United States: Legal Considerations In Determining Whether And How To Construct Protections For Businesses From Liability In Cases Arising From Alleged Exposure To The COVID-19 Virus

Overview

There's an old saying in Washington DC, at least among Capitol Hill staff, that one should never throw away their files because old issues will always come back to the forefront. Of course, the COVID-19 crisis the Nation now faces is virtually unprecedented and the road forward is still uncertain. But as the country turns its attention, indeed only over the last few weeks, to safely reopening businesses, bringing back employees, and again serving customers, past debates about the liability of businesses under our Nation's state tort laws are back on the table.

Much has been written about this area and the cases are almost too many to adequately discuss and quantify, going literally back a century and through the present. While a summary of such extensive legal theory is always fraught with danger, suffice to say that the courts have almost uniformly held that a lack of compliance with legislative and agency regulatory standards which clearly govern the facts before the courts—usually related to safety and health—can be used as per se evidence, that is conclusive proof of, negligence on the part of a defendant. The theory has been that these standards (and there is occasionally less deference given to regulatory standards than legislative), set the societal collective wisdom of what "a reasonable and prudent person" would do in the circumstances, which is of course the test of negligence.

On the other hand, courts have almost invariably found that compliance with the same standards does not per se mean the defendant has acted reasonably and prudently, that is, is not negligent. The reasons for this dichotomy are many and have been extensively written on throughout the literature, but basically surround the fact that it may be that compliance in the circumstances before the court would not be considered reasonable and prudent by a jury—e.g. the standard may be woefully out of date. The courts do normally allow such standards to be offered as evidence of non-negligence for the jury to consider as to whether the defendant behaved in a reasonable and prudent manner. But, importantly, the matter will still be left to the jury to weigh, taking in the totality of the circumstances, bringing along the inherent lack of predictability that goes along with that reality. Hence, in short, such compliance is not a complete safe harbor for businesses as a general matter across our 50 states, exacerbated by the fact that state tort law normally allows for unlimited punitive and compensatory damages. While this seeming inconsistency has been criticized, that is where the case law stands today.

Of course, state workers' compensation laws provide that a worker is eligible for certain capped levels of compensation for injuries that occurred on the job regardless of whether or not the employer is negligent, so this analysis would seem to not be relevant in the workers' compensation situation. However, often workers will attempt to avoid the capped damages by arguing that the employer's actions were "wanton or willful," and introduce a lack of compliance with standards as evidence thereof.

Now, as businesses are looking to reopen—and are encouraged to do so by state and federal decree—concerns have been expressed about customers and employees being able to sue these businesses for creating situations where those customers or employees have become allegedly infected by the COVID-19 virus. An argument has been raised that these businesses are simply trying to do the right thing to energize the economy, and fear of litigation and liability will damper those efforts. For example, there have been proposals to provide "safe harbors" for businesses from lawsuits under the nation's negligence laws and surely that such a safe harbor would be appropriate if the business in good faith complies with state, federal, and local governmental standards and guidelines, e.g. the CDC guidelines. Perhaps this goal could be met through a White House executive order or through legislation on Capitol Hill which would override or preempt state laws in the same field. The counter argument, advocated by many groups, is that such a safe harbor would be a green light for businesses to not take appropriate steps to protect their workers and customers. It will be also argued that it is not appropriate for the federal government to step in and undermine state tort law, regardless of the underlying arguments, out of concern for state rights and federalism.

Complicating this debate is a lack of common meaning with regard to the term "safe harbor." When someone argues that a "safe harbor" from liability is needed, what does that really mean? Is the term intended to mean a per se complete shield from liability when certain standards are met?¹ Or is it a type of "thumb on the scale of justice" in favor of the defendant in the sense of providing a protection from accusations of negligence when certain standards are met, but allowing that presumption to be overturned in the face of other types of conduct which could be deemed to be seen as "wanton or willful" i.e. beyond the pale of mere negligence? As a theoretical construct, that may sound workable, but the reality is that the factual circumstances still wind up in front of, potentially, a jury. That being said, such a construct could help to sustain motions for summary judgment. In this sense, the term "safe harbor" is not an absolute shield from liability, but would be a partial defense.

Related, but often ironically overlooked, is the question of what types of damages would still be allowable under a federal law which limited the reach of state tort law. An absolute shield would mean that no damages would be available—but the more likely scenario is a qualified shield which would still penalize conduct which is wanton and willful—this would require a Congressional determination as to what level of damages would be allowable in these kinds of lawsuits. Would these damages be limited to monetary damages or include the traditional tort remedies of unlimited compensatory and punitive damages, or some mix thereof? This is a critical issue as obviously the amount of damages that might be awarded at the end of the litigation drive the decision to file the lawsuit at the front end.

