Consolidated MDL for COVID-19 Lawsuits?

COVID-19 has sparked significant litigation across the country and presents new challenges for courts to decide. While lawmakers are attempting to limit COVID-19-related litigation by passing liability shield laws and introducing penalties for making a practice out of COVID-19 litigation for attorneys, more and more COVID-19-related lawsuits are being filed. One tool available to courts to reduce this caseload is consolidation under 28 U.S.C. § 1407, which authorizes the Judicial Panel on Multidistrict Litigation (MDL) to centralize cases with one or more common questions of fact. Multidistrict litigation was created to help courts navigate the work-related asbestos cases of the 1990s. The federal MDL panel has received petitions to consider MDL for lawsuits related to COVID-19 business interruption insurance and against banks regarding their handling of COVID-19 SBA loans and repayment of agents.

The panel considered two possible MDLs for lawsuits regarding banks’ handling of SBA loans. First, the panel evaluated consolidating lawsuits against banks that allege that the banks favored and prioritized larger and existing customers over small businesses when distributing Payroll Protection Program (PPP) loans. The panel, in three orders, rejected these petitions for MDL. The panel explained their decision was a result of the small number of cases and the plaintiffs’ varied experiences. Cases were brought against J.P. Morgan Chase & Co., Bank of America, and Wells Fargo & Co., and the MDLs were sought in California and Texas. Second, the panel has considered consolidating cases against banks for allegedly refusing to pay agents fees related to PPP loans, which the panel also denied. Lawsuits have been filed on behalf of agents against over 200 banks; the number of defendants in the panel proved to be the tipping point for the panel. The panel noted that core allegations were similar across all cases, but the court could not identify a prominent defendant nor could it reconcile the different internal procedure and policies for allocating fees to justify authorizing MDL. The separate COVID-19 SBA loan lawsuits will continue without consolidation.

The panel also considered requests to consolidate cases accusing different insurance companies of wrongly denying business interruption claims during the pandemic. The panel declined this petition for an industry-wide MDL, citing that consolidation would not further any efficiency of the court. The panel reasoned that the differences overwhelm the commonalities across the cases. Because there are a multitude of defendant insurance companies, there would be little common discovery. Moreover, the insurance policies vary in language, coverage, conditions, exclusions, and type of businesses for which they are applicable. Furthermore, time is of the essence in many of the cases, and the panel believes that MDL would not prompt a quick resolution. The panel acknowledged the benefits of insurer-specific MDL, whereby all claims against a single carrier or group of related carriers would be consolidated instead of consolidating all business interruption insurance claims in general against all the carriers. However, the panel did not permit insurer-specific MDL at this time. The proposal was made during arguments in front of the panel, and no brief on the idea was ever filed. The panel did not believe the response to the idea proved sufficient enough to support permitting insurer-specific MDL at this time. Nevertheless, the panel has granted four insurance companies and groups (Certain Underwriters at Lloyd’s, London; Cincinnati Insurance Company; the Hartford Insurers; and Society Insurance) permission to file a response demonstrating the benefits of a consolidation in their cases. Similar to the panel’s decision regarding SBA loans, once again differences in circumstances outweighed the benefits of consolidation in the cases involving business interruption insurance claims.

MDL is designed for efficiency, and the circumstances surrounding these areas of COVID-19 litigation make clear that MDL would not provide that as a solution. It is hard to streamline lawsuits into MDL where common questions of fact are buried under differences of law, policy language, and plaintiff experience. It is anticipated that the orders the panel handed down will present a challenge for petitioners seeking MDL for other COVID-19-related cases. Since the panel has differentiated COVID-19 cases from asbestos litigation, it will be interesting to see if this distinction bleeds over into other COVID-19 lawsuits and legislation moving forward.