Coronavirus Pandemic Precipitates a Flood of Virus-Related Class Action Suits |
In this edition of Predominant Issues, we have highlighted several recently filed class actions related to the COVID-19 pandemic to identify the types of exposures companies may face in this unprecedented environment. In the coming months, we will report on notable decisions that arise from pandemic-related class litigation.
- Virus Exposure. Several putative class actions have been filed against cruise lines based on allegations of exposure to COVID-19.
- Data Privacy. Companies that offer video-conferencing services are facing class action lawsuits challenging the privacy of their communications and the safety of their data.
- Higher Education. A number of colleges and universities have been sued in putative class actions following their decisions to close campuses and provide remote, online instruction, in lieu of in-person classes. Among other things, these suits seek reimbursement for tuition, room and board, and/or fees related to on-campus services that are no longer available for student use (e.g., health facilities and student centers).
- Dixon v. Univ. of Miami, No. 2:20-cv-01348 (S.C. Apr. 8, 2020).
- Rickenbaker v. Drexel Univ., No. 2:20-cv-01358 (S.C. Apr. 8, 2020).
- Hassan v. Fordham Univ., No. 1:20-cv-03265 (S.D.N.Y. Apr. 25, 2020).
- Doe v. Vanderbilt Univ., No. 3:20-mc-09999 (M.D. Tenn. Apr. 27, 2020).
- Miller v. California State Univ., No. 2:20-cv-03833 (C.D. Cal. Apr. 27, 2020).
- Brandmeyer v. Univ. of California, No. 4:20-cv-02886 (N.D. Cal. Apr. 27, 2020).
- Subscription-Based Services. Businesses that offer subscription services are facing class action lawsuits filed by consumers who seek refunds of their subscription fees for services and facilities that are no longer available to customers.
- Ticket Cancellations. The coronavirus pandemic has resulted in the cancellation of countless spectator events and travel bookings, and predictably, courts have seen a series of putative class actions seeking refunds for event and travel tickets.
As the coronavirus continues to spread, businesses, universities, and other organizations are presented with new and increasingly complex challenges like the class action lawsuits identified above. King & Spalding’s Coronavirus Taskforce is advising clients real-time on developing policies and playbooks that account for industry- and business-specific scenario planning. To learn more about K&S’s Coronavirus Taskforce and the various resources available to assist our clients, click here. To access K&S’s Coronavirus Business Recovery/Return to Work Hub, click here. |
Fifth Circuit Becomes the Third Appeals Court to Address the Applicability of Bristol-Myers Squibb’s Personal Jurisdiction Ruling to Putative Class Actions |
In the March edition of Predominant Issues, we reported on the first two appellate decisions (from the D.C. and Seventh Circuits) to address whether the Supreme Court’s landmark personal jurisdiction decision in Bristol-Myers Squibb v. Superior Court of California applies to putative class actions. Now, the Fifth Circuit has weighed in, holding that a defendant does not waive the right to challenge personal jurisdiction as to the claims of absent class members by not raising that argument in a motion to dismiss—provided that the defendant properly preserves the argument in its answer and through its subsequent litigation conduct.
- In Cruson v. Jackson National Life Insurance Company, Texas plaintiffs brought a putative class action against Jackson National Life Insurance Company in the Eastern District of Texas, alleging that Jackson overcharged them by miscalculating fees for early withdrawals from the annuities they had purchased from Jackson.
- Jackson filed a motion to dismiss the initial complaint and an amended complaint for lack of subject-matter jurisdiction and failure to state a claim. Jackson did not assert a personal jurisdiction defense in either of its motions to dismiss. But its answer expressly denied that the court had personal jurisdiction with respect to the claims of putative class members residing outside Texas.
- In its opposition to the plaintiffs’ motion to certify a nationwide class, Jackson argued that the court lacked personal jurisdiction over the non-Texas class members’ claims. The district court held that Jackson waived this defense by not raising it in its initial Rule 12(b) motions and by litigating the merits of the plaintiffs’ claims. The court granted the motion for class certification.
- Jackson filed a Rule 23(f) petition, which the Fifth Circuit granted. On appeal, the Fifth Circuit concluded that Jackson had not waived its personal jurisdiction defense as to the claims of the non-Texas class members.
