A Litigation Pandemic

Chief Executive Officer

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Weeks before the World Health Organization declared Covid-19 a global pandemic, long before state governors ordered their citizens to shelter in place, U.S. class action lawyers swung into action.

They sued soap and hand sanitizer manufacturers for claiming their products protected against the novel coronavirus. They sued a pharmaceutical manufacturer after its CEO, perhaps prematurely, said the company had developed a Covid-19 vaccine. Insurance disputes erupted in New Orleans and elsewhere as companies sought to tap business-interruption policies that insurers argued were intended to pay for property damage from storms, not loss of customers due to stay-at-home mandates.

It’s a peculiarity of our legal system that even something that most people would consider the very definition of an act of God— the unforeseen and unstoppable emergence of a global pandemic—would nevertheless provide raw material for litigation.

Some of the lawsuits in situations like this are predictable contract disputes, such as when parties to a business deal fight over whether clauses that were written with one type of disaster in mind apply to a completely different one. Many contracts contain “force majeure” clauses that kick in when unforeseen events prevent one side from fulfilling the terms, despite best efforts to do so. Usually, that’s a natural occurrence like a storm, flood or earthquake. Careful lawyers often write in a war clause to make sure man-made events are included too.

Does a government-ordered shutdown meet the definition? Courts will be asked to decide, but many businesses will choose to take a pass on calling their lawyers, predicts Charles E. Harris II, a partner with Mayer Brown in Chicago. “While we will certainly see some Covid-19 related contract disputes in court or arbitration, I think many companies in the commercial world will resolve their contract disputes without resorting to litigation,” Harris says.

Plaintiff lawyers are likely to file more tort lawsuits accusing businesses of failing to anticipate the coronavirus or failing to protect their customers and employees once it erupted into a pandemic. In those cases, “the critical question will be whether the company breached its duty of care,” Harris says. The answer to that may be driven by how the government or other companies in the same industry responded to the coronavirus threat.

Before the lawyers get too excited, however, they need to contend with a force majeure of their own: Congress. Legislators have repeatedly stepped in to take the ball away from trial lawyers before the game starts to get fun, by passing statutes that limit or prohibit lawsuits over natural and man-made disasters.

In the runup to the Y2K changeover that threatened widespread chaos from faulty computer code, Congress passed the Y2K Act, which banned lawsuits over most economic losses associated with misdated computer software. The late Sen. John McCain justified this extraordinary meddling with the civil court system by saying “there was a realization on both sides of the issue that this legislation is critical to the future of American business, and if it wasn’t passed and signed into law in a timely fashion… lawsuits could cripple the economy.”

Congress also intervened after the 9/11 terrorist attacks and has protected peripheral defendants against Superfund liability. Early in the coronavirus crisis, Congress extended liability protection to manufacturers of N95 facemasks, and New York Gov. Andrew Cuomo protected medical professionals treating Covid-19 patients.

Litigation may seem like a fixed element in the American landscape, but there are times when it must retreat into the background as the public wrestles with more important issues.

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