Imagine what is happening in Texas business, large and small. Every business leader, from a Fortune 500 CEO to a sole proprietor of a neighborhood business, is looking out on a business landscape utterly transformed by events beyond their — or anyone’s — control. Those leaders are frightened and must make decisions quickly, with the survival of their businesses on the line.
I remember when Texas went through a crisis like this in 1986-88, when all the national banks but one failed, and all the S&Ls failed completely. Executives, twenty and thirty years older than me at the time, cried in my office because the government had sued them for alleged wrongs in looking after the financial affairs of their institutions. I recall bank officers, who were my friends, being rousted out of bed by federal agents serving search warrants at their homes.
Those powerful memories shaped me as a lawyer. Since then I have consciously — and probably unconsciously as well — built the law firm that should have existed then, and that now exists to serve Texas business today.
The next three or four years will not bring “normal” litigation. What is coming will be tough and brutal, as it was at the height of the 1980s banking crisis. The gloves come off and well-trained litigation teams with seasoned trial lawyers who have actually tried cases have to be in charge for any chance at success.
The claims will seem odd in the beginning. I already know that the “cookie cutter” work I see produced today from many firms is not where the coming litigation will be fought. Their “updates” and other such research is unsophisticated, plainly produced by people who have never been through a true crisis. I actually saw one called “tool kit” that had such uninspiring advice such as read your contracts.
What do we see coming? Here are just a few examples.
– Derivative actions will be brought against board members and officers of companies for not buying pandemic insurance policies, which were once relatively cheap and could have been purchased as riders on existing policies.
– Of course, there will be lawsuits against insurance companies based on existing business-interruption policies, as limited by the various “epidemic” and “Act of God” exclusions that likely slipped into form documents over time.
– “Force majeure” will become a phrase in the litigation of the 2020s like D’Oench Duhme was to the 1980s. And the real battles to be fought, just as with D’Oench, will involve the boundaries of force majeure claims. What if a contract does not have such a provision; is it implied by operation of law? If so, when? How does this concept carry over to the UCC? What notices and other procedural steps are necessary procedural prerequisites?
We are already starting to litigate novel responses to UCC impracticality notices, particularly in the oil field and oil service industries. And we start from an extraordinary intellectual foundation, because for years, unique among any firm in Texas or for that matter the nation, our firm’s blogs have reviewed and tracked every business-law case from the Dallas Court of Appeals and the U.S. Fifth Circuit. We are actively mining those years of data for the cases and ideas that will control how these issues play out in court. You could say that we are a trial firm that likes to read.
– Litigation will not just be looking backwards at contracts entered long ago. Decisions made today will be aggressively second-guessed in court. As just one example, private equity will be likely be frozen into investments for a long time, and those firms’ decisions about managing those investments — even those to place a company in bankruptcy — will be contentious and cannot satisfy everyone. Forceful misrepresentation and fiduciary-duty claims are a certainty.
We have focused our entire firm to prepare for the coming litigation wave. We are ready and this firm was built for crisis from the ground up. As our lawyers and staff work from home, we see ourselves in an out-of-town jury trial that just happens to be located in our home city of Dallas.
We are following a model, lawyer-by-lawyer, that we long ago perfected for our trial teams. By contrast, many larger firms, locked into high-price overhead and fixed habits about practicing law, are preoccupied with existential challenges to their very way of doing business rather than the problems of their clients in the Texas business world. In the end what makes this kind of litigation different is that the parties are fighting for their life. There will be survivors but there will be a lot of ones who won’t survive, and the difference may well be the skill and tenaciousness of the trial lawyers engaged.
Mike Lynn is the founder of Dallas litigation boutique Lynn Pinker Cox & Hurst.