Tag: COVID-19

Physicians Face Regulatory Exposure for Prescribing COVID-19 Drugs Cited by President Trump

Physicians and medical professionals throughout the world are facing and attempting to treat one of the most serious and deadly viruses that has affected the world in our lifetime. Medical professionals are on the front lines and in a position, despite their best efforts to protect themselves, to contract the disease. Medical professionals do not only fear for their own lives but also for the lives of their family members if they unintentionally bring this disease home.

In light of safety concerns for their family members, over the past few weeks, there have been reports claiming physicians throughout Ohio have prescribed chloroquine and hydroxychloroquine, frequently cited by President Donald Trump, to family members and friends. In some reported instances, prescriptions were issued even when such individuals did not exhibit signs or symptoms of the coronavirus.

In order to preserve the stockpile of medications for patients, on March 22, 2020, the Ohio Board of Pharmacy issued an emergency rule (OAC 4729-5-30.2) that prohibits a pharmacist from filling prescriptions for chloroquine or hydroxychloroquine without a valid COVID-19 diagnosis and positive test result.

On March 30, 2020, the Ohio Attorney General’s Office issued the following statement, which highlighted the Pharmacy Board’s new emergency rule and advised physicians to self-report to the State Medical Board of Ohio if they prescribed these medications improperly:

“It has come to my attention that physicians may be abusing their privilege to prescribe medications by writing prescriptions for chloroquine and hydroxychloroquine for themselves, their friends and their families without any legitimate medical need for the medication. As Attorney General, I am very concerned with these reports and will work vigorously with Ohio’s regulatory boards and agencies to address any illegal or prohibited conduct. I encourage anyone who has written a prescription of this type improperly to self-report to their respective regulatory authority.”

The State Medical Board of Ohio is also on record stating that it takes allegations of inappropriate prescribing very seriously, and that it will be actively investigating complaints as they come in and working with the Ohio Attorney General on any necessary enforcement actions for bad prescribing.[i]

In addition to state regulators, the U.S. Attorney’s Office for the Northern and Southern Districts of Ohio have set up a COVID-19 Task Force. One of its responsibilities is to investigate and criminally prosecute physicians who have egregiously prescribed chloroquine and hydroxychloroquine to themselves, family members, or friends without a legitimate medical purpose. The Task Force is comprised of representatives of the United States Attorney’s Office, Ohio Attorney General’s Office, State Medical Board, and the Pharmacy Board.[ii]

Physicians who recently prescribed chloroquine and hydroxychloroquine and who are considering whether they should self-report to the Medical Board should first contact experienced legal counsel to determine the implications of a possible self-report, including the potentiality of license discipline and/or criminal charges.

[i] See:  https://clt945532.bmeurl.co/A27E486

[ii] See: https://www.dispatch.com/news/20200324/feds-yost-will-prosecute-doctors-who-abuse-power-with-personal-coronavirus-prescriptions

© 2020 Dinsmore & Shohl LLP. All rights reserved.

For more COVID-19 developments, see the dedicated National Law Review Coronavirus News page.

California Judicial Council Adopts Emergency Rules Affecting Unlawful Detainer Actions and More

The Judicial Council of California adopted 11 temporary emergency rules in response to the COVID-19 pandemic affecting eviction proceedings, judicial foreclosures, and statutes of limitations for civil causes of actions, among other things. The rules, adopted April 6, 2020, are effective immediately and apply to all California state courts.

Rules of particular interest:

  •  Emergency Rule 1: Unlawful Detainers
    • Prohibits courts from issuing a summons on an unlawful detainer complaint until 90 days after the Governor declares the state of emergency related to the COVID-19 pandemic is lifted. This rule applies to all new unlawful detainer actions – whether or not the eviction action is related to nonpayment of rent for COVID-19 related issues. The only exception is for an unlawful detainer action necessary to protect public health and safety.
  • Emergency Rule 2: Judicial Foreclosures
    • Stays any action for judicial foreclosure and tolls any statute of limitations for filing such action until 90 days after the state of emergency is lifted.
  • Emergency Rule 9: Tolling of Statutes of Limitations for Civil Causes of Action
    • Tolls statutes of limitations for civil causes of action from April 6, 2020, until 90 days after the Governor declares the state of emergency is lifted.
  • Emergency Rule 10: Extension of 5-Year Rule for Civil Actions
    • Extends the five-year deadline to bring a civil action to trial to five years and six months for all actions filed on or before April 6, 2020.
  • Emergency Rule 11: Depositions through Remote Electronic Means
    • Allows a deponent to not be present with the deposition officer at the time of deposition.

