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Archive for the ‘Commercial Litigation/Directors & Officers’ Category

Statute of Limitations Tolled in California Amid Pandemic

Posted on: August 3rd, 2020

By: Matthew Jones

In response to the COVID-19 pandemic, California’s Governor Gavin Newsom issued a “state of emergency” for the entire State. In response, the California Judicial Council adopted several Emergency Rules to implement during the pandemic. In particular, Rule 9 states that all statute of limitations for civil causes of action are tolled from April 6, 2020 until 90 days after the state of emergency related to COVID-19 is lifted by the Governor. Therefore, if a party’s claim would have expired pursuant to the applicable statute of limitations during this timeframe, such claims are still very much alive. In regard to those claims, there is currently no deadline to file them since the “state of emergency” has yet to be lifted by the Governor. Once lifted, claimants will have six months to file their respective claims.

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Massachusetts Highest Court Rules Benefit of the Bargain Damages Can Include Expectancy Loss in Value of Laboratory for Medical Researcher

Posted on: June 16th, 2020

By: Catherine Scott

It is a long-settled principle of contract law that an individual who seeks to recover  damages under a broken contract will only be allowed to recover a figure sufficient to put that person in the place he or she would have been had the contract been performed. Courts have routinely referred to these types of damages as “benefit of the bargain” or “expectancy” damages. These damages often consist of a party’s out-of-pocket damages, as well as any consequential damages flowing from the breach of contract. However, what happens when the expectancy interest under the contract includes items that cannot be easily quantified, such as loss of reputation, future pay, or, in this instance, the cost of re-building a laboratory for medical research?  

In Hlatky v. Steward Health Care System, LLC, the Supreme Judicial Court ruled that a medical researcher whose hospital-employer had pulled its support of her laboratory, ultimately resulting in its demise, could recover $10 million in expectancy damages to “re-build” the laboratory based on the hospital’s breach of contract and breach of the covenant of good faith and fair dealing. The Court allowed the researcher to do so despite her not having provided any expert testimony as to the value of her laboratory at the time of its demise. Moreover, the researcher could not demonstrate any ownership interest in the laboratory as her laboratory had been fully funded by federal research grants. This fact did not stop the Court from holding the researcher had an expectancy interest in the full value of the laboratory given that it represented the culmination of her life’s work. This ruling was in spite of defendant’s and amicus curiae argument that the researcher could only recover the value of the “expected use” of the laboratory — i.e., her own lost future earnings based on the researcher’s use of the laboratory — but not the laboratory’s full value itself. It is worth noting the researcher established only $200,000 in out-of-pocket damages from the loss of her laboratory and did not pursue damages for loss of future earnings, reputational harm, or emotional distress stemming from the breach of contract. 

Though the Court limited its ruling to these specific circumstances, the Court’s decision has longstanding implications for what would constitute benefit of the bargain damages in other breach of contract actions. The ruling demonstrates that plaintiffs can and will be successful on creative theories of damages in these types of actions. Plaintiffs can recover a significant amount of damages without expert testimony as to value or loss of profit so long as their lay testimony has some basis or foundation in the record. Defense counsel should be vigilant about attacking such theories of damages prior to, during, and after trial, and be careful about preserving significant damages issues for appeal.  

If you have any questions about this ruling or other breach of contract matters, please feel free to contact Catherine Scott at [email protected] or any other member of FMG’s Commercial Litigation group.  

