

A student says she’s getting ‘overpriced bubble-gum and duct-tape substitutes’

In mid-March, college campuses ended in-person classes and turned to online learning. Though many offered pro-rated refunds on room and board, new lawsuits are focused on getting back tuition payments too.

The cases are popping up all over. For example, one Brown University student sued his school late last month and a University of Southern California student did the same Tuesday.

A Brown University student says he’s paying for a ‘comprehensive academic experience’ and getting ‘something far less.’

In the Brown case, the student — with one lab course in his studies — said he’s paying for a “comprehensive academic experience” and getting “something far less: a limited online experience presented by Google /zigman2/quotes/205453964/composite GOOG -2.38%   or Zoom /zigman2/quotes/211319643/composite ZM +6.20%  , void of face-to-face faculty and peer interaction.”

In the USC case, the student alleges she and students like her are paying for “overpriced bubble-gum and duct-tape substitutes” for in-person schooling.

“We are disappointed by the lawsuit, but believe the evidence will show that USC took extraordinary steps to ensure continuity of the educational experience for its students,” the university said in a statement.

‘During this time of global crisis, no aspect of our daily lives are what anyone expected. However, what has not changed is the core value of a Brown education.’

Brown University spokesman Brian Clark

“During this time of global crisis, no aspect of our daily lives are what anyone expected. However, what has not changed is the core value of a Brown education,” a university spokesman said.

Don’t miss: ‘I received an email from clients demanding their deposit back’: Coronavirus took a bite out of the wedding industry — but is this force majeure or force of government?

In all consumer cases, businesses face a court of law, but also the court of popular opinion, Sovern noted.

‘A business that denies a refund might lose a customer for the rest of the customer’s life. Not to mention the customer’s family, friends, and in these days of social media, perhaps a lot of other folks too.’

Jeff Sovern, professor at St. John’s University School of Law

“A business that denies a refund might lose a customer for the rest of the customer’s life. Not to mention the customer’s family, friends, and in these days of social media, perhaps a lot of other folks too.”

A similar dynamic could be at play for schools, he added. “Colleges, for example, want graduates to contribute and so might want to give a refund on the theory that denying the refund would be penny wise and pound foolish.”

Insurance policies for business shutdowns are being put to the test

When businesses launch, one common purchase is a business interruption insurance policy. With so many businesses temporarily closed under state shutdown orders, the wording on those policies is being put to the test.

The policies are written to cover “direct physical loss or damage,” explained Jared Greisman, a partner representing insurance companies at Goldberg Segalla. The policy would kick in, for example, if there was a fire or a burst water pipe halting operations.

‘Generally, you have the absence of direct physical loss or damage. Because the virus is a temporary or ephemeral event, carriers are denying them.’

Jared Greisman, a partner at Goldberg Segalla

In the wake of the coronavirus outbreak, businesses are filing claims “in a volume that has never been seen before,” he said. “Generally, you have the absence of direct physical loss or damage. Because the virus is a temporary or ephemeral event, carriers are denying them,” Greisman said.

He’s aware of at least 100 lawsuits challenging the coverage decisions.

After the SARS outbreak nearly 20 years ago, insurance companies started excluding fallout and losses from viruses, Greisman said. “Coverage without that exclusion is not common, and it’s something that’s purchased specifically as a different type of product. It’s not common that a business will secure that type of coverage,” he said.

The CARES Act has spawned lawsuits against banks

The stimulus bill set aside $349 billion in potentially forgivable loans for small businesses under the Paycheck Protection Program (PPP). Lawmakers poured another $320 billion into PPP when the initial sum was depleted.

The program has its critics, who question how the money is being divvied up and who gets it. The funds come from the federal government, but businesses apply through banks.

In several different lawsuits, small businesses allege that Bank of America, J.P. Morgan Chase and Wells Fargo unfairly layered on their own internal rules and put favored clients at the front of the line for money that was intended to be first come, first served.

The case against Bank of America /zigman2/quotes/200894270/composite BAC -0.55% complained that the bank added different rules for applicants related to their borrowing relationships with the bank and other financial institutions. Apart from setting basic criteria, the loan program never barred lenders from setting their own internal priorities, the bank’s lawyers said in court papers.

The decision “to prioritize lending to clients who do not have lending relationships with other banks is simply an effort to direct its resources quickly and efficiently,” Bank of America’s attorneys argued.

Don’t miss: Opinion: How I finally got a PPP small-business loan without losing my mind

A Chase /zigman2/quotes/205971034/composite JPM -0.21%   spokeswoman declined to comment on the case, but said “Chase served clients as they came to us, and no business or client segment was prioritized over another.” Over 60% of loans secured through Chase went to applicants with under 25 workers, she noted.

Wells Fargo /zigman2/quotes/203790192/composite WFC +0.08%   didn’t respond to a request for comment.

A wave of bankruptcy cases is expected

Experts expect the pandemic to create a surge of bankruptcy cases from cash-strapped consumers and companies who are over their heads in debt.

The anticipated increase hasn’t happened yet — in fact, the number of new cases decreased in April, compared to the previous month. But that’s probably because many businesses and household are still sorting out what their finances will look like, observers say.

J.Crew filed for Chapter 11 bankruptcy protection to restructure its debt; other major retailers could follow suit before the end of the year. The upscale Nieman Marcus has filed its own Chapter 11 bankruptcy petition.

Businesses and church pastors are suing states over social-distancing rules

State-level closures on non-essential business are part of the response to a public health emergency, but they come with grave economic costs. More than 20% of small businesses say they are around two months away from closing down permanently, according to a survey from the U.S. Chamber of Commerce.

A lawsuit says the children of undocumented immigrants — who are citizens by their birth in the country — are entitled to stimulus checks.

In Pennsylvania, a company that makes musical bells is challenging the way state officials are administering their rules on which businesses can stay open.

A separate group of Keystone State businesses — including a golf course, a laundromat and a timber company — took their fight all the way to the U.S. Supreme Court.

The court on Wednesday denied the bid to pause Pennsylvania’s rules.

In California, pastors are suing the state. They say the stay-at-home rules prevent in-person church services and infringe on First Amendment rights to assembly and free exercise of religion. They unsuccessfully pressed for a temporary restraining order to halt the rules. Central District of California Judge Jesus Bernal refused to impose the order last month and the decision is on appeal.

A lawsuit says children of undocumented immigrants should get stimulus checks

The IRS will not issue stimulus checks for undocumented immigrants, but a lawsuit filed Monday says the children of undocumented immigrants — who are citizens by their birth in the country — are entitled to the money.

See also: Why haven’t I gotten my stimulus check? 6 reasons your payment might be a no-show

The $2.2 trillion stimulus bill will pay $1,200 to eligible citizens and green card holders, as well as $500 per child. “The refusal to distribute this benefit to U.S. citizen children undermines the CARES Act’s goal of providing assistance to Americans in need,” said the lawsuit filed in Maryland federal district court.

At least two different lawsuits allege American citizens who are married to non-citizens are being wrongly deprived of stimulus checks. In one lawsuit, the six plaintiffs said they choose who they love and marry, but the government rules “disparages Plaintiffs’ choices and diminishes their personhood.”

The Treasury Department did not immediately respond to a request for comment.

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Andrew Keshner is a personal finance reporter based in New York.

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