Tag: COVID-19

Congress Passes COVID-19 Relief and Stimulus Package

On Monday, December 21, Congress enacted a $900 billion stimulus package to support American workers and businesses impacted by COVID-19. The measure represents a last-minute bipartisan agreement by a lame duck Congress to provide much-needed support as COVID-19 cases continue to rise across the country. Notably, the bill does not include funding to states and local governments, and does not provide any liability protections for businesses related to COVID-19. Those are issues favored by Democrats and Republicans respectively, and were dropped in the compromise.

The legislation includes funding for individual stimulus checks, a restart and expansion of the popular Paycheck Protection Program (PPP) (including clarification that business expenses paid with PPP loan funds are tax deductible), other new and expanded SBA loan programs, direct targeted funding to certain industries, unemployment compensation program extensions, payroll and other tax credits and deductions. The overall legislation will take effect when signed, but individual programs and provisions may have unique effective dates that are separate from the general effectiveness date.

While President Trump has until December 28 to sign the legislation into law, on Tuesday evening, December 22, he called upon Congress to enact an amendment to increase the amount of payments to individuals from $600 to $2000.  He has also expressed discontent with other provisions of the bill, causing some uncertainty as to whether he will sign it or force Congress to take further action.

​Given this uncertainty, we recognize that certain provisions of the bill may change. However, we know that these Congressional stimulus and relief efforts are of great interest to our clients, and we will continue to keep you apprised of any changes to the legislation and its final outcome. The following summaries are based on the version of the law enacted by Congress on December 21.

For a comprehensive review of these provisions and more, please see the following Pierce Atwood alerts:

Business and Tax Relief – including the PPP, other SBA lending, targeted financial aid to certain industries, and payroll and business tax credits and deductions.

Energy Investment Stimulus – including clean energy reforms, research and development, and extension and enhancement of renewable energy tax credits.

Individuals, Families and Workers Relief – including direct stimulus payments and unemployment programs.

Health Care Providers, Patients, COVID-19 Mitigation, and Vaccination – including additional grant money for providers, ending surprise medical billing, and additional support for COVID-19 mitigation.

©2020 Pierce Atwood LLP. All rights reserved.
For more, visit the NLR Election Law / Legislative News section.

Phishing Attack Messaging Targets COVID-19 Vaccine

In April of this year, which seems far longer than eight months ago, we posted about an alert from federal agencies warning that cyber threat actors were exploiting the coronavirus pandemic to fuel phishing and other attacks. Those efforts have continued throughout the year with attackers now retooling their messaging around the COVID-19 vaccine. Criminal threat actors know millions are clamoring for information about the vaccine and are working to meet that demand with false information, largely through phishing attacks.

According to an alert from the New Jersey Cybersecurity & Communications Integration Cell (NJCCIC):

COVID-19 vaccine-themed phishing emails may include subject lines that make reference to vaccine registration, information about vaccine coverage, locations to receive the vaccine, ways to reserve a vaccine, and vaccine requirements.

For business and/or personal reasons, millions are clamoring for vaccination information and may let their guard down when they see it. In the process, they may divulge sensitive or financial information, or open malicious links or attachments. Phishing campaigns may employ brand spoofing and impersonate well-known and trusted entities, such as government agencies playing a central and critical role in the response to COVID-19 and the vaccination rollout. Messages such as the one below, for example, can lure an individual to want to participate and provide helpful information.

Other forms of attack target individuals who want a vaccine with advertisements for supposed “legitimate” vaccines, but which are nothing of the sort.  Organizations such as New Jersey’s Office of Homeland Security and Preparedness are working to get accurate information about COVID-19 to the public, such as through its Rumor Control and Disinformation web page. However, having accurate information available may not do enough to foil these attacks.

Organizations may not be able to prevent all attacks, but there are steps they could take to minimize the chance and impact of a successful attack, and to be prepared to respond. Among those steps is the critical need to maintain a level of security awareness, in addition to training. Annual trainings are a start, but may not be enough to keep up with nimble threat actors who deftly reshape their messaging and methods to improve their chances of success. They take in developments around the world and adapting on a far more frequent basis than annually.

Employees should be trained to recognize phishing attacks and dangerous sites, and instructed not to reveal personal, financial or other confidential information about themselves, other employees, customers, and the company. However, ongoing reminders about the morphing nature of these kinds of attacks can be instrumental in preventing them. Considering the past year and the more recent rise in COVID-19 cases, it is easy to understand how compelling information about a vaccine can be, so much so that it may be easy to forget the warnings given during that annual training on an early Monday morning in February.

Jackson Lewis P.C. © 2020
For more articles on phishing, visit the NLR Communications, Media & Internet section.

Eviction Moratoriums—A Light at the End of the Tunnel? It Depends

With increased cases of COVID 19, most industries are holding their breath as to how these cases will continue to affect their businesses.  This is especially true for residential landlords.  Since this past March there has been a mix of federal and state moratoriums restricting landlords from evicting tenants for non-payment of rent.  The most recent moratorium on residential evictions was issued by the Centers for Disease Control and Prevention (CDC).  The CDC’s order entitled “Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19,” which took effect upon publication in the Federal Register on Sept. 4, declares a national moratorium on certain residential evictions in the name of protecting the public health. See 85 Fed.Reg. 55292 (Sept. 4, 2020).

The creation of Order established a protection for a certain category of tenants, so long as they executed a Declaration Form asserting their qualifications as a “covered person.”  Once a tenant provides the declaration, the text of the order states that a landlord shall not “evict” the tenant from residential premises. See 85 Fed.Reg. at 55296.

While the CDC Order was issued to protect tenants, the ambiguities of the CDC moratorium have left the state courts to issue a patchwork of local Administrative Orders interpreting the moratorium and putting new process in place at the Magisterial District Court and Court of Common Pleas levels.  The result?  Unequal access by landlords to challenge the truthfulness of the CDC Declaration.

A review of the 67 judicial districts reveals a handful of counties that address the CDC moratorium and how it affects current landlord-tenant procedures.  Additionally, certain counties provide remedies for landlords to challenge the truthfulness of the Declaration Form.  By certain counties allowing landlords to challenge the truthfulness of the Declaration Form, it allows the moratorium to protect those truly defined as a “covered person.”  A majority of the judicial districts however are silent as to the landlord’s ability to challenge the Declaration Form, thus leaving landlords frustrated in scenarios where the tenant may not truly be a covered person and are allowed to remain in their apartment with little to no consequence.

With the number of COVID-19 cases increasing and the lack of any additional economic stimulus packages available will the CDC Moratorium be further extended? If it is, will the state Courts address the inequitable remedies currently created amongst the local counties?  Only time will tell.

©2020 Strassburger McKenna Gutnick & Gefsky
For more articles on evictions, visit the National Law Review Real Estate section.

How to Maintain a Positive Company Culture During COVID-19

Culture eats strategy for breakfast, or so we’ve been told by Mr. Drucker and others.

Coincidentally, I wholeheartedly agree.  So, how does leadership maintain, let alone improve, its company culture in the face of the first pandemic of its size in the last one-hundred-plus years?

Of course, it will not be a one-size-fits-all approach, but the following are three suggestions I have seen work recently for several of our clients.

Suggestion 1 – Maintain Visible and Engaged Company Leadership

“I always feel like somebody’s watching me” – Rockwell 1984

Admit it, this song is now stuck in your head (you’re welcome!).  It seems that employees are paying closer attention to company management than ever before.  How you communicate, your style of communication, transparency, consistency, accessibility, and responsiveness (even if only remotely) – it all matters.  What matters most in my humble opinion, however, is that you deliver all information in a timely and authentic way.  Being prompt in sharing good or bad news will be especially appreciated now.  And if you have more than one bad piece of news to share, share it all at once, and now.  Also, be yourself.  By way of example, if you don’t normally try to establish witty repartee, now is not the time to try.  Your employees should already know who you are if you have done your job.  Now is not the time to try and introduce them to someone “new” (even with the best of intentions), but instead is a great time for stability and to remind them why they have hopefully bought into and trusted your leadership style so far.

