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A Look Ahead at Litigation in the Time of COVID-19

While there are still many unanswered questions about COVID-19, we’re beginning to help our clients look beyond the immediate pandemic response and figure out where they should go from here. In this article, partner Frank D’Angelo explores litigation trends and strategy, as well as what makes him hopeful in the midst of the pandemic. 

Frank maintains a broad complex commercial litigation practice, with an emphasis on intellectual property matters within the motion picture, music and advanced media industries. He  advises clients on disputes involving claims under the Copyright and Lanham acts, as well as consumer class actions and shareholder derivative suits. In addition to his litigation practice, Frank advises clients with respect to potential business disputes, contract drafting, intellectual property rights issues and regulatory investigations. He has handled all phases of litigation and has represented clients in both AAA and JAMS arbitrations.

What are the most common questions you are getting now from clients related to COVID-19? 

Since the beginning of the pandemic, clients have been asking us whether they can suspend or terminate performance under existing contracts due to COVID-19. For example, does the pandemic qualify as a force majeure? Even putting aside what the contract may say, do common law or equitable doctrines, such as impossibility of performance or frustration of purpose, provide some measure of relief? Because COVID-19 is touching every sector, we’re getting these questions in a variety of contexts. We have entertainment clients that have had to deal with the fallout from live performance cancellations, clients that have leased event space that can no longer be used, and clients that own or lease offices that have had to deal with rent abatement requests, just to name a few examples. 

There is no one-size-fits-all approach to dealing with these issues; each contract addresses them in different ways. Sometimes, the force majeure language in our clients’ contracts is quite helpful; other times, not at all. The same is generally true for impossibility and frustration: In some cases, the pandemic and the state and local orders that have been issued to manage recovery efforts have quite clearly made it impossible to perform under a contract or destroyed the underlying purpose of the contract; however, typically, the questions as to whether those doctrines apply are much more nuanced, and we’re working with our clients to understand the larger context in which these questions arise.

We’re also getting practical questions from clients around how courts are responding to local stay-at-home orders and other social distancing requirements and what this means for litigation. While initially, in March and April, court operations effectively came to a halt, more recently courts have started expanding operations, primarily by implementing virtual and other remote procedures. This is something we are monitoring closely and working with clients on to decide how best to proceed. To help our clients navigate these issues, we’ve created a COVID-19 Litigation Resource Guide on Loeb’s website that tracks changes in court operations in our key markets.

In terms of the scale of the pandemic’s impact — legally, financially and culturally — this seems to be without precedent. Have there been any events like this in the recent past that you are drawing from to help advise clients on legal issues they are facing? 

Certainly there have been infectious disease outbreaks in the recent past — SARS, MERS, Ebola, H1N1, for example — but because those outbreaks were much smaller in scale than COVID-19, there isn’t much helpful legal precedent to have grown out of them. In terms of the scope and abruptness of business disruption, the pandemic more closely resembles events like 9/11 and the Great Recession. 

But the best legal analogy, in my view, is World War II. That is the only other time in recent history when we’ve had anything resembling the kinds of government-directed business closures and restrictions on public gatherings that we’ve seen over the past few months. In the 1930s and 1940s, there were blackout regulations, embargoes, and government directives with respect to the production and sale of certain goods, all of which had a profound impact on the feasibility or legality of contract performance. There is quite a good body of case law on this, and it’s helped us think through the force majeure, impossibility and frustration questions that we are encountering.

So many of us are starting to plan for the road back. What do you think clients should think about now to best prepare themselves for what many suspect will be a “new normal”?

We’re facing a great deal of uncertainty moving forward, but there are several steps that can be taken now to mitigate some of the legal and business risks that the virus will continue to pose. 

With respect to existing contracts (vendor, license and lease agreements, for example), clients may want to consider renegotiating payment terms where appropriate. Clients may also consider reviewing their contract forms to clearly address pandemics in future agreements, whether by specifying that they excuse performance or trigger more flexible payment terms, or as circumstances may dictate, by specifying that performance is required even in the face of a pandemic.

Many of our clients are also starting to plan for reopening their businesses as local stay-at-home orders continue to be relaxed. There are a host of issues that clients should be thinking through to do this safely — for example, putting in place proper safeguards regarding social distancing for employees and others, and reviewing human resource policies to make sure they address these matters. For clients with more public-facing businesses, it will be important to develop careful messaging to avoid misleading the public on health and safety issues. Clients may also want to audit their insurance policies to ensure adequate coverage for COVID-related claims — several types of insurance may be implicated, including property, general liability, business interruption and D&O — and consider adding policies where appropriate.

Based on what you’re seeing and hearing now, how has the pandemic impacted litigation and litigation strategy? 

For many of our clients, the pandemic has forced a realignment of business and financial priorities. For some clients, it’s forced them to deemphasize litigation and allocate resources elsewhere. For others, it’s rendered litigation all the more important, with the potential for access to another form of capital in damages. We have always worked closely with our clients to make sure their litigation strategy is aligned with their business priorities, but this is something that we, and our clients, are much more focused on right now. We’re also doing whatever we can to alleviate some of the anxiety that comes along with litigation so our clients feel like they have the mental bandwidth to deal with other challenging issues in their businesses. This means making sure that we have a well-considered game plan and can provide specific guidance and status updates — again, something we always strive to do but are especially sensitive to now.

As for the practice of litigation, we are having to navigate the changes in court operations. As court conferences, depositions and other matters are by and large being handled remotely, we’re making sure that we can be effective advocates by telephone and video. At the same time, the pandemic is requiring us as litigators to be a bit more patient and understanding. Of course, we’re always going to zealously represent our clients, but we should also be sensitive to the fact that opposing counsel and their clients are dealing with many of the same challenges that our clients are facing. It’s something that judges are encouraging practitioners to be sensitive to, and it’s also the right thing to do professionally. 

During a time of such uncertainty, what makes you most hopeful for the future? 

I think the human element in all of this is undeniable. We are having a shared experience, likely more than at any other time in our lives. Every phone call I’ve had these past few months, whether it’s with a client, a colleague or an adversary, starts with a sort of mental and emotional check-in, and I’m learning things about the people in my orbit that I never knew — about their families, their homes, their hobbies. 

I’m hopeful by how we’re approaching the pandemic as a firm — by the way it has brought us together. It sounds odd to say, since we’re all working remotely, but I feel more connected to my colleagues now than ever. We’ve been finding creative new ways to interact, whether it’s virtual partner lunches, department videoconferences or weekly Zoom game nights. There has been a tremendous sense of community and rallying together at Loeb & Loeb, and it’s part of why I love working here as much as I do.