Coronavirus Cancellation and Attrition Liability Must-Knows

Editor’s note: This information was accurate at the time of recording, February 28, 2020. We are monitoring and updating as new information is available.

Coronavirus, or COVID-19, is causing fear in the meetings, conventions and incentives industry, even through the full extent of its health risks are not yet defined.

Major conventions in the Asia-Pacific region, as well as Europe and even the U.S. were cancelled because of a drastic cut in airlift, company policies against traveling and the possibility that attendee fear will cause a dramatic decrease in attendance.

Meetings Today’s Tyler Davidson talked with leading meetings and conventions industry attorneys Joshua L. Grimes, with Grimes Law Offices, and Tyra Warner, a professor who teaches on legal issues at the College of Coastal Georgia, about what meeting planners need to know about the major issues wrapped up in coronavirus, including the legality and practicality of trying to invoke force majeure clauses, attrition issues and the legal liability of not taking action.

Whether your organization has a comprehensive risk management plan to help it navigate incidents such as virus outbreaks or other disasters, the growing list of major convention cancellations in the wake of COVID-19 should give us all pause as well as being served notice that we need to prepare. Listen now.

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[Start transcript]

Tyler Davidson: Hello, and welcome to this Meetings Today Podcast, kind of a special broadcast podcast today on the coronavirus, which really [has] the potential to decimate the travel industry, meetings industry and business travel. And I think we've seen what it's done to the stock market—and if you have a 401k, don't look at it, I guarantee it'll all come back.

But we're here with Joshua Grimes, with Grimes Law Offices, and Tyra Warner, from the College of Coastal Georgia, two of the really leading attorneys covering the meetings and events industry. Thanks for joining us.

Joshua Grimes: Thank you.

Davidson: And I'll just start off here, just to kind of set the scene. I know there's the Global Business Travel Association poll that is estimating that the potential losses of the coronavirus, aka COVID-19, could amount to more than $46 billion a month. Business trips to Asia-Pacific are down by almost half, and 23% of companies reported canceling business trips to Europe.

I know here where I'm at in San Francisco, the mayor has declared a state of emergency—really, people say to kind of grease the skids to perhaps get federal funding—but I know there's just too many conferences and conventions that have been canceling to even keep track of, but a few of the big ones are the International Medical Device Regulators Forum in Singapore; Goldman Sachs canceled its annual partners meeting. The world's largest mobile telephone conference, Mobile World Congress, in Barcelona cancelled. The International Trademark Association in Singapore; their annual meeting is no longer.

So, you know, the dominoes seem like they're falling, especially in Asia-Pacific. But I know in the U.S. there are a lot of reported cases. So let me start off with whoever wants to jump into this mess and tell planners what they should be thinking about, especially from a legal perspective. What should planners be thinking about?

Grimes: Tyra, why don't you start?

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Tyra Warner: Okay, I'll be happy to. Well, I think the big thing on everybody's mind, you know, right out of the gate, is can we terminate our contracts without liability; that is, does coronavirus create a force majeure situation for us? You know, that's the first thing that I've been hearing from planners.

(Photo: Tyra Warner, College of Coastal Georgia)

My advice to planners has been you really need to look at that force majeure clause and remember that the force majeure clause as far as terminating your contract without liability—that is without having to pay any kind of cancellation damages—only applies if coronavirus, or COVID-19, makes it truly illegal or impossible. Or, depending on how your force majeure clause was written, makes it impracticable for you to hold the meeting or for the facility to host the meeting. So, for these conferences that are being held in Asia, in Singapore, or, you know, in China or somewhere like that, then you can see the direct effects a little more.

You know, for a conference that's in Cleveland—maybe not quite so clear that it's actually making it illegal or impossible. This is where I'm seeing instead of actually the coronavirus making it illegal or impossible, we're looking more at the fear of the coronavirus making people afraid to go to conferences. And here isn’t a force majeure.

Grimes: I think that's right. Now, I would just add on to that. And let me say, one of my clients was a major exhibitor at the MWC [Mobile World Congress] conference in Barcelona, which got canceled, so I got thrown into this, and I've had to try and pick apart a number of challenging force majeure clauses. So it's through trial by fire, maybe if you want to call it that, that I found a few other ways to look at this in addition to Tyra’s good points.

First, I would say at the outset, Tyra’s right; you need to read your contract clauses, your force majeure clause, but in addition to that, talk to your meeting partners, your vendors, your hotels, the others that you're working with, because you're not going to be the only one probably in the situation that you're in, where your meeting is being cancelled. There's probably others similarly situated. And there already may be a policy that the suppliers, and frankly other planners or other meeting hosts, have worked out.

