As we previously reported, “Phase I” of class action filings relating to the COVID-19 pandemic has become a significant contagion of its own with more than 500 cases being filed since March challenging refund policies, school closures, event cancellations, and marketing and pricing practices. As the economy gradually reopens, “Phase II”—how companies respond to these cases—is just beginning. Not surprisingly, defendants are fighting hard and early to defeat these claims, with many opting to file motions to dismiss rather than answering the complaint and entering into lengthy and expensive discovery.
Early Action in Cases Against Public-Facing Businesses
Public-facing businesses—such those in the retail, travel and hospitality industries—have been the first to re-open and are currently navigating a patchwork of state guidelines on how to do so safely. Compounding this burden, these same companies are facing a wave of lawsuits by customers and employees alleging negligence, breach of contract, and unfair business practices during the pandemic.
These industries are not new to class action litigation and many companies have included arbitration clauses and class arbitration waivers in their consumer contracts. These defendants have, not surprisingly, moved to compel arbitration, and plaintiffs have responded with unique (but likely ineffective) allegations of unconscionability, fraud and duress to try to stay in court. For example, in a case against Amazon, the plaintiffs alleged that the arbitration agreement was unconscionable because they were under duress during the pandemic and were forced to purchase products from Amazon. Amazon’s response was based on the black-letter principle that unconscionability is measured at the time of contracting, and not at the time of the challenged conduct.
Other companies have focused on substance, arguing that they complied with their contractual obligations and that their customers have not suffered damages. For example, in the case of recurring monthly payments for fitness club memberships, defendants have argued that their membership agreements do not mandate refunds for temporary closures, and therefore plaintiffs who filed suit within days or weeks of the initial closure did so too quickly.
Continue Reading What will “Phase II” of COVID-19 Class Actions Look Like?