Business Interruption Lawsuits May Consolidate into a Series of Mini-MDLs
The business interruption insurance lawsuits brought in the wake of COVID-19 promise to keep the federal court system busy for years. There will likely be thousands of complex cases with high-stakes that will be momentous for both insurance companies and the insured. The judiciary is considering how best to handle these cases to keep them moving through the system. There is some talk that these may become part of a series of multidistrict litigation cases. This is a scenario that will make things easier for the plaintiffs and has been opposed by the defendants in these cases.
MDLs Would Make Most Plaintiffs' Lives Easier
Multidistrict litigation is a way that the federal courts can operate more efficiently while making it easier for plaintiffs to get into court. It is not the same as a class action because each case is tried on its own merits. However, plaintiffs' cases are combined at the outset of the case during discovery. In other words, there is common discovery among all the plaintiffs to develop the cases. A handful of bellwether cases are selected, and they go to trial first to give all parties an idea of how juries will view the case. The cases get moved to the district of federal court that is chosen as the jurisdiction for the MDL.
Here, the MDL Panel is considering a unique solution for the business interruption insurance cases. The MDL Panel is discussing the possibility of creating a number of mini-MDL cases to handle these more efficiently. The current proposal being discussed is that cases against the defendants with many lawsuits would each proceed as its own MDL.
At this stage, this is just one solution being discussed. There is opposition to this proposal from numerous quarters. The defendants in the case are obviously opposed to it. For the defendants, this would make it easier for the plaintiffs to have their case heard since they can consolidate efforts and resources. Generally, anything that is efficient for the plaintiffs is opposed by the defense since it is a zero-sum game. The defendants' attorneys argued that these cases were different enough that they should be heard separately in the courts chosen by the plaintiffs.
Surprisingly, not all the plaintiffs are on the same page. The cases that were filed the earliest have already made their way through some of the pre-trial proceedings. In other words, they are further along. The attorneys in these cases do not want them consolidated because it would slow them down. They also believe that they are a state law issue, and they should be heard in the state court where they were filed. However, most plaintiffs' attorneys were in favor of consolidation.
Some Judges Are Skeptical of the Grounds for a Possible Consolidation
Some federal judges were also skeptical of a possible consolidation. They feel that this is a novel and unusual way to use the MDL system. The frequent usage of an MDL is when there are common issues of fact that would benefit from consolidated discovery. Here, these judges believe that the cases turn on a common issue of law. In other words, the predominant issue is the language of the policy and how it is interpreted. Accordingly, an MDL would not provide any benefit. Moreover, two-thirds of these cases are already in various state courts across the country.
The MDL Panel has already rejected a request to consolidate these cases into one MDL. Now, it is considering a series of MDL cases. The MDL Panel should decide this issue relatively quickly so the cases can continue moving forward. This decision has huge implications considering the stakes of the case.
Business owners are arguing that the language of their policy dictates that they are covered for the economic losses that they suffered when they were forced to close down their business due to the pandemic shutdown. However, insurance companies have denied these claims saying that the economic damage from the shutdowns are not the direct physical damages required to trigger the business interruption coverage. For the insurance companies, they could be out billions of dollars if they lose these cases. Similarly, the business owners need to win the lawsuits to recover the money that they need to stay in business after a devastating economic blow. Numerous states are considering legislation to force insurers to cover the cost of these claims.
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