Suggestion 2 – Provide Opportunities to Interact and Contribute as Individuals

During the pandemic, even those more introverted employees have felt isolated.  A feeling of company connection goes a long way towards building loyalty, teamwork, and happy employees.  And even though we are all interacting with our customers and clients more virtually now, those folks get it when your employees genuinely enjoy each other’s company.  So, what are we to do when we have been advised by the CDC to limit our group gatherings, and stand six feet apart, wearing masks – and many of our workforces are still working one hundred percent remotely from home?

Some of our clients have virtual Zoom lunches or happy hours.  Some have encouraged employees to start book clubs or movie clubs and discuss the materials via Zoom.  But ultimately, it is imperative that the tenured employees who get the company culture in our various geographic locations are empowered to lead by example, and given the freedom to illustrate the company’s culture in the way they believe will be most effective.

Suggestion 3 – Fight Against “Checking the Box”/Staleness

This one is tricky.  Most of our clients spent a fair amount of time earlier this year coming up with ways to effectively address Suggestion 1 and Suggestion 2.  But over time, there is definitely a routine, we get comfortable, and inertia sets in.  Don’t be afraid to shake things up!  While we all have some level of Zoom fatigue now, there is no magic number to try and hit per week or month.  Likewise, if every company management communication looks identical background and content-wise (it’s now 10:15 and time for our HR Director to present x, y, or z) and is so predictable that each communication could have just been batch recorded and sent out, things should be adjusted.

Ultimately, we will get through this, and while mention of the number 2020 may produce a zeitgeist-like gag reflex for most of us for a long time to come, for now, work-wise all we have is your own company’s culture and co-workers.  Protect it and each other.

© 2020 Ward and Smith, P.A.. All Rights Reserved.
For more articles on company culture, visit the National Law Review Labor & Employment section.

Revisiting Force Majeure and Other Contractual Considerations Amid COVID-19

In addition to the tragic human toll that it has caused, the coronavirus pandemic has also wreaked havoc on businesses throughout world, leaving countless companies and individuals unable to perform their contractual obligations. While many businesses have reopened since our last client alert on this topic, others have experienced new interruptions amid new spikes in COVID cases. As a result, force majeure and its common law relatives—the doctrines of impossibility and frustration of purpose—remain poised to become a focus of business litigation for years to come.

Force Majeure

Once a party to a contract has made a promise to perform, it must fulfill its promise even where unforeseen circumstances, including an act of God, make performance burdensome, difficult, or more expensive. If the party fails to perform, it usually is responsible for damages to the other party.

However, if the contract contains a force majeure provision, unexpected events could provide a defense to a party’s failure to perform. While it is tempting to assume that the global catastrophic effects of COVID-19 would easily invoke force majeure, the validity of the defense, which courts will narrowly construe, relies upon the specific language of the applicable force majeure provision and the factual circumstances of the parties’ contract. Simply put, because force majeure is a matter of contract, the language in the parties’ agreement determines when and to what extent force majeure will excuse performance in that particular contract.

This is best illustrated by an examination of a typical provision that became the subject of a recent dispute involving a lease to operate a restaurant and catering facility at a state-owned park: It provides:

If either State Parks or Lessee shall be delayed or prevented from the performance of any act required by this Lease by reason of acts of God, weather, earth movement, lockout or labor trouble, unforeseen restrictive governmental laws, regulation, acts or omissions, or acts of war or terrorism which directly affects the Licensed Premises and/or facilities and services of Jones Beach State Park, riot or other similar causes, without fault and beyond the reasonable control of the party obligated, performance of such act, including payment of all License Fees and R & R deposits due, shall be permanently excused for the period of the delay and the period for the performance of such act shall be extended for a period equivalent to the period of such delay, at which time all payments due shall be resumed.

Like nearly every other force majeure clause, this example includes a list of triggering events that might excuse performance. Assuming a party claims that, during the peak of the coronavirus and the effects of government shutdown orders—or now with spikes in the virus potentially leading to new interruptions—it cannot perform its obligations, this clause might serve to excuse performance because it includes “unforeseen restrictive governmental laws” as a triggering event.

But had that language not been included, the application of this type of provision to COVID-19 becomes far less clear. While the pandemic may seem like an act of God, courts have historically defined that term narrowly. Texas courts, for example, have long defined it as “accidents produced by physical causes which are irresistible; as, for example, winds and storms, or a sudden gust of wind, by lightning, inundations, or earthquakes, sudden death or illness.”[1] Similarly, New York views an act of God as “an unusual, extraordinary and unprecedented event,” denoting “those losses and injuries occasioned exclusively by natural causes, such as could not be prevented by human care, skill and foresight.”[2] As pandemic-related litigation unfolds it remains to be seen whether an inability to perform based on COVID-19 would be considered an act of God. Even if the illness itself is deemed an act of God, performance-impeding issues like restrictions on business openings may be labeled a human reaction to the virus, not the act of God itself.

Other triggering events that may apply to COVID-related performance include the obvious—pandemics, epidemics and disease outbreaks—as well as events like labor shortages, where employees are not available to work due to stay-at-home orders or illness spread within a factory. The bottom line is that, in order to provide an effective defense, the force majeure provision must generally include a triggering event that applies to the COVID-related basis for nonperformance.

Many force majeure provisions also include “catch call” language such as “or other similar causes,” as in the example provided above. Catch-all provisions must be interpreted within the context of the provision as a whole, and the legal maxim of ejusdem generis may apply: the catch-all will be interpreted to include only items of the same kind as those listed. Thus, a force majeure provision listing storms, earthquakes, floods “and similar events” may not be interpreted to include events related to COVID-19. On the other hand, some contracts provide more expansive catch all language, capturing any event outside of the reasonable control of the parties.

Courts analyzing attempts to rely upon catch-all language, including in Texas and New York, may also consider the foreseeability of the triggering event.[3] Given prior epidemics and pandemics, including the 2009 H1N1 pandemic, it remains to be seen how courts will determine the foreseeability of COVID-19.

The presence of an applicable triggering event is only the first step in the process of determining whether a party has a valid defense to nonperformance. Unless the force majeure provision provides otherwise, courts generally require that performance be rendered impossible, and not merely more difficult or expensive. For example, a party obligated to manufacture a product may not be able to invoke force majeure where sourcing a component has been made more difficult, but not impossible, due to the pandemic. Issues of causation must also be considered, and language appearing in typical force majeure provisions stating that nonperformance must be “by reason of” or “caused by” requires a showing of direct causation.

These issues aside, parties seeking to invoke a force majeure provision must carefully consider what performance is actually excused. For example, force majeure language in commercial leases will typically exclude the payment of rent, meaning that even amidst the occurrence of a triggering event, rent must still be paid. Parties must also think about what happens when the force majeure event ends. By way of illustration, the example provided above makes clear that performance is excused only during the “period of the delay.”

Parties attempting to rely upon a force majeure provision must also follow any applicable notice provisions or risk losing the ability to invoke the defense. Depending upon the contractual language, force majeure provisions typically mandate that notice be provided within a certain period of time following the force majeure event, and some require that period updates on the force majeure condition be provided.

In litigation arising from the effects of COVID-19, courts have already begun to tackle issues related to force majeure and impossibility. For example, in Palm Springs Mile Associates, Ltd. v. Kirkland’s Stores, Inc., a federal court in Florida cast doubt on a tenant’s ability to claim that a COVID-related force majeure event prevented it from paying rent, observing that “Kirkland . . . has failed to point to factual allegations in the complaint that show the government regulations themselves actually prevented Kirkland from making rent payments.”[4] Similarly, in Future St. Ltd. v. Big Belly Solar, LLC, a Massachusetts court rejected an argument by a distributor of solar recycling bins that it could not perform its contractual obligations due to COVID-19.[5] These cases highlight the need to establish causation between the force majeure event and the performance at issue.

