It has now been over five years since the initial COVID-19 outbreak in the U.S. in March 2020, but the pandemic’s disruptive effects continue reverberate through the economy. In a newly filed securities lawsuit against auto rental company Avis Budget Group, investors claim that the company concealed an auto fleet-related business move that the company made because of earlier pandemic-caused supply chain disruptions. The new lawsuit’s allegations show how the pandemic’s lingering effects continue to influence companies’ decisions and actions – and lead to litigation. A copy of the April 25, 2025 lawsuit can be found here.

Background

Avis is a rental car company. An important aspect of the company’s business model is its fleet rotation – that is, the replacement of older vehicles in its fleet with newer models. The company must try to get as much as it can out of vehicles “useful lives” while balancing the maintenance costs that increase as vehicles age.

The complaint in the newly filed securities lawsuit alleges that “in the years following the COVID-19 pandemic, due to a shortage of fleet supply, automobile rental companies were required to purchase fleet vehicles at higher prices than historic norms.” To offset this increased cost, Avis “decelerated its fleet rotation by maintaining vehicles within its rental fleet for a longer period of time.” In discussing the impact of this approach, the company allegedly told investors that this slower fleet rotation “allowed [the Company] to depreciate its vehicles across a flatter portion of the residual value curve and manage [its] fleet purchase to an appropriate return on invested capital.”

By the fourth quarter of 2024, the complaint alleges, “prices for vehicles model year 2025 began to return to normalized levels.” The complaint alleges that the company did not disclose to investors that it implemented a “change in strategy to significantly accelerate fleet rotations.” 

When announcing its fourth quarter and year end financial results in February 2025, the company disclosed that its “strategy to significantly accelerate fleet rotations” had “resulted in shortening the useful life of the majority of our vehicles in America,” causing a non-cash impairment of $2.3 billion and non-cash related charges of $180 million. In the accompanying earnings call with analysts, company management indicated that the company was aware that accelerating fleet rotation would likely result in a significant impairment charge. The complaint alleges that the company’s share price declined on this news.

The Complaint

On April 25, 2025, a plaintiff shareholder filed a securities class action lawsuit in the District of New Jersey against Avis and certain of its directors and officers. The complaint purports to be filed on behalf of a class of investors who purchased the company’s securities between February 16, 2024, and February 10, 2025.

The complaint alleges that during the class period, the defendants made false or misleading statements or failure to disclose that: “(i) Avis Budget crafted and implemented a plan to significantly accelerate its fleet rotation in the fourth quarter of 2024; (ii) the foregoing acceleration shortened the useful life of the majority of the Company’s vehicles in the Americas segment, thereby reducing their recoverable value; (iii) as a result, Avis Budget would be forced to recognize billions of dollars in impairment charges and incur substantial losses; (iv) all the foregoing was likely to, and did, have a significant negative impact on the Company’s financial results; (v) accordingly, Avis Budget’s financial and/or business prospects were overstated; and (vi) as a result, Defendants’ public statements were materially false and misleading at all relevant times.”

The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the class.

Discussion

The U.S. economy has long COVID. It was really sick for a while, and though it has mostly recovered, some symptoms and their effects are persisting.

If you don’t believe me, take a look at the April 27, 2025 Wall Street Journal article entitled “The ‘Zombie Buildings’ at the Heart of the Office Meltdown” (here). Among other things, the article reports that “Five years after the start of the Covid-19 pandemic, U.S. cities are still struggling to avoid commercial real-estate doom loops that have claimed areas such as downtown St. Louis.” Fights over largely empty downtown buildings are “making it much harder for communities to rebound.” The article quotes a real estate firm executive as saying ““The zombie buildings that are out there are going to cast a pall across the entire office market for years to come because it will take time to reposition the properties in a way that meets tenants’ expectations.”

The real estate industry is not the only segment of the economy over which the lingering effects of the pandemic are casting a pall. The sequence of events reflected in the new lawsuit against Avis shows that the pandemic is continuing to affect the auto rental business. The supply chain disruption that the pandemic produced affected the company’s planning and operations in a way that is continuing to drive the company’s decisions and actions – and continuing to disrupt the company’s financial results.

We are now into the sixth year since the initial COVID outbreak in the U.S. in March 2020. In most ways and for most purposes, the pandemic has long been over. The national health emergency officially ended in May 2023, almost exactly two years ago. And yet, as the Journal article cited above shows, the economy’s long-COVID symptoms and effects continue to “cast a pall” over certain industries and sectors. And as this lawsuit shows, these lingering effects can still translate into securities class action litigation.

According to the Stanford Law School Securities Class Action Clearinghouse website (here), not counting the new lawsuit against Avis, a total of 82 COVID-19-related securities class action lawsuits filed, including 16 in 2024 alone. If the new lawsuit against Avis is any indication, lawsuits based upon ongoing business effects from the economy’s ongoing long-COVID symptoms are likely to continue to be filed.