You can’t sue a virus when you lose your job, a deal goes south, or a family member gets sick. But companies? They could be fair game.
As business leaders contemplate the thawing of this economic deep-freeze, they might want to brace for a flood of litigation that could follow.
The trickle has already started: A lawsuit is filed against Walmart over a worker’s death in Illinois. The owner of a lifestyle center in Rhode Island takes tenants to court over missed lease payments. Amazon faces potential class-action litigation accusing it of price gouging.
Yes, most disputes will be worked out. After all, it’s usually in the best interests of both sides to avoid litigation, a maxim that might be more true during a global pandemic. However, attorneys at Boston law firms say they expect the legal tussles to increase significantly, particularly after the largely shuttered state courts are fully reopened.
Elizabeth Levine, an employment lawyer at Goulston & Storrs, said the coronavirus creates a new kind of “minefield for employers.”
Here’s a quick rundown of the places where the bombs could go off:
Contractual disputes: Most contracts have a clause that could allow one or both parties to break free if an unforeseen major calamity gets in the way of fulfilling the terms. Businesses and their lawyers are dusting off their contracts and going over the wording of these “force majeure” clauses. “If this doesn’t constitute a force majeure event, I don’t know what would,” Roberto Braceras, a litigator at Goodwin Procter, said of the pandemic and its abrupt economic impact.
Many businesses, particularly those with no revenue because their doors are shut, are having tough conversations with landlords about skipping rent payments. There will be supply agreements that can’t be met, vacations canceled, membership disputes at gyms that are now shuttered. Many of these discussions, it’s safe to say, will not end pleasantly.
Discrimination: Talk to top executives about their return-to-office plans, and many will say they plan to tell the workers most at risk of severe illness from COVID-19 to stay home: older employees, or those with preexisting conditions such as diabetes or asthma. While that’s well-intentioned, employment lawyers say making this a mandate for certain employees is a bad idea. Even if they keep their current jobs and pay levels, employees forced to stay home could believe they will fall further behind on the career ladder, and turn to a lawyer to combat what they see as discrimination. Employers also need to be cognizant of potential discrimination claims when choosing who is furloughed or laid off and who is brought back.
Public health concerns: There’s a flip side: forcing high-risk workers to come into the office when they fear for their health. Workers who believe they caught the coronavirus on the job may seek redress through a workers’ compensation claim or an OSHA complaint. Susanne Hafer, an employment lawyer at Sullivan & Worcester, said employers could face lawsuits if they don’t take reasonable steps to protect their workers from COVID-19, such as requiring them to wear masks or gloves.
Similar allegations might be raised by customers, depending on the circumstances. And facilities tied to COVID-19 fatalities, such as nursing homes, could face a crush of wrongful-death suits, according to Michael Brier, a litigator at Gesmer Updegrove.
Higher-ed dilemma: University officials are under pressure to fulfill expectations for a traditional classroom experience; Brier said some shuttered colleges could be sued by students who want their money back. But they could also face health-related litigation. “A lot of universities are worried about bringing kids back into residence halls and dining halls, where everybody lives so closely, and somebody gets COVID,” said Braceras, the Goodwin litigator.
Securities issue: Publicly traded companies face another possible threat if their stocks drop precipitously — from accusations that they hid information about the impact of the pandemic or waited too long to disclose it. Many public companies have updated their annual reports to list the coronavirus as a new risk factor. But those efforts might not be enough to prevent shareholder suits. “There’s going to be a lot of combing through disclosures,” said Kathleen Burns, a litigator at Nixon Peabody.
Deals gone bad: The world of mergers and acquisitions could become a source for more litigation, thanks to “material adverse change” clauses in acquisition agreements. Dan McCaughey, a corporate litigator at Ropes & Gray, said these clauses are designed to protect buyers in the off chance that revenue is obliterated at the businesses they’re acquiring. They are invoked frequently in negotiations, he said, but rarely have been put to the test in court. That could change, now that the coronavirus has slammed nearly every corner of the economy.
McCaughey said the jury is still out on the kinds of COVID-19 disputes that will occur the most. However, he expects a surge will come. He said it’s almost inevitable in tough times that more individuals and companies facing sudden and extreme financial hardships will use litigation to place the blame — and to share the burden.