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP

COVID-19 and Cybersecurity: Combating “Zoombombing” and Securing Your Remote Working Videoconferences

As COVID-19 has prompted a massive shift by organizations to the implementation and use of remote working solutions for their employees, there has been an unfortunate, but not surprising, corresponding rise in malicious actors seeking to exploit remote working solutions.

Over the past few weeks, the most notable and prevalent “digital hijacking” has occurred on the Zoom teleconferencing application. Since the start of the COVID-19 pandemic, there has been an explosion in the number of individuals using the Zoom application. Prior to the pandemic, Zoom averaged approximately 10 million users per day. However, Zoom now estimates that approximately 200 million users per day utilize its videoconferencing application. These users not only include remote workers, but also many school children and teachers who utilize the Zoom application for remote learning.

The phenomenon commonly known as “Zoombombing” involves the infiltration of Zoom videoconferences by hackers. Once they have infiltrated a videoconference, hackers have undertaken a variety of malicious acts including, among other things, posting hate speech, stealing personal identifying information, and posting pornography or other offensive or inappropriate content to the other participants in the videoconference. Typically, hackers look to exploit Zoom conference links that are posted publicly and/or open to the public without the need for a password or access key. In response to the increase in Zoombombing attacks, some governments and organizations have restricted or prohibited the use of the Zoom application by their employees. Recognizing the threat that hackers pose to their platform, Zoom recently added new default security features and recommended that users employ additional security safeguards.

Of course, it is not only Zoom that has been targeted by malicious cyber actors. Similar attacks have occurred on numerous other commonly use videoconferencing platforms. Attacks on these other platforms exploit similar flaws or security vulnerabilities that are seen in Zoombombing attacks.

Given the rise of attacks on videoconference applications during the COVID-19 pandemic, the FBI recently issued a warning discussing Zoombombing and other similar attacks aimed at remote working employees and students. The FBI advised that videoconference application users take the following steps:

  • Do not make meetings public and, if the option is available, utilize passwords for access to meetings;
  • Do not share links for meetings publicly;
  • Only allow meeting hosts to have the option to share their screens with other participants;
  • Ensure that you are using the most recent version of the application; and
  • Ensure that your organization’s remote working policies address requirements for videoconferencing security.

Other important security tips include:

  • Ensure that your teleconferencing sessions have active password protections in place;
  • Keep password protection on by default to prevent unauthorized users from joining or hijacking your sessions; and
  • Use a unique, one-time ID number for large or public teleconferencing calls.

The COVID-19 pandemic has made remote working a reality for many in a world handcuffed by social distancing. It is more important now than ever to understand the power, and the corresponding dangers, these new remote connection technologies hold in order to ensure that you maintain the safety and security of your organization’s data and information.

© 2020 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.

For more work from home considerations among the COVID-19 pandemic, see the National Law Review Coronavirus News page.

CARES Act Brings Changes to Federal Substance Use Disorder Privacy Law

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted March 27, 2020, rewrote significant portions of 42 U.S.C. § 290dd-2, the federal statute governing the confidentiality of substance use disorder (SUD) records that is more commonly known by its implementing regulations at 42 C.F.R. Part 2 (Part 2). Among other changes, the CARES Act revises the permissible uses and disclosures of SUD records to more closely align with the HIPAA Privacy Rule, 45 C.F.R. § 164.500, et seq., when a Part 2 program obtains the patient’s prior written consent.

Historically, Part 2 programs have been restricted in their ability to share SUD records by the Part 2 regulations, which require written patient consent for each disclosure of SUD records and prohibit re-disclosure of such SUD records except in limited circumstances. The CARES Act directs the Secretary of the U.S. Department of Health and Human Services (HHS), in consultation with appropriate federal agencies (which may include the Substance Abuse and Mental Health Services Administration (SAMHSA)) to revise the Part 2 regulations as necessary to implement and enforce the statutory revisions contained in the CARES Act effective March 27, 2021. The forthcoming revisions to the Part 2 regulations may be substantial given these CARES Act changes to the federal statute.

