COVID-19 COMMERCIAL LITIGATION TRENDS AND OUTLOOK
The rapid spread of coronavirus (COVID-19), coupled with government shutdown orders, has resulted in an onslaught of litigation spanning across all practice areas – from habeas corpus petitions to breach of contract actions, exposure-based claims for wrongful death and personal injury, constitutional claims, insurance disputes, consumer protection class actions, broken-deal litigation and securities cases, among others.
We expect to see a continued increase in COVID-19 related claims as fallout from the pandemic continues and businesses slowly begin to reopen. This article will highlight several of the emerging trends in COVID-19 related commercial litigation and explore steps companies can take now to prevent or prepare for the risk of future litigation.
COVID-19 as a defence to contractual performance
Every industry has been touched by the COVID-19 pandemic in some manner. COVID-19 has wreaked havoc on supply chains and affected manufacturers’ ability to source materials, produce products and fill orders. It has prevented large-scale events from occurring and caused others to cancel out of fear or apprehension of what will be permissible in the near or even long-term future. It has pounded the travel and hospitality industries, with many predicting that the way consumers travel and consume services will never be the same. And it has strained companies’ abilities to perform under service agreements, leases, promissory notes and other payment obligation contracts.
As companies are faced with contractual obligations that they are unable or unwilling to fulfill on the required terms, they are turning to force majeure provisions in their contracts and common law defences of impracticability, impossibility and frustration of purpose in an effort to escape or delay performance without liability. Inevitably, challenges to these attempts are popping up in courts across the country.
The success of a party attempting to avoid liability will depend on a number of factors, including the specific terms of any force majeure provision in the parties’ contract, applicable law in the jurisdiction governing the parties’ performance, whether COVID-19 actually caused non-performance or merely made it more difficult or economically burdensome, and whether conditions precedent to invoking a defence have been satisfied.
Jul-Sep 2020 issue
Skadden, Arps, Slate, Meagher & Flom LLP