In this webinar, Seyfarth attorneys Robert Milligan, Jonathan Braunstein, Daniel Joshua Salinas, and Darren Dummit covered the recent developments in consumer class actions related to COVID-19 in California, explaining the claims and expected defenses, and proactive attempts that companies can employ now to attempt to avoid these suits.
As a conclusion to this webinar, we compiled a summary of takeaways:
- With all sporting events, concerts, conferences and festivals either “postponed” or cancelled by the pandemic, and with uncertainty as to what future events may look like, class action refund litigation have proven to be somewhat inevitable for those who were not capable or willing to provide full refunds immediately. Going forward, while best efforts are made to provide “full value” with different options for future events, traditional uses of cash flow from paid-in-advance revenue may need to be revisited, along with terms and conditions of the contract provisions, including arbitration provisions, class actions waivers, updated force majeure provisions, and limitation of remedies. Looking ahead, the restrictions imposed on the events in a post-pandemic world will result in additional refund cases, including arguments around diminishment in value.
- For businesses and activities which involve annual or monthly membership or subscription fees, such as gyms, co-working spaces, theme parks, ski mountains, and golf/social clubs, class action litigation has also been an inevitability absent an immediate refund or cessation of all payments, and absent an enforceable arbitration agreement and/or class action waiver. Going forward, these organizations would be wise offer and track multiple alternatives, so as to best mitigate damages and defeat class certification issues, while also revising future terms and conditions to account for the possibility of pandemic shutdowns, rollovers, and suspensions of payment. Looking ahead, these organizations will face tough choices (and potential class action risks) as some customers claim diminishment in value as a result of social distancing, while others claim a health-related inability or unwillingness to engage in the same activity.
- Class actions suits against colleges, universities, and other education providers arising from the closure of facilities during the COVID-19 pandemic have exploded across the nation, including over 15 such actions brought in California. Opportunistic plaintiffs’ counsel are filing suits demanding partial refunds on tuition, campus fees, room and board, and of course attorneys’ fees. Plaintiffs allege that on-line instruction does not provide the benefit of the bargain that they contracted for. Likely defenses that will be explored by the education providers include: 1) no breach (e.g. no requirement to provide in-person instruction and providers have sole discretion to make academic judgments); 2) substantial performance; 3) force majeure and related contractual defenses; 4) limitation of damages provisions; and 5) sovereign immunity for public institutions. Additionally, providers with arbitration and class action waiver provisions may be better positioned to avoid class suits. Lastly, plaintiffs will face substantial class certification challenges as providers attempt to demonstrate that individual issues predominate.
- Price gouging occurs when, during abnormal market conditions, a seller increases the prices of goods, services, or commodities to a level much higher than is considered reasonable or fair. Unconscionable or exorbitant pricing can occur after a demand spike or supply disruption during a public emergency. COVID-19’s unprecedented size, scope and duration presents extraordinary opportunities for price gouging. On March 4, 2020, California Governor Gavin Newsom declared a state of emergency in response to the COVID-19 public health emergency. Executive Order N-44-20 makes it unlawful to increase the price of food items, consumer goods, or medical and emergency supplies by more than 10 percent of what a seller charged for that item on February 4, 2020, subject to certain exceptions. In California, price gouging during a declared state of public emergency is a crime. See Cal. Penal Code Section 396. Whether criminal or not, price gouging is generally discouraged and may be considered exploitative and unethical. Numerous other states and jurisdictions have their own similar but distinct and somewhat varying price gouging laws. Price gouging can have a profound impact across commercial business and supply chains. Actual or perceived price gouging presents tremendous challenges, class action litigation risks, and potential exposures for commercial businesses and employers. As businesses reopen, employees return to work, and courts resume operations, there is likely to be a spike in price gouging claims, disputes, and lawsuits—including class actions—filed by consumers or businesses under state and federal consumer protection, antitrust, and unfair competition laws.
- California remains an attractive forum for consumers alleging privacy violations. The reopening of brick-and-mortar stores, offices, and other physical locations may increase in the need to screen and collect physiological data of customers or employees entering the space. Companies collecting or using such data should ensure they have compliant collection, storage, and notice policies and practices. Notably, the California Attorney General has made it clear at this point that he will not be giving companies extra time to make sense of, and comply with, the new California Consumers Privacy Act in light of the COVID-19 pandemic.
A recording of the webinar is available on the Seyfarth website: https://www.seyfarth.com/news-insights/covid-19-related-consumer-class-action-developments-and-trends-in-california.html