In 1978 Warren Zevon released the hit "Send Lawyers, Guns and Money," which is purported to be about a troubled youth visiting Cuba who writes home to his father for help when things turn dicey. The song ends with the chorus: "Send lawyers, guns and money. The s*** has hit the fan." Businesses and educational institutions that are still reeling from the effects of the COVID-19 pandemic are now facing a new challenge. COVID-19 related class action litigation is now hitting the fan. In particular businesses and educational institutions that collected revenue in advance and are now not providing the goods or services due to the COVID-19 pandemic have been targeted. A Wisconsin-based insurer has also been hit with two coverage class actions. These filings are likely the first wave of COVID-19 related class action filings.
COVID-19 related consumer class actions
The initial targets of COVID-19 related consumer class action litigation include an educational system, fitness centers, a festival promoter and a ticket reseller. These cases are largely based on a contracts theory -- the defendant agreed to provide goods or services and is now refusing to deliver or provide a refund.
• Educational Institutions. On March 27, 2020, the parents of two Chicago area students attending the University of Arizona filed a class action complaint against the Arizona Board of Regents on behalf of a putative class of all persons who paid for room and board or various fees for the second semester at the state run Arizona universities. Rosenkrantz et al v. Arizona Board of Regents, No. 20 CV 0613 (USDC D. Az.). Plaintiffs allege a breach of contract theory seeking to recover the amounts they paid for room and board and fees they are not receiving the benefit of due to the Universities' policy requiring them to vacate dorms and leave campus as a result of the COVID-19 pandemic.
On April 8, 2020, Drexel University was named in a putative class action complaint filed in the United States District Court for the District of South Carolina seeking refunds for fees, housing and tuition. Rickenbacker v. Drexel University, No. 20 CV 1358 (D.S.C.).
On April 8, 2020, a putative class action complaint was filed in the United States District Court for the District of South Carolina against the University of Miami. Dixon v. University of Miami, No. 20 CV 1348 (D. SC). Plaintiff seeks to recover not only fees and housing costs, but also tuition alleging that online instruction is inferior to the in-person instruction plaintiff and for which the putative class members paid.
On April 9, 2020 a putative class action complaint was filed in the United States District Court for the Northern District of Indiana against Purdue University. Church v Purdue University, et al., No. 20 CV 025 (N.D. Ind.). This complaint not only seeks refunds for housing and fees but also seeks a tuition refund for online instruction. The complaint alleges: "The University's decision to transition to online classes and to request or encourage students to leave campus were responsible decisions to make, but it is unfair and unlawful for the Defendants to retain full tuition and fees and a disproportionate share of prepaid amounts for on campus housing and meal costs and fees, effectively passing the losses on to the students and their families. Other higher education institutions across the United States that also have switched to online learning and requested their students leave campus have recognized the upheaval and financial harm to students and their families from these decisions and have provided appropriate refunds. The University, unfortunately, has not followed the pattern of many of its peers."
We note that sovereign immunity and state tort acts may come into play with respect to actions against state universities. These issues will not generally come into play in actions against private institutions. Private high schools and grade schools may also be hit with similar actions.
• Fitness Centers. There have been at least three class action complaints filed against fitness centers. On March 26, 2020, a putative class action complaint was filed against a prominent fitness chain, New York Sports Club (NYSC), for failing to suspend or credit membership fees during the COVID-19 shutdown. Mary Namorato v. Town Sports International LLC, and Town Sports International Holdings Inc. d/b/a/ New York Sports Clubs, No. 20 CV 02580 (USDC S.D. NY). Plaintiff alleges NYSC continued to charge monthly membership dues after closing its gyms in accordance with New York state's order to close all nonessential businesses. The complaint alleges NYSC has 605,000 members who pay monthly membership dues ranging from approximately $30 to $120 and therefore, even assuming average monthly rate of $50, NYSC is charging $30,250,000 per month to its customers. Further, the complaint alleges NYSC has also "made it virtually impossible for members to cancel their memberships and has refused to honor many members' cancellation requests."