Alternatives to Force Majeure

Parties to contracts without force majeure provisions are not without a remedy, as the common law doctrines of impossibility and frustration of purpose may provide a defense to nonperformance. Impossibility is exactly as it sounds, and excuses performance where it has become objectively impossible. In addition, the impossibility must be the result of an event that was unforeseen and could not have been addressed by the contract. Similar to force majeure provisions discussed above, mere economic difficulty or burden is not enough to invoke impossibility.

In some circumstances, applying these narrow standards to COVID-related nonperformance will be straightforward, as in the case of a vendor who was unable to provide event services on a specified date due to the government’s stay at home orders. But the analysis becomes murkier in other hypothetical scenarios, such as a purchasing party to a real estate contract who claims that shut down orders made a scheduled closing impossible. The seller may assert that the closing could have taken place virtually, or that the purchaser is now trying to escape a contract that has become an economic burden. Such factual issues are likely to be the subject of future litigations. It is worth noting that some courts also recognize the doctrine of impracticability, although there is little functional difference between impracticability and impossibility.

Short of impossibility, frustration of purpose may also provide an avenue to relief. This doctrine, also narrowly construed, provides a defense to nonperformance where a change in circumstances makes one party’s performance virtually worthless to the other, frustrating the purpose of making the contract. As explained by one court, “the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense.”[6]

Practical Considerations

Based upon the nuances discussed above, parties seeking to invoke force majeure or common law doctrines to excuse performance should keep several practical considerations in mind:

  • Provide timely notice of the force majeure event, and consider doing so even if it is not required;
  • Communicate with the counterparty;
  • Maintain detailed records related to non-performance, including a timeline of events leading to the inability to perform, copies of relevant government orders and pronouncements, efforts to avoid the force majeure event or identify alternative means for nonperformance, and efforts to negotiate substituted performance.

Similar steps should be taken by the party who will be defending against the invocation of force majeure:

  • Provide a timely response to any notice, and be sure to keep responses realistic, professional and performance-oriented, keeping in mind that any response will likely be filed with the court should litigation occur;
  • Keep detailed records relating to the nonperformance, including a timeline of events that may provide a counter-narrative, the availability of alternative means for non-performance and, perhaps most importantly, evidence of damages.

Drafting Considerations Going Forward

Parties currently negotiating contracts should also be sure to address the implications of the ongoing pandemic. Drafting considerations amid COVID-19 include:

  • Defining the triggering events to include (or exclude) events such as “disease”, “pandemic”, “epidemic”, “public health crisis” and “state of emergency”;
  • Avoiding overreliance upon “act of God”;
  • Considering the effect of doctrines like ejusdem generis;
  • Crafting language making it clear what will happen at the end of the force majeure event, including whether the event permits termination versus a temporary suspension of performance; and
  • Considering whether to address disruptions to supply chains, labor force and/or access to financing.

[1] Morgan v. Dibble & Seeligson, 29 Tex. 107, 111 (1867).

[2] Prashant Enterprises Inc. v. State, 206 A.D.2d 729, 730 (3d Dep’t 1994).

[3] See, e.g, TEC Olmos, LLC v. ConocoPhillips Co., 555 S.W.3d 176, 182 (Tex. App. 2018); Goldstein v. Orensanz Events LLC, 146 A.D.3d 492, 44 N.Y.S.3d 437 (2017).

[4] Palm Springs Mile Associates, Ltd. v. Kirkland’s Stores, Inc., No 20-21724, 2020 WL 5411353 (S.D. Fla. Sept. 8, 2020).

[5] Future St. Ltd. v. Big Belly Solar, LLC, No. 20-CV-11020-DJC, 2020 WL 4431764, at *6 (D. Mass. July 31, 2020).

[6] Crown IT Servs., Inc. v. Koval-Olsen, 11 A.D.3d 263, 265 (1st Dep’t 2004).

© 2020 Bracewell LLP
For more articles on the pandemic, visit the National Law Review Coronavirus News section.

Ten Estate Planning Tips as We Emerge from a Pandemic and Head into a Presidential Election

No one can say that 2020 has been an ordinary year – from the outbreak of COVID-19 in the first quarter of 2020 to the death of Supreme Court Justice Ruth Bader Ginsburg to the upcoming Presidential election.

So, amidst such an unusual year, why not think about estate planning? These times provide an exceptional backdrop to engaging in thoughtful consideration about planning, and the economic environment provides unique opportunities.

Here are ten estate planning tips worth considering, right here, right now, during the final three months of 2020:.

Planning with Continued Low Interest Rates.

The Federal Reserve’s decision to keep interest rates historically low, even at the risk of inflation, has created a fertile environment of estate planning freeze strategies which utilize the IRS’s published interest rates. The Grantor Retained Annuity Trust (or “GRAT”) and the Charitable Lead Annuity Trust (or “CLAT”) are two techniques which, when most successfully deployed, allow for the transfer of wealth at a reduced gift tax cost and provide that the future appreciation on the assets transferred passes without exposure to the individual’s estate tax. The GRAT pays a defined sum back to the creator for a fixed number of years, and the remainder passes to family; the CLAT pays a fixed sum to a named charity for a defined number of years, and then the remainder passes to the creator’s family. The current applicable Federal interest rate for determining the gift tax value of these techniques is currently 0.4%, having dropped from 2.2% in February. Normally a GRAT or CLAT is most successful when a client transfers an asset which has significant appreciation potential, such as a closely-held entity where the owner expects a successful sale in the future. However, funding a GRAT with securities (or swapping them into an existing GRAT, as described below), given the relatively depressed and volatile capital markets and the low interest rates, means that more long term growth resulting from the rebounding stock market will be able to be passed to family.

Lower Values in Commercial Real Estate.

If your commercial real estate holdings have recently decreased in value, this could be an ideal time for making a gift of interests in these assets to family. When gifts are made in the form of interests in limited liability companies or limited partnerships, discounts continue to be appropriate for lack of marketability and lack of control even on top of lower real estate appraised values. The result is that owners of commercial real estate may be in a position to move quickly by transferring that property now to family trusts before the value rebounds in coming years. Such transfers may be most effective in the form of an outright gift or a gift to an irrevocable trust which is not considered to be owned by the creator for income-tax purposes or perhaps using promissory notes to family members.

Checking the Existing Basic Estate Plan.

Now is the time to review your will or your revocable living trust agreement (or both) to see if they still accurately reflect your wishes.

Testamentary Provisions.

Reconsider whether inheritances should be outright or placed in trust for the benefit of children and more remote descendants. Parents have a unique ability to provide meaningful asset protection for children by utilizing trusts for their benefit, to shield children from claims in divorce and other predatory maneuvers. Simple wills can overlook nuances that perhaps now during this period have become magnified, particularly in younger families struggling economically and emotionally with the pandemic. Review and reconsider choices for executors, trustees and guardians.

Testamentary Tax Strategies and the 2020 Presidential Election. Tax strategies and language contained in the will need to be reviewed as the Presidential election approaches and in its aftermath. Most sophisticated estate plans are framed around optimizing an individual’s estate tax “applicable exclusion amount” (or “AEA”) using a credit shelter trust, and his or her generation-skipping transfer (“GST”) tax exemption amount using a “dynasty” or descendants’ trust. Attorneys draft for these strategies in wills or living trusts using a formula meant to maximize the allowance. For many wills, after the Tax Cuts and Jobs Act of 2017 that formula was impacted by the increase of the AEA and the GST exemption from $5,000,000 to $10,000,000. (Increased for inflation, that amount is $11,580,000 today.) Barring Congressional action, the AEA and the GST exemption is set to retreat to $5,000,000 (again indexed for inflation) on January 1, 2026.

