The COVID-19 pandemic brought new waves of litigation as parties turned to the courts to sort out their contractual obligations in the wake of widespread shutdowns. While the courts quickly embraced technology and adjusted litigation procedures to keep their dockets moving, the substantive law underlying the COVID-related contract claims was not as nimble in responding to the abrupt changes. As disputes arose over issues ranging from procedures for virtual depositions and trials, insurance coverage, and tuition payments, courts continued to apply existing legal principles and frameworks to innovative theories of liability.
January 21, 2022 Feature
Litigation Trends During the COVID-19 Era
Pandemic changes litigation procedures, but not rights and obligations
By Mark A. Flores
Court Rejects Virtual Gamesmanship
When practitioners adopted remote depositions and hearings, courts had to resolve novel issues arising out of virtual practice. For example, the U.S. District Court for the District of Utah considered a dispute over a plaintiff’s request for in-person depositions in Sunstate Equipment Co., LLC v. Equipmentshare. The plaintiff had originally offered to take the depositions remotely with everyone appearing virtually or in person with all attorneys socially distanced. The defendants objected to in-person depositions, citing the ongoing COVID-19 pandemic, but the court stated that “the pandemic is not a golden ticket to get out of discovery obligations.”
Significantly, the district court noted that the parties’ negotiations regarding how to take the depositions showed that the “[d]efendants want to have their cake and eat it too.” The defendants wanted the plaintiff’s counsel to attend virtually, while the defense counsel would be physically present with the deponents. Recognizing that other courts had applied creativity to continue litigation, it stated, “[s]uch creativity, however, has not included creating advantages for one party over another in holding remote depositions.” Accordingly, the court held that the parties could either participate in the depositions with all parties and counsel using remote technology in separate rooms or with all parties and counsel in the same room while complying with social distancing and other safety protocols.
“The pandemic has brought out a lot of creative people,” comments Alexander C. Wharton, Memphis, TN, cochair of the ABA Litigation Section’s Minority Trial Lawyer Committee. “That said, attorneys cannot use tactics that undermine the rights of plaintiffs and defendants to have their facts presented to the judge or jury to decide the issue,” Wharton adds. He also acknowledges litigators faced with this situation have few options for recourse outside of getting the court involved.
“Lawyers are still going to lawyer,” agrees Adam C. Reeves, Lexington, KY, Social Media Subcommittee chair of the Litigation Section’s Appellate Practice Committee. “The difficulty is that when someone says, ‘I do not want to be in the same room with others because of COVID-19,’ you have to take them at their word,” he continues. “It is really difficult to determine whether that is the case or not.”
Significantly, the district court noted that the parties’ negotiations regarding how to take the depositions showed that the “[d]efendants want to have their cake and eat it too.”
Reeves expects a similarly sticky issue to arise regarding unvaccinated attorneys attending depositions with persons concerned about catching COVID-19. “Instead of people saying, ‘I’m worried about COVID-19,’ you may have attorneys and witnesses say the participants need to get vaccinated,” posits Reeves. “Particularly when people insist on it, attorneys may have a professional expectation to be vaccinated.”
Remote Discovery Is Here to Stay
Section leaders expect video-conferencing and virtual depositions to continue in the post-pandemic world. “I do not know that this will ever be the same because it is hard to argue the costs to travel to a place like Omaha, Nebraska, when you can take the deposition remotely,” opines Brent W. Huber, Indianapolis, IN, cochair of the Section’s Insurance Coverage Committee. “It is a pretty good way of getting a deposition, it is much cheaper, and I have been impressed with the quality of the transcript by and large.”
There are limitations inherent in the technology, however. “There’s no way to effectively cross-examine someone over Zoom,” Reeves explains. “I hope we do not move to all-virtual depositions,” adds Huber. “I think you lose a lot when you’re not examining a witness in person.”
Clients may still approve travel for deposition if it is bet-the-company litigation, but if it is not necessary, I’ll be curious to see if clients say we should just do the deposition via Zoom to avoid the travel.
Thus, going forward, whether depositions are conducted virtually or in person may be decided on a case-by-case basis. “Clients may still approve travel for deposition if it is bet-the-company litigation, but if it is not necessary, I’ll be curious to see if clients say we should just do the deposition via Zoom to avoid the travel,” muses Reeves. “In other words, the attorney can do the deposition however the attorney wants, but the client will not pay for travel.”
The Advent of Virtual Jury Trials?
Courts also prepared to try cases virtually if necessary, with new protocols in place. For example, the U.S. District Court for the Western District of Washington developed Virtual Trials, Bench & Jury, A Handbook for Attorneys to “guide attorneys through the use of the ZoomGov platform for conducting virtual trials.” The handbook contains instructions regarding basic Zoom operations, waiting rooms and breakout rooms, presentation of trial exhibits via Box.com, and other virtual trial information. The court also maintains videos on its YouTube channel as well as a Virtual Trial Juror Reference Guide.
