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Coronavirus (COVID-19) Response - Litigation Issues



The global coronavirus (COVID-19) pandemic is causing significant business disruption-related disputes, and Nixon Peabody’s Commercial Disputes practice group is actively addressing these matters to help clients wade through the challenges.

Among the issues the practice group is tackling:

  • Force majeure clauses in commercial contracts—What do they cover and not cover? When does it apply? How does a company handle a potential force majeure claim? If force majeure is not applicable, are other legal remedies available?
  • Commercial leases—Does force majeure apply? Can a tenant withhold rent? What other lease clauses are important when businesses are shuttered due to calamity?
  • Insurance—Insurance claims will be significant in this crisis, and NP’s team of attorneys focused on insurance issues is already analyzing where the problems will arise.
  • Supply chain disruption—What happens if goods or services cannot be delivered? What if manufacturing ceases production? Who is liable for these disruptions in the supply chain?
  • Dealing with the public—To what extent is a business liable to the public that interfaces with the business? What protections do businesses need to take when interacting with the public?
  • Financing disruption—What happens if credit sources are not available?
  • Broken deals—What recourse do parties have when a business transaction fails to close? What are the available remedies? Who is responsible if financing is not available?
  • Employment related issues—We are collaborating with our colleagues in NP’s Labor & Employment practice group on the myriad of questions and growing disputes arising from the closing of businesses.

The COVID-19 pandemic will have long-lasting effects on the economy and our clients’ business. We’re working with clients to best position them for what comes next.

We’re advising:

Business Operations

  • On FDA and CDC guidance and assistance with the novel questions that have and will continue to arise through the coronavirus.
  • Clients on disruption in current active litigation caused by closed courts.
  • For-profit companies on operations and supply chain management and compliance with government orders.
  • On force majeure, commercial impracticability, impossibility, and frustration of purpose under various states’ laws, the Uniform Commercial Code, and English law, for numerous industries including health care, travel, real estate, manufacturing, food and beverage, transportation, and finance.
  • Client in commercial landscaping business with ongoing projects and maintenance in compliance with government orders, contractual obligations, workforce management, and business operations.
  • Client in auto industry regarding the applicability of the Cybersecurity and Infrastructure Security Agency’s (CISA) critical manufacturing sector guidelines to its business.

Commercial Contracts

  • On drafting and revising notice letters, force majeure provisions, and default language.
  • Entities concerning their ability to cancel fundraising or annual events by invoking force majeure clauses.
  • On the impact of COVID-19 on travel and gathering restrictions leading to cancellations of confirmed reservations for social event space.
  • Advertising agencies who are experiencing production delays on the existing force majeure clauses identifying creative solutions to ensure client satisfaction and mitigate contract issues.
  • On the administrative orders and travel/work restrictions on Material Adverse Change (MAC) clause, a contractual requirement to use commercially reasonable efforts, and related provisions in an asset sale transaction.

Commercial Leases

  • Commercial real estate landlords and tenants concerning force majeure, utilities, and other lease rights.
  • Owners and contractors on navigating project continuity issues under various local, state, and federal guidelines and regulations, as well as project delay issues including relating to termination, suspension, and force majeure.
  • For-profit medical school on the force majeure provisions in its construction contract and its definition in loan documents for the close of a New Markets Tax Credit deal to develop a new school in Puerto Rico. The completion guaranty in the agreement is in flux with the ever-changing conditions of the COVID-19 pandemic. 

Corporate Deals

  • Regarding client’s rights in broken merger & acquisition (M&A) and investment deals.

Financing

  • Nursing homes, small health care practices, and businesses on how to secure a loan through the Small Business Administration Disaster Loan Program.
  • Not-for-profits on compliance with government orders and on grant programs for employee retention.
  • On SEC enforcement priorities in this crisis period.

Insurance

  • On insurance issues related to renewals.
  • Insurance-related claims, including business interruption, event cancellation, workers’ compensation, general liability, and Directors and Officers liability insurance.