Another issue unexplored by the case law is whether the same type of deference given to legislative and agency standards should be given to "mere" guidelines or FAQs issued by agencies, which presumably have not gone through notice and comment rulemaking. Given the fast pace of issuance of governmental guidelines in the COVID-19 world, this issue is particularly relevant, but has not been adequately addressed by the case law.

In sum, while the context of this debate is new, the legal issues in fact are not, and have always been hotly contested—indicated by the fact Congress has only stepped in and approved limited liability, effectively amending state tort laws, in very narrow cases and the where the need is clear. Broader efforts to significantly limit the reach of state tort laws have been routinely rejected. Of course, the states have greater political room than the Congress or the federal government to step in and implicitly amend their own tort laws, and we have seen some evidence of that movement, as discussed below.

Below, we will touch on the legal issues raised by this growing debate and to make a few recommendations.

Analysis

Without comprehensive federal legislations providing a safe harbor against state tort claims related to COVID-19—or state-wide legislation—employers will face an unfortunately uphill battle defending future tort claims arising out of the COVID-19 pandemic. This section addresses the application and availability of some of these defenses.

A. Use of Legislative and Regulatory Standards: A Brief Primer

For a hundred years courts have considered axiomatic the common law principle that, against possible liability in tort, a defendant's compliance with germane government statutes and regulations is admissible only as evidence of the defendant's exercise of due care.² Additionally, industry custom and private safety codes may be relevant to determining whether a person acted reasonably, but they do not themselves establish a binding standard of care.³ As noted above, courts have traditionally approached compliance and noncompliance with governmental safety standards unevenly: the former, ironically, is not a defense to tort liability, but the latter is often conclusively held to constitute negligence per se.

Most courts "have concluded that compliance with federal safety standards is merely evidence [of reasonable conduct], effectively allowing juries to substitute their judgment for that of a regulatory agency."⁴ In other words, compliance with a legislative enactment or an administrative regulation does not preclude a finding of negligence in cases where a reasonable person would take additional precautions. Most states follow that approach in negligence cases. Thus, compliance with safety regulations is generally considered to be some evidence of due care, but it is seldom conclusive.

In sum, a lack of compliance with a legislative or regulatory standard is an extremely powerful sword in the hands of a plaintiff's lawyer but compliance is a weak shield for a defendant business.

1. Regulatory Compliance Defense

Legal commentators have questioned this one sided, pro-plaintiff, anti-defendant framework and argued for a strong regulatory compliance defense to protect those whose conduct adheres to federal guidelines, typically in the product liability context. Despite the numerous legislative proposals to alter this framework, none of these efforts have been enacted.⁵ While the California Supreme Court, which is the least likely court to accept a regulatory compliance defense, held that "there is some room in tort law for a defense of statutory compliance," it declined to create a complete safe harbor.⁶ No jurisdictions to our knowledge have deemed regulatory compliance as a complete defense to tort liability.

Some state legislatures have instructed their courts to disregard the time-honored rule that regulatory compliance serves only as evidence of defendant's reasonable care. Instead, these legislatures have created a presumption that regulatory compliance suffices to establish a defendant's exercise of due care. For instance, Kansas law declares:

When the injury-causing aspect of the product was, at the time of manufacture, in compliance with legislative regulatory standards or administrative regulatory safety standards relating to design or performance, the product shall be deemed not defective by reason of design or performance, or, if the standard addressed warnings or instructions, the product shall be deemed not defective by reason of warnings or instructions, unless the claimant proves by a preponderance of the evidence that a reasonably prudent product seller could and would have taken additional precautions.⁷

However, note that even these powerful, state-wide legislative enactments only create a presumption of reasonableness; they are not absolute defenses to tort liability. Moreover, these statutes often relate to specific issues, e.g. products liability, but do not provide defenses to common law tort claims generally.

2. Preemption Defense

Preemption is another possible defense, but it is typically only available when a defendant can point to a federal statute which clearly could be read to preempt state tort law. Of course, federal statutes and regulations may preempt state common law, in effect rendering compliance with the same a complete defense to state tort liability.⁸ While rare, Congress has from time-to-time passed federal laws⁹ that preempt state laws as to matters involving a compelling interest, but even here the circumstances have been relatively narrow as compared to a law which would sweep across the entire economy and all businesses affected by the COVID-19 exposure question.