Building on these materials, the U.S. District Court for the District of Kansas ordered parties to conduct a jury trial using Zoom in Kieffaber v. Ethicon, Inc. The plaintiff filed suit in 2012 seeking recovery for injuries sustained after a health product used in a pelvic organ prolapse surgery failed. The case became part of multidistrict litigation in the U.S. District Court for the Southern District of West Virginia before getting transferred to Kansas in June 2020, with a scheduled jury trial in April 2021. The district court required the parties to show cause why the trial should not proceed remotely under the Western District of Washington’s protocols for virtual trials. The plaintiff agreed to move forward, but the defendant refused.
The court ruled that “with appropriate safeguards, good cause and compelling circumstances justify the use of contemporaneous video conferencing technology in this case.” In so holding, the court recognized that an in-person civil jury trial would, at best, be placed well behind a long line of federal criminal jury trials. It dismissed concerns regarding potential Zoom fatigue and technical difficulties, explaining that “[t]he Court will not make the parties wait another unknown number of months (possibly years) until it is safe to resume in-person jury trials and the District’s pandemic backlog (an ever-growing backlog) of criminal jury trials has been cleared.” It also noted that technology now allowed “for near instantaneous transmission of testimony with no discernable difference between it and ‘live’ testimony, thereby allowing a juror to judge credibility unimpeded.”
Making progress in cases pending during the pandemic may require creative and aggressive lawyering, according to Section leaders. “I had to file a motion to get a trial date and put us on a scheduling order to address my concerns about the speed of the depositions,” offers Wharton about one of his pending cases, echoing some of the same delay concerns noted by the court in Kieffaber. In Wharton’s case, “the court was reluctant to do so because it was a new case, and there is a backlog of cases.”
Section leaders also believe that litigators may see an increase in remote proceedings in arbitrations. “In arbitration, it’s just a contract and the parties can agree to alter the contract through consent,” observes Reeves. “The American Arbitration Association is really pushing these remote hearings.”
However, “criminal jury trials will likely stay in person because of the constitutional issues like confrontation and the right to participate,” predicts Reeves. “I think you will see things in the criminal jury trial arena return back to the normal we believe existed.”
Students Get Educated on the Difficulties of Seeking Tuition Refunds
In Hassan v. Fordham University, a student filed a class action complaint seeking a refund of tuition and fees after Fordham University suspended in-person classes due to COVID-19 and instead held online classes. The plaintiff alleged the online classes were “subpar in practically every aspect, from the lack of facilities, materials, and access to faculty,” and sued for breach of contract, unjust enrichment, conversion, and money had and received.
The U.S. District Court for the Southern District of New York dismissed the complaint. It first held that the educational malpractice doctrine, which requires judicial restraint and precludes lawsuits requiring courts to adjudicate the effectiveness of an institution’s curriculum, did not apply to bar the plaintiff’s claims. The court reasoned that breach of contract claims could lie against a university where a contract for “certain specified services” was alleged to have been breached. Though the complaint alleged that the university’s online classes were “subpar,” the court found that the allegations primarily impacted the plaintiff’s damages and that she had otherwise adequately predicated her claims on the university’s promises of an in-person education in its course catalogs.
The difficulty is in balancing the defendants’ concern about opening the door to a multitude of similar class action lawsuits against other universities, while also recognizing that students did not receive the education they had expected.
However, the court noted that the plaintiff failed to identify any specific promises by the university for in-person instruction, as required for her breach of contract claims. It pointed out that neither the course catalog’s identification of on-campus locations for classes, nor the university’s policy of not accepting transfer credits from online courses constituted a promise for “certain specified services.” The court also found no indication that the university had “‘relinquished its authority’ to alter the modality of its instruction.”
The court further rejected the plaintiff’s reliance on Ford v. Rensselaer Polytechnic Institute (RPI) and Bergeron v. Rochester Institute of Technology (RIT), which held that those plaintiffs had sufficiently alleged the promise of in-person instruction. It distinguished those cases, observing that “RPI’s catalog described a program that relied on a ‘time-based clustering and residential commons program’ that could be fairly characterized as a ‘mandatory’ on-campus program.” In the case against RIT, that university had made specific statements about the benefits and different rates for two mutually exclusive programs: one that was an “in-person, hands-on program” and another “fully online distance learning program.” Nor did it find availing the plaintiff’s argument that the university’s “prior course of conduct” established a promise to continue providing in-person instruction, as that was an implied promise grounded in custom rather than a written contract. The court concluded that dismissal was warranted in the absence of a contract.
“What is Fordham supposed to do?” asks Huber. “They’re literally prevented from offering what they wanted to provide through no fault of their own and getting sued over it.” Huber notes, however, the difficulty is in balancing the defendants’ concern about opening the door to a multitude of similar class action lawsuits against other universities, while also recognizing that students did not receive the education they had expected.
