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Hartford Law Firms See Spike in COVID-19-related Business

This article was originally featured in the September 21, 2020 issue of the Hartford Business Journal. To view the original, please click here.

As business slowed down at companies across Greater Hartford in mid-March due to COVID-19-related shutdowns, it picked up significantly for Lisa Zaccardelli, a partner at law firm Hinckley Allen who focuses on employment law.

“I probably had one of the busiest years of my career in the labor and employment area, and I don’t see that changing,” Zaccardelli said.

She’s far from the only lawyer currently working at a fever pitch.

The overbearing backdrop of the COVID-19 pandemic has been one of consistent misery for many businesses: potential illness outbreaks, closures, layoffs, furloughs, bankruptcies, rent negotiations to avoid eviction, etc. But most of those issues involve some kind of legal dispute, so companies — and individuals — have been calling their lawyers. And attorneys seeing an uptick in business are predicting a further outbreak of lawsuits that could keep them busy for at least the next few years.

Toward the beginning of the pandemic, some practice areas at law firm Pullman & Comley LLC experienced a slow down as courts temporarily closed, said Robert Holzberg, a retired state Superior Court Judge who handles civil litigation at the firm, which has offices in Hartford, Stamford and Bridgeport. It didn’t last.

“The whole world froze in place but we have noticed a significant uptick over the past three months,” Holzberg said.

Pullman bankruptcy attorney Irve Goldman said his work volume has at least doubled — and possibly tripled — from the amount he’d expect in an average year. The reason isn’t very surprising: lots of pandemic-battered businesses are filing for bankruptcy protection. But even with a slew of high-profile bankruptcy filings already occurring at national brands like Pier 1 and J.C. Penney, Goldman said he thinks bankruptcies will pick up in the months ahead.

That’s partly because many smaller and midsize companies have been kept afloat by securing potentially forgivable loans from the federal Paycheck Protection Program. But that money is running out, and the business climate hasn’t improved much.

Nationally, the number of Ch. 11 bankruptcies filed through August — 4,780 — is up 28.2% from the first eight months of 2019, according to data compiled by the American Bankruptcy Institute.

Additionally, Goldman said, the federal CARES Act — which passed in March — includes a feature that expands the number of small businesses eligible for a relatively new type of Ch. 11 bankruptcy protection that is less costly and quicker than the traditional reorganization process.

The Small Business Reorganization Act of 2019 established rules that allow companies with debts of $2.7 million or less to apply for so-called subchapter V of the Ch. 11 bankruptcy code. The CARES Act expands those new protections to businesses with up to $7.5 million in debt, but only until March 26.

“You could liken it to when they passed the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005,” Goldman said of the law that tightened rules for filing personal bankruptcy, and led to a crush of Chapter 7 bankruptcy filings, as people tried to get their papers in before the law went into effect.

“I think [Chapter 11 bankruptcies] are going to spike higher,” Goldman said.

Evolving rules

Attorney Tanya Bovée, Hartford office managing principal of labor and employment law firm Jackson Lewis PC, said her employer clients have been constantly calling for advice about how to remain in compliance with state and federal COVID-19-related regulations, on everything from the amount of personal protective equipment they must provide, to whether they’re adhering to wage and safety rules.

“I think that the need for advice and counsel has gone up dramatically because so many employers are aware that they need to comply with so many different laws,” Bovée said. “It’s challenging for your average employer to navigate that.”

As courts open back up for non-criminal matters, Bovée said she expects even more lawsuits brought by employees suing over wages, termination or other work-related grievances.

The pandemic’s timing also dovetails with Connecticut’s 2019 Time’s Up Act, which expands employer’s obligations to prevent sexual harassment and goes into effect Oct. 1, Bovée pointed out. The law extends the statute of limitations for employees to file sexual harassment suits and allows the courts to impose punitive damages in discrimination cases, among other facets.

In addition to rising workloads in areas like bankruptcy and employment law, Day Pitney is seeing an uptick in real estate investor clients enlisting services, Managing Partner Tom Goldberg said.

It’s one of the practices where attorneys’ hours have spiked in tandem with the pandemic, because the same financial upheaval leading some businesses to shutter could create opportunities for real estate investors, Goldberg said.

“We are optimistic that as the economy starts to recover — or as we start to come out of the pandemic — that we are going to see a rise in business activity in real estate,” Goldberg said.

Day Pitney also has seen an increase in demand for services from clients seeking guidance about the CARES Act and loans through the U.S. Small Business Administration. As a result, the firm formed a five-executive COVID-19 taskforce to focus exclusively on those specific issues.

The uptick in COVID-related lawsuits appears to have staying power in the short term, at least in part because the pandemic has introduced so many unanswered questions, Zaccardelli of Hinckley Allen said. One example she points to is the expanded use of remote work platforms that could create liability surrounding cybersecurity.

“There are a lot of new businesses that are popping up in the virtual space, and there’s a whole host of issues that need to be resolved with online platforms,” Zaccardelli said.

But Pullman’s Goldman thinks that, while COVID-related lawsuits will take years to make their way through the courts, the overall spike in lawsuits will eventually die down.

“Certainly you’ll see some [legal] fallout,” Goldman said. “But I don’t see this as some sort of permanent increase.”

View the publication here.