- The court explained that a defense which is omitted from a Rule 12 motion is waived only if the defense was “available” to the defendant at the time the motion was filed. Jackson’s personal jurisdiction defense as to the absent class members, however, was not “available” at the time of Jackson’s motion to dismiss, because the absent class members “were not yet before the court when Jackson filed its Rule 12 motion.”
- In other words, the absent class members’ claims only became relevant, and the personal jurisdiction defense only became “available” to Jackson, when the district court certified the class. Because Jackson asserted its personal jurisdiction defense at that juncture, Jackson did not waive the defense.
- The Fifth Circuit declined to address the merits of Jackson’s personal jurisdiction defense, leaving that issue for the district court to determine in the first instance. The panel observed that although “Bristol-Myers provided new legal support for Jackson’s objection, the Supreme Court’s decision did not make the objection ‘available.’ Certification did.”
- Although the Fifth Circuit’s ruling constituted a “win” for the defendant on the waiver issue, it may make matters more difficult for class action defendants in the Fifth Circuit, as the court’s reasoning suggests that district courts will no longer dismiss the claims of out-of-state absent class members for lack of personal jurisdiction at the pleading stage. Like the Seventh Circuit and D.C. Circuit opinions before it, however, the Fifth Circuit’s ruling did not call into question the generally prevailing view after Bristol-Myers Squibb that non-resident named plaintiffs may not pursue claims in jurisdictions where the defendant is not subject to general jurisdiction.
Read the Fifth Circuit’s opinion here. |
Ninth Circuit Revives Claims Alleging that Facebook Violated Users’ Privacy |
On April 9, the Ninth Circuit reversed a district court’s dismissal of several privacy claims advanced in a putative class action alleging that Facebook improperly tracked its users’ browsing histories—and sold them to third-party advertisers—even after the users logged out of their social media accounts.
- The named plaintiffs alleged that Facebook surreptitiously used “tracking cookies” to record its users’ browsing histories even after they logged out of their accounts, despite contrary representations made in Facebook’s governing materials.
- The complaint alleged violations of several federal and state privacy statutes, including the Wiretap Act, the Stored Communications Act, and the California Invasion of Privacy Act, as well as a variety of common law claims premised on harm to the named plaintiffs’ privacy interests (such as intrusion upon seclusion). The named plaintiffs sought to represent a putative class of people who had active Facebook accounts between May 27, 2010 and September 26, 2011.
- The Northern District of California granted Facebook’s motion to dismiss, holding that the named plaintiffs lacked standing to advance their privacy claims and otherwise did not adequately plead the remaining claims. Plaintiffs appealed.
- The Ninth Circuit reversed in part, holding that the named plaintiffs had standing to pursue their privacy claims.
- The court explained that the named plaintiffs had pled the invasion of a legally protected interest, as violations of the right to privacy—which encompassed an individual’s control of information concerning his or her person—were long actionable at common law.
- As the court explained, the plaintiffs “adequately alleged that Facebook’s tracking and collection practices would cause harm or a material risk of harm to their interest in controlling their personal information…. [which] would allegedly reveal an individual’s likes, dislikes, interests, and habits over a significant amount of time, without affording users a meaningful opportunity to control or prevent the unauthorized exploration of their private lives.”
- The court determined that Facebook’s alleged actions would constitute a clear invasion of the user’s right to privacy protected by these statutes.
- The Ninth Circuit also found that plaintiffs sufficiently alleged economic injury to bring claims for a violation of California’s Computer Data Access and Fraud Act and common law claims including trespass to chattels and fraud. Plaintiffs alleged that Facebook was unjustly enriched through the use of plaintiffs’ data, which was enough to confer standing. Facebook disagreed, asserting that plaintiffs had to demonstrate that they planned to sell their data or that Facebook made their data less valuable, and, in any event, that plaintiffs’ claimed entitlement to damages was not an injury for standing purposes.
- The court agreed with the plaintiffs. Relying on the rule that state law can create interests to support standing in federal court, the court pointed to California law recognizing a right to disgorgement of profits resulting from unjust enrichment, regardless of whether a defendant’s actions made the plaintiff’s property less valuable or forced the plaintiff to spend money.
- Because California recognized a legal interest in unjustly earned profits, plaintiffs’ allegations that their browsing histories were worth $52 a year to Facebook and that Facebook profited from plaintiffs’ data were sufficient to demonstrate standing.
