Amid the COVID-19 pandemic, The Rose Group has analyzed the current issues facing our clients and can help find solutions. Our team can help you understand the government programs available, the effect of state and county orders, insurance availability and other legal remedies. We encourage you to contact us with any questions or concerns. Please contact one of the attorneys below.
Business Crisis Management Team
The year 2020 has already told us that if there is one constant in life, it is change. That definitely includes business and finances. Let our Business Crisis Management Team help you navigate these tumultuous times.
The Families First Coronavirus Response Act (FFCRA or CARES Act) requires certain employers to provide employees with paid sick leave or expanded family and medical leave, for specified reasons related to COVID-19. The Wage and Hour Division of the Department of Labor will enforce the new law which became effective April 1, 2020. The CARES Act applies not only to employees who are experiencing COVID-19 symptoms, but also to those caring for someone who is suffering from symptoms, and, most expansively, those who are taking care of children whose school or child care provider is closed for reasons related to COVID-19. There are also changes to Family and Medical leave allowing for additional coverage. The CARES Act greatly expands the number of employers who are subject to the Act’s requirements. Specifically, the 50 employee threshold for State and Federal FMLA does not apply to the CARES Act. There are exemptions, but those exemptions must be applied for and approved. The Rose Group can offer advice on complying with the new law or can assist in applying for an exemption if that is in the client’s best interests.
Impact of COVID-19 on Commercial Real Estate Transactions
The current spread of COVID-19 may cause unanticipated delays or render it impossible or commercially unreasonable for a seller or purchaser in a commercial real estate transaction to perform one or more obligations under their purchase and sale agreement. These delays may include restrictions upon parties, lenders, service providers or consultants as a result of governmental “safer at home” or “shelter in place” orders, the impact of a COVID-19 diagnosis on a party, or other logistical difficulties affecting performance. As a result, it is important to consider including a provision relating to delays caused by COVID-19 in your purchase and sale agreement, so as to avoid a “What happens now?” scenario. Such a provision could address such COVID-19 related delays by providing that under certain specified conditions relating to COVID-19 resulting in such delays, either party would be able to extend certain unexpired deadlines.
While both purchasers and sellers could benefit from the elimination of uncertainty flowing from a COVID-19 related delay, each party would have different goals for the scope and applicability of such a provision. For example, sellers may want to limit the scope of the conditions that cause delay to only parties directly involved in the transaction, as well as the type of deadlines that are subject to the extension so as to not unnecessarily delay closing or allow a purchaser additional opportunities to pull out of the deal. As a purchaser, you may want to broaden the scope and include the inability or unwillingness of a third-party (such as a lender) to provide necessary services as a condition causing a delay or the inability of the purchaser to close on a transaction. Until such time as COVID-19 becomes less impactful on everyday life, parties to real estate transaction should plan for the possibility of a multitude of impacts on their transactions. For further inquiries into how COVID-19 may impact your real estate transaction and how to structure a purchase and sale agreement to best serve your interests, please contact Christina Ruud or Mitch Kiffmeyer at The Rose Group.
Paycheck Protection Program; Additional Funding & Forgiveness
Unfortunately, many businesses were unable to obtain loans through the initial wave of Paycheck Protection Program (PPP) funds. Fortunately, the federal government is inching closer to making an additional $310 billion available through the PPP. While there is no clear procedure that will guarantee your business PPP funding, businesses should contact other lenders, especially smaller banks, if their primary lender has not been able to process their PPP application. Additionally, if business owners are not certain whether their PPP application has been approved, they should request their lender provide the applicable SBA Authorization Number which confirms the PPP application has been approved.
On the other hand, if your PPP application has been approved, then a main concern is to ensure the loan is fully forgiven. The SBA provided the PPP Interim Final Rule regarding how the PPP will be governed, but as the title of the regulations suggests, these rules are not final. These interim rules will be closely reviewed and shortly after May 15, 2020, the SBA will likely make rule revisions it deems appropriate. However, at the very least business owners should be aware that at least 75% of the PPP proceeds must be used on payroll costs to ensure forgiveness. The remaining 25% (or less) may be used on non-payroll costs such as mortgage interest, rent and utilities. Unfortunately, there is little written guidance on the best steps to take in documenting the use of PPP funds to ensure forgiveness. Therefore, business owners should discuss with their PPP lender how to handle this documentation because it is likely that each lender will control the review of forgiveness. Finally, while it is possible to open a separate account with your lender for the exclusive use of PPP proceeds, this is not a requirement to ensure forgiveness and could be an unnecessary hassle for many businesses.
Please contact The Rose Group for further information for business owners still searching for PPP funding or guidance to those that have already received PPP proceeds.
Safer at Home Order
On March 24, 2020, the Wisconsin Department of Health Services, at the designation of Governor Tony Evers, enacted Emergency Order No. 12 Safer at Home Order. The purpose of the Order was to enact various restrictions and social distancing practices to reduce further spread of COVID-19 throughout the state. While the restrictions were originally in place until April 24, 2020, Emergency Order No. 28 extended that timeframe through May 26, 2020. Other states and municipalities have enacted similar orders.