Supply Chain

  • On model force majeure provisions in supply agreements.
  • Manufacturing client on how to leverage and navigate the force majeure clause to allow remote supervision of the installation of equipment from its international supplier.
  • Plastic film manufacturer on compliance with government orders and contractual issues concerning its suppliers and customers, including increased demands from its customers in the food supply industry.
  • On applying the Defense Production Act of 1950 and related laws and regulations.
  • Manufacturers in navigating the PPE shortage crisis, including the parameters around how non-FDA cleared masks and gowns can be manufactured, in light of recent CDC guidance.
  • Manufacturing clients on converting operations to provide alternative masks and gowns and negotiated contracts with hospitals to make and provide alternative products.
  • On converting operations to produce hand sanitizer.

Workforce Management

  • Clients in multiple industries as they lay off staff, put in place temporary furloughs, close locations, and execute other operational changes to their businesses as a result of COVID-19.
  • Employers general questions regarding workers’ compensation and if work-related activities can give rise to claims of probable exposure to COVID-19 under state workers’ compensation laws.
  • Commercial real estate firm with various employee issues as well as potential employee exposure to coronavirus as some workers maintain its properties, which is considered “essential” under the Illinois governor’s shelter in place order.
  • Grocery store coop and a fast-food restaurant chain on various employee issues as well as potential employee exposure to coronavirus as they remain open after the Illinois governor announced a shelter in place order.
  • Automotive supplier with creating a communication strategy, on contract with on-site provider for the medical review of its workforce, and temporary furloughs.
  • Hospitality industry organization on temporary furloughs.
  • Employer on state-specific interpretation of governor’s stay-at-home executive order.

Navigating the current state and federal orders and statutes

  • State-wide and hospital- and health care-provider specific emergency orders, health care-related agency guidance, federal and state waiver requests and approvals, and related developments.
  • Regarding state laws restricting telemarketing and related activities, including during declared emergencies.
  • On Anti-Price Gouging Statutes of various states.
  • Movie theater complex in Massachusetts on how to comply with the governor’s order prohibiting gatherings of over 50 and the serving of food, except for take-out. The business remained open for a few days before all movie theaters were ordered to close.
  • Regarding the applicability of the PREP Act and whether certain responses to the coronavirus pandemic would be considered as immune from liability under the Act.

How employers can prepare for expected waves of coronavirus-related litigation

Daily Journal | June 03, 2020

Labor and Employment partner Bonnie Glatzer and associates Hillary Baca and Jade Butman, all in San Francisco, contributed this article on potential coronavirus-related litigation matters that California employers should be aware of, and how employers can prepare for possible lawsuits.

Former United Way VP asks judge for home confinement, claims he is vulnerable to COVID-19

New Hampshire Union Leader | March 30, 2020

This article highlights the efforts of Manchester Complex Commercial Disputes partner Dan Deane and associate Michael Strauss to secure home confinement for their client, who is currently serving a sentence in a Merrimack County jail where a corrections officer has tested positive for COVID-19.

Pandemic prompts urgent review of overlooked contractual clause

Rhode Island Lawyers Weekly | March 26, 2020

Providence Corporate partner Adam Gwaltney weighs in on the implication of force majeure clauses, particularly in cross-border contracts. These boilerplate clauses are becoming a popular topic as businesses consider the possibility they may not be able to fill contractual obligations as a result of coronavirus.

Hold off or proceed?

Inside Higher Ed | March 26, 2020

Providence Complex Commercial Disputes partner Steven Richard says the lack of a fixed time frame for the completion of Title IX investigations has created uncertainty for colleges and universities during this public health crisis.

U.S. corporate crisis bailouts may prove bonanza for insider trading, new study warns

Reuters | March 26, 2020

Boston co-office managing partner Kathleen Ceglarski Burns, a partner in the Complex Commercial Disputes group, provides insight on a possible uptick in SEC enforcement activity in the wake of the coronavirus crisis and the new federal stimulus package.

Dated Mass. courts present risks, opportunities amid crisis

Law360 | March 25, 2020

Complex Commercial Disputes partner Kathleen Ceglarski Burns, of Boston, and Litigation Department chair Scott O’Connell, of Manchester, discuss the challenges and opportunities presented by the near-freeze on Massachusetts court proceedings during social distancing in the commonwealth.

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