Another significant change to the federal SUD confidentiality statute addresses the ability of health care providers to use SUD records for treatment, payment, and health care operations purposes (except for certain provider fundraising activities) in a manner more consistent with the allowances provided for protected health information under HIPAA. Specifically, the CARES Act authorizes a Covered Entity or Business Associate (as those terms are defined in the HIPAA Privacy Rule) or Part 2 Program (as defined by the Part 2 regulations) to use, disclose, or re-disclose SUD records with the patient’s written consent for treatment, payment, and health care operations as permitted by the HIPAA regulations, 45 C.F.R. Parts 160, 162, and 164, and Sections 13405(a) and (c) of the Health Information Technology and Clinical Health Act (42 U.S.C. § 17935(c)) (HITECH Act). Under the revised statute, a patient can provide written consent once that will then authorize all such future uses or disclosures for purposes of treatment, payment, and health care operations until such time as the patient revokes such consent in writing.

Additionally, the CARES Act incorporates the following privacy protections for SUD records:

  • Except as otherwise authorized by court order or by written patient consent, SUD records or testimony relaying information from the SUD records may not be disclosed or used in any civil, criminal, administrative, or legislative proceedings conducted by any federal, state, or local authority.
  • Penalties applicable to HIPAA violations (42 U.S.C. §§ 1320d-5 and 6) shall apply to a violation of 42 U.S.C. § 290dd-2.
  • The breach notification provisions of Section 13402 of the HITECH Act shall apply to SUD records.
  • By March 27, 2021, HHS will update the HIPAA Privacy Rule to require that Part 2 programs provide notice of privacy practices, written in plain language, describing the patient’s rights with respect to the Part 2 records and how the patient may exercise those rights, and describing each purpose for which the Part 2 program is permitted or required to use or disclose the SUD records without the patient’s written authorization.
  • Part 2 providers can disclose information, regardless of whether the patient gives written consent, to a public health authority (as defined by HIPAA), if the content is de-identified in accordance with the HIPAA de-identification standards set forth at 45 C.F.R. § 164.514(b).
  • Patients shall have the right to request a restriction on the use or disclosure of SUD records for treatment, payment, or health care operations.
  • Patients shall have the right to request an accounting of disclosures of SUD records consistent with the HITECH Act and HIPAA.
  • Entities shall be prohibited from discriminating against an individual on the basis of information received, whether intentionally or inadvertently, from SUD records in: (a) admission, access to, or treatment for health care; (b) hiring, firing, or terms of employment, or receipt of worker’s compensation; (c) the sale, rental, or continued rental of housing; (d) access to federal, state, or local courts; or (e) access to, approval of, or maintenance of social services and benefits provided or funded by federal, state, or local governments.
  • Recipients of federal funds shall be prohibited from discriminating against an individual on the basis of information received, whether intentionally or inadvertently, from SUD records, when offering access to services provided with such funds.

The CARES Act provides that the above-summarized amendments to the federal SUD statute will apply to uses and disclosures of information on or after March 27, 2021. While these changes implement long-awaited alignment efforts to enable data sharing across providers in a manner consistent with the allowances permitted under HIPAA, the real impact of these changes will come from the forthcoming implementing agency regulations from, which are also due to be issued by March 27, 2021.

©2020 Greenberg Traurig, LLP. All rights reserved.

Restriction on PPP Loans to Insiders and Their Close Relatives

On

Friday, April 3, we posted that under the Interim Final Rule issued by the Small Business Administration (SBA) on April 2, businesses owned by an officer, director, key employee, or 20% or more shareholders of a lender are not eligible for a Paycheck Protection Program (PPP) loan from that lender. As noted at the top of page 8 of the Interim Final Rule, “[b]usinesses that are not eligible for PPP loans are identified in 13 CFR 120.110.” Section 120.110(o) says “[b]usinesses in which the Lender . . . or any of its Associates owns an equity interest” are ineligible. “Associate” of a lender is defined in 13 CFR § 120.10(1) as “[a]n officer, director, key employee, or holder of 20 percent or more of the value of the Lender’s . . . stock.” Thus, any business in which any one of those types of individuals owns any equity interest would be disqualified from a PPP loan made by that lender.

