The COVID-19 crisis has caused businesses and individuals to face unexpected social and economic consequences, including disputes caused by COVID-19. Lex Machina is tracking disputes that have made their way into court. Previously, we tracked new litigation caused by COVID-19 for federal district court cases filed March 1 through May 2, 2020 and observed the following trends:
- COVID-19 case filings were trending upward.
- Contracts and insurance, followed by employment, were the leading practice areas with COVID-19 keyword matches.
- Contracts, insurance, and employment were the leading practice areas with confirmed case filings directly resulting from COVID-19.
We continue to track cases filed in federal district court by analyzing new litigation filed May 3 through July 4, 2020, in order to determine whether the early trends persisted.
Trend Updates Looking at March 1 through July 4, 2020:
- Case Filings Citing COVID-19 Keywords Increased in March and April, then Leveled Off in May and Plateaued in June. New cases with complaints citing COVID-19 increased week-over-week from three cases in early March to 138 cases in the last week of April. New case filings peaked in May (126-140 cases per week) and plateaued at a slightly lower level in June (102-115 cases per week). The median cases per week from May 3 through July 4 was 115 cases.
- Leading Practice Areas with COVID-19 Keyword Matches. Contracts and insurance had the largest number of complaints filed from March 1 through July 4 that cited COVID-19 keywords, with 522 and 438 cases, respectively, followed by employment with 197.
- Leading Practice Areas with Confirmed Case Filings Directly Resulting from COVID-19. Insurance, contracts, and employment were the three practice areas with the largest number of cases (424, 397, and 102 cases, respectively) that (a) would not have been filed if not for the pandemic, and/or (b) have claims substantially exacerbated by the pandemic.
Trends to watch in 2020:
- Additional Practice Areas with an Accruing Volume of Confirmed New Case Filings Directly Resulting from COVID-19. Torts, securities, consumer protection, and trademark each have a growing number of new case filings (74, 55, 45, and 44 cases, respectively) that directly resulted from the COVID-19 crisis.
- Total Confirmed Case Filings Directly Resulting from COVID-19. From March 1 through July 4, 2020, 1,137 cases from Lex Machina practice areas have been filed that directly resulted from the COVID-19 crisis.
Lex Machina tracks new litigation, identifies cases with COVID-19 keywords, and analyzes the substance of claims that assert a significant impact by the coronavirus health crisis or related societal changes. We searched complaints filed in new cases for the eighteen weeks starting March 1-7, 2020 and ending June 28-July 4, 2020. For each practice area, legal data experts reviewed all complaints.
Tracking New Cases Citing COVID-19 Keywords in the Complaint
As shown in the figure below, cases with complaints citing COVID-19 increased weekly in March and April. The week of May 10-16 saw the highest number of cases filed that cited COVID-19 keywords. In June, case filings per week plateaued at a slightly lower level, which led to a median of 115 cases per week from May 3 through July 4. Using the search string “covid OR coronavirus OR pandemic” over complaint documents filed from March 1, 2020 through July 4, 2020 in the practice areas tracked by Lex Machina, we found 1,536 cases. The complaints mentioned these keywords for various reasons; some merely mentioned the keywords as part of the current state of events, while others alleged claims directly related to the coronavirus health crisis or related societal changes.
The keyword search was conducted over initial complaints filed each week starting March 1-7, 2020 through June 28-July 4, 2020. Initially, new complaints matching the COVID-19 search string increased week-over-week, starting with three cases filed March 1-7 and progressively increasing over the following weeks to 138 cases filed April 26-May 2. Case filings maintained a steady rate with a weekly high of 140 cases during May 10-16 and a dip to 102 cases during June 14-20.
Lex Machina covers the majority of cases filed in federal district court and possesses a comprehensive data set that spans 16 practice areas and nearly two million cases. Some cases are not included in these numbers if they are outside the Lex Machina practice areas. We recently released an expanded torts data set that is discussed in this blog entry for the first time.
New Cases Citing COVID-19 Keywords in the Complaint
Tracking New Cases Citing COVID-19 Keywords in the Complaint by Practice Area
We detected 1,536 cases from a keyword search over initial complaints in cases filed March 1 through July 4, 2020. When analyzed by practice area, contracts had the most cases filed (522 cases), followed by insurance (438 cases), then employment (197 cases).
The other practice areas with a moderate number of cases included torts (115 cases), securities (83 cases), consumer protection (58 cases), trade secret (37 cases), patent (28 cases), and copyright (25 cases). In addition, other practice areas had some new case filings that cited COVID-19 such as ERISA (22 cases), product liability (21 cases), antitrust (10 cases), environmental (8 cases), and tax (2 cases). As a case may have more than one practice area tag, these numbers exceed 1,536.
