Force Majeure: The Coronavirus Made Me Do It!
Just weeks ago, life was simpler. People bought event tickets, made hotel reservations, planned travel—and costumes—and eagerly anticipated attending superhero and comic conventions. But things happen. Like the coronavirus. Suddenly, external things interfere with the performance of contracts—and force majeure clauses, which are often considered boilerplate, take on extreme, one might even say super, significance.
Lawsuits asserting defenses of coronavirus are now starting to appear. In a new case filed on March 23, 2020 in the United States District Court for the Southern District of New York, plaintiff alleges force majeure as a defense to payment of ticket sales fees to defendants, ticket sale processors, in connection with a subsequent agreement for defendants to provide refunds to would-be attendees of Comic Con in Boston, Massachusetts. Ace Universe, Inc. v. GrowTix, LLC and Patron Technologies, LLC 20-cv-2517 may be one of the first of what will likely be a tidal wave of litigation arising out of the coronavirus pandemic and resulting governmental order requiring closures, cancellations and restrictions on communal gatherings and events.
Ace Universe, Inc. is a company that hosts and sponsors immersive experiences for large superhero and comic book fans across the United States. One such event, Ace Comic Con Northeast, was scheduled to be held in Boston, Massachusetts on March 20 – 22, 2020. The event was to include celebrity appearances, photo ops, vendors and more. It was much anticipated and nearly sold out.
Ace contracted with GrowTix to process ticket sales through its software. In return, GrowTix would receive a percentage of sales receipts. GrowTix remitted payments to Ace on a weekly basis as ticket sales were processed.
On March 11, 2020, a state of emergency was declared by order of the Governor of Massachusetts in light of the coronavirus pandemic. The Ace Comic Con Northeast was cancelled. Ace invoked the force majeure provisions of its contract with defendants and instructed GrowTix to refund all ticket sales within 30 days. GrowTix agreed. A detailed plan for providing refunds was developed and agreed to and Ace began to publicize it.
Pursuant to this understanding, and defendants' assurances, Ace transferred $680,000 to GrowTix to begin to fund the refunds. Ace believed that GrowTix was going to make the refunds but, in a letter received on March 16, learned that, not only was GrowTix claiming the $680,000 forwarded by Ace, it was also demanding more money for its own fees. On March 17, 2020, Ace learned that defendants, GrowTix and its parent company, Patron, were attempting to remove $2.3 million from Ace’s bank account without authorization.
No refunds were given and Ace began to accumulate additional damages for chargeback and other fees at the same time as defendants continued to provide event management services to other event hosts across the country who were not issuing refunds.
Ace alleges multiple causes of action including fraud, conversion and promissory estoppel. While contracts carry an expectation of performance, circumstances beyond the control of the parties may occur to frustrate such performance, which is the reason for inclusion of a force majeure clause: to limit damages when the reasonable expectations are met with such agreed upon impediments beyond the reasonable expectation of the parties and the performance of the contract have been frustrated by circumstances beyond the control of the parties. While, as with any contract dispute, the exact language of the force majeure provision will determine the relative rights and obligations of the parties, assertions of force majeure often include acts of war and governmental actions, but have also included have included sickness of a performer preventing performance [Belgium v. Matteo Productions, Inc., 138 A.D.3d 479 (1st Dept. 2016)].
Creative pleading isn’t the same as settled jurisprudence, but in a global event such as the present pandemic, we can anticipate a great deal more creativity.