Finding Shelter from the Storm: SBA Issues New Guidance on Safe Harbors for PPP Borrowers

Posted on: May 20th, 2020

By: Anastasia Osbrink

The safe harbor period for businesses that received the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) loans expired on May 18, 2020 after a 4-day automatic extension. That safe harbor provided that businesses that repaid loans by that date would automatically be deemed to have satisfied the “good faith” requirement of the PPP wherein borrowers certified that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” This safe harbor arose after reports of large businesses, such as Shake Shack and the NBA, receiving loans under the program. Under normal circumstances, a business must provide documentation of making unsuccessful attempts to obtain loans from other sources prior to receiving an SBA loan. However, the PPP required self-certifications of good faith and eligibility without requesting separate documentation. The purpose of this was to quickly get an injection of cash into the economy – particularly to small businesses – so that companies could retain and rehire employees. When it came out that large companies were also receiving these loans, a public outcry ensued and the SBA provided additional guidance allowing for this safe harbor period so that large businesses would be encouraged to repay loans without facing any further investigation, audits, or consequences based on the “good faith” certification. Many of these larger businesses may still satisfy the “good faith” requirement, but making quick repayments creates good optics for these companies and eliminates further audits based on this certification.

Now, in a further effort to conserve resources and protect small business’ payroll capacities, the SBA has announced an additional safe harbor. This second safe harbor provides for an automatic assumption of good faith for any borrower that, along with its affiliates, received under $2 million in PPP loans, regardless of whether that loan was repaid by May 18, 2020. This means that audits for good faith will only be conducted for companies that received over $2 million and did not repay that loan by May 18th. The SBA cited three reasons for this additional safe harbor: 1)  borrowers that received under $2 million are more likely to satisfy the “good faith” requirement because they are less likely to have had access to other loan sources; 2) it will help promote economic stability by helping small businesses retain and rehire employees that otherwise may not have the ability to do so; and 3) it will enable the SBA to conserve resources by only investigating and auditing those companies that received bigger loans, which could yield larger returns if successful. It should be noted, though, that neither of these safe harbors apply to other requirements, such as the eligibility certification, or outright false statements or fraud. However, except where there is evidence of actual fraud, it appears that companies that fall into one of the safe harbors are unlikely to be audited.

It also seems that the SBA is less focused on punishment and more focused on recouping loans that did not satisfy the good faith requirement. That is because the SBA additionally stated that if it does determine a company failed to satisfy the good faith requirement after being audited, the company will not face any further action or fines if it repays the loan in full. This though, again, does not apply to determinations of actual fraud.

As the focus shifts to larger companies and the safe harbor for these larger loans expires, the Securities and Exchange Commission (“SEC”) is ramping up its investigations of public companies that received PPP loans. The SEC is seeking information from several of these public companies in order to ascertain whether they satisfied the PPP requirements. As part of this sweeping probe, the SEC is sending out letters to these public companies entitled “In the Matter of Certain Paycheck Protection Program Loan Recipients,” in which it requests additional information and documentation. This again demonstrates the focus of audits and investigations on large companies that received significant loans rather than on small businesses.

If you have questions or would like more information, please contact Anastasia Osbrink at [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Supreme Court to Hear Arguments Remotely, Including TCPA Constitutional Challenge

Posted on: April 16th, 2020

By: Matthew Foree

This week, the United States Supreme Court announced that it would hear oral arguments remotely for the first time in its history.  The Court will hear oral arguments by telephone conference on certain dates in May in a limited number of cases that had previously been postponed.  The cases are to be assigned dates for argument after confirming counsel’s availability.

The Court’s press release provides that “[i]n keeping with public health guidance in response to COVID-19, the Justices and counsel will all participate remotely.”  Interestingly, the Court stated that it “anticipates providing a live audio feed of these arguments to news media” and that “[d]etails will be shared as they become available.”

Among the cases the Court is set to hear in May is Barr v. American Association of Political Consultants, Inc., which concerns a constitutional challenge to the Telephone Consumer Protection Act (“TCPA”).  The Court has just scheduled argument in the Barr case for Wednesday, May 6, 2020.The TCPA generally prohibits calls to a cellular telephone using either an “automatic telephone dialing system” (ATDS) or an “artificial or prerecorded voice,” unless the call is made with the prior express consent of the recipient.  In a 2015 amendment to the TCPA, Congress exempted from this prohibition calls “made solely to collect a debt owed to or guaranteed by the United States.” 