New Cases Citing COVID-19 Keywords in the Complaint by Practice Area
Tracking New Cases Confirmed to be Caused by the COVID-19 Crisis by Practice Area
We reviewed each of the 1,536 cases identified by the keyword search and verified whether the case was filed as a direct result of the COVID-19 crisis. We found that a total of 1,137 cases were caused by the COVID-19 crisis and 399 cases merely mentioned a COVID-19 keyword as a preface or procedural recitation.
In order for a case to receive classification as having been “caused by the COVID-19 crisis”, the case must satisfy at least one of the following two criterion:
- If not for the pandemic, the case would not have been filed because the allegations brought are tied explicitly to circumstances created by the pandemic; and/or
- The factual description of the case describes how pandemic-related circumstances exacerbated a dispute.
Cases that merely mentioned COVID-19 as a preface or recitation were not included, nor were cases with procedural directives referencing COVID-19.
When analyzed by practice area, insurance had the most cases caused by COVID-19 (424 cases), followed by contracts (397 cases), then employment (102 cases). Subsequent to these three leading practice areas were torts (74 cases), securities (55 cases), consumer protection (45 cases), and trademark (44 cases). The other practice areas with at least one case filed due to COVID-19 include trade secret (14 case), copyright (7 cases), patent (7 cases), product liability (7 cases), antitrust (6 cases), environmental (2 cases), and ERISA (2 cases). As a case may have more than one practice area tag, these numbers exceed 1,137.
New Cases Confirmed to be Caused by the COVID-19 Crisis by Practice Area
Tracking Monthly Filings for Cases Confirmed to be Caused by the COVID-19 Crisis
The figure below breaks down by month the number of case filings caused by the COVID-19 crisis in the three top practice areas. (Specific dates, as labeled on the figure, were used in order to include four full weeks each month.) There was a month-over-month increase in all three groups from March 8 to May 30, 2020. While employment cases caused by COVID-19 continued to increase into June, cases from the other two groups decreased.
Both insurance and contracts had more new cases resulting from COVID-19 in May (153 and 145 cases, respectively, from May 3-May 30) compared to March (4 and 18 cases, respectively, from March 8-April 4) and April (94 and 116 cases, respectively, from April 5-May 2), and then had fewer cases in June (131 and 100 cases, respectively, from May 31-June 27). We expect that filings will continue at least at the present rate, if not increase, as more businesses face continued economic disruption and may resort to litigation to pursue business interruption claims or handle disputes around contract fulfillment.
Employment case filings caused by the COVID-19 crisis increased steadily in May (26 cases from May 3-May 30) and again in June (41 cases from May 31-June 27). More employment cases will likely be filed as businesses and employees navigate extraordinary workplace conditions and expectations that will be further impacted by the dynamic nature of the COVID-19 outbreak and related economic reopening plans.
Monthly Filings for Cases Confirmed to be Caused by The COVID-19 Crisis
Analyzing Cases Confirmed to be Caused by COVID-19 by Practice Area
The COVID-19 crisis has consequences for a broad range of social and economic sectors in the United States. Lex Machina’s legal data experts reviewed all 1,536 federal district court cases citing COVID-19 keywords to verify the 1,137 cases caused by COVID-19, and shared their observations on the new cases filed.
Antitrust cases caused by the COVID-19 crisis cited the pandemic as an exacerbating factor to alleged anti-competitive behavior. For example, two cases filed against Dairy Farmers of America in May 2020 alleged that Clayton Act and Sherman Act violations caused a monopoly on the production and processing of milk during the COVID-19 pandemic shutdown.
No bankruptcy cases filed in federal district court from March 1 through July 4, 2020 cited the COVID-19 crisis in the complaint. It is likely that after the underlying bankruptcy proceedings prompted by the pandemic shutdown proceed further in Bankruptcy Court, cases filed as withdrawal of the reference or appeal will appear in federal district court.
The majority of the Consumer Protection cases resulting from the COVID-19 crisis were Fair Debt Collection Practices Act (FDCPA) cases. Many involved consumers that could not repay debts because their income had been impacted by the coronavirus. Four cases are pending against defendant I.Q. Data International, Inc., a collection agency that allegedly violated the FDCPA by making unauthorized withdrawals and collecting on defaulted loans throughout the pandemic.
