By Chang Se-moon
Rightly or wrongly, numerous lawsuits will be filed in many countries affected severely by COVID-19, once the health issues from the virus are under control.
In principle, force majeure, a popular term in major commercial contracts, should keep many lawsuits from moving forward. Force majeure refers to a natural and unavoidable catastrophe that interrupts the expected course of events, or prevents a party from completing a contractual obligation. Some may call it an act of God that no ordinary person can foresee and thus is not responsible for the unintended outcome.
Reality can be complicated.
Consider a patient with flu symptoms. Medical personnel at a hospital, already overflowing with COVID-19 patients diagnose the patient as having the flu and send the patient home who later dies there. Surviving family members may file a wrongful death lawsuit against the hospital and the medical personnel who did their best under the given circumstances.
Consider exporters of a popular product under contract with buyers in other countries. Either because of a breakdown in the supply chain or because of a hectic schedule ― all caused by COVID-19 ― products were not shipped on time. Potential buyers may claim that the delay led to a loss of millions of dollars in profits. The buyers then file a negligence lawsuit against the exporters.
Consider also that a potential investor asked the financial adviser to sell shares one day before the virus led to the collapse of the stock market. Shares are sold but at a significantly lower price than one the investor expected. The investor files a lawsuit against both the financial adviser and the firm for breach of fiduciary duties.
Life in our money-driven world is not meant to be simple. Even if both sides agree that force majeure should be a reasonable guide in many potential lawsuits arising from the virus, human ingenuity will create many instances where the other side appears to have made an avoidable error that goes beyond force majeure and led to financial losses.
Possibilities of post COVID-19 lawsuits are endless.
Manufacturers against suppliers of intermediate goods for loss of profit; passengers against cruise ship operators for loss of time and possibly loss of income; employees against employers for wrongful termination of employment; churchgoers against church leaders for the wrongful death of family members; property owners against tenants for unpaid rents; students against schools for refund of tuition; investors against investment management firms for untimely advice in fund management; victims against insurance companies for refusing to compensate; and possibly some countries against China for not limiting the spread of the virus.
When we have a pandemic such as COVID-19, virtually everybody loses with the possible exception of a few companies in, for example, face mask manufacture, vaccine research, and online order firms.
Besides, not everybody loses an equal amount. Many small businesses may not survive the results of the virus spread. Their owners may suffer not only financial losses but mental depression as well.
To minimize the loss to society and the compensation as fair as humanely possible, I would suggest the government in each country affected by the virus establish a Civic Mediation Board.
Members of the board should all be volunteers with impeccable reputations. The board may charge a nominal fee to discourage frivolous complaints. The board hears the complaints and makes suggestions for resolution.
Mediation is different from arbitration. Parties who choose mediation are not required to accept the recommendation of the Mediation Board, whereas parties who choose arbitration are required to accept its findings.
In other words, parties who participate in mediation can file a lawsuit even after the ruling by the Mediation Board. Practically speaking, however, the party who is not happy with the ruling by the board and files a lawsuit will have difficulty winning the lawsuit. The potential expenses of the plaintiff that can follow the litigation loss may be enough deterrent to filing a lawsuit after the ruling.
Life after COVID-19 will not be smooth and for many, it will be filled with long-term disruptions. Some who lived paycheck to paycheck will now have to resort to government welfare, if available.
Small businesses that barely survived before the virus attack now find themselves unable to pay the rent, unless property owners act reasonably and agree to compromise. Others who are scheduled to retire may now have no choice but to accept a significantly reduced amount in their retirement benefits. The list is endless.
Hopefully, those who have better resources will make concessions to those who are not so fortunate. The suggested Civic Mediation Board will go a long way to settle differing claims in an amicable way, without resorting to lawsuits in which one of the two parties, if not both, will lose.
Chang Se-moon (changsemoon@yahoo.com) is the director of the Gulf Coast Center for Impact Studies.
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In principle, force majeure, a popular term in major commercial contracts, should keep many lawsuits from moving forward. Force majeure refers to a natural and unavoidable catastrophe that interrupts the expected course of events, or prevents a party from completing a contractual obligation. Some may call it an act of God that no ordinary person can foresee and thus is not responsible for the unintended outcome.
Reality can be complicated.
Consider a patient with flu symptoms. Medical personnel at a hospital, already overflowing with COVID-19 patients diagnose the patient as having the flu and send the patient home who later dies there. Surviving family members may file a wrongful death lawsuit against the hospital and the medical personnel who did their best under the given circumstances.
Consider exporters of a popular product under contract with buyers in other countries. Either because of a breakdown in the supply chain or because of a hectic schedule ― all caused by COVID-19 ― products were not shipped on time. Potential buyers may claim that the delay led to a loss of millions of dollars in profits. The buyers then file a negligence lawsuit against the exporters.
Consider also that a potential investor asked the financial adviser to sell shares one day before the virus led to the collapse of the stock market. Shares are sold but at a significantly lower price than one the investor expected. The investor files a lawsuit against both the financial adviser and the firm for breach of fiduciary duties.
Life in our money-driven world is not meant to be simple. Even if both sides agree that force majeure should be a reasonable guide in many potential lawsuits arising from the virus, human ingenuity will create many instances where the other side appears to have made an avoidable error that goes beyond force majeure and led to financial losses.
Possibilities of post COVID-19 lawsuits are endless.
Manufacturers against suppliers of intermediate goods for loss of profit; passengers against cruise ship operators for loss of time and possibly loss of income; employees against employers for wrongful termination of employment; churchgoers against church leaders for the wrongful death of family members; property owners against tenants for unpaid rents; students against schools for refund of tuition; investors against investment management firms for untimely advice in fund management; victims against insurance companies for refusing to compensate; and possibly some countries against China for not limiting the spread of the virus.
When we have a pandemic such as COVID-19, virtually everybody loses with the possible exception of a few companies in, for example, face mask manufacture, vaccine research, and online order firms.
Besides, not everybody loses an equal amount. Many small businesses may not survive the results of the virus spread. Their owners may suffer not only financial losses but mental depression as well.
To minimize the loss to society and the compensation as fair as humanely possible, I would suggest the government in each country affected by the virus establish a Civic Mediation Board.
Members of the board should all be volunteers with impeccable reputations. The board may charge a nominal fee to discourage frivolous complaints. The board hears the complaints and makes suggestions for resolution.
Mediation is different from arbitration. Parties who choose mediation are not required to accept the recommendation of the Mediation Board, whereas parties who choose arbitration are required to accept its findings.
In other words, parties who participate in mediation can file a lawsuit even after the ruling by the Mediation Board. Practically speaking, however, the party who is not happy with the ruling by the board and files a lawsuit will have difficulty winning the lawsuit. The potential expenses of the plaintiff that can follow the litigation loss may be enough deterrent to filing a lawsuit after the ruling.
Life after COVID-19 will not be smooth and for many, it will be filled with long-term disruptions. Some who lived paycheck to paycheck will now have to resort to government welfare, if available.
Small businesses that barely survived before the virus attack now find themselves unable to pay the rent, unless property owners act reasonably and agree to compromise. Others who are scheduled to retire may now have no choice but to accept a significantly reduced amount in their retirement benefits. The list is endless.
Hopefully, those who have better resources will make concessions to those who are not so fortunate. The suggested Civic Mediation Board will go a long way to settle differing claims in an amicable way, without resorting to lawsuits in which one of the two parties, if not both, will lose.
Chang Se-moon (changsemoon@yahoo.com) is the director of the Gulf Coast Center for Impact Studies.
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