In addition, I would look hard into the wording of your force majeure clause. As Tyra said, they're all different, but many of them include an ability to cancel without liability if the meeting can't go forward because of a government regulation. And, arguably, if your meeting is such that many of your attendees are from a country where people aren't allowed to travel from because of government regulation, like China right now, that may be a force majeure that may be less than obvious because we're not used to invoking that portion of the force majeure clause.

In addition, many countries and every U.S. state has a statutory force majeure law that may go beyond what's in your clause. So in the case of the MWC conference in Barcelona, the Spanish Civil Code, I believe, offers some relief outside of the contract. So I would just urge people to look at what may not be so obvious in their force majeure clauses, and also in the law of the place that they're meeting, to see if that gives you any additional leverage to get out of a contract.

Davidson: And I would just add, too, that San Francisco has just declared a state of emergency, and I know Facebook canceled its F8 conference here. How does that figure into anything like this, if a jurisdiction maybe announces a state of emergency?

Warner: Go ahead, Josh.

Grimes: Well, I think it depends on the particulars of that. If they're saying that people shouldn't meet, like some countries I know--and I'm not familiar specifically with what San Francisco has done—but some countries have banned gatherings of more than 1,000 people, which could have impact—if Japan were to do that it could impact the Olympics, or could impact a lot of sporting events or other gatherings.

(Photo: Joshua Grimes, Grimes Law Offices)

If that's what's happened, then a governmental action or regulation has made the meeting impossible or illegal. So that would clearly be a force majeure. If they're just saying, ‘Well, we're declaring an emergency because we want people to do things like wash their hands and not gather in big groups, and if you feel sick, you should do this or that,’ but they aren't actually banning a meeting, it would give you less leverage to cancel for force majeure.

Warner: And it also raises a good issue. You know, one of the things that I've found in some of my clients’ force majeure clauses that they've asked me to review are some of their force majeure clauses are a little more vaguely worded. And instead of talking about governmental travel regulations, they just say travel bans.

And so they're trying to say that their own companies have declared travel bans, and that should be a reason for them to declare force majeure, and I try to explain to them that that would be like me saying, ‘I'm not going to allow myself to travel to Dallas, and therefore I have to be able to get out of my plane ticket without any penalty.’

Of course, you can't declare your own travel force majeure. So I would say that's another thing to sort of be wary of, is if your own company declares that you're not allowed to travel somewhere, that probably isn't going to count as a force majeure.

Grimes: But again, and Tyra pointed this out, a force majeure; it generally has to be something outside the control of one of the parties seeking to invoke it. So if it's a company policy that people can't fly, I don't believe that that would work to excuse performance.

But, for instance, the situation right now as I understand it, is most airlines have stopped—if not all of them at this point—have stopped flying from China, including some of the Chinese airlines. So that would be cessation of transportation services that would be a force majeure. It just can't be something that the party invoking it seeks to use to excuse performance.

Warner: Right, and I think, too, an important point—and Josh, I think I've seen you make this point in some articles that I've read that you've been quoted in—is remembering that this force majeure language doesn't just apply to an all-or-nothing situation on these conferences, that it may also apply in an attrition-type situation where there's a reduction in numbers.

Say that you go on with a conference or convention but your numbers are down because, you know, the people who are supposed to come from Asia are unable to come, or in some cases as I'm hearing, being asked not to come. And so there are times that the force majeure clause may excuse that partial performance, and/or event cancellation insurance kicks in for some of these occasions as well.

Grimes: And I think that's a very good point in that force majeure generally excuses performance—can excuse performance—in part and not totally, so a properly drafted force majeure clause—and I would say particularly after this experience—when people look at their clauses, if I were redrafting one for the future I would include expressly a part-performance situation like Tyra just discussed.

So maybe you can't get the numbers that you were hoping to get but you could still perform with a lesser number, and because of force majeure not have to pay attrition.

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Davidson: Interesting. And have you heard about how long this may last? I believe that the CDC and the World Health Organization said it could last up to a year. And I know there's been conferences in April, late April, that are being canceled. What are you hearing out there? And how does that sort of work into the outlook on the legal front?

Grimes: Well, I guess I'll start on this one. I'm not sure that anyone knows. I've heard the same things that you just mentioned, Tyler, but on the other hand, I just read an article saying that one of the major hotel companies is going forward with opening some new hotels in China in the next few months. So I don't think people know. I think the key is to be prepared.

If I were signing a hotel contract today—or, frankly, anytime in the future—I’d take a long hard look at my force majeure clause and see if it covers, based on what I know now with this experience, to see if it would cover my group adequately in the future. And also, you talk to your partners in the meeting—your venues, your hotels, your other suppliers—because they've been through this same experience, and it may be easy to get everyone on the same page because the tendency might be to say, ‘It's uncertain, so we're just going to cancel,’ but I don't think anyone wants you to cancel if you don't have to.