- The Ninth Circuit, however, affirmed the dismissal of plaintiffs’ claims for violation of the Stored Communications Act, holding that the plaintiffs’ data was not in “electronic storage” as required by the statute. The court also affirmed the dismissal of plaintiffs’ breach of contract and implied covenant claims, holding that they failed to adequately allege the existence of a contract that was subject to breach.
- The Ninth Circuit’s decision may embolden plaintiffs who claim damages based on alleged violations of privacy laws, and may also motivate them to search for state law claims that will allow them to allege standing based on broad theories of financial injury.
Read the full opinion here. |
First Circuit Holds That Plaintiffs Lack Standing to Bring Class Action Against Medical Records Software Company on Behalf of Deceased Individuals |
On March 27, the First Circuit affirmed the dismissal of a putative class action for lack of Article III standing, rejecting the named plaintiffs’ attempt to allege an informational injury stemming from inaccurate medical records.
- The estates of two deceased individuals filed suit against the manufacturer of allegedly faulty software used to track medical records, claiming the manufacturer was liable for failing to disclose or correct certain software bugs. The estates sought to represent a class of patients whose medical providers used the defective software. The putative class included patients who were not deceased.
- While one of the named plaintiffs learned prior to his death that his health information contained inaccuracies, the other named plaintiff did not. That plaintiff’s primary care physician had attempted to order a magnetic resonance angiogram, but the order went unfulfilled due to the alleged software glitches—resulting in her brain aneurysm remaining undiagnosed and untreated.
- The manufacturer moved to dismiss, arguing that the named plaintiffs lacked Article III standing. The estates claimed that the two deceased patients shared the following concrete injuries with the putative class: (1) a risk that their doctors would misdiagnose them or botch their medical treatment based on the faulty records; and (2) the future out-of-pocket costs necessary to find and fix the errors. The district court disagreed and dismissed the case.
- On appeal, the First Circuit likewise concluded that the named plaintiffs had not alleged a sufficiently concrete injury-in-fact because they passed away before the complaint was filed. As a result, the named plaintiffs did not face an imminent threat of injury when the complaint was filed. The court further noted that the estates could not “drum up standing by claiming [they would] need to pay money to correct errors no longer relevant to their care.”
- The court also rejected the estates’ argument that the deceased plaintiffs suffered an “informational” injury-in-fact by being unable to rely on their medical records, which were maintained through the software during their lifetimes. Citing the Supreme Court’s decision in Spokeo, Inc. v. Robins, the court explained that the authorities cited by the estates relied on Congress’s power to identify previously inadequate intangible injuries and protect them with procedural rights by statute. The estates, by contrast, were not claiming that a statute gave them a right to have the software manufacturer maintain accurate information about them and to bring suit if it did not—in fact, they conceded that their claims did not involve a new statutory right, but only rights protected at common law. The court held, however, that the estates failed to identify a common-law claim that would provide the kind of informational right that would give rise to a concrete injury-in-fact.
- As a result, the First Circuit held that the estates’ claims concerned “a moot risk of misdiagnosis or mistreatment that no statute or common-law claim makes suable,” and thus affirmed the district court’s dismissal for lack of Article III standing. The decision makes it more difficult for plaintiffs to claim informational injury absent a specific federal statute creating a right against such injury, and also confirms that named plaintiffs must be similarly situated to the putative class members they seek to represent.
The case is Amrhein v. eClinical Works LLC, No. 19-1429 (1st Cir. 2020). Read more here. |
Second Circuit Affirms Dismissal of False Advertising Class Action, Holding That Registering to Do Business in New York Does Not Constitute Consent to General Personal Jurisdiction |
On March 31, the Second Circuit upheld the Eastern District of New York’s dismissal of false advertising claims against Dunkin Donuts, rejecting the out-of-state plaintiffs’ claims for lack of personal jurisdiction. The court held that registering to do business in New York does not constitute consent to general jurisdiction in the State—an issue of first impression in the circuit. The court also rejected the remaining New York plaintiff’s claims on the merits.
- In 2018, five named plaintiffs filed a class action suit alleging that Dunkin Donuts deceptively marketed its Angus Steak & Egg Breakfast Sandwich and Angus Steak & Egg Wake-Up Wrap to consumers. Plaintiffs’ main beef with Dunkin Donuts was that the company’s ads allegedly deceived consumers into believing that the sandwiches contained an “intact” steak, even though the sandwiches actually contained ground beef patties with additives. Plaintiffs asserted violations of various state consumer protection laws, including New York General Business Law §§ 349 and 350, and the Magnuson-Moss Warranty Act.
