Business Litigation and COVID-19 – Trends and Challenges – (Part 2 of 2)

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 2 of this series, we identify additional hot spots seeing an uptick in litigation:

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Health Care

Hospitals, nursing homes, urgent care facilities, and other health care providers face a significant and broad risk of litigation. There is a range of potential claims, including those related to their performance/provision of medical services, facility safety, compliance with guidelines and preventative measures taken to prevent the spread of the virus, disclosures to patients, residents, and their families, compliance with privacy laws and other concerns resulting from the sudden rise in tele-medicine, and issues related to payment, billing, and reimbursement. Additionally, lawsuits between and among providers and suppliers relating to supply chain issues are also anticipated.

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Mergers and Acquisitions

The pandemic has caused the termination or disruption of many business transactions and related financing agreements, due to adverse impacts on valuations, fund availability, deal feasibility, or other factors. Key disputes are anticipated over whether parties can cite the pandemic (and/or related governmental shutdowns) as grounds for terminating a previously agreed-upon deal. This analysis can be complex as: 1) uncertainty exists as to the duration of adverse conditions, 2) pandemic impacts can be specific to geographic region and industry, and 3) the risk of a second or third wave of virus provides further uncertainty as to transaction outcomes.

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Privacy

The health and economic crisis is also fertile ground for privacy litigation. Many have significantly increased use of distance/online learning, working, visiting, and shopping. The increase in online users during the crisis presents a risk to companies that now find themselves custodians of considerably increased amounts of data without sufficiently robust security systems in place to protect privacy. Moreover, if track-and-trace programs become widely used by consumers or businesses, such usage will likely trigger privacy litigation.

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Real Estate

Government-mandated shutdowns caused by the pandemic immediately increased disputes related to commercial and residential leases. Key issues include assessing whether a tenants’ failure and/or inability to make rental payments is attributable to the pandemic. And over the longer term these disruptions are likely to result in an increase in foreclosures, renegotiations, and workouts, and at the same time a rise in litigation and bankruptcy filings.

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Securities Fraud and Auditor Liability

The pandemic is expected to result in a variety of securities fraud and related litigation. Specifically, some public companies will likely be sued for materially misleading statements or omissions regarding the impact or severity of COVID-19 on their businesses. Additionally, volatile markets and sudden declines in asset values will likely result in an increase in accountants/auditors/advisors liability cases, where such firms may face claims of fraud, negligence and/or failure to conduct sufficient due diligence in certain cases.

Questions?

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