California recently passed the one-year anniversary of the COVID-19 stay at home order. The COVID-19 pandemic has affected lives in different ways. Employees who regularly worked in an office now work from home. Restaurant chains open for years have shut their doors for good as they could no longer turn a profit. COVID-19 has also affected litigation. It was unclear what types of suits would result from the pandemic. However, a year into this unforeseen global epidemic, we now have a better idea of the types of lawsuits which will be filed. This article explores recent news involving COVID-19 litigation throughout the United States in an effort to achieve a better understanding of how litigation has changed.
Claim that Coronavirus Restrictions Violate First Amendment Rights
Massachusetts Colonial Ghosts, LLC, which conducts business as Salem Ghosts, brought suit in a U.S. District Court against the Governor of Massachusetts to request the court block the emergency rules which limited Salem Ghosts to having only 11 people on their tours.1 Salem Ghosts argued their First Amendment rights were being violated because the type of speech they engaged in was being treated differently from those that assemble for political speech which had no capacity limits imposed.
The court denied Salem Ghost’s preliminary injunction and allowed Defendant’s motion to dismiss, making clear in its order that it was ruling only on the constitutionality of the orders imposed and not whether they were wise or appropriate. The court also recognized the plight of the tour operators and many other small business owners during the crisis.
Lawsuit Over Private Club Membership Fees During the Pandemic
Two California ClubCorp USA, Inc. members (ClubCorp USA, Inc. is the largest owner and operator of private clubs nationwide with 200+ country clubs, city clubs, athletic clubs, and stadium clubs2) brought a class action suit against ClubCorp USA, Inc.3 In this suit, the members claimed ClubCorp USA, Inc. charged its monthly membership fees at full price even while clubs were closed due to the coronavirus pandemic.
ClubCorp USA, Inc. moved the court to toss the suit or send it to arbitration. ClubCorp USA, Inc. argued the bylaws of each of its clubs include arbitration clauses which they integrated into each members’ membership application. However, a U.S. District Court Judge denied defendant ClubCorp USA, Inc.’s request. The Court determined there was a factual dispute regarding whether the two class representatives were bound by the subject arbitration agreements. The judge denied both motions, giving the parties time to discuss how they want the case to proceed.
New York Luxury Hotel Sues Its Insurer for Coronavirus-Related Losses
A luxury hotel in Manhattan recently filed a lawsuit in New York against its insurer.4 The hotel argues its insurer denied coverage for coronavirus pandemic-related losses, and therefore, it is entitled to business interruption coverage under its insurance policy. Specifically, the hotel argues it is entitled to such coverage because the presence of people who test positive for the coronavirus make the property unsafe, which in turn, creates a loss to the hotel’s property. In support of its arguments, the hotel claims the exclusions in the policy do not exclude the coronavirus.
A Court Determined a Popular Clothing Store Chain Cannot Use the Coronavirus Pandemic and Lockdown as an Excuse Not to Pay Rent
The popular clothing store chain Gap Inc. claims its lease for Gap and Banana Republic Stores in New York City became invalid at the beginning of the coronavirus pandemic when local legislature required stores to shut down.5 Gap, Inc. argued it had no liability to pay rent after the date the coronavirus began. However, a U.S. District Court Judge granted summary judgment in favor of Gap’s landlord. The Court reasoned Gap did not effectively show the coronavirus pandemic and restrictions actually frustrated the principal purpose of the subject lease to the point the lease became invalid. Specifically, COVID-19 restrictions did not block Gap from conducting business via curbside pickup, online ordering, or a variation of limited in-store shopping.
Recent news related to coronavirus litigation provides insight on how the
Pandemic is currently affecting litigation and how it will affect litigation in the future. Parties can track trends to see how the courts are currently ruling on particular issues to determine likely outcomes for future filings. This will allow for claims professionals and defense counsel to assess potential liability in the coming years.
1 ZAAL VENTURES CORP., et al., Plaintiffs, v. CHARLES D. BAKER, in his official capacity as Governor of Massachusetts, et al. Defendants. Additional Party Names: Colonial Ghosts, LLC, Michael Kennealy, Monica Bharel, Salem Ghosts, 2021 WL 1026715 (D. Mass. Mar. 17, 2021).
3 Jeffrey Cuenco and Linda Hong v. ClubCorps USA, Inc., et al. 2021 WL 794270.
4 Melissa Angel, Luxury NYC Hotel Cites Trump In COVID-19 Insurance Suit, LAW360 (Mar. 26, 2021, 3:03PM), https://www.law360.com/articles/1362089/luxury-nyc-hotel-cites-trump-in-covid-19-insurance-suit.
5 The Gap, Inc. v. Ponte Gadea New York, LLC 2021 WL 861121.