Clients and their advisors should evaluate these formulas on a case-by-case basis, with an eye towards the 2020 Presidential election. Vice President Biden has spoken of his intention to repeal the 2017 Tax Cuts and Jobs Act, which, presumably, means restoring the AEA and the GST exemption to the $5,000,000 level, as indexed. A long-standing Democratic agenda item has been to restore the AEA to the Clinton-era $3,500,000. Curiously, the Trump campaign lacks a definitive statement either to eliminate the Federal estate tax or even take decisive action to make permanent the exemption increases in the Tax Cuts and Jobs Act. The one secure tax take-away is that there is no telling what Congress and the President will do in 2021 and the years following, and so having the flexibility in a will or living trust to optimize the wealth tax environment, should death occur during this period of uncertainty, is essential.

How is this accomplished? Avoid or revisit formula clauses for credit shelter trusts where a surviving spouse is involved. These clauses might result in an unexpected and disproportionate benefit passing to a trust which is not exclusively for a spouse’s benefit. Better planning suggests drafting to set up a marital trust for the surviving spouse to hold the estate’s financial assets, which, through elections made during the period of administration and the ability to divide it into different shares, can provide the same benefits of planning with the AEA but offer more flexibility to achieve the best tax strategy overall.

Check Advance Directives and Durable Powers of Attorney.

Usually an integral part of the basic estate planning package, advance directives for health care and durable powers of attorney tend to gather dust as years wane. Unlike wills, which only take effect at death, these documents state an individual’s wishes regarding financial decision-making and health care decision-making while he or she is alive but unable to act or express intentions. These documents should be reviewed and refreshed at least every ten years, even if there is no change.

 Advance Directive for Health Care.

Different practitioners may use different forms, but at its core, this documentation sets out wishes about health care decisions and end-of-life views (end-of-life decisions are sometimes set out in a separate document known as a living will), and the appointment of a health care representative to act as the agent to make medical decisions including end-of-life decisions (sometimes set out in a separate document known as a health care proxy or proxy directive).  Are these choices and wishes still accurate? Is the agent’s information up to date?  Have the wishes been discussed with the agent? If the pandemic has taught many families one thing about estate planning, it has stressed the importance of having this document prepared, properly executed, and having the agent informed and ready with decision-making knowledge and resolve.

Durable Power of Attorney.

A durable power of attorney as created by most practitioners immediately grants authority to an agent to conduct business or financial transactions in the name of the individual who executes it. That being said, these documents can often be the most difficult to use. Many banks and financial institutions will insist on their own forms, whenever possible. In view of these hurdles, these documents should be reviewed and updated, if necessary, to avoid a costly confrontation with an uncooperative bank representative should the need arise to have them implemented. Check the names and addresses of the named agent. If there are co-agents, can they act independently or is unanimity required? Is there a power in the agent to make gifts? Is there authority to deal with digital assets? What is the relationship between the agent and the named executor in the client’s will?

Check Existing Estate Planning Strategies.

Individuals should take stock and review their other irrevocable strategies implemented in years past which may be impacted by the current economic and political climate. Existing life insurance trusts, spousal lifetime access trusts (described below), dynasty trusts, GRATs, qualified personal residence trusts, and charitable trusts, to name the most common, all may be accomplishing a desired goal of minimizing a client’s exposure to estate tax, but they need care and feeding, and a proper audit from time to time is essential. For example:

Insurance Trusts. Are Crummey notices being sent faithfully to trust beneficiaries in the case of insurance trusts where transfers are being made to the trust to pay premiums? Are the trust provisions still desirable? Are the successor trustees still acceptable? Are beneficiary designation forms up to date?

GRATs. Is the property in an existing GRAT subject to volatility such that it might be appropriate to freeze the fluctuation by having the creator substitute the property for a less volatile asset class (like cash) having an equivalent value? Have the required GRAT payments been made faithfully as prescribed in the trust agreement? If a GRAT has terminated, has the remaining property been transferred to the beneficiary of the remainder?

Dynasty Trusts and Spousal Lifetime Access Trusts. Are the provisions in the governing instruments regarding trust benefits and distributions and trustees still desirable? How are the assets performing? Is there an opportunity to do income tax planning for an asset otherwise excluded from the creator’s estate by swapping it out, as described above with the GRAT?

In many instances, upon reviewing these existing strategies, clients or their counsel have identified concerns or issues which need immediate attention, either because the provisions are no longer desirable or the technique has lost its purpose relative to size of his or her estate. Many states, including New Jersey, have adopted in one form or another, the Uniform Trust Code, which can help practitioners address changes needed to outdated or out-of-touch trusts. Decanting, combining or merging may also present viable options.

Renegotiate Family Loans.

Intra-family loans can often be a pragmatic solution for individuals looking to transfer wealth using the technique of an estate freeze.  The transfer itself is not a gift, but the value of the transfer is frozen at the time it takes place, meaning that the expected return of the principal amount is fixed by the value of the loan, whereas the asset or funds in the hands of the borrower is allowed to appreciate free of estate tax. For example, assume in 2015 a parent lends $1,000,000 to a child to purchase a home. If the parent had the child sign a promissory note and mortgage with a market rate of interest, no gift occurred. In October 2015, the applicable Federal interest rate (i.e., the minimum rate the parent must charge to avoid characterizing the loan as a gift) was 2.44%. In October 2020, the AFR for the same term loan is 1.12%. By refinancing the indebtedness, the child can lower his/her payments of interest by more than half. And if the parent is forgiving the interest as part of an annual gifting program, the annual gift tax cost has dropped from $24,400 to $11,200. Consideration should be given, however, to determine if refinancing to a lower rate and the benefit which the child realizes is, itself, a taxable gift. This may be avoided if the child pays to the parent the points associated with the adjustment to the lower interest rate at the time of the refinancing.

Using (or Losing) Your AEA before 2021 (or 2026).

As mentioned above, the AEA is currently $11,580,000 per person and, absent any legislative overhaul, will continue to be adjusted for the next five years with inflation and then disappear, reverting to the base amount of $5,000,000. Neither candidate seems to have mentioned gift, estate or GST taxes directly in any public discourse, but the Biden tax platform does include ending the income-tax benefit of the step-up in basis on appreciated property at death. The step-up at death currently allowed under the tax laws offers pragmatic and economic benefits for all taxpayers, regardless of affluence. Although not entirely clear as yet, a Biden administration agenda item appears to suggest that previously-unrealized gains are to be taxed at an individuals death, regardless of whether they are sold. Similarly, if Republicans were to revive their efforts at full-blown estate tax repeal, it is likely that the measure would follow the pattern of the repeal which occurred in 2010, namely that outside of an exemption, most of a decedent’s assets would not be allowed a step-up in basis.

Sunsetting and “Clawback.”

Putting aside these possibilities, the enhanced AEA will, absent any legislative action, sunset on January 1, 2026, thereby eliminating a meaningful amount of tax-free wealth which an individual can pass to family.  Individuals planning for this increasingly-likely situation are being encouraged to make taxable gifts immediately which use their AEA (i.e., gifts of up to $11,580,000 for individuals or $23,160,000 for married couples). In addition, the IRS has confirmed that taxpayers who make such gifts during this period will not be penalized even if the base amount of the AEA reverts to $5,000,000 as a result of the sunset in 2026.  Prior concerns of this “clawback” have discouraged gifts in the past, but with this pronouncement, there is no downside for making the gifts today and, potentially, no time like the present.

Techniques.