Since that alert was posted, you should be aware of one other important aspect of loans under the PPP. According to 13 CFR § 120.10(1)(ii) and the SBA’s guidance in SOP 50 10, this restriction applies not only to a lender’s officers, directors, key employees, and 20% or more shareholders, but also to businesses in which a “Close Relative” of any such individual has an interest. A “Close Relative” is defined in 13 CFR § 120.10 as “a spouse; a parent; or a child or sibling, or the spouse of any such person.”

We have been asked numerous times since our last alert whether a bank’s Associates, including directors, could obtain a PPP loan from a lender with which they are not affiliated. We have no reason to believe that they cannot participate through an unaffiliated lender since 13 CFR § 120.110(o) only prohibits loans to businesses in which Associates of the Lender have an equity interest.

© 2020 Jones Walker LLP

For more on SBA administration of the PPP loans, see the Coronavirus News section on the National Law Review.

Quick Q&A: Handling Holiday During COVID-19

As employees settle into working from home, it is important for employers to consider their approach to annual leave while the COVID-19 crisis is ongoing. Regular rest breaks help to ensure the physical and mental wellbeing of employees during a stressful period with additional work, health and family pressures. It is also important from a business continuity perspective to ensure that employees do not return work with a significant amount of holiday outstanding. With this in mind, Katten looks at common queries that have come up recently regarding holiday accrual and pay.

Does holiday entitlement continue to accrue while staff are furloughed, laid off or on short-time working?

Yes, employees continue to accrue holiday as they remain employees of the company. If an employee is entitled to more than the statutory minimum amount of 28 days’ paid holiday (inclusive of bank and public holidays) then you can, by agreement, negotiate a reduction in their contractual entitlement provided that doesn’t go below the statutory minimum.

Can I ask staff to take holiday at a specific time?

Yes, employees can be required to take holiday at a specific time, provided they are given notice of at least twice the length of the period of leave that they are being required to take (e.g., for a five day holiday they would need to be given 10 days’ notice). We would recommend that employees continue to record their holiday in your usual holiday tracker system. You can ask an employee to take holiday regardless of whether it has already been accrued.

How much should I pay staff who take holiday while furloughed?

While the guidance is not clear cut, we expect that holiday pay will be payable at an employee’s reduced furloughed rate of salary for any holiday taken while furloughed. This will be reimbursable as salary up to the Her Majesty’s Revenue & Customs (HMRC) limits under the coronavirus job retention scheme.

Can staff carry over accrued but untaken holiday?

The UK Government has amended the Working Time Regulations so that employees and workers can carry over up to 4 weeks’ paid holiday over a 2-year period, if it was not reasonably practicable to take the leave due to the coronavirus. This is a change from the current position where the ‘basic holiday’ of 4 weeks must be taken each year as a health and safety measure, meaning that it was only previously possible to carry over the balance of holiday above 20 days (which in the UK would be a minimum of 8 days). So in practice, employees can now carry forward 4 weeks as a matter of law. We recommend considering the impact of holiday accrual on the business when things return to ‘normal’ (i.e., employers should consider whether they want to require employees to take holiday even while they are furloughed).

Can I force employees to cancel a booked holiday?

Employers are still able to refuse an employee permission to take holiday on particular days (e.g., if they are critical to the business at this time and the employer needs them at work), provided that they give notice to the employee which is at least as long as the holiday requested. However, the law has changed to say that employers can only exercise this right where there is “good reason to do so”.
©2020 Katten Muchin Rosenman LLP
For more employment considerations during the COVID-19 pandemic, see the National Law Review Labor & Employment law page.

Stimulus, IRS Extended Deadline and Gifting Opportunities

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

  • President Trump signed the CARES Act on March 27, 2020, a $2 trillion stimulus package providing $560 billion of relief for individuals, including:
    • Cash Payments: $1,200 per individual ($2,400 for couples); plus $500 per qualifying child1
    • Retirement Funds: Early withdrawal penalties waived for distributions of up to $100,000, if withdrawal is for coronavirus related purposes
    • 401(k) Loans: Loan limit increased from $50,000 to $100,000
    • Required Minimum Distributions: Suspended in 2020 for IRA/401(k) plans, including inherited IRAs
    • Charitable Deduction: Up to $300 charitable deduction for 2020 taxpayers who utilize the standard deduction

