Finding Creative Solutions to Business Disputes During the COVID-19 Pandemic
As co-chair of my local bar association’s Commercial and Bankruptcy Law Committee, I have been communicating with local court officials on a regular basis about the impact the COVID-19 pandemic has had on state court operations. One of Governor Cuomo’s executive orders tolled all New York statutes of limitation—an order which was recently extended to June 6, 2020. The Chief Administrative Judge soon followed with a ban on commencing new “nonessential” actions. As a result, potential plaintiffs with commercial claims are unable to commence a state court lawsuit in the near term or obtain emergency relief with respect to such claims.
Businesses with pending state court lawsuits were largely put on hold in mid-March, with the state court system gradually re-opening for virtual conferences in April and resuming electronic filing in pending cases last week. We are probably several months away from regular state court operations and jury trials resuming. As explained in this alert, the COVID-19 pandemic provides a unique opportunity for businesses to find creative and cost-effective solutions to their most pressing business disputes in a time of uncertainty.
The Current State of the State Courts
In response to the COVID-19 crisis—and consistent with NY Governor Cuomo’s suspension of statutes of limitation, on March 22, 2020—the Chief Administrative Judge shut down most of the state courts, suspending all filings of papers except those related to a specified list of “Essential Matters.” Virtual courtrooms were set up and the Essential Matters were conducted virtually, while maintaining transparency through video courtrooms across the state, allowing the press and public to view proceedings if desired.
In April, virtual capabilities were expanded to provide all state court judges’ chambers the ability to address existing cases that were not on the Essential Matters list. Many judges gradually began to conduct virtual court conferences, decide motions that had been fully submitted prior to the shut-down, and refer matters to the court ADR programs or to court roster mediators to conduct virtual mediations. With that said, most judges are handling cases remotely with limited access to court staff and other resources.
As of May 4, 2020, certain motions and documents may now be filed electronically in most pending state court cases; however, no new cases may yet be filed. While it is impossible to predict the future, we are several months away from access to the courthouse being fully restored and jury trials being scheduled. Most likely, access will continue to expand through electronic and virtual means before the courts return to in-person appearances. Bench trials will surely return before jury trials.
Even with the state courts operating at limited capacity, businesses looking for certainty can work with experienced litigators to find creative solutions to their most pressing business disputes.
Making Informed Decisions
COVID-19 presents several contractual issues for potential litigation. Faced with uncertainty created by an economic downturn, businesses suddenly find themselves asking questions about force majeure provisions, the “frustration of purpose” contract doctrine, and the “impossibility” defense to contract performance. Some businesses might be looking to their business interruption insurance policy for relief. During these uncertain times, a business litigator can analyze your legal rights and provide you with informed advice.
Drafting Demand Letters and Pleadings
Often the party on the other side of your dispute will ignore you unless it knows that litigation is imminent if the problem is not addressed. Attorney demand letters or cease and desist letters can be effective. Business litigators can draft pleadings now and be ready to file as soon as the courts open. Often sharing the draft pleading with the other party before commencing an action is enough to get the party to come to the table to address the issue.
Preserving Existing Business Relationships
Other times, you may need to resolve a costly issue while maintaining the business relationship, such as supply chain vendors and partners, and want to avoid litigation. During this pandemic, cash flow problems for your business partners and vendors—or perhaps for your own business—may create a level of urgency that pushes the parties to find a creative solution to a dispute. Business litigators can help with the creative problem-solving process by drafting enforceable forbearance agreements, amendments to contracts, or settlement agreements that can allow your business to save money and forge ahead.
Alternative Dispute Resolution
Finally, an experienced litigator can assist a business in navigating the alternative dispute resolution processes. State court mediation programs have resumed, and private mediators are increasingly available to conduct virtual mediations through Zoom, Skype, and other video-conferencing platforms. A skilled mediator can help parties find creative and cost-effective solutions to business disputes without the limitations that the law necessarily places on a judge or jury.
The temporary limitations on the state court system are no reason to leave a business problem or dispute unaddressed. Given the emerging long-term nature of the COVID-19 pandemic, businesses might require an entirely new or modified business model—one that makes the best use of existing current resources: people, intellectual property, systems and technology, or capital. Minimizing risk and resolving ongoing businesses disputes can help give a business the flexibility it needs to adapt during this time. Call us. We can help.