The Tip of the Iceberg Emerges: Initial Wave of Class Actions Reflect How Private Causes of Action Will Add Significantly to Price Gouging Litigation

As pandemic response task forces at the federal and state levels ramp up price gouging investigations and enforcement actions across the country, civil plaintiffs attorneys have jumped to the forefront by utilizing private causes of action to file price gouging-based class action lawsuits against dozens of major retailers and food supply companies.   Senate Majority Leader Mitch McConnell’s prediction that the COVID-19 crisis will be the “biggest trial lawyer bonanza in history” appears to be taking shape, as the number of putative class action lawsuits targeting price spikes in products that span the consumer spectrum—including N95 masks, toilet paper, hand sanitizer, medical supplies, consumer food items and emergency department physician services—escalates daily during the current crisis.  Notably, these lawsuits have attacked purported price gouging not just under existing price gouging statutes but also through an array of state laws, including consumer protection statutes, negligence, breach of implied contract, unjust enrichment and common law unconscionability.

As we discussed in a prior post, federal and state price gouging laws are widely varied, but frequently operate as a price cap that can cover products and services such as food, clothing, fuel, healthcare, hygiene supplies, transportation and storage.  Further, many state price gouging laws expressly include a private right of action, giving potential class action plaintiffs firms a wide berth from which to launch frontal assaults on industries and supply chains that may be operating without adequate awareness of the often strict pricing restrictions applicable during the current state of emergency.  For example, California’s 10% price cap lies at the core of several anti-gouging class actions filed against online and brick-and-mortar retailers.

Importantly, these laws are rarely invoked, largely untested and have never been applied in the type of widespread, sustained crisis in which we are now operating.  This could make it difficult for class action defendants to dispose of lawsuits in the early stages of motions practice, since courts will be addressing questions of first impression that could turn on the application of novel legal theories to a complex set of facts implicating entire supply chains, from the producer of production inputs to the retailer selling finished goods, and every player in between.

Companies in the retail supply chain that want to mitigate risk can and should take steps now to assess and document their pricing decisions in connection with the pandemic.  They should assume that they may be forced to defend these decisions down the road in a law enforcement or civil litigation setting.  Our Quick Reference Guide to Price Gouging Law can help them understand the legal lay of the land.

McGuireWoods’ Government Investigations & White Collar Litigation Department is a nationally recognized team of nearly 60 attorneys representing Fortune 100 and other companies and individuals in the full range of civil and criminal investigations and enforcement matters. Our team is comprised of a deep bench of former senior U.S. officials, including a former Deputy Attorney General of the United States, former U.S. Attorneys, more than a dozen federal prosecutors, and an Associate Counsel to the President of the United States. Strategically centered in Washington, D.C., our Government Investigations & White Collar Litigation Department has been honored as a Law360 Practice Group of the Year and earned the trust of international companies and individuals through our representation in some of the most notable enforcement matters over the past decade.

McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.