While any irrevocable family dynasty trust can be effective to make a lifetime gift of AEA, the most pragmatic technique which keeps the assets within the creator’s reach is the spousal lifetime access trust (or “SLAT”). SLATs are appealing for married individuals because, when properly set up, SLAT property remains accessible to the creator of the trust through their spouse as the beneficiary. However, the growth on the assets in the SLAT not consumed is passed on to the lower generation without further exposure to estate tax. Obtaining a policy of insurance on the life of the beneficiary (in an irrevocable trust) can be a way to insure for the creator that the death of the spouse-beneficiary does not compromise the access to funds otherwise being enjoyed by the couple prior to the creation of the trust. Spouses can set up SLATs for each other, but care must be taken to avoid the IRS’s “reciprocal trust doctrine” and the “step transaction doctrine,” both of which can cause undesirable consequences.  Clients who are considering the technique but not sure if or when they want to pull the trigger should take steps now to prepare for the eventual transfer of assets by making a substantial gift to the spouse who may not have sufficient assets in her or his own name, in order to enable that spouse to create the gift. In this way, there is a meaningful amount of time which has passed and allows the gift to “cure” in the hands of the spouse before being moved into a trust. Just how much should be considered to be placed in the trust? The answer will vary from client to client and will likely depend upon resources outside of the SLAT, but ultra-high net worth couples are advised to take a large bite of their unused exemption, using the SLAT, while it is still available.

Don’t Forget about the GST: Are Existing Trusts Being Optimized?

Many family wealth portfolios already have in existence trusts which provide benefits in the form of income, savings or potential future educational funds for children. Such trusts may have been created by parents or grandparents or even by the clients themselves during the last “fiscal cliff” estate planning crisis of 2012. Many of these trusts present challenges and opportunities for multi-generational wealth planning which, in this dynamic tax environment, require attention. Many individuals are unaware of the impact of the Federal generation-skipping transfer (or “GST”) tax, which, when applicable, creates an additional tax of up to 40% on transfers which land in the laps of beneficiaries who are two or more generations removed from the creator of the trust. In reviewing these trusts clients should be aware of the following:

“Grandfathered Trusts.”

Is the trust even subject to the GST tax? In general, any trust which was already in existence and irrevocable prior to September 25, 1985, enjoys the status of being a so-called “grandfathered trust,” meaning it is not subject to the tax at any point. Trusts of this nature should be carefully administered to avoid potential unintended exposure to the tax resulting from the exercise of certain rights or powers by beneficiaries or the modification of the terms (using certain statutory techniques or judicial actions). Such actions have the potential to cause the trust to be subject to the tax.

“Non-Exempt” Trusts Fully Subject to the Tax.

As wealth from “the greatest generation” passes down to baby boomers, many sophisticated estate plans have irrevocable trusts that are literally GST tax ticking time bombs. These trusts were created with an individual’s wealth which, at the time of transfer, exceeded his or her GST exemption amount available. By definition, these trusts upon termination will suffer the full blow of the 40% GST tax, thereby depleting the wealth otherwise intended to be passed to the family. Trustees have a fiduciary duty to minimize all taxes – including GST taxes – consistent with the intent of the creator. In many cases there are options available which should be considered at this time, particularly in the face of potentially shrinking estate tax exemptions. For example, assume the principal trust beneficiary is a child of the creator who has personal assets which fall below the AEA. Here, a trustee might do well to consider making a large principal distribution to the beneficiary to enable him to create a SLAT or a dynasty trust using the beneficiary’s own AEA so the trust escapes both the GST tax as well as estate tax when the beneficiary dies. Another strategy might include granting the beneficiary a testamentary general power of appointment which changes the impact of the GST tax and causes the trust to be included in the beneficiary’s estate for estate tax purposes.

Capital Gain Taxes and GST-Exempt Trusts.

Apart from the GST tax planning opportunities and obligations, trustees should also consider the fact that many generational trust strategies may be victims of their own success in another way:  appreciated assets – particularly in GST-exempt trusts such as dynasty trusts – may be harboring large unrealized gains. Family members may be pleased to receive appreciated assets free of GST tax, but that good feeling may soon dissipate if the appreciated asset is sold and the individual is subject to income tax on a large, long-term capital gain. Such gains by definition are not stepped up (as they are in the case where the underlying assets are subject to estate tax) because they bypass the beneficiary’s estate. Trustees, therefore, need to consider strategies which might be employed to minimize the potential gain. Unlike the GST strategies above, these income tax-driven techniques are more complex and need to be vetted against the individual variables of a client’s tax picture.

Strategize about Business Succession and Long-Range Planning.

The national lock-down which began in March not only locked down the economy, but it created a unique environment for business owners to stop and reflect about their enterprises and the future. Is this the time to liquidate a business? A division? Sell certain assets to raise cash and redeploy in a different line of products or services? Professional advisors are essential because they can help provide perspective and options. And if a business owner is looking to stay the course and transition the business to the next generation, an important consideration will be the fitness of the family to continue the legacy in the “new normal.” Business succession experts and consultants are well aware of the expression “shirtsleeves to shirtsleeves in three generations,” meaning an entrepreneur’s ability to have a business thrive multi-generationally is a direct function of the ability of the family members in the next generation to work hard, continue to innovate and adapt to new challenges.

Consider State Estate and Income Tax Effects on Your Domicile.

One of the unintended silver linings of the past six months has been the surprising ease with which certain businesses can conduct their operations in a remote capacity. The increased reliance on web-based video conferencing technology has revolutionized the way employees can accomplish tasks. The long-range effect of this shift in employment platforms may be that companies no longer need employees to remain in a centralized locale. Indeed, many individuals fled their homes and urban apartments to take refuge in the Berkshires, the Jersey Shore and Florida, where they continue to work productively. If business in the post-pandemic age permits migration, individuals now have a unique opportunity to re-evaluate their domicile in terms of tax and estate planning. Florida, for example, affords the benefits of no state income or estate tax and a generous homestead exemption. New Jersey has – for the moment – repealed its estate tax but has retained its inheritance tax. Residing in other jurisdictions could have other benefits. This may be the time to consult a tax advisor to determine if shifting domicile creates an overall tax reduction. In so doing, clients need to remember that a residence maintained in a former domicile renders them vulnerable to tax challenges by that jurisdiction. A legal domicile is a factual consideration made up of a series of intent-driven indicators which go beyond an individual’s physical presence in a jurisdiction. Factors include the individual’s driver’s license, voter registration, club and religious affiliations and the like. If social contacts relating to the former domicile become more prevalent, that state might be able to prove that the individual ultimately intended to return to that jurisdiction and negate even a temporary change in domicile. Here again, a legal advisor can assist in advising which steps are best to accomplish the desired result.

Conclusion

Neither the pandemic nor the upcoming Presidential election promises us any certainty anytime soon. In the midst of this climate, it is important to remember that certain opportunities for shifting wealth down to lower generations may be expiring within the next few years. The pandemic and its effect on the economy continue to keep interest rates at historic lows, which make this an ideal environment to engage in all aspects of estate planning, from the simple to the comprehensive. Now is the time to take stock of what is driving your estate planning, to think through existing choices and options with the help of legal and financial advisors, and then decide how best to optimize the strategies going forward.

© Copyright 2020 Sills Cummis & Gross P.C.
For more articles on estate planning, visit the National Law Review Estates & Trusts section.

Mastering the Zoom Apology

A CEO, executive director, bar president, section chair or another leader has to apologize or speak about something very important. The stakes are high – and in this COVID-19 era, the apology is going to have to be done using Zoom or another virtual platform.

Under any circumstance, delivering an effective apology can be a daunting experience. It involves conveying the right words, in the right tone of voice, with the right facial expression. It requires authenticity combined with the ability to convince the individual (or group) you’re apologizing to that you really mean what you say — and that you are really sorry.

If you’re sincerely sorry, and you really feel sorrow, you may succumb to emotions that affect the message you’re trying to convey – a quavering voice, maybe some welling up, perhaps some tripping over your words. If those feelings are true and 100% authentic, it’s OK to express emotion.

But if you really don’t believe you were at fault, it may be challenging to keep a tone of resentment out of your voice and a steely look out of your eyes. In these situations, your apology will likely fail to convince anyone of your remorse and the whole exercise will have been for naught.

