Every crisis is unique, but they all share common threads. Here, we share some of the lessons we’ve learned over decades of helping clients navigate numerous crisis-related disputes.
For a brief, additional page of information on each topic, click on the link at the end of each paragraph.
Assess and act now. The range of possible solutions is almost always greatest when you take stock and act early. Assemble an internal team to assess the situation and identify existing and potential problems. Engage outside advisors—experts, attorneys, PR professionals, etc.—as needed. If you have existing or potential adversaries, assess early whether to explore possible negotiated resolutions. Remember that you may have to disclose your internal and external communications if your business issues morph into formal disputes. See Navigating a Crisis: Lessons From Running Our Own Businesses Part 1 and Part 2.
Assume that any business disputes will be governed by standard commercial and legal principles that apply even in a crisis. Since the first consideration in any contract dispute is the parties’ intent, consider carefully what, if anything, was intended in light of the current situation. If your dispute arises over something beyond the parties’ contemplation, black-letter legal principles exist to deal with that. The legal principles are not complex. The real key will be for your legal team to work closely with your business team to understand your specific commercial facts and objectives, and to tailor your legal strategy to your business needs. See Navigating a Crisis: Contract Disruptions and Delays—7 Key Steps.
However, even the clearest contract provisions might be difficult to enforce in a crisis situation. In a crisis, courts, legislators, or regulators may try to alter your contract rights and obligations. Be prepared. Know the playing field. Know the limits on the government’s power and on your counterparty’s leverage. See Navigating a Crisis: Bankruptcy and Other Governmental Interference with Contracts.
In the face of sudden market shifts or disruptions, valuation issues can be even more complex than usual. Business interruption disputes, collateral disputes, IP disputes, post M&A disputes, and other similar matters can raise complex liability issues, but do not forget about valuation. In a crisis, where markets are freezing, and the economy has suddenly shifted, valuation becomes harder. Jump on your potential valuation issues early. Get your experts in place. Hire lawyers with economic sense and experience working with valuation issues and experts. See Navigating a Crisis: Special Valuation Issues.
Crisis-related disputes often arise from delegated authority. If you gave someone authority to bind you to business, now is the time to check/audit their compliance with your guidelines for exercising that authority. If you have acted under delegated authority, make sure your ducks are in a row so you can defend challenges to your exercise of that discretion. See Navigating a Crisis: Dealing with Delegated Authority.
Next Article in This Series —
Click here to view our full list of COVID-19 Information and Resources.
Stay informed of Chaffetz Lindsey’s updates, new articles, and events invitations by subscribing to our mailing list.