Plaintiffs have filed claims against credit bureaus Experian Information Solutions, Inc. and Trans Union, LLC for violating the Fair Credit Reporting Act (FCRA). The claims alleged that negative information on credit reports impacted the plaintiffs’ ability to obtain credit during this stressful economic time. In a FCRA class action against Deloitte Consulting, LLP for a data breach while processing protected information in unemployment claims, the plaintiff alleged that the class was larger as a result of increased COVID-19 job losses.
New Telephone Consumer Protection Act cases involved unauthorized automated collection calls or marketing statements related to COVID-19. For example, a pain management practice sent a facsimile containing the following statement, “By quickly deploying telemedicine, not only is PMC providing an essential service to those suffering with pain, it is also helping to ensure patients don’t end up in overburdened Emergency Rooms, where the risk of contracting coronavirus will surely be higher.”
Unfair/Deceptive Trade Practices Act and FTC Enforcement cases involved defendants capitalizing on the economic stress caused by the pandemic. For example, the FTC claimed that Traffic Jam Events, LLC violated the FTC Act when it solicited consumers with a “Time-Sensitive” mailer purporting to contain “Important COVID-19 Economic Stimulus Documents.” The mailer also contained a check-like document issued by the “Stimulus Relief Program.”
Contracts disputes related to the COVID-19 pandemic shutdown continued to generate new contracts case filings. A significant number of class actions were filed against universities, seeking tuition refunds for students who were unable to participate in the “campus experience” due to the COVID-19 closure of campuses. Similarly, a significant number of class actions were filed against airlines, seeking refunds (as opposed to credits) for flights cancelled because of the pandemic. Other cases have focused on the plaintiffs’ failure to receive a refund for tickets purchased prior to the pandemic for cancelled events such as concerts, or for the failure to provide refunds for passes or subscriptions to ski resorts, amusement parks, and gyms.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has generated a number of the most recent COVID-19 cases. In these cases, agents (or classes of agents) sought reimbursement from lenders under the provisions of the CARES Act for their role in assisting small businesses in procuring loans under the Paycheck Protection Program. Other recent COVID-19 cases involved failed transactions for the purchase of Personal Protection Equipment such as masks and hand sanitizer. Finally, a number of recent contracts cases involved contracts that were allegedly breached due to an inability (or unwillingness) to perform under the terms of a contract due to COVID-19. This group of cases included, among other things, the termination of restaurant franchises, the refusal to consummate certain real estate transactions, and the breach of lease agreements (including leases for student housing).
The top district for new contracts cases resulting from COVID-19 was the Southern District of New York with 57 of the 398 contracts cases. The top parties in contracts cases caused by COVID-19 included Vail Corporation (ski pass refund cases mostly filed in the District of Colorado), Zoom Video (unjust enrichment and breach of contract claims filed in the Northern District of California), and the University of Miami (tuition reimbursement mostly filed in the Southern District of Florida).
We will be watching to see whether all the districts reach a consensus on how certain types of COVID-19 cases (such as refunds versus credits) should be resolved as the courts scrutinize the language in the various contract types. We expect that certain industries (e.g., airlines) may not be required to provide refunds if the contracts included comprehensive no-refund policies, whereas other industries (e.g., ticket sellers) might be required to give refunds if they have provided event-cancellation guaranties. To date, 54 of the 397 contracts cases that resulted because of COVID-19 have terminated with no findings on the merits or damages.
Copyright cases have been filed alleging infringement of COVID-related materials, such as masks, photographs, and news articles. The most high-profile case was likely Hachette Book Group, Inc. et al v. Internet Archive et al. In this case, four publishers alleged that the Internet Archive began lending unlimited copies of books during the COVID-19 pandemic under a program it called the “National Emergency Library.” According to the complaint, it “opportunistically seized upon the COVID-19 pandemic as an excuse to accomplish its long-desired goals.”
In the last few months, we have seen the progression of pandemic-driven employment litigation. Starting with the plight of the working parent, plaintiff-employees have filed lawsuits detailing their struggles with their current or former employers and adequate child care coverage. Many defendants are employers that decided against remote accommodations and demanded in-office attendance to the detriment of their employees who have children. Interestingly, several complaints alleged Family First Coronavirus Response Act (FFCRA) “interference.” Plaintiffs alleged that employers failed to properly post or notify employees of their rights under the novel FFCRA.
Unfortunately, the lawsuits also detailed the grim reality of living in a pandemic. Plaintiff-employees filed retaliation lawsuits under the FMLA, FFCRA, EFMLA, or ADA, alleging they were wrongfully terminated after contracting the virus and not being able to return to work. In other words, sick workers were charged with job abandonment and terminated for attendance-related reasons. A few tragic cases detailed co-workers who contracted COVID-19 and passed away after an employer allegedly discouraged disclosure between employees or customers. This is the reality that the judicial system will have to adjudicate in the coming months.
