FORT LAUDERDALE BUSINESS LITIGATION: COVID-19 CONTRACT LITIGATION

The unprecedented COVID-19 pandemic affected many Florida business’ ability to comply with their contractual obligations. Government quarantine measures as well as changes in economic conditions and consumer demand continue to influence contract compliance. Mavrick law released two articles at the outset of the pandemic concerning contractual disputes and COVID-19. The first addressed the contractual defense of force majeure clauses and the second discussed common law defenses of “frustration of purpose” and impossibility. At that time, there had not been any cases concerning COVID-19 complications in contract law. Since then, however, several orders have been entered applying the defenses of force majeure and frustration of purpose. Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

“For a breach of contract claim, Florida law requires the plaintiff to plead and establish: (1) the existence of a contract; (2) a material breach of that contract; and (3) damages resulting from the breach.” Vega v. T–Mobile USA, Inc., 564 F.3d 1256 (11th Cir. 2009). In business litigation, the terms of a contract may sometimes be implied or derived from advertisements and publications. Salerno v. Florida S. Coll., 8:20-CV-1494-30SPF, 2020 WL 5583522 (M.D. Fla. Sept. 16, 2020) (“It is also generally accepted that the terms and conditions of that contractual relationship may include the publications of the private university”).

Contract law encourages contracting parties to allocate for themselves the risk of certain events which cannot feasibly be mitigated (such as a natural disaster). This is more easily done when categories of risk are predictable. For example, leases often describe whether the landlord or the tenant will bear the costs when a natural disaster causes real property to become uninhabitable. While the COVID-19 pandemic was not entirely unpredictable, it has been more than a hundred years since the United States has experienced a pandemic with a similar scale and scope. Accordingly, few, if any, contracting parties contemplate how such a risk would be apportioned in their pre-COVID-19 contracts.

“Under the doctrine of impossibility of performance or frustration of purpose, a party is discharged from performing a contractual obligation which is impossible to perform and the party neither assumed the risk of impossibility nor could have acted to prevent the event rendering the performance impossible.” Marathon Sunsets, Inc. v. Coldiron, 189 So. 3d 235 (Fla. 3d DCA 2016). Even when the doctrine of impossibility of performance is applied, in business litigation the question remains as to which party should bear the cost of nonperformance when both parties are excused from performing under the contract. The typical remedy for such circumstance is to put back the parties to their original position, but that is not always possible. Rosado v. Barry Univ. Inc., 1:20-CV-21813-JEM, 2020 WL 6438684 (S.D. Fla. Oct. 30, 2020)(“Indeed, in the absence of specific contractual provisions, courts often attempt to return the parties to their precontractual positions, insofar as possible, when nonperformance is excused”). For contracts which were disrupted by COVID-19, there is often no clear party which should bear the burden of the risk. Because the pandemic was not predictable or mitigatable, and the harm does not arise from either parties’ fault, there is no clear party to allocate the risk to.

There have been several class action lawsuits concerning university students’ claims against their universities for failing to provide on-campus education and amenities which were part of the tuition. These cases include Salerno v. Florida S. Coll., 8:20-CV-1494-30SPF, 2020 WL 5583522 (M.D. Fla. Sept. 16, 2020), Rosado v. Barry Univ. Inc., 1:20-CV-21813-JEM, 2020 WL 6438684 (S.D. Fla. Oct. 30, 2020), and Gibson v. Lynn Univ., Inc., 20-CIV-81173-RAR, 2020 WL 7024463 (S.D. Fla. Nov. 29, 2020). Each of these three cases involve a federal court determining whether a complaint should be dismissed for failing to state a claim when universities failed to provide students with the amenities. While these cases concern education disputes, the precedent established in these cases also applies to business litigation.

Each of these three cases determined that students may proceed with their breach of contract claims. The courts found that the defendant universities’ promotional material can create an implied contractual requirement that the universities’ services be provided in person. E.g. Gibson v. Lynn Univ., Inc., 20-CIV-81173-RAR, 2020 WL 7024463 (S.D. Fla. Nov. 29, 2020) (“At this early stage of the case—given that Florida law recognizes that the university/student contract may be implied in the university’s publications—these factual allegations are sufficient to plead the existence of a valid contract for in-person education”). Furthermore, the defendant universities would have to litigate whether the impossibility defense applied and the proper remedy that should be applied if such a defense applied.

The COVID-19 university cases reveal that plaintiffs may have claims of breach of contract concerning failures caused by COVID-19. Peter Mavrick is a Fort Lauderdale business litigation attorney who also practices business litigation in Palm Beach, Boca Raton, and Miami-Dade. This article does not serve as a substitute for legal advice tailored to a particular situation.