By way of example, preemption of state tort laws is evident in its strongest form in the Federal Aviation Act.¹⁰ That legislation expressly preempted all state vicarious liability laws relating to aircraft to facilitate the availability of aircraft financing for businesses in the United States.

Because the scope of federal preemption primarily turns on matters of statutory construction, the subject defies simple unitary treatment, but it is worth a broad overview. In the decade before SCOTUS' holding in Cipollone v. Liggett,¹¹ courts expressed a marked reluctance to find preemption of common-law tort claims,¹² but more recent decisions suggest a significant reversal in this attitude.¹³ A number of lower courts have read Cipollone quite expansively, finding preemption of most or all tort claims; other lower courts have read the decision more conservatively, finding no preemption unless the statute is explicit. Nevertheless, any alleged tortfeasor relying on the preemption defense faces an uncertain application of preemption, depending on the law of the jurisdiction where the matter is venued. For example, the preemption doctrine in its strongest form would completely cut off common-law claims whenever federal safety requirements apply, whether or not a particular company has strictly complied with those requirements.¹⁴ This powerful view of preemption is strongest in recent medical device cases, as illustrated by the 5th Circuit's holding in Reeves v. AcroMed Corp.¹⁵

Some jurisdictions will apply a less sweeping preemption standard in which federal preemption of tort claims does not foreclose the availability of compensatory damages for personal injuries or other common-law remedies, but it does mean that federal regulatory standards will trump common-law standards such as the general duty of care under negligence.¹⁶ As one court in the 4th Circuit queried: "The question, however, is not the preemption of a remedy, but whether the federal government can impose . . . [a] uniform standard of conduct [where] compliance with federal law protects the defendant from the vagaries of each state's judicial system."¹⁷

Finally, in the weakest iteration of preemption, the defendant must demonstrate compliance with the federal standards as a prerequisite to using preemption as a defense.¹⁸ The pertinent difference between the second and third iterations is the allocation of the burden of proof: in the former, the burden lays with the plaintiff bringing suit; in the latter, it lays with the hypothetical defendant.

Even as the law trends toward preemption, it is worth noting Cipollone and its progeny would be useless to employers facing a potential tort claim raising out of the pandemic absent Congressional action expressly stating its intention to preempt such claims.

B.  Limited Liability Protection in the CARES Act and Other State Responses

Although not widely publicized, Congress has already provided some narrow protections limiting liability for cases related to the coronavirus. However, the very narrow nature of this relief arguably indicates the political difficulty of providing broader relief.

Under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), Congress provided limited liability protection to volunteer health care professionals providing health care services during the current public health emergency. This provision preempts state or local laws that provide such volunteers with lesser protection from liability. Notably, Congress chose not to extend liability protection to non-volunteer health care professionals, affording no wide-spread federal protection to those employed or contracted professionals treating patients during the emergency. Not only did the CARES Act not extend liability for front line workers, it definitely did not take the additional step of providing a safe harbor for employers facing tort claims arising out of the COVID-19 pandemic.

To fill the void left by the CARES Act, states like New York, New Jersey, Illinois, Michigan, and Mississippi have already moved to protect certain health-care providers from liability for injuries and deaths while treating the virus, except for those caused by gross negligence. Florida state Sen. Jeff Brandes (R) told Bloomberg Law that he's in the "early stages" of drafting legislation that could similarly shield a wider range of businesses. The bill would create "a safe harbor for businesses that are following the published guidelines" from the White House, the CDC, and the state. New York, through executive order, recently waived certain state laws to provide immunity from civil liability to certain health care professionals for any injury or death alleged to have been sustained directly as a result of an act or omission by such professional in providing medical services during the pandemic, unless such injury or death was caused by the professional's gross negligence.

On April 8, 2020, in an effort to further increase access to COVID-19 testing, the Office of the Assistant Secretary for Health (OASH) issued new guidance under the Public Readiness and Emergency Preparedness Act (PREP Act). Under the OASH's new guidance, pharmacists will qualify as "covered persons" under the PREP Act, meaning they may receive immunity with respect to all claims for loss caused by, arising out of, relating to, or resulting from, the administration or use of FDA-authorized COVID-19 tests. While this is much-needed relief, it also represents two major problems with piece-meal rulemaking in the pandemic setting: (1) this immunity extends only to a finite group of professionals accounting for a fractional percentage of potential tort liability and (2) as has been pointed out throughout the article, this is once again only "guidance" and thus it is unclear the weight a court would give to compliance.