The battleground between healthcare-employee plaintiffs and healthcare-employer defendants has been heating up over the last few months. These cases included allegations of unsafe work conditions, retaliation, and/or whistleblower cases. These types of cases will only increase as the pandemic continues, resulting in more stressful workplaces for healthcare employees.
Two environmental cases filed in May resulted from the COVID-19 crisis. A case against the Environmental Protection Agency (EPA) challenged the recent shift by the EPA to non-enforcement of monitoring and reporting requirements under federal environmental law; plaintiffs argued that this change in policy is not a necessary response to the COVID-19 pandemic. Another case, filed by the Assiniboine and Sioux Tribes of the Fort Peck Indian Reservation, alleged that in violation of the National Environmental Policy Act, the defendants failed to mitigate the impact from TransCanada’s construction activities on tribal members during the COVID-19 crisis, which will potentially increase community spread of COVID-19.
A few pandemic-related ERISA cases alleged a breach of fiduciary duty caused by a significant drop in pension fund value during the stock market fallout in March 2020. Although the stock market is still volatile, much of its pre-pandemic value has returned, alleviating these types of issues. We anticipate an increase in claim-denial filings in the coming year, due to the rising casualty rate.
The influx of new insurance cases related to COVID-19 was dominated by claims for business interruption losses. While there were a handful of cases involving travel insurance, season ski lift ticket insurance, and homeowners’ losses affected by COVID-19, over 95% of the cases involved business interruption claims. The named plaintiffs in many of these cases were small businesses or professional practices, and over half the cases purported to be class actions. The wide variety of types of businesses that filed claims reflected the broad effects of COVID-19 on the US economy. While restaurants, bars, day care centers, salons, doctors, and lawyers continued to bring claims, larger businesses such as minor league baseball leagues, Las Vegas casinos, marketing firms, event planners, and commercial property owners also sued for coverage for their losses. Business interruption claims are pending throughout the country but these five jurisdictions accounted for almost 40% of the filings: 1) Eastern District of Pennsylvania, 2) District of New Jersey, 3) Northern District of Illinois, 4) Western District of Washington, and 5) Southern District of Florida.
The JPML is considering a petition to create an MDL to handle some or all of the business interruption claims. Over 200 pending cases have been associated to MDL 2942, In re: COVID-19 Business Interruption Insurance Coverage Litigation. Oral argument before the JPML is scheduled for July 30, 2020.
A new patent infringement case caused by COVID-19 involved a dispute between two companies in the smokeless tobacco industry. In late May, Altria & U.S. Smoking Tobacco Company filed a case against RJ Reynolds Vapor Company, and FDA deadlines relevant to vaping product approvals were adjusted due to COVID-19. Altria argued that Reynolds Vapor used these new COVID-19-related deadlines to continue the accused infringement, rather than withdrawing from the US market.
In two other cases, plaintiffs claimed that defendants were leveraging the circumstances of COVID-19 to gain market share and/or impact sales of their products. In a furniture case, the plaintiff brought a non-infringement action against the defendant after plaintiff’s product had been removed from Amazon.com for alleged patent infringement, “right when the market for temporary and collapsible furniture was accelerating.” Plaintiff alleged that the defendant acted to remove plaintiff’s product, knowing that it did not infringe the relevant patent. In a case between automobile collision repair businesses, plaintiff claimed that the defendants circulated a rumor of patent infringement by the plaintiff, along with other false claims, to deter customers and businesses from working with the plaintiff. As a result, plaintiffs brought a declaratory judgment of non-infringement of the discussed patent, in addition to other claims like false advertising.
Product liability cases due to COVID-19 have generally been related to vaping products. While most have been related to the pending MDL, In Re: Juul Labs, Inc., Marketing, Sales Practices, and Products Liability Litigation, a class action was recently filed in the District of New Jersey against Cool Clouds Distribution, Inc. Plaintiffs alleged that in April 2020, defendant used the social isolation created by the pandemic to market its e-cigarette to teenagers by urging them to “stay sane with Puff Bar this solo-break” since it’s the “perfect escape from the back-to-back zoom calls.” Plaintiffs made strict liability failure to warn and fraud claims against Cool Clouds.
Perhaps many will recall the conditions from the early days of the pandemic and sympathize with the plaintiff in a case against Amazon pending in the Northern District of New York. Unable to find toilet tissue locally due to the COVID-19 pandemic, plaintiff instead ordered it from Amazon, and alleged that the tissue was defective and caused an infection for which they had to seek medical treatment.
