Jason A. Levine, Ryan Martin-Patterson, & Stephen Tagert
The top COVID-19 litigation developments since our last post are: court orders enjoining federal vaccine mandates promulgated by federal agencies and President Biden; the dismissal of an antitrust lawsuit against Apple related to a COVID-19 tracking app; and a securities lawsuit against Novavax executives over alleged public misstatements about its prospects for developing a vaccine candidate.
1. Federal Vaccine Mandates Face Legal Challenges
Overview: The Biden Administration’s new mandates obligating federal contractors and private employers to require employee vaccinations—issued by the Occupational Safety and Health Administration (OSHA), the Centers for Medicare and Medicaid Services (CMS), and Executive Order—have been enjoined or stayed by courts across the country.
OSHA ETS Update: Since our last update, the U.S. Court of Appeals for the Sixth Circuit was selected to handle the consolidated litigation challenging the OSHA Emergency Temporary Standard that certain employers must require their workers either to test weekly or to be fully vaccinated against COVD-19. The government asked the court for the stay (issued by the Fifth Circuit prior to consolidation) to be lifted and filed a motion to expedite the briefing schedule regarding the stay. The various challenging States opposed the motion, saying the proposed briefing schedule was too short.
Federal Contractor Mandate:The U.S. District Court for the Eastern District of Kentucky enjoined President Biden’s requirement that federal contractors and subcontractors mandate vaccination of their employees. The court found that the President’s Executive Order exceeded his authority under the Federal Property and Administrative Services Act (“FPASA”), which empowers the President to manage federal procurement. And the court found unpersuasive the government arguments that requiring vaccinations would limit the spread of COVID-19 and help the economy by decreasing worker absence and labor costs: “It strains credulity that Congress intended the FPASA . . . to be the basis for promulgating a public health measure such as mandatory vaccination.” The court also found that the asserted authority would make the President’s power almost limitless, allowing him “to enact virtually any measure at the president’s whim under the guise of economy and efficiency.” The permanent injunction entered by the court covered Kentucky, Ohio, and Tennessee.
CMS Mandate: After the U.S. District Court for the Middle District of Florida declined to stay CMS’s vaccine mandate for all covered healthcare workers, two courts issued preliminary injunctions preventing the implementation and enforcement of the rule. The U.S. District Court for the Eastern District of Missouri held that the plaintiffs (various States) were likely to succeed on the merits of their challenge because Congress did not grant CMS authority to mandate vaccinations. The court found no clear indication from Congress that CMS could invoke such significant authority, and reasoned that CMS’s delay in issuing the order undermined its “emergency” justification. The court also held the rule was arbitrary and capricious because, among other reasons, CMS lacked evidence that the rule would in fact prevent the spread of COVID-19. The court’s injunction extended to ten States. A day later, for similar reasons, the U.S. District Court for the Western District of Louisiana granted a nationwide injunction for the remaining 40 States.
Our Take: Federal vaccine mandates to date have all been promulgated under emergency procedures rather than through notice-and-comment rulemaking. If all remain enjoined for significant periods of time, then they may expire before going into effect or, at least, have their start dates delayed into 2022. Litigation over one or all of these mandates seems likely to reach the Supreme Court.
2. Apple Wins Dismissal of Coronavirus Tracker App Antitrust Lawsuit
Overview:The U.S. District Court for the Northern District of California dismissed all claims filed by the makers of a COVID-19 contact-tracing app against Apple for allegedly monopolistic conduct.
The Opinion: The plaintiffs asserted antitrust and breach of contract claims against Apple for rejecting their “Coronavirus Reporter” app under Apple’s policy requiring that apps related to COVID-19 be submitted by a recognized health entity (such as a government organization or medical institution). The court dismissed the antitrust claims because the plaintiffs failed to allege a relevant product market. And the court ruled that plaintiffs failed to plead an antitrust injury, as all asserted damages solely related to the plaintiffs and not the market as a whole. The court also dismissed the other claims on pleading grounds.
Our Take: We previously covered this lawsuit, and its dismissal with prejudice is likely to chill similar future litigation over health tracking apps. We will monitor for similar lawsuits as the pandemic continues.
3. Biotechnology Company Executives Sued for Overselling Ability to Create Vaccines
Overview: A proposed securities class action was filed against individual defendants who work for biotechnology company Novavax, seeking to remedy their alleged breaches of fiduciary duties and other legal violations.
The Complaint: Plaintiff Robert Meyer filed a stockholder derivative complaint in the U.S. District Court for the District of Maryland, alleging that the individual defendants made materially false and misleading statements regarding Novavax’s ability to complete Emergency Use Authorization submissions for a COVID-19 vaccine candidate. The complaint alleges that, although Novavax received $1.6 billion in investment from the federal government, it repeatedly overstated the prospects of its vaccine candidate even as it faced significant production problems. Meyer asserted claims for breach of fiduciary of duty against all individual defendants, and for improper insider selling and unjust enrichment against one individual defendant.
Our Take: This litigation is similar to previous cases we have covered, which premised alleged securities violations on overstatements or misstatements about COVID-19 testing technology, vaccines, and treatments. A potentially unique aspect of this case is the substantial federal funding provided to Novavax. It will be interesting to see whether plaintiff’s allegations prod a federal investigation or False Claims Act litigation against the company.