In Brief

Litigation and the Covid-19 Pandemic

April 21, 2020
Litigation and the Covid-19 Pandemic

From court closures and navigating force majeure clauses to the way litigators conduct business, the Covid-19 outbreak is having a notable impact in the litigation space. Analysis and news by Bloomberg Law litigation experts highlight some of the key issues cropping up as a result of the novel coronavirus.

[For more information on how the coronavirus is affecting litigation, the court system, and more, please visit our resource page.]

What types of lawsuits could result from the coronavirus?

The wide disruption caused by the virus could raise legal actions in a range of different areas. A spectrum of businesses from restaurants to hospitals to cruise lines could face claims that they did not take sufficient action to protect customers and patients. Force majeure clauses in contracts will get close scrutiny over whether the clause applies to missed fulfillment by suppliers, lack of available transport, and a host of other performance factors.

Force majeure does not apply to all legal contracts in the same way. How and whether it can be invoked depends on the specific wording in each case. The fact that companies can’t declare force majeure until there’s a specific breach of contract suggests notices already issued to contract partners by some organizations may be premature.

As individual companies face the prospect of litigation actions stemming from remote working conditions and related employee/employer interactions, there also are questions regarding the power of the federal versus state governments to order quarantines and to take other actions deemed necessary to limit the illness’s spread. Claims directly related to the virus already have been made against the U.S. Citizenship and Immigration Services over medical professionals with H-1B visas and a maker of hand sanitizers for allegedly overstating the efficacy of its product.

[Help your company navigate the ongoing impacts of Covid-19. Our special report offers practical guidance, analysis, and sample policies.]

Could social distancing have a lasting impact on the legal profession?

The demands that remote working is placing on the legal profession might drive permanent change in how legal work is done. The new environment could engender in otherwise tech-reluctant practitioners an awareness of how telework, videoconferencing, paperless processes, and securely handling and transferring client data files can make life easier and save costs.

Depositions are a particular area where lawyers have resisted anything other than face-to-face interaction, but with social isolation requirements there’s a growing familiarity with applications that support holding depositions, arbitrations, and hearings live over the web. Law firms also are taking a closer look at travel costs and the savings that could result from widespread acceptance of teleconferencing for a variety of events.

Besides the prospect that human nature will revert to the old ways once things return to normal, data security problems and the need to have troubleshooting help readily available might also limit permanent adoption of new tech tools. With sharply higher usage, the companies that offer tech tools are under pressure to address glitches and improve performance. Many applications are being stress-tested by the sudden surge in adoption, potentially limiting users’ ongoing enthusiasm, and remote working conditions will usually make accessing tech support a frustrating experience.

Practical Guidance: Coronavirus Toolkit

Bloomberg Law’s new toolkit will help you navigate an array of Covid-19 issues, including employment policies and procedures, contract management, and more.

How are courts working around coronavirus restrictions?

Federal District Courts are using a variety of measures to minimize as much as possible the inevitable delay in caseload disposition. The vast majority of the 94 U.S. District Courts have elected to restrict public access to courthouse facilities, halt jury trials, and/or encourage or require the use of teleconferences for hearings for certain proceedings. Many such orders mention exemption from the Speedy Trial Act, which mandates that criminal trials begin at a certain time and cannot be delayed.

Courts in some of the most seriously affected areas are using teleconferencing, email, and phone calls to deal with cases in which defendants are constitutionally entitled to a speedy trial. The U.S. District Court for the Western District of Washington issued an order on March 25 laying out a four-level remote access plan that would allow such trials to move forward. In-court proceedings are not feasible because of Covid-19 contagion guidance, but levels two through four will range from a skeleton courthouse hearing with defendant videoconferencing from a separate room to a fully remote, telephone-only hearing with relevant exhibits exchanged by email.

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Who might benefit from Covid-19’s impact on the legal system?

Court delays forced by the pandemic may benefit some parties. The Covid-19 fallout and several recent court decisions may enhance the position of gig economy workers who have been stymied in legal actions by companies such as Uber and Lyft, who have driven class suits into arbitration. Two late-March decisions by the New York Court of Appeals and the U.S. District Court for the District of Massachusetts, respectively, were pro-worker on the relevant issues. The public perception of the gig economy workforce unquestionably has been aided by the important role it’s playing in helping get through the pandemic.

The delayed legal environment also may be good for players in the litigation funding industry, because their return on investment tends to be higher when the cases they’re invested in get dragged out. That advantage will undoubtedly be tempered by the sector’s growing competitiveness and what analysts see as a power shift away from funders and toward law firms and clients.

What are the pandemic’s effects in the antitrust and regulatory areas?

Antitrust and competition regulators are steering a difficult course in maintaining the production and distribution flexibility needed to respond to the pandemic without creating too wide an opening for price gouging, fraudulent schemes, and securities law violations. The European Competition Network, comprising the EU’s national competition authorities, has set up a dedicated website to offer guidance to companies, departing from its usual reticence on such matters. It has, however, pointedly underscored its readiness to take action against companies that might exploit the current situation by “cartelizing or abusing their dominant position.”

In the U.S., the Department of Justice has directed state attorneys general to prioritize a range of fraudulent activities, and state and local law enforcement will be able to draw on $850 million in funding to be disbursed by DOJ under the Coronavirus Emergency Supplemental Funding program. DOJ also has established a COVID-19 Hoarding and Price Gouging Task Force. Health care and online companies, in particular, should expect to experience additional scrutiny for some time, even beyond the peak of the virus.

The Food and Drug Administration and the Federal Trade Commission have issued warning letters to seven companies about claims made on Covid-19 products, and the Department of Health and Human Services’ Inspector General has initiated a review of the compliance of Medicare- and Medicaid-funded facilities with federal emergency and infectious disease control requirements.

Bloomberg Law’s resource page offers additional guidance to help you advise clients and businesses through the impact of Covid-19.

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