Additionally, Huber questions the long-term impact of deciding the case on contract principles without recognizing the impact the pandemic has had on life. “I would have been more comfortable with a limiting principle that was tied to the pandemic, such as the doctrine of impossibility, rather than grounding the decision entirely on the breach of contract saying there is no breach,” asserts Huber.
No Insurance Coverage for Pandemic Business Losses
Similarly, courts applied existing contract interpretation principles and largely concluded that business interruption insurance coverage did not cover losses from pandemic-related shutdowns. In Kahn v. Pennsylvania National Mutual Casualty Insurance, the U.S. District Court for the Middle District of Pennsylvania became the latest court to weigh in on whether insurance policies covered losses caused by the pandemic. The plaintiff restaurant owners sought coverage under a business income provision and a civil authority provision of the policy, both of which required a direct physical loss of or damage to the property.
The district court concluded that “the phrase ‘physical loss of or damage to property’ unambiguously requires some issue with the physical premises that impedes business operations and causes a loss of income.” In so holding, it looked to the dictionary definition of “physical”: “[o]f, relating to, or involving material things; pertaining to real, tangible objects.” It also cited insurance treatises for the proposition that policies with a prerequisite for a physical loss exclude economic losses absent a physical injury. Additionally, the district court found that the policy’s language stating that only losses incurred during the “period of restoration” implied a requirement of actual physical loss to trigger coverage.
The district court rejected the reasoning of decisions from other jurisdictions, including federal courts in Missouri, Florida, and Ohio, that allowed cases with a similar provision to proceed. In those cases, the plaintiffs had alleged that the COVID-19 virus “attached to and damaged property,” thereby making it unusable. By contrast, the plaintiff in Kahn made no such allegation. The district court also noted that other lower courts within the Third Circuit Court of Appeals had been unanimous on the issue, but added that it regretted “that business owners across the country, who paid hundreds if not thousands of dollars in monthly premiums under the impression that they would be protected in the event a calamity, forced them to close their doors to the public, have had little to no luck seeking recourse in federal court.” Specifically, the district court observed that almost 1,500 complaints had been filed in state and federal courts last year on this coverage issue, and 82 percent of those claims were terminated on a motion to dismiss.
“The judge in the Kahn case had an introductory paragraph that was very sensitive and a nice thing to put into this decision,” notes Huber. “These statements could arguably limit the case to the pandemic.”
Given the unique demands and stresses of litigating during a pandemic, Section leaders remind practitioners to be mindful of others. “I try to give people the same level of respect that I would want and deserve,” advises Wharton. “I also try to give respect for the fact that you’re dealing with a lot of people under a lot of stress personally and professionally.”
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Resources
- Sunstate Equip. Co., LLC v. Equipmentshare, No. 2:19-cv-784 HCN (D.Utah Dec. 16, 2020).
- Suzanne Wynn Ockleberry, “The Future of Virtual Document Discovery,” Alternative Dispute Resolution (Apr. 8, 2021).
- Josh Jones and Joel Everest, “Prehearing Issues Raised by Virtual Hearings of FINRA Arbitrations,” Alternative Dispute Resolution (Mar. 15, 2021).
- Conna A. Weiner, “It’s Showtime! What I Learned in 2020 about Doing Virtual Mediations and Arbitrations,” Commercial & Bus. Litig. (Mar. 11, 2021).
- Melissa Ho and Edward Novak, “Tips for Trials in the Time of COVID-19: Practical Lessons Learned,” Commercial & Bus. Litig. (Nov. 18, 2020).
- Nicholas S. Graber, “Potential Impact of Remote Trial Testimony on Forum Non Conveniens,” Prods. Liab. Litig. (June 9, 2020).
- U.S. Dist. Ct. for the W. Dist. of Wash., Virtual Trials, Bench & Jury, A Handbook for Attorneys (Jan. 25, 2021).
- U.S. Dist. Ct. for the W. Dist. of Wash., Virtual Trial Juror Reference Guide (Jan. 20, 2021).
- Kieffaber v. Ethicon, Inc., No. 20-1177-KHV (D.Kan Feb. 8, 2021).
- Hassan v. Fordham Univ., No. 20-CV-3265 (S.D.N.Y Jan. 28, 2021).
- Ford v. Rensselaer Polytechnic Inst., No. 1:20-CV-470 (N.D.N.Y Dec. 16, 2020).
- Bergeron v. Rochester Inst. of Tech., 2020 WL 7486682 No. 20-CV-6283 (Dec. 18, 2020).
- Kahn v. Pa. Nat'l Mutn Cas. Ins., No. 1:20-cv-781 (M.D. Pa. Feb. 8, 2021).
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