Lengthy Oral Argument on Potential Consolidation of Business Interruption Coverage Cases Related to COVID-19

By Damon Vocke

On July 30, the Judicial Panel on Multi-District Litigation (the Panel) heard oral argument of extraordinary length on the potential consolidation of all the federal cases involving business interruption coverage relating to COVID-19 and/or the COVID-19 shut-down orders.  There are some 449 such federal cases, approximately 200 of which are putative class actions.

Normally, the arguments for consolidation are short.  This one was not.  This was likely due to the importance of the pandemic-related litigation, as well as the multiplicity of positions.

Several policyholder plaintiffs argued for national consolidation.  Insurer-specific consolidation was the most common fall-back position among the policyholder plaintiffs.  Several policyholder plaintiffs argued against any consolidation – most notably, David Boies.  Counsel for some of the insurer defendants argued on behalf of the industry against any consolidation.

From the questions posed to counsel, we believe it is unlikely that there will be any national consolidation.  The judges seemed skeptical that there are common questions of fact, which is the most important criterion for consolidation.  For instance, mass torts and consumer class actions have obvious common questions of fact involving a defendant’s allegedly tortious conduct.  By contrast, here, the policyholder plaintiffs insisted that there are common policy wordings, but that did not appear to satisfy the Panel.  Industry counsel and some policyholder counsel argued that not only are the wordings different (which present legal issues, not fact issues), but also, more importantly, that the fact-specific circumstances for the various claims are also quite different and involve plaintiff-specific discovery.

The theme of the policyholder plaintiffs is that “time is of the essence,” that there is a national emergency requiring fast coordinated action at the federal level for their business clients to survive.  Industry counsel had strong rebuttals to that position in terms of how far along many of their actions already are in federal district court, how other national emergencies were effectively handled without MDLs, and how MDLs are more likely to slow down the pace.

The Panel asked many questions about less ambitious MDL formations, such as insurer-specific MDLs and state-specific MDLs.  The industry response was largely that there are already effective ways for district courts to coordinate such actions with fellow district judges and also state judges.  It is possible, though we believe still unlikely, that the Panel could order, for instance, the coordination of certain insurer-specific actions in their own respective MDLs.  State-specific MDLs are even more of a dark horse for various reasons, though still possible.

The Panel demonstrated substantive knowledge of insurance coverage actions, including an awareness of the great impact of differences in state laws, as well as an awareness that these actions are usually resolved on summary judgment, if not before.  The Panel asked none of the traditional questions about convenience factors relating to the various forums suggested to host the MDL, which strongly implies that they are not considering a national consolidation.

The Panel does not issue rulings from the bench, and did not do so here.  While we cannot predict the timing of a ruling with any certainty, we anticipate a decision relatively soon (1-3 weeks).