Ron Leibman, head of the transportation, logistics and supply chain management practice at McCarter & English LLP, outlines some the legal issues and complications that are likely to arise as a result of the coronavirus pandemic.
Legal questions raised by the pandemic abound, including broken supply lines, the fairness and availability of the Paycheck Protection Program (PPP), and the invoking of force majeure to justify suppliers failing to live up to their contracts. There hasn’t been much government guidance in those areas, Leibman says, one reason why we can expect to see extensive litigation in the months ahead.
Companies will claim harm due to breaches of contract and improper allocation of goods. Widespread layoffs are also likely to trigger lawsuits by aggrieved workers who were laid off during the COVID-19 pandemic, both temporarily and permanently.
On the positive side, the pandemic has resulted in companies placing an intensified focus on supply-chain resilience. They’ll be looking back to see what went wrong in their supply lines during the crisis, and taking steps to shore up systems against future disruptions. That’s likely to lead to extensive renegotiation of supplier contracts. “Across the board,” Leibman says, “we’re going to see a lot of new work in the contract field that we weren’t used to.
Force majeure, the declaration of disruptive conditions outside suppliers’ control, could prove to be a popular “out.” Whether suppliers will succeed in making their case is uncertain. Laws governing force majeure clauses in contracts can vary widely from state to state. In some cases, merely citing the occurrence of a pandemic won’t be sufficient grounds for relief unless the claimant can prove that it led directly to an inability to perform. In others, courts might rule that force majeure doesn’t apply unless the contracts in question specifically mentioned the possibility of a pandemic.