Business Litigation and COVID-19 – Trends and Challenges – (Part 1 of 2)
Updated: Aug 5
The Coronavirus ("COVID-19") pandemic has upended lives, businesses, markets, and institutions on a global scale that is unprecedented. The turmoil has in turn set off a wave of business litigation. In Part 1 of this series, we identify several hot spots seeing an uptick in litigation:
Banking and Finance
Banks and other financial institutions have and will face a variety of litigation resulting from the COVID-19 crisis. Litigation relating to loan defaults and debt collections has been on the rise. And class actions have arisen against banks based on their imperfect and, as has been alleged, biased implementation of federally directed programs intended to keep businesses afloat (e.g. the CARES Act).
Business Interruption Claims
One clear and virtually universal result of the pandemic has been the interruption of countless small businesses nationwide. The dollars at stake are very high, and significant litigation is already under way relating to whether business interruption, contamination, and related impacts of the COVID-19 crisis are covered by insurance policies.
The pandemic has disrupted countless contractual relationships in the distribution chain and elsewhere, as parties have in many cases been unable to fulfill contracts. As a result, the number of breach of contract lawsuits is expected to grow exponentially. A key question will be whether the pandemic itself and/or governmental-mandated social distancing are sufficient to invoke “Force Majeure” and justify contract non-performance, and the extent to which the pandemic was the cause of the breach or merely an excuse to not comply with a contractual obligation.
The pandemic is resulting in increased employment litigation. Hastily-devised work-from-home plans and slack record-keeping of hours working remotely will in some situations likely give rise to a spike in wage-and-hour litigation. Additionally, discrimination litigation will likely result from response to furloughs and layoffs that may have disproportionately impacted employees in protected groups. Finally, health and safety claims will likely be brought by employees that allege they contracted COVID-19 when they returned to work because their employer failed to follow appropriate safety guidelines.
The shutdown starting in Mid-March essentially brought all live in-person events to an abrupt halt — including sports and entertainment, weddings, corporate outings, and vacations. For some of these, (e.g. professional sports and major concerts), there has been increased public pressure from fans and others (even public officials) regarding refunds. Consumers have recently brought lawsuits regarding refunds (and refund policies) against third-party ticket sellers, such as Ticketmaster and StubHub, as well as Major League Baseball and its teams. And hospitality businesses – including pool, golf, tennis and/or beach clubs, as well as amusement parks and other venues/locales for which customers purchase season or monthly passes – will face similar issues and the threat of litigation.
Grobstein Teeple provides business valuation and litigation services that enable attorneys to help their clients successfully resolve disputes and achieve favorable results.
If you have any questions, please contact one of our experts below:
William Thomsen, Director
Howard Grobstein, Partner
Brian Lundeen, Partner
Kurt Stake, Partner