With the onsite of COVID-19, the ability to deliver an effective apology has become even more challenging. Why? Because most of them are now being delivered via Zoom or a comparable video platform.  Depending on the situation, the apologizer will be facing a small group, or potentially a throng of hundreds. The apology will be delivered to a camera lens instead of a live audience. Every flaw will be captured close-up. And your words will be captured for all eternity if the Zoom call is taped and uploaded to a website, to YouTube or any of the other platforms designed to share content throughout cyberspace.  It makes the prospect of going on live television seem a far better alternative – and very few individuals are well-equipped to undertake that experience.

We recently saw a business executive deliver an apology via Zoom. It was clear the individual was apologizing under duress. The delivery was void of emotion. There was scant eye contact. Worse yet, the apologizer read from a prepared script. The term “hostage video” came to mind as we watched this individual struggle toward his concluding remarks. Technically, an apology was delivered. In actuality, it’s doubtful anyone’s opinion was altered by the words that were spoken. As part of a larger strategy to rehabilitate this individual’s reputation or standing, the undertaking was a failure.

Zoom apologies can be improved and can achieve the larger goal behind them – even those that are coerced.  Here are some recommendations to improve performance and enhance results.

Start with the right words.  This applies to all apologies, but especially those that will be memorialized online.  If someone is writing your apology for you, make sure it reflects the way you speak and the phrases you use. Don’t let someone else put words in your mouth that will be difficult for you to deliver. Especially to be avoided are words you don’t believe.

Ask someone familiar with the situation to review what’s been written. Do the words ring true? Can you deliver them with a straight face? Think back to the example a couple years ago when the CEO of United Airlines , Oscar Munoz, was forced to apologize for the police officers that dragged a paying passenger off one of its flights. “I apologize for having to re-accommodate that customer,”said Munoz – two days later. What does that even mean?. How satisfied do you think the affected passenger felt after receiving it? And what about the public, which now had just another reason to hold United Airlines in contempt?

Contrast the United Airlines situation with one that happened shortly after to an American Airlines passenger who was attempting to board a plane while holding two infants in her arms along with a stroller. An airline employee got into a shouting match with her and another passenger. Of course, the entire incident was caught on-camera with a mobile phone and uploaded to Facebook where it then went viral. Don’t remember that story? That’s because the president of United Airlines immediately issued an apology, an apology without equivocation. United Airlines’ story lasted weeks; American Airlines’ story lasted a day or two.

As you consider the content of your apology, beware of the false apology. “I’m sorry you feel that way,” is not an apology. Apologizing – without qualification – for what your or your organization did or the problems you caused is an authentic apology. The former will only make your victims more resentful and more inclined toward revenge or retribution. The latter may actually help you makes progress toward resolution of the problem your actions have caused. For a great short summary of the 12 kinds of fake apologies, read this article.

Get familiar with the medium.  No doubt you are using Zoom, Microsoft Teams or some other platform almost every day to conduct business. Staging an apology on Zoom requires a higher level of preparation. Make sure you are seated at the right height so you are looking straight into the camera and making eye contact with your audience. You want to be close enough to the camera to appear engaged, but not so close that you look as though you’re peering through a keyhole trying to intimidate your audience. Nor do you want to sit too far away, which gives the appearance that you are trying to distance yourself from your viewers – and perhaps subconsciously, from the issue at hand. Don’t let your eyes roam off-camera as though you’re looking for someone to rescue you. And, as anyone who has been media trained for a sit-down interview will also tell you, sit straight up and don’t swivel in your chair.

Set the stage. Lighting is critical to a good Zoom appearance. Avoid overhead lights that can create shadows on your face. Never sit in front of a bright window or other light source that will cast your face in darkness and likewise cast doubt on your character. Strive instead for a soft source of light to illuminate you from the front.  An inexpensive LED light can do the trick (for a few selections, click here).

Be very mindful of the background. What do the framed photos and art in the background say about you? If you’re apologizing for misspending someone else’s money, avoid pictures that show you in expensive vacation spots, enjoying the company of celebrities or otherwise telegraphing your bad financial management skills. Apologies should be delivered in neutral locations that will not generate envy, questions about your judgement or other distracting speculations about your personal life. Stick to pictures of the family, your pets, framed awards and other items that speak to your professionalism and values.

Lastly, make sure the door to the room you are Zooming in is closed and that those on the other side understand it is not to be opened until you do so. Spouses wandering in the background, small children climbing into your lap and a photobomb from the family pet will undercut the professionalism and solemnity you want for this critical communication.

Dress the part. What you wear for your Zoom apology should reflect the seriousness of the situation.  Dress at least one step up from the look you typically put on for day-to-day business meetings. At the same time, avoid an outfit that will make you visibly uncomfortable and distract from the important message you are delivering. Try to be rested before you confront the camera and do take a good look in the mirror before the session starts to make sure you are presenting yourself in the best light possible. And if you choose to wear shorts or sweat pants, you must make 100% certain they won’t be seen on the video, even inadvertedly.

Say it, don’t read it.  Apologies that are read from a piece of paper in your hand compel you to lose eye contact with the camera and your audience. If you can’t memorize your apology and deliver it without stumbling, consider attaching notes to your desktop screen (without blocking your camera) containing key phrases to prompt you through your delivery. Just be sure the type is large enough that you don’t need to tilt your head or squint to read it.

Practice and practice some more.  Ask someone you trust – ideally, someone who also understands Zoom – to hold a few sessions for the two of you so you can practice delivering your apology to a live audience. Ask your friend or colleague to give you a frank assessment. How do you look on camera? How is your delivery? Do you sound sincere, do you sound credible and, most important, do you sound sorry?

As we often tell clients, more often than not it’s not what you say, but the way you say it. Matching the right words with the performance techniques detailed above is the one-two punch that will make your apology believable.

© 2020 Hennes Communications. All rights reserved.
For more articles on the legal industry, visit the National Law Review Law Office Management section.

COVID-19 Liability: Practical Guidance on Risk Management for Horse Shows and Competitions

As COVID-19 continues to alter our daily lives, many of us have found comfort in barn time spent with our four-legged friends.  With so many spring and summer events cancelled, we are eager to get back in the saddle and into the show ring.  However, the legal implications facing horse show boards and competition venues are complex and ever-evolving. Which rules and guidelines apply?  What if someone at the show has or contracts COVID-19?  How do we manage (can we manage) the risks inherent in a pandemic?  This legal alert will explore risk management for horse shows in the age of COVID-19, including best practices, the efficacy of COVID-19 waivers, and prospects for statutory immunity.

Meeting Your Standard of Care through Best Practices

“Standard of care” is the legal yardstick by which we measure whether a person or business is acting in a reasonable manner.  If a business breaches or violates its standard of care and someone is injured as a result, a judge or jury can find that the business is legally liable to the injured person.  The best way for horse shows to meet their standard of care is to follow best practices in planning and preparing for events.

Best practices start with having a detailed, written plan for how the event will address and minimize the risk of exposure to COVID-19.  A good starting place is the United States Equestrian Federation’s (USEF) Emergency Response Plan, which walks through the types of things to consider when developing a plan specific to your event.[1]  But simply having a plan is not enough – you must implement and live your plan.  From a liability perspective, having a plan that is not updated, followed, or that is even intentionally ignored, is worse than not having a plan at all.

Your plan should comply with all applicable requirements and guidelines from your governing body or bodies.  If you are a USEF affiliate or hosting a USEF-rated competition, your plan must incorporate the mandatory requirements found in the USEF’s COVID-19 Action Plan.[2]  In addition, check with your breed/discipline association and your state and local government for requirements or recommendations.  For example, in Kentucky, three sets of state requirements could apply: Minimum Requirements, Horse Show Requirements, and Venues and Event Spaces Requirements.[3]  The state requirements overlap with each other and with the USEF Action Plan on topics such as maximizing work from home and electronic options, staff health screenings, face coverings, and social distancing, but the Kentucky Minimum Requirements also require items like a plan to ensure testing of symptomatic staff within a certain period of time and mandatory staff training on COVID-19 and the applicable state requirements.