C.  Can an Executive Order Have Preemptive Effect?

White House officials are hotly debating whether and how to propose a "liability shield" that would prevent businesses from being sued by customers who contract COVID-19. The exact details of such an order have not been determined, and planning remains in flux.

While the prudence of issuing such an executive order¹⁹ depends on a range of factors, the legal ramifications merit discussion. Specifically, would such an order—which necessarily would not pass through a deliberative legislative body—preempt state tort laws to provide a defense to employers facing negligence claims arising out of the COVID-19 pandemic? While the case law in this area is remarkably underdeveloped, SCOTUS has suggested that executive orders, if otherwise valid, are also considered federal law for purposes of preemptive effect.²⁰ An argument could be made that, particularly in this time of crisis, the president's powers to issue executive orders preempting state law are at their zenith, and thus, should operate as a liability shield supplanting state tort laws, but only as it relates to cases arising from COVID-19. The same issues that are implicated with regard to legislation exist here—including what is scope of the liability protection shield—total or qualified—the conduct which must be followed to qualify for the protection, what types of defendants could assert the shield, and what damages could be awarded.

Conclusion

Historically, courts have been extremely reluctant to hold state common-law tort claims preempted by federal law, and thus will narrowly construe the scope of federal power. However, after the Supreme Court decision in Cipollone, courts trended toward expanding the preemption doctrine. Even as the doctrine has expanded, where a court declines to apply preemption, it remains axiomatic that a defendant's compliance with germane government statutes and regulations is typically only admissible as evidence of the defendant's exercise of due care, but non-compliance with the same can be per se evidence of negligence.

As businesses across the Nation navigate reopening their stores while keeping employees and consumers safe in the middle of the pandemic, they must also remain vigilant of the threat of future tort liability due to COVID-19. Employers have been fastidiously checking the websites of the CDC, OSHA, the IRS, and the EEOC for guidance on ensuring a safe, legally compliant workplaces so the economy can return to some semblance of normalcy while addressing the difficult health issues of possible contagion. Arguably then, employers who bear all the risk in heeding the guidance in order "to get back to business" should enjoy some heightened degree of protection when they can demonstrate good faith compliance with the very guidance intended to acheive a safe workplace. The law, as it stands today, would answer that a sea of litigation, lawyers' fees and punitive and compensatory damages—with the uncertainty of jury trials—awaits them. However, this presents a perfect opportunity for Congress to step in and provide some modicum of certainty—which most employers haven't experienced in months—by including in its next legislative package a clear directive that employers who follow the guidance will be protected, completely or to a significant degree, from claims arising out of the COVID-19 pandemic.

Footnotes

1 As an example of a safe harbor, Professor Samuel Eistrecher suggests that if a business requires its workers and customers to wear masks and practice social distancing to the extent practicable, it would have a "safe harbor" from being considered by the federal government to be negligent—a standard that could also discourage state-court lawsuits.

2 See, e.g., Dorsey v. Honda Motor Co., Ltd., 655 F.2d 650, 656 (5th Cir. 1981); Westinghouse Electric Corp. v. Nutt, 407 A.2d 606, 610 (D.C. App. 1979); Leonard v. Say-A-Stop Services, Inc., 289 Md. 204, 424 A.2d 336, 340 (1981); Kemp v. Wisconsin Electric Power Co., 44 Wis. 2d 571, 172 N.W.2d 161, 164 (1969).

3 See, e.g., City of Dothan v. Hardy, 188 So. 264, 265 (Ala. 1939) ([S]uch rules are not regulations having the force of law, whose violation is negligence per se.); Jorgensen v. Horton, 206 N.W.2d 100, 102 (Iowa 1973) (en banc) "(Proof of compliance or noncompliance with such safety code . . . is not conclusive upon the jury on the question of defendant's due care.)"; Kent Vill. Assocs. Joint Venture v. Smith, 657 A.2d 330, 337 (Md. Ct. Spec. App. 1995) ("[S]afety standards . . . may be admitted to show an accepted standard of care, the violation of which may be regarded as evidence of negligence.").

4 Richard C. Ausness, The Case for a "Strong" Regulatory Compliance Defense, 55 Md. L. Rev. 1210, 1241-1242 (1996).

5 Id. (listing the many bills Congress introduced and attempted to pass, but ultimately failed.).

6 Ramirez v. Plough, Inc., 863 P.2d 167, 172 (Cal. 1993) (affirming dismissal of claims predicated on failure to include risk information in Spanish where label carried FDA-mandated warning).