Extension of filing and payment deadlines

  • The federal and Wisconsin income tax return filing and payment deadline for the 2019 tax year was automatically extended to July 15, 2020
  • The federal gift tax return filing and payment deadline for the 2019 tax year was automatically extended to July 15, 2020

Gifting opportunities

  • Low valuations, low interest rates, and the anticipated reduction in the federal estate/gift tax exemption from $11.58 million to approximately $6.5 million on January 1, 2026 have created many planning opportunities, including:
    • Gifts and/or sales to existing or newly established Trusts to take advantage of low valuations and use the $11.58 million exemption while it is still available;
    • Amending intra-family loans to take advantage of low interest rates; and
    • Creation of charitable lead trusts, grantor retained annuity trusts, and other estate planning techniques that benefit from low interest rates are particularly attractive right now.

Now may also be a good time for clients to review their existing estate plans to make certain that their plans are up to date and consistent with their wishes.

1Amounts are phased down for individuals making more than $75,000 ($150,000 for couples) and phased out for individuals making more than $99,000 ($198,000 for couples)

Copyright © 2020 Godfrey & Kahn S.C.

Small Business Administration Announces Access to Emergency Relief Loans (Updated April 6, 2020)

The Small Business Administration (SBA) announced on March 31, 2020, that small businesses and sole proprietorships may apply for Paycheck Protection Program (PPP) loans authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act starting Friday, April 3, 2020. Independent contractors and self-employed individuals may begin to apply for such loans starting Friday, April 10, 2020.

The CARES Act was passed by Congress and signed into law last week to provide emergency relief to American businesses in the wake of the disruptions caused by the COVID-19 pandemic. Among its most notable provisions, the CARES Act establishes the PPP, which will:

  • Enable small businesses to borrow up to $10 million that may subsequently qualify for forgiveness

  • Provide additional funding for the Economic Injury Disaster Loan (EIDL) program, pursuant to which certain businesses may qualify for loans of up to $2 million

  • Authorize grants of up to $10,000 for EIDL loan applicants.

UPDATE:

The interim final rules contain two changes to the information provided in the original alert. The SBA:

  • Announced that the interest rate on PPP loans would be 1.0% per annum (not the 0.5% per annum previously reported).
  • Clarified that repayments on such loans would be deferred for six months.

PPP Loans

Businesses and individuals may apply for PPP loans through any existing SBA lender or through any federally insured depository institution, federally insured credit union, Farm Credit institution or other regulated lender that is participating in the program. The SBA recommends consulting with local lenders to determine whether they are participating. A list of SBA lenders can be found at www.sba.gov.

A form application for PPP loans can be found at https://www.sba.gov/document/sba-form–paycheck-protection-program-ppp-sample-application-form. Applications must be submitted to a participating lender, not the SBA. Loan applications must be submitted and processed prior to June 30, 2020.

Eligibility

Businesses with 500 or fewer employees generally will be eligible to apply for PPP loans (with some exceptions for businesses with more employees in the hospitality and foodservice industries). The 500-employee threshold applies to all employees whether full-time, part-time or any other status, and SBA affiliation rules typically apply when counting employees. Passive business investments, gambling businesses, private clubs or businesses that limit membership for reasons other than capacity, religious organizations and other businesses listed in 13 CFR § 120.110 generally are not eligible for PPP loans.

Requirements

As part of the application, borrowers will be required to certify in good faith the following:

  • Current economic uncertainty makes the loan necessary to support ongoing operations.

  • Borrowed funds will be used to retain workers and maintain payroll or make mortgage, lease or utility payments.

  • Borrower will provide lender with documentation verifying the number of employees, payroll costs, and covered mortgage, lease or utility payments for eight weeks after receipt of the loan.

Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage, lease or utility payments. However, the SBA advised that due to expected subscription, it anticipates that no more than 25% of the amount of forgiven loan principal may be allocated to non-payroll costs.

No collateral and no personal guarantees will be required in connection with PPP loans.

Terms and Amount

PPP loans will mature after two years and accrue interest at an annual rate of 0.5%. Proceeds of the loans may be used to cover “payroll costs,” group health care benefit costs and insurance premiums, mortgage interest payments, rent, utilities and interest on debt existing prior to February 15, 2020 (Qualifying Expenses). Payroll costs include wages, commissions, salaries and similar compensation (provided that prorated compensation in excess of $100,000 annual salary will not be included as a payroll cost), federal payroll and income taxes, and certain sick leave and family leave wages.

