Jason A. Levine, Ryan Martin-Patterson, and Stephen Tagert, Alston & Bird LLP
This week’s top COVID-19 litigation developments include: a district court order vacating the residential eviction moratorium enacted by the U.S. Centers for Disease Control and Prevention (“CDC”); a Sixth Circuit decision that Kentucky’s probe of alleged price-gouging in connection with sellers on Amazon’s online marketplace does not violate the Dormant Commerce Clause; the discovery of a large data breach in Pennsylvania’s contact tracing system; and a new Florida law banning the use of “vaccine passports.”
1. D.C. District Court Vacates CDC Residential Eviction Moratorium
Overview: Judge Dabney Friedrich of the U.S. District Court for the District of Columbia held that the U.S. Department of Health and Human Services, through the CDC, had exceeded its authority by extending a residential eviction moratorium originally enacted by Congress as part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and thus vacated the moratorium.
Opinion:In late March 2020, Congress passed the CARES Act and then-President Trump signed it into law. The Act included a 120-day residential eviction moratorium for rental properties that participated in federal assistance programs or were subject to federally-backed loans. In September 2020, the CDC issued an order extending the moratorium to all residential properties nationwide under the Public Health Service Act (“PHSA”), which authorized the CDC to take certain actions to keep communicable diseases from being brought into or spread across the country. The CDC has renewed the moratorium several times. Importantly, although the moratorium prevents eviction for non-payment of rent under certain circumstances, it does not compensate landlords, nor does it absolve tenants of ultimate responsibility for rent due.
Rental property owners sued the CDC, arguing that the moratorium violates the Administrative Procedure Act and exceeds the CDC’s statutory authority under the PHSA. The D.C. court agreed, finding that a nationwide eviction moratorium is different in nature than the types of measures permitted by the PHSA. Applying Chevron, the court also held that the plain text did not extend as far as the CDC contended. The court concluded by noting that the political branches of government must decide how to respond to the pandemic, and cautioned that the court addressed only the narrow question whether the PHSA grants the CDC the legal authority to impose a nationwide eviction moratorium.
Our Take:The eviction moratorium is one of many divisive federal programs in response to the pandemic, and it was already set to end in June 2021. Other district courts have enjoined the moratorium as applied to parties involved in challenges to its validity, but none have vacated the rule. This new decision may affect other ongoing litigation. For example, property managers sued the Consumer Financial Protection Bureau for requiring them to make certain disclosures, and the moratorium ruling may be a useful precedent for these plaintiffs. The federal government has announced its intention to appeal the district court’s decision and seek a stay of enforcement, which may moot the case if the moratorium expires as currently scheduled. If the district court’s decision is not stayed, however, there may be an uptick in evictions before the moratorium expires.
2. Sixth Circuit Revives Kentucky Probes of Alleged Price-Gouging by Amazon Sellers
Overview:On April 29, 2021, the Sixth Circuit ruled that the Kentucky Attorney General can resume investigations of price-gouging allegations related to sellers on Amazon’s online marketplace, holding that such investigations do not violate the Dormant Commerce Clause of the U.S. Constitution.
Background: Third-party sellers use Amazon’s marketplace to sell their products to customers across the United States. According to the plaintiff, sellers are required to charge the same price in every state for a given product, and Amazon must approve their suggested price. Plaintiff further states that Amazon is in privity of contract with consumers, not the sellers themselves.
On March 26, 2020, at the beginning of the pandemic, the Kentucky Attorney General’s Office (the “State”) announced that it would investigate alleged price-gouging by third-party sellers on Amazon’s platform. The State issued subpoenas to suspected price-gougers, including a member of the Online Merchants Guild (the “Guild”). In response, the Guild sued the State on May 1, 2020, seeking to enjoin enforcement of Kentucky’s price-gouging laws. The Guild alleged that the State’s proposed application of Kentucky law violated the Dormant Commerce Clause, by seeking to apply Kentucky law extraterritorially – effectively, across the country. The U.S. District Court for the Eastern District of Kentucky entered a preliminary injunction against the investigation, and the State appealed.
The Decision:The Sixth Circuit reversed the district court, holding that it had erred in concluding that the Guild is likely to succeed on the merits of its Dormant Commerce Clause challenge. Because state laws are unconstitutional if they regulate extraterritorially, the Guild argued – and the district court agreed – that a finding of price-gouging under Kentucky law would effectively enforce a national maximum price for items on Amazon’s platform, which would be an extraterritorial application of Kentucky law. The Sixth Circuit, however, concluded that the effect of the challenged laws “depends entirely upon Amazon’s independent decisions in how it structures its online marketplace.” Amazon determines its pricing policies, not the Commonwealth of Kentucky. Therefore, a determination by the State that a third-party seller was price-gouging under Kentucky law would not inevitably result in a national maximum price, because Amazon might, in that circumstance, allow for state-specific pricing.
Our Take:This case illustrates the difficulty of predicting how courts may apply Dormant Commerce Clause jurisprudence to the modern, internet-driven economy. Apart from a possible petition for Supreme Court review by the Guild, we would expect this issue to arise elsewhere as enforcement efforts against internet sellers persist even outside the COVID-19 context.
3. Data Breach Revealed in Pennsylvania’s Contract Tracing System
Overview: On April 29, 2021, Insight Global, which had contracted with Pennsylvania to provide contract tracing for COVID-19, announced that it had experienced a data breach affecting up to 70,000 Pennsylvania residents. A putative class action has been filed against the Pennsylvania Department of Health and Insight Global.
Background:According to Insight’s press release, it was retained by the Commonwealth of Pennsylvania to provide contract tracing services to the Pennsylvania Department of Health. Insight recruited, interviewed, hired, trained, and supported contract tracers who were tasked with tracking down and notifying individuals who may have been exposed to COVID-19. Insight discovered the data breach on April 21, 2021, and believes the impacted information consists of names, test results for COVID-19, symptoms of COVID-19, addresses, telephone numbers, and the names of any close contacts. Insight believes that the data were accessed between September 2020 and April 21, 2021, and that approximately 70,000 people were affected.
Our Take:Insight Global surely will not be the last government contractor to experience a major data breach related to the collection of data for COVID-19 tracing or vaccination purposes, and data breaches tend to lead to litigation. It is somewhat surprising that larger-scale breaches of contract tracing systems have not regularly occurred. Government contractors should be mindful of their legal obligations with regard to the data they collect, given the breadth of patients involved and the sensitivity of the information at issue.
4. Florida Governor Signs Bill Barring “Vaccine Passports”
Overview:Florida Governor Ron DeSantis signed a bill related to COVID-19 restrictions and preventing the use of so-called “vaccine passports.”
The Law:The Florida bill covers many pandemic-related legal issues. It limits the Governor’s ability to extend emergency powers beyond 60 days, creates a presumption that K-12 schools will remain open to the greatest extent possible, and provides auditing procedures when a pandemic exceeds 90 days. The law also prevents businesses from “requir[ing] patrons or customers to provide any documentation certifying COVID-19 vaccination or post-infection recovery to gain access to, entry upon, or service from the business operations in this state.” In other words, businesses cannot require so-called “vaccine passports,” or documentation that patrons have been vaccinated, as a condition of service. Educational institutions also may not require such documentation.
Our Take: As companies consider what policies to implement as more people receive vaccinations, they may need to navigate different states’ requirements related to vaccine-identification requirements. We will pay attention to see if other states enact similar laws or instead go the opposite direction and require such identification for certain purposes. Such a divergence could result in an interesting constitutional showdown.