COVID-19 legal insights for hospitality, entertainment industries (Voices)

COVID-19 has enormously impacted the lodging, gambling, travel and leisure industries through cancellations of trade shows, conventions, concerts, vacations and travel in general.

In Nevada, casinos are currently shut down for business. Every new case throughout the world is reported by the media in near real time, and travel restrictions are more restrictive on a daily basis.

Governmental measures to limit contact with one another are likely to continue. Here are a some legal insights to consider for the entertainment and hospitality industries, as well as other types of businesses.

How to avoid false advertising claims

The logical impulse of many affected businesses will be to address the real and prospective threat of coronavirus through advertising and marketing.

Certainly, companies will want to make assurances to their consumers and investors that, for example: (1) they are taking adequate precautions to prohibit infection or spread of the disease; (2) there are no known (or minimal) reported cases among their employees or customers; (3) the city in which they are located has no known (or minimal) reported cases; (4) the vast majority of coronavirus cases are nonfatal, and many have almost no symptoms or side effects; or (5) travel is not restricted or prohibited to your city or property.

Before any advertising or marketing plans are finalized, however, it is important to recognize that there are many unknowns about coronavirus. The relevant data changes daily as more cases are reported, and advertising that is true today may be wrong tomorrow.

We've litigated dozens of false advertising cases, and the importance of being factually accurate in real time or near real time, and providing disclaimers where appropriate, cannot be overstated.

A quick refresher on the badges of a false advertising claim. The typical elements under the federal Lanham Act and common law are: (1) a false or misleading statement of fact; (2) used in a commercial advertising or promotion; that (3) deceives or is likely to deceive in a material way; and (4) has caused or is likely to cause competitive or other injury to the plaintiff.

A false advertising claim is often combined with common law fraud or negligent misrepresentation claims and, depending on the jurisdiction, can be brought by either competitors or consumers. In non-competitor cases, statutory penalties and attorneys' fees can often be the drivers of this litigation.

It is important to remember that most of the advertising that affected companies will engage in in response to the virus is national or at least nationally accessible. That means that companies can be subject to the laws of states around the country.

For example, an advertising claim from a West Virginia company may subject the company to potential liability in California. A California jury will be more sensitive to coronavirus issues than one from a state that has far less reported cases.

Best practices means recording (and taking) the steps that companies are claiming in connection with their advertising.

For example, if a hotel or an airline claims that they are doing additional “wipe downs” to eliminate coronavirus, then the records should show an increase in time for the people tasked with the cleaning or the hiring of new employees, an increase in the use of requisite cleaning supplies, and the like.

If a concert venue advertises that they have hand sanitizer stations, then those stations need to be available for more than just the VIP section or in a sufficient number to serve the volume of guests.

A diligent plaintiff is going to look under the rocks to show that a claim is false or misleading and it is important to have records and activities that support the advertising at issue.

In short, most affected businesses will want to quell concern or even hysteria about their consumers contracting coronavirus. That makes good business sense, but you must ensure that you use good legal sense as well. To adequately protect your company, ensure that your representations are factual and based upon reliable sources, and be ready to change them quickly as necessary.

Downplaying risk could result in lawsuits

In the wake of coronavirus fears impacting many consumers' vacation planning, companies in the hospitality industry also should not be tempted to downplay or conceal any risks around coronavirus exposure.

Reports surfaced on March 12 that managers at a major cruise line encouraged sales teams to tone down and even misrepresent risks associated with the coronavirus in order to continue bookings.

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 the coronavirus will not survive in warmer temperatures, these statements likely violate federal and state consumer protection laws that prevent companies from making affirmative misrepresentations to sell their products.

What may be less obvious is that failure to report or disclose suspected coronavirus exposure can 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.

As several state laws allow for private rights of action in addition to government enforcement, plaintiffs' lawyers or government regulators could claim that a hotel, resort or restaurant that failed to disclose a coronavirus exposure failed 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 coronavirus exposure is a “material fact” in consumer decision-making grows stronger. Consequently, in addition to running afoul of laws requiring reporting to public health agencies of any suspected cases of coronavirus, lack of transparency on coronavirus exposure could also result in costly consumer class action lawsuits or government investigations.

In sum, companies considering whether to report or disclose suspected coronavirus exposure need to be mindful of both public health concerns as well as potential consumer protection liability.

Mike Rounds and Alissa Gardenswartz are shareholders with Brownstein Hyatt Farber Schreck, which has a branch in Reno, where Rounds is based.