The maximum total principal amount of a PPP loan will be the lesser of (a) $10 million or (b) the sum of two and one-half (2.5) times the business’s average monthly “payroll costs” during the year prior to the closing of the loan (subject to adjustment for seasonal workers) plus EIDL loans received after January 31, 2020, that are refinanced as PPP loans.

Extension and Forgiveness

The CARES Act provides for a possible deferment of repayment of PPP loans for a period of at least six months but not more than one year. The Act also provides for the forgiveness of a portion of the principal of PPP loans on a tax-free basis for federal income tax purposes (states have not yet announced whether they will offer a similar exemption). The amount forgivable will equal the sum of Qualifying Expenses paid with loan proceeds during the eight-week period following the date of the loan less 25% of the amount that payroll expenses were reduced during that eight-week period as the result of wage or salary cuts or the layoff or furlough of employees. However, the SBA has advised that due to expected subscription, it anticipates that no more than 25% of the amount of forgiven loan principal may be allocated to non-payroll costs.

EIDL Loans and Grants

EIDL loans, like the PPP loans, are generally available for businesses with 500 or fewer employees and the proceeds of such loans may generally be used for similar purposes. However, EIDL loans differ from PPP loans in several important ways. The maximum amount of EIDL loans is $2 million with a maximum term of 30 years. Borrowers apply directly to the SBA for such loans, for which the interest rate was 3.75% as of March 12, 2020. There is no provision for forgiveness of principal of EIDL loans. However, businesses that have secured EIDL loans may refinance such loans with PPP loans.

Businesses that apply for EIDL loans also may request a grant of up to $10,000 from the SBA. Such funds must be used to maintain payroll to retain employees or pay sick leave resulting from the COVID-19 pandemic, make rent, lease or mortgage interest payments, repay obligations that cannot be met due to revenue loss or satisfy increased materials costs resulting from supply chain interruption. Award of the grant is not dependent on approval of the loan.

© 2020 Wilson Elser

For more on PPP provisions in the CARES Act, please see the Coronavirus News section on the National Law Review.

Rent Relief Considerations in the Time of COVID-19

“In any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing,” said Theodore Roosevelt.

By now, everyone recognizes the havoc and uncertainty of the Coronavirus’s impact on almost every aspect of the commercial real estate sector – e.g., 630,000 US retail locations have closed, with the office and other sectors experiencing similar impacts. The duration of this crisis is uncertain, but in this evolving situation, every landlord, tenant, lender, and investor is processing and planning next steps with respect to their real estate relationship counterparties (while at the same time determining the applicability, if any, of insurance coverages; the applicability, timing, and requirements of government stimulus programs, such as the CARES Act; and countless other business continuity challenges). As April rents and debt payments come due or past due, many have already reached out to their counterparties (or their lawyers) to discuss short term solutions. These conversations are important to have.

While each situation may have unique aspects, and the lease language and overall relationship between the parties play a significant role in the outcome, there are some possible approaches for landlords and tenants to consider at this time including the following:

Rent Deferral: An agreement to defer all or a portion of rent (be it fixed or basic rent and some or all of the additional rent components – operating costs, taxes, insurance, etc. – due under the lease) for a defined period – say 60, 90 or 120 days. Deferred rent would then be repaid at some later date either in a lump sum or amortized (with or without an interest component) and repaid over a defined period once full rent commences – ideally, from a landlord’s perspective, quickly following full rent commencement, but this may vary based on many factors, including the tenant’s business operations and the landlord’s asset “hold” period. Restructured short-term repayment agreements deliver some immediate structure and “certainty” while providing tenant rent relief and maintaining the landlord’s cash flow under the lease, albeit restructured and extended, without adding defaulting tenants to the rent roll.

Rent Abatement/Tolling: An agreement to simply abate or “toll” rent (again, all or a portion of the various rent components) for a fixed period. After the abatement period, rent would recommence. This abatement approach provides tenant breathing room and cash flow relief but does not address the landlord’s on-going obligations – debt service, taxes and operating costs (although the landlord may be seeking similar relief from some of these). Accordingly, a landlord may resist this or add the abatement or tolling period to the end of the lease term (at what may then be higher rents).