As part of living your plan, you should consider how you will enforce it and then train your staff accordingly.  Both the USEF and Kentucky require the use of face coverings.  Both also require that shows ask an individual to comply and, if the person refuses (and is not exempt), either deny entry to the person or remove the person from the show grounds.  What is your enforcement plan?  Think in terms of a tiered system of soft and hard enforcement.  Soft enforcement includes making masks readily available across the grounds, signs, floor markings for social distancing, and routine announcements reminding participants and spectators of masking and other protocols.  If you’re seeing sloppy compliance or non-compliance, soft enforcement can also be in the form of show management holding (socially distanced) trainers’ or competitors’ meetings to reinforce the importance of following the protocols.  It can also come in the form of hiring off-duty, uniformed police officers, since their presence alone can encourage compliance.  Hard enforcement means denial of entry, asking someone to leave, and, if necessary, escorting that person from the premises.  If you see persistent non-compliance from a specific barn or group, consider whether hard enforcement might mean banning them from competition.  Of course, the goal is to avoid the need for hard compliance.  Consider training your staff on de-escalation techniques and push the themes of “we’re all in this together” and “we want to be able to compete, so please help us make this show happen.”

Finally, your plan should recognize what you do not know and plan for contingencies.  Revisit the plan as our understanding of COVID-19 evolves and as applicable requirements and guidelines change.  Since as many as 40 percent of COVID-19 cases are asymptomatic, encourage employees, volunteers, and contractors to take advantage of free testing in your area before, during, and after the competition.  Consider having staff operate in small pods with minimal face-to-face interaction with other pods.  This could minimize disruptions in the event a staffer becomes symptomatic or has to quarantine due to potential exposure or an asymptomatic positive.  Consider the conditions and circumstances under which you would cancel the show.  Will you rely on local positivity rates?  Will you consult with state and local health departments?  How far in advance do you need to make the call to be considerate to participants, sponsors, venues, and staff?  An insurance check-up – like an annual physical – is always a good idea, but this is especially so in the age of COVID-19.  Check your liability policy for language excluding claims related to communicable or infectious diseases.  If your policy excludes coverage for these claims (or if the policy isn’t clear on the subject), ask your agent if you can add coverage.  It may be cost-prohibitive to do so, but at least you will have a better understanding of your risk.  If you have event cancellation insurance, make sure you know what the policy covers and the type of documentation you will need if you have to make a claim.

Shows and competition venues should consider all of these factors when tailoring their individual plans.  While meeting the standard of care will not always deter claims or lawsuits, following best practices provides a solid starting point for your defense in the event of a claim.  It documents the careful planning, preparation, and implementation that went into making the show reasonably safe for participants and staff.

Should You Use COVID-19 Waivers?

COVID-19 waivers (“COVID waivers”) are an increasingly popular tool used by businesses in an effort to limit legal exposure.  However, like many popular trends, we have yet to see if the waivers have any staying power.  From a litigation perspective, there are serious questions about their enforceability.    Asking someone to waive potential claims related to “the inherent risks of being in public during a pandemic” is a much more abstract concept than asking them to sign the typical “inherent risk of equine activities” waiver.[4]  We do not yet know all or even most of the risks associated with COVID-19 and, as a result, courts may not enforce COVID waivers.  To compound this concern, courts in a majority of states (including Kentucky) have found that waivers signed on behalf of minors are not enforceable in at least some situations.[5]  Even putting enforcement concerns aside, COVID waivers – like most waivers – generally do not protect against gross negligence or willful misconduct.  In the context of COVID-19, this could look like a show that fails to follow their plan or a participant or staff member who knows he/she is positive and, nevertheless, comes to the competition.

Despite all of these challenges, a well-written COVID waiver can be useful to establish that a person was given fair notice of the potential for exposure and the potential risks of that exposure and chose to participate anyway.  If you decide to use a COVID waiver as part of your risk-management plan, consider including the following features.

  1. Draft the waiver in plain English with minimal legalese.
  2. Make the waiver a standalone document.  Avoid using combination waivers that lump in the standard equine activities language with vague references to “communicable and/or infectious diseases.”
  3. State the known risks of COVID-19 and the scope of the waiver in a clear and conspicuous manner.[6]  Does the waiver include claims arising from negligence?  Is it limited to the show board/committee, the venue, and staff, or does it include claims against other participants?
  4. One COVID waiver per person, signed by that person.  Do not permit trainers to sign on behalf of participants.  Develop a system for participants to access, sign, and submit the waiver online but avoid using fine print with a “Click Here to Accept Terms & Conditions” box.
  5. Use a specific waiver for minor children that requires the person signing to warrant and represent that she/he is the parent or authorized legal guardian.
  6. Use the waiver as a vehicle for compliance.  Consider attaching a copy of the show’s COVID-19 participant requirements and safety protocols.  Include language in the waiver that references those requirements and states that the participant acknowledges receipt and agrees to comply.

As discussed above, a well-written COVID waiver has uses beyond enforceability.  Even if a court finds that the waiver does not bar a claim, your show will still have important written evidence that the participant was warned of the risk in plain English and chose to participate anyway.

What about Statutory Immunity?

Several states and the federal government have enacted – or are considering – some form of statutory immunity to protect businesses from COVID-19 related claims.[7]  States like Kentucky limit that immunity to certain sectors, such as health care providers and PPE manufacturers.[8]   At least 10 states offer immunity to a broad range of businesses through heightened burdens of proof.[9]  For example, under Tennessee’s new COVID-19 Recovery Act, businesses are protected unless a plaintiff can prove (i) causation by clear and convincing evidence and (ii) that the business acted with gross negligence or willful conduct.[10]  The former will likely require proof of a verified, contact-traced outbreak at the business, and evidence that the plaintiff was at the business during a certain window of exposure.

While statutory immunity can provide some liability protection, horse shows should view it as a backstop rather than the centerpiece of their COVID-19 risk-management plan.  As with any immunity statute, COVID-19 immunity statutes will face court challenges on a variety of issues from the scope of immunity to the type of proof required to meet any exceptions.  Even if your state offers immunity for your event, it is not a substitute for careful planning and implementation of best practices.

Final Thoughts

Risk management in the age of COVID-19 is an ever-evolving challenge, but identifying best practices and putting them into action can help horse shows rein in potential liability and provide safe opportunities for competition.  Know the applicable governing body, state, and local requirements, be smart about how you use COVID waivers, and never rely entirely on statutory immunity.  It is impossible to eliminate all liability risks, but careful planning and living that plan give shows, venues, and equestrians the best chance for a return to safe and fun competition.

Footnotes

[1]See United States Equestrian Federation, COVID-19 Emergency Response Plan, August 18, 2020, available at: https://www.usef.org/forms-pubs/4Tog688hc10/covid-19-emergency-response-plan–

[2]See United States Equestrian Federation, COVID-19 Action Plan, August 18, 2020, available at: https://www.usef.org/forms-pubs/XhKGVYiiwTA/usef-covid-19-action-plan-for-operating

[3]See, e.g., Minimum Requirements for All Entities, Kentucky Healthy at Work Guidance Version 3.0, effective July 10, 2020, available at:  https://govsite-assets.s3.amazonaws.com/PuhOvvxS0yUyiIXbwvTN_2020-7-10%20-%20Minimum%20Requirements.pdf;  Requirements for Horse Shows, Kentucky Healthy at Work Guidance Version 3.0, effective July 10, 2020, available at:  https://govsite-assets.s3.amazonaws.com/1bjXrMecSSeEy8LR3mDk_2020-5-29_-_healthy_at_work_reqs_-_horse_shows%20draft%203.0.pdf; Requirements for Venues and Event Spaces, Kentucky Healthy at Work Guidance Version 3.0, effective June 29, 2020, available at: https://govsite-assets.s3.amazonaws.com/wHu3QCJdS6Bleg8gV5qR_HAW%20Venues%20and%20Events%20Spaces%20-%20FINAL%20-%202020-06-22.pdf

[4]See, e.g., KRS 247.4027 of the Kentucky Farm Animal Activities Act which endorses the use of waivers related to participation in equine and farm animal activities.