On March 27, 2020, another class action complaint was filed against 24 Hour Fitness in the U.S. District Court for the Northern District of California. Labib v. 24 Hour Fitness USA, Inc., No. 20 CV 02134 (N.D. Ca.). The complaint alleges on March 16, 2020, 24 Hour Fitness announced it was closing all of its gyms nationwide indefinitely, starting at midnight that night. However, the complaint alleges 24 Hour Fitness continued charging its millions of customers monthly fees -- at full price and is "bilking" its customers out of roughly $120 million per month while they do not have access to 24 Hour Fitness's gyms.
On March 30, 2020, another putative class action complaint was filed against LA Fitness in the United States District Court for the Southern District of Florida. Barnett v. Fitness International, LLC, Case No. 20 CV 60658 (S.D. Fla.). The complaint alleges that on March 16, 2020, Defendant voluntarily closed its fitness facilities around the country through April 1, 2020, and furloughed most of its employees and has refused to provide its members with a refund for March 2020 keeping millions of dollars in membership fees. The complaint alleges that instead of issuing refunds, LA Fitness sent an email to all of its members purporting to offer extended memberships or a free three-month membership for a friend or family member as an apology for closing its facilities earlier in the month.
• Event Promoter. On March 24, 2020, a class action complaint was filed in Los Angeles Superior Court against the promoter of the Lightning in a Bottle electronic dance music festival. Rutledge v. Do Lab, Inc., No. E124175132 (LA Sup. Ct.). The complaint alleges that the festival, which was scheduled for Memorial Day weekend, was canceled due to the COVID-19 pandemic and the promoter refuses to provide refunds asserting that the terms and conditions on the tickets do not require it to do so.
• Ticket Reseller. On April 2, 2020, a class action complaint was filed against Stub Hub in the United States District Court for the Western District of Wisconsin alleging it refuses to provide cash refunds to customers who purchased tickets through it for events that were canceled in violation of its FanProtect guarantee. McMillan v. Stub Hub, Inc. et al., No. 20 CV 2508 (E.D. Wis.).
COVID-19 related shareholder class actions There have been at least two COVID-19 related shareholder class actions.
• On March 12, 2020, a shareholder class action complaint was filed against Inovio Pharmaceuticals in the United States District Court for the Eastern District of Pennsylvania. McDermid v. InovioPharm. Inc., No. 20 CV 1402, 2020 WL 1227260 (E.D. Pa.). The complaint alleges Inovio's CEO made false or misleading statements about a potential vaccine for COVID-19 it was developing.
• Also on March 12, 2020, a shareholder class action complaint was filed against Norwegian Cruise Lines in the United States District Court for the Southern District of Florida alleging the company failed to disclose it was providing customers with false assurances of safety relating to COVID-19 to get them to book cruises and avoid cancellations. Douglas v. Norwegian Cruise Lines, No. 20 CV 21107, 2020 WL 1226410 (S.D. Fla.).
COVID-19 related insurance coverage class actions
There have been two COVID-19 related insurance coverage class actions complaints filed in the United States District Court for the Northern District of Illinois against Society Insurance, a Wisconsin based insurer, over the denial of business interruption claims. The cases were filed by groups of Chicago area bars, restaurants and theatres. Big Onion Tavern Group LLC et al. v. Society Insurance Company No. 20 CV 2005 (N.D. Ill.) and Billy Goat Tavern I et al. v. Society Insurance No. 20 CV 2068 (N.D. Ill.).
Businesses and educational institutions should carefully review the contractual provisions governing their relationships with consumers and students
The rapid filing of these COVID-19 related class action complaints likely indicates the impatience of consumers and students who are also being financially stressed by the COVID-19 pandemic and signals that more class action filings are coming. Businesses and educational institutions should carefully review the terms of the contractual relationships with their customers and proactively develop policies to address claims of consumers and students before they are faced with a class action.
•Bart T. Murphy is a Litigation Partner at Ice Miller, LLP and is a member of the firm's Class Action Defense team. He has defended clients in over 300 class action cases under a wide variety of federal and state statutes and common law claims. He has been recognized as a Super Lawyer in Class Actions/Mass Torts and in 2016 he received the Lexology Client Choice Award for Litigation in Illinois. He may be reached at firstname.lastname@example.org or (630) 955-6392. This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.