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COVID-19 and Class Action Lawsuits

May 27, 2020

The COVID-19 pandemic has forced unprecedented shutdowns in businesses across the country. Following closely on the heels of this upheaval is a growing list of class action lawsuits from consumers whose plans were canceled or drastically scaled back in the era of social distancing, as well as from investors unhappy with companies’ performances in the shaken global market. Class actions often arise in situations where a large number of people or entities are negatively impacted in a similar way by the same event. In these situations, the class action mechanism allows for the possibility of bringing many related claims in one action, thereby aggregating the damages sought by multiple plaintiffs into one suit and drastically increasing a company’s exposure. Although the full scope of these lawsuits in the wake of COVID-19 remains to be seen, a few categories of class action lawsuits already filed offer some hints at what’s to come.

Event & Ticket Cancelation

Stay-at-home and social distancing orders have forced the cancelation of many events that involve large public gatherings, including concerts, cruises, flights, and sporting events. Ticket sellers have had to decide between offering refunds or rainchecks, and many have chosen the latter. As evidenced by recent complaints against Ticketmaster and StubHub, some consumers would have preferred refunds and filed suit in reaction to these decisions. Hansen, et al. v. Ticketmaster Entertainment, Inc., No. 3:20-cv-02685 (N.D. Cal. Apr. 17, 2020); McMillan, et al. v. StubHub Inc., No. 3:20-cv-00319 (W.D. Wis. April 2, 2020).

Memberships

In a similar category of suit, companies that offer ongoing access to services in exchange for recurring or flat fees (like gyms, recreational facilities, and ski resorts) have been sued by consumers alleging dues should have been suspended or refunded when their access ended. Members of 24 Hour Fitness sued the fitness chain, alleging they were charged full monthly fees despite the fact the gyms closed in mid-March. Labib, et al. v. 24 Hour Fitness USA, Inc., No. 4:20-cv-02134 (N.D. Cal. Mar. 27, 2020). Likewise, season pass holders sued Vail for retaining the fees from season pass sales despite closing its resorts indefinitely in March, although some of the suits were dropped after Vail announced it would give credits to pass holders based on the number of days they were able to ski. McAuliffe v. Vail Corp., No. 1:20-cv-01176 (D. Colo. Apr. 27, 2020); Clarke v. Vail Corp., No. 1:20-cv-01163 (D. Colo. Apr. 24, 2020); Faydenko v. Vail Resorts, Inc., No. 20-cv-01134 (D. Colo. Apr. 22, 2020); Han v. Vail Resorts, Inc., No. 20-cv-01121 (D. Colo. Apr. 21, 2020); Hunt, et al; v. Vail Corp., No. 4:20-cv-02463 (N.D. Cal. Apr. 10, 2020).

Higher Education

As colleges transition to online learning, students and their parents begin to wonder why they should be required to pay for room and board when the dorms and dining halls remain shuttered. For example, a class action recently filed in Arizona alleges the Arizona Board of Regents improperly retained fees for the cost of on-campus services when students were not allowed on campus. Rosenkrantz, et al. v. Arizona Board of Regents, No. 2:20-cv-00613 (D. Ariz. Mar. 27, 2020).

Securities

Right behind the consumer lawsuits driven by disrupted businesses are suits from investors unhappy with attendant drops in share prices. Although such suits may come from a number of different angles, the primary hook for the investor suits filed thus far has been allegedly false and misleading statements companies made in the lead-up to the pandemic. A class of shareholders in Norwegian Cruise Lines, for example, sued the company for making optimistic statements in February about their expected financial performance despite the developing COVID-19 outbreak. Douglas v. Norwegian Cruise Lines, No. 20-cv-21107 (S.D. Fla. Mar. 12, 2020).

As the above examples illustrate, any negative impact, however small, on a large number of people may give rise to a class action lawsuit. Such cases bring a host of unique procedural and strategic considerations, including fighting class certification and managing class related discovery in an efficient and effective way. These suits are only likely to increase as the impacts of COVID-19 continue to be felt, and companies should consider engaging experienced class action counsel early on to help them navigate these complex and unique issues.

If you have any questions, please contact Jennifer Allen or Kyle Holter.

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