The novel coronavirus (COVID-19) pandemic is creating unique challenges for businesses nationwide, and this in turn is creating unique challenges for the lawyers that represent them. The federal government has passed numerous statutes that impact companies of all sizes – some with much more fanfare than others – and governors and state legislatures across the country are continuing to issue new directives on a near-daily basis.
At present, the timeline for restoring the nation’s economy remains unknown. The same is true with regard to what businesses and their legal counsel can expect with regard to the “new normal” moving forward. While there have been some signals from the White House and the U.S. Centers for Disease Control and Prevention (CDC), we still ultimately do not have a clear picture of what the future has in store.
As lawyers who represent companies that are struggling to cope with the economic impacts of stay-at-home orders and that are lost among the myriad new laws and executive orders that have been issued, what are our responsibilities? How can we effectively represent our clients, how can we protect them, and how can we help them take advantage of opportunities that may arise?
1. Proactive Advice and Representation
First, we must provide our business clients with proactive legal advice and representation. Whether and to what extent this is required under the terms of a particular engagement is an issue to be addressed on a case-by-case basis, but ethical considerations must absolutely come into play as well. Also, keeping clients informed of pertinent legal develops, especially in extraordinary times such as the COVID-19 crisis, is simply good business. It shows that we are attuned to our clients’ concerns, it lets them know that we are looking out for them, and it gives them the opportunity to make their own proactive decisions before new risks materialize.
For example, consider the $349 billion Paycheck Protection Program (PPP), which effectively ran out of funds in a matter of minutes. Why did some companies get their applications in quickly enough while others did not? While individual circumstances vary, it is safe to say that many companies were made aware of the PPP’s pending enactment by their legal counsel. Not only did these companies get access to much-needed funds; but, for many, taking advantage of this opportunity also afforded them the ability to avoid contract defaults and various other threats for litigation.
2. Anticipating Litigation Risks
On the litigation front, the risks are many. Private civil litigation arising out of the novel coronavirus pandemic will involve issues ranging from commercial lease defaults to personal injury and wrongful death claims involving allegations of negligent exposure to COVID-19. Companies in various industries will be at risk for state and federal enforcement litigation as well.
Health care providers, for example, are facing extraordinary new burdens, but they must also continue to comply with all federal benefit program (i.e. Medicare, Medicaid, and Tricare) billing guidelines. On a broader scale, the U.S. Securities and Exchange Commission (SEC) has made clear that while it will afford companies some leeway in light of the federal social distancing guidelines, it will still be vigorously enforcing companies’ federal disclosure and reporting requirements.
Another area in which many companies are likely to face litigation is employment law. From the anti-discrimination, wage and hour, and other generally-applicable legal requirements to the extraordinary burdens imposed by the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, employers face numerous risks specifically related to the COVID-19 crisis. If we can help our clients understand these risks and address them accordingly, we can help protect them against the potential for significant liability exposure and the possibility of being tied up in litigation for years to come.
3. Mitigating Risk Through Contract Renegotiations and Other Strategies
With regard to mitigating litigation risk, another crucial strategy for many businesses will be to renegotiate certain contracts before they are on the brink of default. With just about everyone struggling due to the pandemic, there are likely to be many unique opportunities to negotiate mutually-beneficial contract modifications that not only alleviate short-term cash flow concerns, but also preserve critical commercial relationships for the future.
Other similar types of opportunities are likely to present themselves as well; and, on the opposite end of the spectrum, some companies will be able to leverage the economic impacts of the pandemic to pursue litigation and terminate contractual relationships that they have wanted to terminate for a long time. However, in all cases, companies will need to rely on sound legal advice, and it will be up to their lawyers to ensure that they have all of the information they need to confidently make decisions with their financial stability and their shareholders’ best interests in mind.