Side Effects Of Pandemic? Legal Action

Side Effects Of Pandemic? Legal Action

As the novel coronavirus continues to wreak havoc on people and the economy, attorneys are bracing for a flood of lawsuits in its wake.

“I think we’ll see an uptick,” said Robert W. George, a partner at Friday Eldredge & Clark’s office in Rogers who practices commercial litigation and regulatory law.

One issue that is expected to be litigated is “force majeure” clauses. These clauses, typically boilerplate language buried in a contract, release a party from fulfilling its contractual obligations for unforeseen circumstances, such as a war, a riot or “act of God.”

“The differences in the [boilerplate] language will matter,” George said.

Public officials’ declarations about states of emergency or banning large gatherings in certain cities “will be very important in some of the disputes,” George said. “Because typically those force majeure contract provisions will say not only an act of God, but also an order from the government that makes performance of the contract unlawful.”

On March 11, Arkansas Gov. Asa Hutchinson declared a state of emergency because of the virus.

T.J. Lawhon, a member at the Little Rock law firm of Dover Dixon Horne, said the first step between a manufacturer and its client should be communication.

“So if there is an interruption of the supply chain or if there is an issue that’s going to cause a hardship on performances of agreements, communication is the first step to try to work through it,” he said. “If that’s not successful, the next step is just to do the best you can.”

He said companies that aren’t able to perform their contractual duties might have legal defenses under the doctrines of impossibility of performance or commercial impracticability.

Lawsuits also could arise if business disruption insurance claims are denied.

“I know that every insurance policy will be different,” and some policies contain exclusions for acts of God, said Trey Cooper, an attorney at Dover Dixon Horne and whose practice area includes litigating claims for insurance companies and employment law issues. “I would encourage businesses to look at their policies that cover their manufacturing or their shipping … and see if that’s covered. If it’s not, it’s probably too late to look at it now, but you may want to look at it for the future.”

Public Companies Targeted

George also expects some class-action lawsuits against public companies because their stock prices tumbled during the pandemic.

“Boards and senior executives who are accountable to shareholders are expected to anticipate all kinds of risks and to have the right plans and procedures in place as good managers to avoid disruptions that hurt the bottom line,” George said.

And when there’s a dramatic plunge in a company’s stock price, some securities attorneys will probably file suits claiming the company’s board breached its fiduciary duties for not anticipating the risk of the coronavirus, he said.

“I will be stunned if we do not see — not just in Arkansas but across the country — a wave of securities class-action suits,” George said.

Working From Home

Even before Hutchinson declared a state of emergency, some companies had already been updating their policies on working from home and sick leave in light of the pandemic, Cooper said.

He said he advised companies that an employee coming from an area with a known outbreak should work from home for the 14-day incubation period.

“With computers the way they are now, … it shouldn’t be too difficult to allow people to work from home during this period of time,” Cooper said.

Allison Pearson, an attorney at Friday Eldredge & Clark in Little Rock and whose practice area includes labor and employment law, said she’s telling businesses to be flexible on allowing employees leave. “You certainly don’t want to put either your employees or your clients at risk,” she said.

Pearson also said allowing the flexibility could prevent any potential liability issues.

George said if the employer doesn’t provide flexibility — or an employee thinks his company didn’t provide enough — and that employee then contracts COVID-19, “that employee is likely to find a lawyer and ultimately bring a claim. I suspect we’ll see those sorts of lawsuits in the employment space.”

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