For LA’s malls, lawsuits could be the next crisis

In Jacksonville Beach, Florida, 16 employees and patrons of an Irish pub were infected with coronavirus in just one evening.

Lynch’s Irish pub in Jacksonville Beach, Florida (Credit: Facebook)

And in suburban Chicago, Walmart was sued by the family of an ex-employee who died after he allegedly contracted coronavirus at work.

These incidents are happening as brick-and-mortar shops reopen across the U.S. including Los Angeles County, which greenlighted the return of mammoth malls like The Grove and Del Amo Fashion Center that power the region’s retail economy.

The totems of L.A. sprawl and sunny consumerism are back after blanket shutdowns, tenants not paying rent, and looting and vandalism following the death of George Floyd.

Their return might be the best of bad options for besieged mall landlords, but it poses new problems. One to watch for is exposure to coronavirus-related lawsuits from customers and employees, as the county’s coronavirus toll shows no sign of decline.

The average June day in L.A. County has brought more than 30 deaths and 2,000 new covid infections, according to the county health departments, figures that went up once retail began to reopen. In other parts of the country, cases are skyrocketing.

“There is going to be a wave of lawsuits,” said Nick Rozansky, a lawyer at Brutzkus Gubner Rozansky Seror Weber who defends retailers in litigation, and noted a single lawsuit from one employee or customer would cost six figures to defend.

Mall landlords are making educated guesses on the best measures to prevent infection, noted Ariel Cudkowicz, an employment defense lawyer at Seyfarth Shaw. If they fail, landlords could be subject to lawsuits, “that will have a material impact on their bottom line.”

Lawyer up ‘til you drop?

California Gov. Gavin Newsom has said the decision to reopen retail, “is foundationally a question for local health directors and local health officials.”

State and county officials, meanwhile, are mostly lawsuit proof.

“Local government generally has some level of immunity protection, unless there is intentional malfeasance,” said Greg Aldisert, an attorney at Kinsella, Weitzman, Iser, Kump and Aldisert.

The target of a potential lawsuit from a customer or employee who falls ill, Aldisert said, then is the mall and possibly a retailer in the mall as well.

Trade groups like the California Retailers Association have spent months pushing for some type of legal immunity as stores reopened, but have hit a legislative dead end.

Rachel Michelin, president and CEO of the California Retailers Association

“There’s not the political will to make it happen,” said Rachel Michelin, president and CEO of the California Retailers Association. “We just haven’t been able to gain traction on it.”

A mall employee contracting coronavirus could mean a worker’s compensation claim, which has more limited damages, but it’s not clear if coronavirus falls under worker’s comp.

If not, the cost of simply going to court is at least $200,000, Rozansky estimated. Often there’s liability insurance, “But there are hundreds of policy exclusions for viruses,” Rozansky said.

“An insurance company may settle with the plaintiff and then turn around and sue the mall,” Rozansky said.

The Grove (Credit: iStock)

Mall owners can argue in court that people assumed the risk of entering a public space during a health crisis, Rozansky said, or that the person suing doesn’t know where they contracted the virus.

But sometimes people do know, like the party at the bar in Jacksonville Beach, or tourists on Princess Cruise Lines, which has been subject to dozens of negligence lawsuits from customers and employees for infections at the pandemic’s onset in the U.S.

A mall is not that different from a cruise ship, Kelly Reynolds, a professor of environmental health sciences at the University of Arizona, a hard to control public space with a lot of commingling.

“In the nature of shopping, you’re touching a lot of clothes, you’re touching a lot of surfaces,” Reynolds said. “It won’t be possible to follow behind people and sanitize everything people touch.”

The nightmare situation, said Cudkowicz at Seyfarth Shaw, “is a cluster of infections that cause a mall to shut down and could lead to a class action lawsuit.”

Such massive complaints have not yet been filed, according to the law firm Hunton Andrews Kurth, which has tracked coronavirus lawsuits. But there have been at least eight personal injury and three wrongful death cases regarding Covid filed in California courts.

An additional case with relevance to L.A. mall titans is taking place in Evergreen Park, Illinois. Walmart employee Wando Evans allegedly died from coronavirus, because the store was not properly sanitized and did not adhere to socially distancing guidelines. Walmart has denied the charges.

Preventing lawsuits

L.A. County’s tentpole mall landlords were not eager to discuss their liability exposure.

Del Amo Fashion Center (Credit: Simon Property Group)

Mall owners including Rick Caruso of The Grove and Palisades Village, Del Amo Fashion Center landlord Simon Property Group, Westfield owner Unibail-Rodamco, and Fig&7th proprietor Brookfield Properties either declined comment or did not respond to questions.

Michigan-headquartered Taubman Centers, owner of the Beverly Center, responded with a statement that the mall “has taken the necessary steps” including “following federal, state and local guidelines to keep customers and employees safe.”

A rendering of the Beverly Center (Credit: Beverly Center via Los Angeles Times)

Some of the mall’s actions concerning lawsuits can be gleaned from recent announcements.

The Caruso-owned Grove, for example, is professing to follow the L.A. County Health Department’s reopening guidelines, and going a few steps further.

The 575,000-square-foot open air mall let customers return June 10 after it spent the previous week filled with National Guard personnel and tanks after the mall’s Apple and Nordstrom stores were looted.

The Grove has a 21-page powerpoint outlining health and safety measures including “physical distancing ambassadors,” stationed to swoop in and sanitize common spaces.

Caruso, a member of the USC Board of Trustees, has also brought on Dr. Neha Nanda, director of epidemiology at the USC Keck School of Medicine, as a consultant.

Meanwhile, the Beverly Center, immortalized in “Clueless” as a center of L.A. mall culture, has rearranged furniture to preserve social distancing, and turned off water fountains, while individual retailers have closed dressing rooms and put up plexiglass at checkout counters.

The cost of these measures can add up, said Ron Lutz, the chief retail officer at interior design firm Miller Zell, who noted it costs between $2,000 to $5,000 shield stores with plexiglass, and additional cleaning perhaps $1,500 a day for a 100,000-square-feet store.

Mall landlords also must deal with specific liability issues facing each tenant. Brian Weltman, a CEO at interior design firm RHDC Studio, said some retailers fear there’s not enough cleaning supplies and hand sanitizer for them to come back.

It is all a juggling act for the malls, Weltman noted, reopening enough to recoup revenue but trying to prevent a public health disaster.

“An open mall with a bunch of closed stores,” Weltman said, “Really doesn’t do any good.”