Downplaying or Concealing Coronavirus Risk Could Result in Consumer Protection Lawsuits
By Alissa Gardenswartz Shareholder, Brownstein Hyatt Farber Schreck | April 12, 2020
This article was co-authored by Airina Rodrigues, Shareholder, Brownstein Hyatt Farber Schreck LLP
In the wake of coronavirus's impact on many consumers' vacation planning, companies in the hospitality industry should not be tempted to downplay or conceal risks around COVID-19 exposure. Reports surfaced earlier this month that a major cruise line encouraged sales teams to downplay and even misrepresent risks associated with COVID-19 in order to continue bookings. According to those reports, emails from managers within the company instructed employees to call more than 150 people a day and tell them that the virus "cannot live in the amazingly warm and tropical temperatures that your cruise will be sailing to," and that "the only thing you need to worry about for your cruise is do you have enough sunscreen?"
Given that the State Department has specifically warned consumers against booking cruises during this pandemic, and that there is no definitive scientific evidence to support claims that coronavirus will not survive in warmer temperatures, these statements could violate federal and state consumer protection laws that prevent companies from making affirmative misrepresentations to sell their products or services. Indeed, the statements have already led to a shareholder lawsuit and a state attorney general investigation.
What may be less obvious is that failure to report or disclose suspected COVID-19 exposure could also lead to consumer protection law violations. All states, either expressly or impliedly, include the failure to disclose a material fact as a deceptive practice under their unfair and deceptive acts and practices (UDAP) laws. The Federal Trade Commission's Policy Statement on Deception similarly clarifies that deception can result from a representation or omission that is likely to mislead the consumer.
According to the FTC's guidance, deception occurs if (1) a misrepresentation, omission or practice is likely to mislead the consumer, (2) the act or practice is examined through the lens of a consumer acting reasonably under the circumstances, and (3) the representation, omission, or practice is material. The FTC goes on to explain that material means "whether the act or practice is likely to affect the consumer's conduct or decision with respect to a product or service." Because there are state and federal laws allowing for private rights of action in addition to government enforcement for deceptive acts and practices, both plaintiffs' lawyers and/or government regulators could claim that a hotel, resort or restaurant's failure to disclose a COVID-19 exposure amounts to failure to disclose a material fact to improperly induce sales.
As more events are canceled, schools are closed and emergency measures are declared, the argument that COVID-19 exposure is a "material fact" in consumer decision-making grows stronger. And, even if public health and distancing measures are effective to slow the rate of coronavirus transmission, issues around disclosure of COVID-19 exposure are unlikely to go away anytime soon, as most public health authorities have warned that there are likely to be subsequent waves of infection.
Hotels' General Duty to Warn About Unseen Risks