In 2016, the Respondents in Barr initiated a declaratory judgment action against the Federal Communications Commission (“FCC”) and the Attorney General, arguing that the TCPA’s content-based ban on protected speech violated the First Amendment.  They sought declaratory relief and an injunction restraining the Government from enforcing the ban against them.  The case made its way to the U.S. Court of Appeals for the Fourth Circuit, which found a First Amendment violation and determined that the government-debt exception was severable from the rest of the TCPA.    

As we have discussed previously, TCPA litigation often centers around whether calls were made using an ATDS.  The current litigation landscape concerning the interpretation of the definition of ATDS has caused a split in the Circuit Courts and generated significant confusion that continues to this day.  In Barr, Respondents argue that the TCPA’s automated call restriction, not just the government-debt exception, violates the First Amendment.  Accordingly, practitioners in this area are anxious for the ruling on this matter, particularly as it relates to how far the Supreme Court will go to resolve the constitutional issue, which can have a major impact on the statute and TCPA litigation moving forward.  

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Georgia Supreme Court Overrules Precedent on Attorney’s Fees for Counterclaimants

Posted on: April 8th, 2020

By: Jake Carroll

Georgia law permits the award of attorney’s fees to a claimant where the party defending the claim has “acted in bad faith” in making the contract, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense. O.C.G.A. § 13-6-11. The “bad faith” refers to bad faith in the making or performance of the contract, and may exist whether or not there is a bona fide controversy otherwise existing between the parties.  Thus, “bad faith” relates to the making or performance of the contract and not the conduct of the litigation. The terms “stubbornly litigious” and “unnecessary trouble and expense” relate to the conduct of the litigation and may be found to exist where there is a lack of bona fide controversy.

Both the Georgia Supreme Court and Court of Appeals have repeatedly held that “the award of expenses of litigation under O.C.G.A. § 13-6-11 can only be recovered by the plaintiff in an action under the language of the statute; therefore, the defendant and plaintiff-in-counterclaim cannot recover such damages where there is a compulsory counterclaim.”[1]

However, the decision in SRM v. Travelers overrules prior holdings, and allows a counterclaimant to recover attorney’s fees under O.C.G.A. § 13-6-11, regardless of whether the counterclaim is independent of the plaintiffs claim.

In light of the Travelers decision, claimants should evaluate the potential risk of claims for attorney’s fees from their counterclaimants. In commercial and construction contract disputes, the Travelers decision impacts risk for counterclaims of attorney’s fees based on a claimant’s conduct during litigation, as well as bad faith in making or performing the underlying contract.

For Georgia insurers, this ruling does not call into question the status of Georgia’s insurance bad faith statute, O.C.G.A. § 33-4-6, which is the exclusive remedy for and insurer’s refusal to pay a “covered loss.” Although the claims at issue in SRM were against an insurance company, they involved the calculation of premium as opposed to a coverage issue within the purview of Section 33-4-6. Be sure to follow FMG’s Insurance Coverage and Bad Faith BlogLine for analysis of current state-wide and national trends in insurance litigation.

If you have questions regarding this decision, or any other construction or commercial contract questions, Jake Carroll practices construction and commercial law as a member of Freeman Mathis & Gary’s Construction Law, Commercial Litigation, and Tort and Catastrophic Loss practice groups. Mr. Carroll represents business and commercial entities in a wide range of disputes and corporate matters involving breach of contract and warranty claims, business torts, and products liability claims. He is available at [email protected].


[1] See Byers v. McGuire Properties, Inc., 679 S.E.2d 1 (Ga. 2009); Graybill v. Attaway Constr. & Assocs., 802 S.E.2d 91 (Ga. Ct. App. 2017) (attorney’s fees not permitted on compulsory counterclaim);Singh v. Sterling United, Inc., 756 S.E.2d 728 (Ga. Ct. App. 2014); Sanders v. Brown, 571 S.E.2d 532 (Ga. Ct. App. 2002).