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Utah Business

COVID-19 has changed some things about the typical corporate suing process. Here's what you need to know to keep your business protected.

Suing each other in a post-COVID world

Our legal system is far from perfect, but in ordinary times I suspect most of us would take it over the alternatives.  For one, it gives each of us these nifty rights like free speech and due process that allow the little guy to stand up to the largest and most powerful institutions.  You won’t find that in most parts of the world (or in Davis County traffic court my teenagers would argue).  And thank goodness our lawyers don’t wear wigs in the courtroom.   Classic American entertainment like The Good Wife, Law and Order, and John Grisham thrillers would just not be the same.  

But our system of law is being stretched by COVID-19.  

An important trend in recent years has been the way our entrepreneurial legal system puts business in the crosshairs.  Litigation that keeps corporate managers on their toes definitely has its role, but as jury awards grow exponentially in size, and theories of liability broaden, the potential for company-killing litigation increases, along with the potential to take away the jobs and commercial activity they generate.  The COVID-19 crisis is putting this trend on steroids.  

Here’s a quick example. Claims against restaurants and retailers for not following safety protocols are well reported.  But now some retailers are facing age and disability discrimination cases for requiring customers to wear masks in their stores.  For a plaintiffs’ lawyer, it’s heads I win, tails you lose.

Another interesting one: a proposed class action was recently filed against the College Board, which is the administrator of AP exams, for glitches in its remote test taking software and procedures it undertook in response to COVID.  The claim includes a request for damages of $500 million.  Those AP credits are valuable!

Students are also represented in a large number of “refund suits” being brought against universities due to the switch to online classes.  This category of litigation also involves suits against airlines, resorts, the MLB, and most recently against Weight Watchers for making changes to their services in response to COVID.  McDonalds is always too big to be ignored.  One of the more creative, recent theories involves employees of McDonalds and their family members suing the restaurant for creating a “public nuisance” owing to the alleged unsafe environment of some of its restaurants in the Chicago area.

To be fair, businesses are doing their fair share of suing as well.  Dozens (maybe hundreds) of claims at this point have been brought against insurance companies by companies seeking lost profits and other compensation (often including punitive damages) for the fact that they were shut down during the crisis.  Theories range from virus contamination to government action to fraud by insurance companies in not disclosing the fact that their policies in fact exclude coverage for viruses.  

While I find some of these cases fascinating in their creativity, to be clear I am not criticizing any of them specifically.  One thing about the law is that individual facts and circumstances really matter, and it’s wrong to pre-judge what can be months of fact-finding and analysis in a fulsome trial process.  But as a policy concern, it’s not hard to worry about the cumulative effect these kinds of cases will have on our hopes for economic recovery.  Litigation is not just a distraction for business, it changes the way companies operate, makes them more cautious about expanding and influences where they invest capital.  These issues are immensely important to the millions of Americans out of work and fearful for their economic futures.

So what should be done?

Utah looked to be ahead of the game by adopting SB3007 earlier this month, providing a higher degree of protection for businesses and property owners for claims related to the COVID-19 virus.  This law is being tested in a recently filed Utah County case, Flores v. Built Brands LLC.  The plaintiff, an employee, alleges that the nutritional supplements company didn’t do enough to sanitize and provide proper PPE.  We’ll see where it goes, but if litigated the case may put some real world definition to the new standards in our state.  

At the federal level, Senate Majority Leader Mitch McConnell announced earlier this month that providing additional protection for businesses from COVID-related claims by customers and employees would be a “red line” for the GOP in negotiating further stimulus packages.  

Yes, this is tort reform, and yes, politically tort reform has in the modern era been virtually impossible to get done.  But this time may be different because the need for economic recovery has raised the stakes immensely, and simply creating space for business to operate may have more value than trillions in stimulus.

Troy Keller is an attorney at the international law firm Dorsey & Whitney in its Salt Lake City office. He has a deep experience in M&A, corporate governance and government relations.