Given the widespread economic effects of the pandemic and fluid nature of ongoing changes to the market caused by the COVID-19 crisis, the situation is ripe for securities litigation. Disputes filed in early March have continued through early July, cutting across industries in a total of 55 cases. Some cases involved corporate disclosures about the impact of the coronavirus pandemic on financial performance. In these cases, plaintiffs alleged misuse of financial models, unsupported business projections, and erroneous or misleading projections in everything from press releases to public filings. Key cases where plaintiffs challenged defendants’ presentation of the stated impact of the pandemic on business or future projections included an oil investment fund and a case against Tesla/Elon Musk.
Other new securities cases directly involved products related to the COVID-19 pandemic. Biotechnology and pharmaceutical companies were accused of misrepresenting company performance on everything from sales of products to creating or producing tests or vaccines. In three Chembio Diagnostics cases, plaintiffs cited false statements around the efficacy of a COVID-19 antibody test that the company is developing, while two cases against SCWorx alleged inaccurate statements around deals to sell COVID-19 test kits. In another example, shareholders alleged that directors and officers of Inovio Pharmaceuticals made reckless statements about the company’s development of a COVID-19 vaccine within three hours of receiving the relevant DNA and pending clinical trials.
Two cases filed against Carnival Cruises alleged material misrepresentations and omissions around how the company safeguarded passengers and crew during coronavirus outbreaks on cruise ships, which made its disclosures of future profitability misleading.
Two tax cases mention the CARES Act in complaints, but neither case was filed as a result of the COVID-19 crisis. In light of the financial impact of the COVID-19 pandemic, the new regulations enacted under the Tax Cuts and Jobs Act in 2018 will likely be tested in federal district court. In the coming months, we may see new filings seeking reduction of tax claims to judgment, as well as tax refunds.
On June 30, 2020, Lex Machina released an expanded definition of torts cases to cover more personal injury cases. Personal injury litigation resulting from COVID-19 began to emerge as the number of cases and deaths due to the virus continued to increase. The recently-filed cases in federal district court included dozens of lawsuits against cruise ship operators such as Princess Cruise Lines, Ltd. Passengers claimed, among other things, that the cruise ships improperly continued operations. They alleged that the cruise ships allowed new passengers aboard despite knowledge that the ship was infected from previous passengers who came down with symptoms of the coronavirus, took no adequate preventive measures, and placed the passengers at risk of contracting the disease.
Nursing home facilities were also the targets of torts litigation. Some facilities are now facing gross negligence and wrongful death claims filed by the patients’ families because of the alleged poor infection control and precautions, and the failure to comply with restrictions to keep their residents safe from the coronavirus.
Many of the negligence-based COVID-19 lawsuits commonly revolved around whether the concerned entities took reasonable measures to do their best in preventing the spread of the coronavirus. Several class action cases have been filed against the People’s Republic of China (PRC) and its various government entities alleging they were responsible for the public-health crisis. These cases included claims for negligence, emotional distress, public nuisance, and strict liability for “conducting ultra-hazardous activity.”
COVID-19 is causing trade secret litigation based on the firing and movement of employees during the pandemic. Many of these cases alleged that the pandemic exacerbated the harm done by the accused theft of trade secrets. In one case, plaintiffs alleged that after they were fired, defendants broke into the office while it was shut down due to the pandemic and physically stole files containing trade secret information. In another significant case, plaintiffs alleged that defendants had a fiduciary relationship in competing COVID-19 testing companies, but breached that duty when they shared trade secrets between the two companies.
3M has continued filing trademark cases alleging defendants are using its trademarks for 3M brand N95 respirators, masks, and other supplies in order to engage in price gouging. It filed 15 of these cases between March 1 and July 4, 2020. In other trademark cases, plaintiffs alleged counterfeiting of COVID-related materials. Several cases have been filed alleging defendants used confusingly similar or counterfeit logos in order to interfere with plaintiffs’ business operations during the pandemic. Additionally, several franchisors sued when franchisees broke their agreements due to the pandemic but continued using the previously-licensed trademarks.
Our team is following litigation data in a multitude of practice areas and venues, and we aim to present meaningful trends and observations on an ongoing basis. While this post focuses on fact patterns in recently-filed cases, Lex Machina will have more updates on litigation activity as litigation caused by COVID-19 makes its way through the court system. We are tracking activity such as findings, remedies, damages, and case resolutions.
This data was gathered from the Lex Machina platform on July 13, 2020. The Lex Machina platform updates daily and therefore any numbers in this report will change as new cases get added to PACER with new information. This report is meant to provide trends and general research information as of the date of publication.