COVID-19 class actions: Cautionary reminders from south of the border

Canadian companies have faced an unprecedented last few months in the wake of the COVID-19 pandemic and the subsequent measures to contain its spread. As the pandemic’s impacts continue to reverberate, the first round of COVID-related litigation has begun.

Several COVID-related class actions have already been launched in Canada, including:

  • Class actions against long-term care facilities in both Ontario and Québec by family members of residents who contracted COVID-19;
  • A national class action by insurance policyholders against several indemnity insurers for refusing to pay claims for losses arising from COVID-19 under business interruption policies; and
  • Multiple class actions against domestic and international airlines for breach of contract due to the refusal to refund costs for cancelled flights. 

As the U.S. often serves as a roadmap for Canadian litigation, it is also helpful to be mindful of developments south of the border when assessing possible future litigation trends and risk exposure. Indeed, there have been over 150 class actions filed to date in the U.S. dealing with some aspect of the current pandemic, and it would be reasonable to assume that there may be potential spill-over into Canadian jurisdictions as similar issues are raised by Canadian litigants.

Among those filed to date, the following U.S. proceedings serve as a cautionary reminder to Canadian companies of the litigation risk that can arise in the context of the current crisis.

Securities class actions

Shareholder class actions have been filed challenging both affirmative representations and omissions relating to the pandemic. For instance, a class action against a pharmaceutical company alleges false and misleading claims that the company had developed a vaccine for COVID-19. When the allegedly false statement was exposed as false, share prices plummeted, resulting in losses to shareholders. Similar securities actions may arise with respect to public companies’ representations in respect of, among other things, preparedness for the pandemic or pandemic response measures.

Negligence and breach of contract class actions

Negligence actions have largely been focused on nursing homes and cruise lines for failing to follow public health guidelines or, in the case of cruise ships, failing to notify passengers that individuals who had tested positive were aboard the ship.

Breach of contract claims have included claims against lenders for suspending beneficial interest rates as well as claims against airlines and other ticket sellers for refusing to provide refunds for cancelled flights and events.

Deceptive advertising/Unfair business practice class actions

A number of companies have been hit with class action lawsuits over the alleged lack of evidence that their hand sanitizers can effectively prevent the spread of COVID-19. In one complaint, the plaintiffs allege that the defendant claimed its hand sanitizer prevents Ebola or the flu.

An airline has also faced a class action from ticket purchasers claiming it misrepresented that purchasers were not entitled to refunds for cancelled flights, and that the refusal to refund tickets constitutes an unfair business practice.

Price-gouging class actions

In multiple states, class actions have been filed against online retailers for charging unconscionable prices on hygienic products and N95 masks, contrary to consumer protection laws.

Privacy class actions

As video conferencing apps are relied on in this time of physical distancing, popular apps have been hit with several class actions challenging their privacy practices. This shows a greater litigation risk for technology companies whose platforms have seen a surge in popularity due to the pandemic.

While many of these proceedings are confined to the particular context in which they arise, they nonetheless serve as helpful reminders of the need for companies to be vigilant and to ensure that their ongoing business practices and public representations do not inadvertently expose them to heightened litigation risk as they respond to the current crisis.

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Editors

Deborah Glendinning

Partner, Litigation

Sonia Bjorkquist

Partner, National Chair, Litigation

Éric Préfontaine

Partner, Litigation

Christopher Naudie

Partner, Litigation

Craig Lockwood

Partner, Litigation

Tristram Mallett

Partner, Litigation

Karin Sachar

Partner, Litigation