Most of these cases fall into the following two categories:
- Recurring Fees. As ongoing state and local quarantine orders have shuttered businesses across the country, consumer class action complaints are being filed alleging that some of these closed businesses have improperly continued to collect recurring fees. Gyms have been the primary target of such litigation, with at least seven suits filed thus far in California, New York, Florida and Massachusetts federal courts, and one in Florida state court, alleging that gyms continued to charge monthly dues while closed. Three of these suits are against Town Sports International, operator of New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs. Similar suits take aim at LA Fitness, Blink Fitness, Fit Republic and others. Bursor & Fisher, P.A., the plaintiffs’ firm behind three of the gym suits, has also filed similar suits in California federal court against Vail Resorts in connection with ski pass fees, Six Flags in connection with theme park memberships, and a “singles” events company for its monthly member fees. Six Flags also faces a second suit in California federal court. Plaintiffs’ firms will no doubt seek out additional membership and subscription services that continue to charge recurring fees while eliminating or reducing their services.
- Failure to Refund. Quarantine orders have also forced the cancelation or postponement of myriad one-time events and prepaid services. In response, consumers have filed class action suits attacking the refund policies of a wide array of businesses, generally demanding monetary refunds rather than credits or rain checks. United Airlines has been hit with two such suits in Illinois and Ohio federal court, and the discount Mexican airline Volaris faces one in Illinois federal court. Bursor & Fisher, P.A. has also sued another discount airline and an online travel agent in California federal court. Federal lawsuits in Arizona, Indiana, South Carolina, and Virginia have alleged that various universities have improperly retained payments for tuition, room, board and other on-campus services despite closing their physical campuses. DiCello Levitt Gutzler LLC has sued both the Arizona Board of Regents and Liberty University, while Anastopoulo Law Firm, LLC has sued both the University of Miami and Drexel. StubHub has been another refund litigation target, facing a suit in Wisconsin federal court, but under California law, brought by Liddle & Dubin, P.C., which also brought one of the Town Sports cases. Additional refund suit targets include the Lightning In A Bottle music festival in California state and federal court, with the federal case brought by Bursor & Fisher, P.A., and an educational tour operator in California federal court. Plaintiffs’ attorneys are also actively seeking clients to bring additional coronavirus-related refund cases.
While other COVID-19 consumer class action cases are less concentrated in particular areas, the following additional categories have begun to emerge:
- Exposure to Health Risks. Cruise lines are facing consumer class actions in California and Florida federal court for allegedly continuing business as usual despite knowledge of emerging risks to passengers. Plaintiffs in these cases seek to represent all passengers aboard specific voyages with documented coronavirus cases. In addition to further suits against cruise lines2 and other businesses that were allegedly too slow to shut down as news of coronavirus emerged, we anticipate seeing suits filed when the pandemic slows alleging that businesses put their customers at risk by reopening too soon and/or by failing to warn customers of ongoing risks despite the resumption of operations.
- False Health Benefit Claims. Consumers have also filed two putative class actions in California federal court against hand sanitizers marketed under the Germ-X and in-house Target brands. These suits allege that the hand sanitizers are expressly and implicitly advertised as a way to prevent the coronavirus and other ailments despite FDA warnings that there is insufficient evidence to support such claims. Other government enforcers at the federal, state and local level have been pursuing unwarranted coronavirus-related health claims, and further follow-on class litigation addressing coronavirus-related false advertising will likely follow.3
- Contract Revision. Businesses have also been targeted for allegedly changing the terms of their agreements with consumers in response to the coronavirus pandemic. For example, the StubHub refund case mentioned above alleges that StubHub unilaterally changed the terms of its “FanProtect” cash refund guarantee by giving itself sole discretion to instead offer a credit unless a refund is required by law. And in the education space, DiCello Levitt Gutzler LLC, one of the plaintiffs’ firms involved in the university refund litigation, is also suing a student loan provider in Minnesota federal court, under both Minnesota and California law, for discontinuing its program lowering the interest rate of borrowers who make timely loan payments. Similar suits involving changes to consumer contracts are likely to follow.
- Price Gouging. Although the response to alleged coronavirus-related price gouging has largely been limited to government enforcement activity, at least one consumer class action has been filed against an online retail platform in Florida state court alleging it inflated prices of hygiene products like disinfectant wipes, hand sanitizer and toilet paper. While it is highly questionable that liability can be imputed to platform operators for prices almost certainly set by third-party sellers, the scope of reported coronavirus-related price gouging activity will likely inspire additional private class action litigation in this area.
It is noteworthy that businesses experiencing heightened visibility during the coronavirus crisis have also become class action targets. Zoom Video Communications is the primary example, facing at least 11 new class actions since March 30, 2020, 10 of which have been filed in California federal court. While these cases have been brought under various state privacy and consumer protection laws and federal securities laws, they all generally relate to alleged issues with the privacy and security of the Zoom platform that predate the COVID-19 pandemic. One of these suits also names Facebook as a defendant for allegedly harvesting Zoom user data. Meal delivery services Grubhub, DoorDash, Postmates and Uber Eats, who have similarly experienced burgeoning coronavirus-related demand, were sued on April 13, 2020, in New York federal court in a class action alleging antitrust conduct dating back to 2016. Specifically, these services are accused of monopolizing the meal delivery market and of fixing prices by requiring restaurants to offer menu items at the same price to dine-in customers as they do to delivery service users.
In sum, many consumer-facing businesses are fighting for their survival due to the COVID-19 pandemic’s economic fallout and have no choice but to seek out ways to cut costs and preserve liquidity in this climate. Nevertheless, such businesses should remain mindful of the above litigation risks associated with such measures and should carefully strive to avoid any actions that might lead to consumer class actions alleging that they are using the crisis as a pretext to take advantage of their customers.
For more information, please reach out to your regular Pillsbury contact or the authors of this client alert.
Pillsbury’s experienced, multidisciplinary COVID-19 Task Force is closely monitoring the global threat of COVID-19 and providing real-time advice across industry sectors, drawing on the firm’s capabilities in crisis management, employment law, insurance recovery, real estate, supply chain management, cybersecurity, corporate and contracts law and other areas to provide critical guidance to clients in an urgent and quickly evolving situation. For more thought leadership on this rapidly developing topic, please visit our COVID-19 (Coronavirus) Resource Center.
[1] We have reviewed thirty-one consumer class action complaints in identifying the bulleted categories discussed below. Fifteen of these cases have been filed in California or involve California claims. Four have been filed in Florida and three in New York.
[2] Many individual suits have already been filed against various cruise lines, and a shareholder class action has been filed against a cruise line in Florida federal court based on allegedly false and misleading statements representing “positive outlooks for the company in spite of the COVID-19 outbreak.”
[3] Inovio Pharmaceuticals is facing a shareholder class action in Pennsylvania federal court for allegedly inflating its stock price with false claims it had developed a coronavirus vaccine.