- Dunkin Donuts is incorporated in Delaware, headquartered in Massachusetts, and has franchises throughout New York. It is registered to do business in New York under New York Business Corporation Law § 1301.
- The district court dismissed the complaint, holding that Dunkin Donuts could not be subject to general personal jurisdiction in New York with respect to the claims of the four named plaintiffs who purchased sandwiches at franchises in other states. The court also held that Dunkin Donuts’ advertisements were neither deceptive nor misleading to a reasonable consumer.
- On appeal, the Second Circuit first addressed the plaintiffs’ contention that Dunkin Donuts consented to general personal jurisdiction by registering to do business and designating an agent for service of process in New York. New York’s highest court has not decided whether the act of registering to do business under § 1301 confers general jurisdiction over a non-resident defendant.
- The Second Circuit observed that, while inferior New York courts were divided on the issue, New York’s intermediate appellate courts had uniformly interpreted the act of registering under § 1301 as consenting to general jurisdiction in the State. Citing the U.S. Supreme Court’s decision in Daimler AG v. Bauman, the court explained that a state’s exercise of general personal jurisdiction over a foreign corporation will not comport with due process unless the corporation’s affiliations with the state are so “continuous and systematic” as to render the corporation essentially at home in the forum. As a result, a corporation is “at home” only where it is incorporated or has its principal place of business, absent an “exceptional case.”
- The court expressed reservations about whether Daimler permitted a state to coerce a foreign corporation to consent to general jurisdiction merely by registering to do business in the forum state. Such coercion raised constitutional concerns in the post-Daimler general jurisdiction regime.
- Moreover, nothing in the text of § 1301 expressly conditioned registration on consent to general jurisdiction in the state. Accordingly, the court predicted that New York’s highest court would hold that registering to do business under § 1301 was not sufficient to confer general jurisdiction over a non-resident defendant.
- Dunkin Donuts also was not subject to general jurisdiction based on the presence of franchises in New York, as there was no showing that the company’s relationship with New York was in any way significant compared to its nationwide activity.
- As for the merits, the court rejected the New York plaintiff’s §§ 349 and 350 claims, which were based on the allegation that Dunkin’s television advertisements were deceptive because they used the word “steak.” The ads all concluded with multiple zoomed-in images that clearly depicted the “steak” in the sandwiches as a beef patty. The court also noted that the word “steak” can be defined as “ground beef prepared for cooking or for serving in the manner of a steak,” which meant that Dunkin’s descriptions of the sandwiches would not have misled a reasonable consumer.
- The Second Circuit’s general jurisdiction analysis confirms that non-resident plaintiffs face a high bar in suing a corporation that is not incorporated or headquartered in the forum state, at least absent some connection between the plaintiff’s claims and the defendant’s forum-based activities.
The case is Chen v. Dunkin’ Brands, Inc., No. 18-3087-cv (2d Cir.). Read more here. |
Hyundai Obtains Dismissal of Consumer Fraud Class Action Alleging Defective Powertrain |
On March 31, the District of New Jersey dismissed a putative automotive class action against Hyundai Motor America and Hyundai Motor Company, finding that the named plaintiff failed to plead that Hyundai had knowledge of an alleged powertrain defect or that Hyundai was required to disclose the alleged defect.
- Plaintiff Jan Schechter, a New Jersey resident, sued Hyundai on behalf of a putative nationwide class of consumers who had purchased or leased 2017–2018 Hyundai Santa Fe vehicles. Schechter alleged that the vehicles’ defective powertrain resulted in delayed acceleration, loss of power, and rough shifting, and that Hyundai knew about these problems based on online consumer complaints posted on the NHTSA website, which Hyundai purportedly monitored.
- He also alleged knowledge based on two technical service bulletins (“TSBs”) about the transmission control unit; a previous class action filed in California federal court that purportedly involved a similar defect; and certain pre-production testing and analysis data.
- Schechter brought claims for violations of the New Jersey Consumer Fraud Act (“NJCFA”), negligent misrepresentation under New Jersey law, and violations of California’s Consumers Legal Remedies Act (“CLRA”) and Unfair Competition Law (“UCL”). Schechter sought to represent a putative nationwide class and New Jersey and California sub-classes.