Rent Reduction: An agreement to simply reduce rent for a short period of time to get tenant over the “hump” of the crisis while maintaining some level of cash flow to the landlord. While more economically favorable to the tenant than the landlord, this approach may provide other relationship benefits when coupled with other factors, such as an agreement to exercise (or not exercise) an extension or other option, future rent restructuring or other agreement.

Tapping the Security Deposit: An agreement or understanding that a landlord can apply some or all of the cash security deposit to rent shortfalls may provide a liquidity solution for both parties during the short term. The agreement could include replenishing of the security deposit at a later date or over time, or treat the reduction as a burn-down or burn-off.

Hardline: Some landlords and tenants will elect a more aggressive approach – exercising defaults and further remedies based on non-performance, or asserting that non-performance is excused or extended during the current Coronavirus pandemic based on lease language or legal doctrines (e.g., force majeure, impossibility or impracticability, frustration of purpose, etc.). In some situations, this approach may be appropriate. For instance, non-performance where a tenant is clearly not impacted or where the lease documents unambiguously prohibit such non-performance (e.g., a fully-net ground lease). It is also likely that a few will use this situation as a pretext for unrelated non-performance. Regardless of merit, these positions may simply set a difficult tone during and after the resolution, and the current court closures and restrictions (and likely backlog when those abate) won’t easily or quickly allow for a judicial determination.

Other considerations include the following:

Realistic Expectations: Set and seek goals that are practical and reasonable in terms of economics and duration and workable for all parties to the extent discernible and practical. While unilateral actions may be or become necessary, a mutually agreeable short term solution to span this crisis will likely leave parties in better positions post-Coronavirus impact.

Transparency: In order to seek and obtain relief, the requesting party should be willing to provide some level of transparency and evidence of hardship if requested. At the same time, while a showing of need may be important, requests for this information should be realistic and practical given the situation and fit the scope of the tenant and situation – rather than an exhaustive list difficult to quickly provide in current circumstances. This shouldn’t simply be a hurdle landlords use to reject requests, but landlords may need to explain, share or at least attest to tenant restructurings in order to obtain lender approval or latitude under loan documents to grant relief. Similarly, landlords may want to explain the limitations they face due to underlying financing or other restrictions.

Competent Planning: While difficult to assess the duration of the current situation, any request for relief should be accompanied by a competent and professional showing that there is a current plan to bridge the crisis based on realistic assumptions and that relevant stakeholders are putting skin in the game.

Lender (or Other) Approval: Parties should keep in mind that third party (e.g., lender) approvals may be necessary to restructure or amend leases. Consider seeking programmatic approval for parameters to restructuring/relief deals now to cut down on individual approvals.

Other Issues or Concerns: This may be an opportunity to address other outstanding issues or concerns providing the benefit to the other party and allowing relief to go forward – such as extending the term, waiving rights, acknowledging facts, etc. The degree of leveraging these issues during a crisis, however, should be prudently and strategically applied.

Documentation: Any agreement to modify, restructure or affect a lease should be in writing. This step is essential to ensure there’s an actual agreement to actual terms and conditions – even stripped-down writing is better than none.

This crisis has placed significant stress on both sides of the landlord-tenant equation. Both sides have suddenly found their operations interrupted, cash flow jeopardized, business continuity models upended, and have had their ability to perform their obligations to their lenders, investors, employees, and clients and customers severely strained. To the extent practical, each party should seek the mutually shared goal in this time to outlast the crisis impact in a manner that allows as quick a recovery as possible.

© 2020 SHERIN AND LODGEN LLP

For more on rent considerations among the COVID-19 pandemic crisis, see the National Law Review Coronavirus News section.

Techplace Tickler: eDiscovery Challenges in a Remote Work Environment

In the first episode of our Techplace Tickler series, Danielle Ochs, Tom Lidbury, and Traer Cundiff discuss various eDiscovery-related issues that have arisen during the COVID-19 pandemic when many people are working remotely. They cover data security concerns while working from home, remote document review, and best practices for collecting, capturing, and transferring data remotely.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

For more legal & data security issues amid the COVID-19 Pandemic, please see the National Law Review Coronavirus News section.