[5]See, e.g., Miller, as Next Friend of her Minor Child, E.M. v. House of Boom Kentucky, LLC, 575 S.W.3d 656 (Ky. 2019) (holding that pre-injury liability waivers for commercial businesses signed by a parent or guardian on behalf of a minor child are unenforceable under Kentucky law.)

[6]See Symptoms of Coronavirus, Center for Disease Control, available at: https://www.cdc.gov/coronavirus/2019-ncov/symptoms-testing/symptoms.html?utm_campaign=AC_CRNA

[7] Congress has considered legislation that would impose strict nationwide limitations on COVID-19 tort liability.  In anticipation of a “risk of a tidal wave of lawsuits” the proposed bill offers immunity for businesses, educational, religious and nonprofit institutions, local government agencies and healthcare providers for exposing people to COVID-19. SeeSAFE TO WORK Act, S. 4317, 116th Cong., §2 (2020), available at: https://www.congress.gov/bill/116th-congress/senate-bill/4317/text

[8]See Kentucky Senate Bill No. 150, March 30, 2020; see, e.g., states including Alaska (S.B. 241, enacted April 9, 2020), Massachusetts (S2640, enacted April 17, 2020), New Jersey (S2333, enacted April 14, 2020), New York (S75006B-A90506B-Chapter 56 (Section GGG),and Wisconsin (2019 Wisconsin Act 185, enacted April 15, 2020, as well as the District of Columbia (B23-0734), have enacted similar protections for healthcare workers and personal protective equipment manufacturers.

[9] Like the contemplated federal legislation, some states have already enacted legislation limiting COVID-19-related civil liability for a broad range of businesses.  See, e.g., Georgia (S.B. 359, enacted August 5, 2020), Kansas (H.B. 2016a, enacted June 8, 2020), Louisiana (HB 826, enacted June 13, 2020).

[10]See Tennessee COVID-19 Recovery Act (SB 8002/HB 8001), August 17, 2020.

© 2020 Dinsmore & Shohl LLP. All rights reserved.
For more articles on horse racing, visit the National Law Review’s Entertainment, Art & Sports section.

COVID-19 Update: CDC Order Temporarily Halts Residential Evictions Nationwide until December 31, 2020

In response to the coronavirus pandemic, the federal government, as well as many States, have enacted eviction and foreclosure moratoriums in an effort to keep homeowners and renters in their homes and slow the spread of Covid-19.  One such moratorium was included by Congress in the Coronavirus Aid, Relief, and Economic Securities (CARES) Act, which was enacted earlier this year.  The CARES Act provided, among other things, for a 120-day eviction moratorium for tenants who participated in federal housing assistance programs or who lived in a property that was federally related or financed.  The CARES Act eviction moratorium, which expired on July 24, 2020, prohibited landlords from commencing new evictions proceedings or charging late fees, penalties and/or other charges against eligible tenants for non-payment of rent during the moratorium period.

This week, citing concerns with the continued spread of Covid-19, the Center for Disease Control and Prevention (the “CDC”) issued a new order temporarily halting residential evictions nationwide through December 31, 2020 (unless extended).  The order would prohibit landlords, owners of residential properties, or any other person with the right to pursue an eviction action, from commencing eviction proceedings against any eligible non-paying tenant affected by the Covid-19 pandemic. The new CDC order does not, however, preclude evictions for reasons other than non-payment of rent or release qualifying tenants from their obligation to pay rent or to comply with the other terms of their rental agreement.  In addition, the order does not preclude foreclosures of home mortgages.

Unlike the CARES Act, the protections provided in the CDC order are available to all qualifying residential tenants and not just those tenants who receive federal housing assistance or who lived in a federally related or financed property.  In addition, the order does not prohibit landlords from imposing late fees, fines and/or from charging interest on unpaid rent while the moratorium is in effect.

In order to qualify, tenants must submit a “Declaration” to their landlord, the owner of the residential property, or any other person who has the right to commence an eviction action, claiming their eligibility under the new CDC order.  The declaration must include the following statements from each adult tenant listed on the rental agreement: (1) that the tenant has used his/her best efforts to obtain all available governmental rental or housing assistance; (2) that the tenant either (i) expects to earn no more than $99,000 (or $198,000 for joint filers) during the 2020 calendar year, (ii) was not required to file an income tax return with the IRS for the year 2019, or (iii) received an Economic Impact Payment under the CARES Act; (3) that the tenant is unable to make rental or housing payments when due as a result of a substantial loss of household income, loss of hours of work or wages, being lay-off or due to “extraordinary” out-of-pocket medical expenses; (4) that the tenant is using his/her best efforts to make partial rental payments, taking into account such tenant’s other non-discretionary expenses; and (5) that the eviction of such tenant would likely result in such tenant being homeless or such tenant having to move into a “closed quarters” shared living space.  Failure by any landlord to comply with the CDC order will result in criminal penalties.

The CDC order will only be applicable to those States, local, territorial, or tribal areas that do not already have an eviction moratorium in place that provides for the same or greater tenant protection than those provided in the CDC order.

© Copyright 2020 Cadwalader, Wickersham & Taft LLP
For more articles on real estate, visit the National Law Review Real Estate, Transportation, Utilities and Construction Law News section.

DOL Issues Additional FFCRA Guidance as Schools Reopen

On Aug. 27, 2020, the U.S. Department of Labor (DOL) issued three new Frequently Asked Questions (FAQ) related to the reopening of schools in various formats and employee paid leave eligibility under the Families First Coronavirus Response Act (FFCRA).

The FFCRA requires employers with fewer than 500 employees to provide up to 80 hours of paid leave to employees for certain reasons related to the 2019 novel coronavirus (COVID-19) pandemic under the Emergency Paid Sick Leave Act (PSLA) and expands the Family and Medical Leave Act (FMLA) to provide employees up to 12 weeks of emergency job-protected leave to care for a child as a result of school or child care closings due to a public health emergency. The recent FAQ address caregiver leave associated with the closure of schools, which, if eligible, entitles employees to two-thirds’ pay up to $200 per day ($10,000 in aggregate).

NEW FAQ ADDRESSING SCHOOL CLOSURES

The following is an overview of DOL’s three newly issued FAQ regarding school closures:

A child attends a school operating on an alternate day basis

The DOL confirmed in FAQ #98 that an employee will be eligible for paid leave on an intermittent basis to accommodate a hybrid school schedule whereby children attend school both in-person and remotely. For purposes of the FFCRA and its implementing regulations, the school is effectively closed on days that a child cannot attend in person and leave is available on remote-learning days. The DOL cautions in its guidance that even under these circumstances, leave is only available if no other suitable person is available to care for the child.

A parent chooses remote learning when in-person instruction is available

FAQ #99 makes clear that FFCRA leave is not available to take care of a child whose school is otherwise open for in-person attendance. As a result, if a child needs care because the employee chose a virtual or remote school option, the employee is ineligible for leave. The DOL notes, however, that if the child is home due to a quarantine order or has been advised by a health care provider to self-isolate or self-quarantine, an employee may be eligible to take paid leave to care for the child.

School begins with remote learning, but shifts to in-person instruction if conditions change

FAQ #100 clarifies that leave eligibility will change as schools adopt different teaching models. Using the example of a school that starts virtually with the hope of returning to in-person teaching in the future, the DOL explains that an employee will be eligible for leave during the remote learning period for so long as the school remains closed, but eligibility will end when the school converts to in-person instruction.

ADDITIONAL FFCRA RESOURCES

Consider reviewing the following resources to learn more about the FFCRA:

Copyright © 2020 Godfrey & Kahn S.C.

ARTICLE BY Margaret R. Kurlinski and Christine McLaughlin of Godfrey & Kahn S.C. 

For more on DOL guidance, see the National Law Review Labor and Employment Legal and Regulatory Law News section.