- The court first applied New Jersey’s “most significant relationship” test to hold that Schechter, as a New Jersey resident who purchased his vehicle in New Jersey, could not assert claims under California law on behalf of a nationwide class.
- That Hyundai Motor America was located in California and may have made some of the misrepresentations there was not enough to overcome New Jersey’s relationship with the claims. As a result, the court dismissed the California claims.
- Turning to the NJCFA claim, the court found that Schechter did not adequately plead that Hyundai knew of the alleged powertrain defect.
- The court found that a prior class action involving vehicles from 2010–2012 did not permit a finding of knowledge, since the earlier class vehicles allegedly suffered from a different defect (losing power or stalling). In any event, there was no allegation that a defect in 2010–2012 vehicles would still be present in 2017–2018 models.
- The 25 online complaints to NHTSA were not enough to plead knowledge because roughly half were published after Schechter filed his lawsuit, and therefore could not show that Hyundai was aware of the defect at the time of sale. The other complaints involved different vehicles than Schechter’s vehicle or did not specify the model.
- The two technical service bulletins were also insufficient to show knowledge because one TSB involved a different vehicle model than Schechter’s. Although the other did involve Schechter’s model, Schechter merely alleged that the TSB related to a “powertrain defect,” which was not specific enough to satisfy the heightened pleading standard for an NJCFA claim.
- Schechter did sufficiently allege an ascertainable loss because he identified comparable vehicle models that he could have leased at a lower cost. As a result, the court granted him leave to replead his NJCFA claim.
- The court also dismissed Schechter’s negligent misrepresentation claim because he did not allege a duty to disclose the purported defect. Namely, the court found that Schechter had not pleaded the existence of a “special relationship” between himself and Hyundai that was sufficient to trigger a duty to disclose because he had leased the vehicle in a routine, arms-length transaction with an authorized dealership.
- The court’s ruling that Schechter’s collective allegations failed to plead knowledge is significant because named plaintiffs in automotive class actions typically plead knowledge based on similar grounds, such as TSBs and online consumer complaints. The court’s ruling may help defendants defeat similar allegations at the pleading stage.
Read the order of dismissal here. |
FCC Rules Certain Communications Related to COVID-19 Are Permissible Under TCPA “Emergency Purposes” Exception |
On March 20, the FCC released a declaratory ruling clarifying that certain calls and text messages related to COVID-19 satisfy the “emergency purposes” exception to the Telephone Consumer Protection Act’s (“TCPA”) prohibition against automated and prerecorded communications to wireless numbers without the prior express consent of the called party.
- The TCPA contains an exception to its consent requirements for calls made for “emergency purposes.” In turn, the FCC’s rules define “emergency purposes” as “calls made necessary in any situation affecting the health and safety of consumers.”
- The FCC’s declaratory ruling acknowledges that the COVID-19 pandemic qualifies as “an imminent health risk to the public,” and accordingly, certain automated calls and texts related to COVID-19 health and safety measures satisfy the emergency purposes exception.
- To qualify under the FCC’s exception, the call must satisfy a two-part test, which examines both the caller and content of the call: “First, the caller must be from a hospital, or be a health care provider, state or local health official, or other government official as well as a person under the express direction of such an organization and acting on its behalf. Second, the content of the call must be solely informational, made necessary because of the COVID-19 outbreak, and directly related to the imminent health or safety risk arising out of the COVID-19 outbreak.”
- The FCC also provided examples of exempted calls, including “a call originating from a hospital that provides vital and time-sensitive health and safety information that citizens welcome, expect, and rely upon to make decisions to slow the spread of the COVID-19 disease” and “a call made by a county official to inform citizens of shelter-in-place requirements, quarantines, medically administered testing information, or school closures necessitated by the national emergency.”
- Calls that include “advertising or telemarketing of services” (such as “advertising a commercial grocery delivery service, or selling or promoting health insurance, cleaning services, or home test kits”) and “calls made to collect debt, even if such debt arises from related health care treatment” for COVID-19 are not exempt.
- The FCC pledged to remain vigilant in monitoring complaints about telemarketing and fraudulent robocalls related to the pandemic.
- While this ruling provides relief to certain identified callers, its restrictive language creates some uncertainty for other callers who are not named, such as employers outside the healthcare sector who contact employees regarding measures to limit COVID-19 exposure.
Read the FCC’s declaratory ruling, In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278 (2020), here. |
|