Despite the Order’s requirements for individuals to stay at home and for businesses to cease operations to the extent possible, many Wisconsin businesses are excepted as “Essential Businesses and Operations” as defined within the Order. These businesses can continue operations during this time. However, many of these businesses are uncertain whether they are exempted from the Order and should be aware of other requirements placed on Essential Businesses that continue to work. Businesses may also have questions regarding Emergency Order No. 31 “Badger Bounce Back” which adopts a phased approach to re-opening economic and social activity when certain public health goals are achieved.
Our attorneys have already helped many clients by providing tailored analysis of the Order for their business operations, drafting letters designating all or certain employees as essential employees needing to continue to work and travel despite the Order, drafting language for businesses to post on their websites regarding decisions to remain in operation during this time, and comparing other state and municipality orders for businesses whose operations go beyond the state borders. Please contact our office with any questions regarding how the Safer at Home or Badger Bounce Back Orders impact you or your business.
The quick onset of the COVID-19 pandemic has impacted the ability of many businesses to maintain operations and fulfill existing contractual obligations. In addition to other remedies, businesses are looking to the force majeure provisions in their contracts for relief.
Force majeure provisions are contract specific and while their content can differ, the general purpose of the provision is to set forth whether contract performance may be excused when unforeseen circumstances occur. While some contracts are silent on force majeure, most commercial contracts include some form of force majeure provision. Force majeure provisions typically fall into one of the following categories:
- Those that include a specific list of events that constitute a force majeure event.
- Those that include a broad statement of “any events out of the parties’ control” or similar vague language.
- Those that include a specific list of events with a broad catchall at the end.
If the force majeure provision includes a specific list, the question becomes whether pandemic is included in that list or if there is another broader category that triggers the provision. For example, if the provision includes “the act of a governmental authority”, businesses may be able to invoke the force majeure provision if the nonperformance is the result of a governmental order.
Determining whether COVID-19 triggers the force majeure provision in a contract is the first step in the analysis, but there are other important factors. Is there a notice requirement in the provision in which the failure to provide timely notice prohibits a party from obtaining the benefit of the clause? If there is a notice provision, in what form should the notice be given? Are there any strategic reasons why a party should consider delaying notice (if within the terms of the agreement or other applicable law)?
Common Law Relief
Not all contracts contain force majeure provisions or other terms that excuse nonperformance. Where a contract does not contain a force majeure provision, or that provision does not appear to address or encompass the current health crisis and governmental shutdown, parties may turn to two primary common law defenses to relieve nonperformance: (1) impossibility and (2) frustration of purpose.
Under the doctrine of impossibility, a party is relieved from its performance obligations because the object of the contract is no longer possible to perform. As relevant to COVID-19, the general rule of contract performance is that a contract cannot be performed where performance would amount to a violation of a law or governmental order. With estimates indicating that over half of the United States population is presently subject to some form of governmental “stay-at-home” order, the issue of whether performance of a contract may violate some portion of law poses an increasingly valid potential defense. 
However, whether performance is truly impossible due to a particular governmental order presents a factual question that must be resolved on a case-by-case basis. Further, where impossibility created by law is temporary, a party may only be excused from performance for the duration of the impossibility. 
Relatedly, nonperformance may also be excused under the theory of frustration of purpose. This doctrine provides relief where there is “a change in circumstances [that] makes one party’s performance virtually worthless to the other, frustrating his purpose in making the contract.” Although closely related to impossibility of performance, frustration of purpose focuses on the change in circumstances that eliminates the need or desirability of the contract at issue regardless of whether performance may technically be impossible.
Specifically, the party seeking relief under the doctrine of frustration of purpose must establish each of the following: (1) the party’s principal purpose in making the contract is frustrated; (2) without that party’s fault; and (3) by the occurrence of an event, the non-occurrence of which was a basic assumption on which the contract was made. Thus, the central inquiry is whether some unforeseen circumstance so frustrates the purpose of the agreement that it can no longer be said to perform its function or provide value.
Companies should be mindful of their contract provisions and the viability of common law defenses before acting to enforce a right to performance or choosing not to perform under a contract. The team at The Rose Group is here to assist with the review and analysis of force majeure provisions in your business contracts. For questions, please contact firstname.lastname@example.org or email@example.com.
 Wisconsin Elec. Power Co. v. Union Pac. R. Co., 557 F.3d 504, 506 (7th Cir. 2009)
 See e.g. M. A. Felman Co. v. WJOL, Inc., 104 Ill. App. 2d 66, 243 N.E.2d 33 (3d Dist. 1968).
 See, Evan Gerstmann, FORBES, Are ‘Stay At Home’ Orders Constitutional?, https://www.forbes.com/sites/evangerstmann/2020/03/25/are-stay-at-home-orders-constitutional/#589e5a65104e (Mar. 25, 2020).
 See Stanley Walter Septic Tank Cleaning LLC v. Mack Trucks, Inc., No. 12-C-0317, 2014 WL 1271873, at *11 (E.D. Wis. Mar. 27, 2014)
 See e.g. Colonial Trust Co. v. Bodek, 108 N.J. Eq. 584, 155 A. 799 (Ch. 1931).
 See RESTATEMENT (SECOND) OF CONTRACTS § 265 cmt. a.
 In re Estate of Sheppard, 2010 WI App 105, ¶ 13, 328 Wis. 2d 533, 540, 789 N.W.2d 616, 619.