7 KAN. STAT. ANN. § 60-3304 (1983 & Supp. 1987). Tennessee has a similar statute. TENN. CODE ANN. § 29-28-104 (1978 & Supp. 1987); See also COLO. REV. STAT. § 13-21-403 (1987). As noted, it is inherently easier for states than for Congress to pass safe harbors for employers who act in accordance with a governmental safety standard as those states' police powers are not similarly inhibited by concepts of comity, separation of powers, and federalism. This fact, however, does not mitigate the need for a national, comprehensive directive that employers will be protected for acting in accordance with the very COVID-19 guidelines the Federal Government promulgates.

8 See Geier v. American Honda Motor Co., 529 U.S. 861, 881-83 (2000).

9 Shortly after the September 11, 2001 terrorist attacks, the President signed the "September 11th Victim Compensation Fund of 2001" into law as Title IV of Public Law 107-42. Section 405(c)(3)(B) of the Act provided that a claimant who filed for compensation under the Act waived any right to file a civil action (or to be a party to an action) in any federal or state court for damages sustained as a result of the terrorist-related aircraft crashes of September 11, 2001. The pandemic obviously presents very different, less discrete, more open-ended scenario.

10 49 U.S.C. § 44112.

11 505 U.S. 504 (1992).

12 See e.g., Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984).

13 Lars Noah, Reconceptualizing Federal Preemption of Tort Claims As the Government Standards Defense, 37 Wm. & Mary L. Rev. 903, 906 (1996).

14 See e.g., Reeves v. AcroMed Corp., 44 F.3d 300 (5th Cir.), cert. denied, 115 S. Ct.2251 (1995) (holing that common law failure-to-warn claims for injuries allegedly cause by a spinal implant are preempted by § 360k(a) of the Medical Device Amendments, even where Plaintiff alleged Defendant misled the FDA and violated FDA regulations by withholding material information from the FDA concerning the intended uses of its product.) citing Moore v. Kimberly-Clark Corp., 867 F.2d 243, 246-247 (5th Cir. 1989) (same) and Stamps v. Collagen Corp., 984 F.2d 1416, 1423-24 (5th Cir.), cert. denied, 114 S.Ct. 86, 126 L.Ed.2d 54 (1993) (same).

15 Id.

16 See, e.g., Lowe v. Sporicidin Int'l, 47 F.3d 124, 130 (4th Cir. 1995); Notably, this is the formulation adopted by the third restatement on torts. See RESTATEMENT (THIRD) OF TORTS: PRODUCTS LIABILITY § 7 cmt. e (1995), at 198 ("[W]hen federal preemption is found, the legal effect is clear. Federal preemption replaces the tort law of all states with a uniform body of federal law regulating the relevant area of product safety.").

17 Stewart v. International Playtex, Inc., 672 F. Supp. 907, 910 (D.S.C. 1987).

18 See, e.g., St. Louis S.W. Ry. v. Malone Freight Lines, 39 F.3d 864, 867 (8th Cir. 1994).

19 On April 28, President Trump issued an Executive Order entitled "Executive Order on Delegating Authority under the DPA with Respect to Food Supply Chain Resources during the National Emergency Caused by the Outbreak of COVID – 19." Although there was much talk in the press about the need to protect meat packers against liability, the executive order itself says nothing about this issue, perhaps indicating the political and legal difficulties in doing so through an executive order, as relatively uncharted territory.

20 See Old Dominion Branch No. 496 v. Austin, 418 U.S. 264, 273 n.5 (1974) (concluding in that case that the "Executive Order is valid and may create rights protected against inconsistent state law through the Supremacy Clause."); Jonathan R. Macey, Executive Branch Usurpation of Power: Corporations and Capital Markets, 115 YALE L.J. 2416, 2420, 2422 (2006) (observing that "[t]he executive possesses considerable power to affect policy unilaterally both in the implementation of laws and in the preemption of legislative activity through the use of executive orders, proclamations, and memoranda.... Presidents act entrepreneurially as well as unilaterally. Presidents can preempt legislative action by acting first"); Erica Newland, Executive Orders in Court, 124 Yale L.J. (2015) (Old Dominion Branch "suggests that executive orders of indeterminate provenance can preempt state law via the Supremacy Clause, raising sensitive questions about federalism with no obvious answers.").