Warner: Right. You know, I think there's so much speculation right now. I mean, you know, even the health professionals are scrambling to figure out what's going on. I think there's some speculation that like flu season, there will be a season where this is a big problem and then it'll fade into a smaller problem. And then there's some concern that it's going to be a worldwide pandemic that's just going to continue to be an issue.

But I think one of the things that I would stress to planners—meeting professionals of all kinds—is let's learn from this. I mean, everybody's treating this like it's a novel, brand new, one-of-a-kind kind of issue, but if you look back, even through your own archives, Tyler, of your own magazine, coronavirus is not the first thing like this to come along.

People have really short memories. There was SARS, there were cases of Ebola, there was Zika virus; there's always things like this, so it's not how long is coronavirus going to be around, it's what's the next thing that's going to be around the corner, and let's start crafting really good contract language for the next thing we don't know.

Davidson: And are you noticing, say with your clients or what you're hearing out there in the industry, that meeting and event planners and organizations are becoming more aware of this, or is it going to go away, hopefully, and things will just go back to normal and they won't think about it till the next time something happens.

Grimes: Well, I've gotten a number of requests to review force majeure clauses in the last two or three weeks, so I think people are looking to go ahead. I mean, quite frankly, I'm more concerned right now about the economy, which I hope bounces back quickly. But I think the possibility of an economic recession could be a bigger, long-term cramp on the meetings industry than this.

Davidson: Yeah, I was talking to someone yesterday and she said, ‘Well, look for the Quarter 2 GDP. She was hearing that it could decrease by as much as 2%. Because when you think about it, where does all our stuff come from? China, right? And there’s factories that are closed there now.

Warner: That's right. If we all think back to 2008, 2009, and what we all went through then—I won't speak for you fellas about who remembers the effects of that. We do have to think about the next thing that's around.

But I do feel, Tyler, that we do in this industry tend to have very short memories, so there will there be a blip—and I can say this now that I'm more of a professor than I am an active lawyer—I think there's a surge and, ‘Oh, I need to call my lawyer and get help with this,’ and then it sort of fades off until the next event, and I wish that meeting professionals would consistently see the value in preventative measures like reviews of contracts and preventative measures instead of after something happens and then trying to get help.

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Grimes: Yeah, I think that's right. And I would say that, you know, I review my sort of standard clauses—to the extent that I call anything I do standard. In fact, I have changed my suggested force majeure clause based on this experience, and six months from now there may be another experience that would cause me to amend it. So it's really a good reason to look at your clauses.

If I could just say something else real quick, because Tyler, you brought up a point that is something I talk about when I speak to industry groups, and it brings it out. You said, ‘How long do we think this is going to last?’ And the answer, of course, is we don't know.

But it brings up sort of a pet peeve I have with some force majeure clauses I see. Some of them say that if a party wants to cancel for a force majeure, they must do what within 10 days or 20 days of when the force majeure occurrence happens. So if there's an earthquake, you need to notify the hotel within 10 days that you're going to cancel. Well, in this situation, if that were the case, that would mean every group that's meeting at a hotel in the next two or three years, or whatever, would have to decide to cancel today, or in the next 10 days.

I don't see what the point is of that. In most situations there's an advantage to letting things play out, because this situation could improve in the next, you know, month or two months. And the catastrophe we're having now will subside and there will be no reason to cancel, but if I have a meeting nine months from now and I need to make a decision within 10 days, I might choose to cancel. So if you're going to include that kind of deadline on invoking a clause, I would think long and hard about it, about whether it makes sense.

Warner: That's a really good point, because that's language I usually include in a force majeure, and it makes sense in an immediate event like a hurricane or a tornado or whatever, but it sure doesn't make sense in this occasion, which goes to not just dropping in standard clauses, but really thinking it through.

Grimes: Well, as I say, I think you learn something from every experience. And there's an example maybe of where that happens.

Davidson: I don't know if you guys have anything else to add, but before we sort of wrap up, I would be remiss to not reiterate what the World Health Organization has said, especially to people who operate hotels and meeting facilities, on the importance of having sanitizing hand-rub dispensers in prominent places, letting people know to wash their hands, and that includes people working at the venues, contractors, and making sure to continually educate everyone who comes to a large gathering, such as a meeting or event.

And I don't know if you guys have heard anything else out there about precautions that people should take?

Grimes: Well, I think that you’ve hit the nail on the head. There are two reasons for it. One is because it's a good idea and it protects the health and well-being of your attendees. But there's also legal reasons, because you don't want to get accused of someone getting sick at your event. I think those are all very good suggestions of precautions, and frankly, if attendees have confidence that you've addressed some of the health risks by making sure the hotel cleans things regularly and appropriately, and there's hand sanitizer around, it gives your attendees confidence that they can attend without being overly concerned.

Davidson: Great. Well, thanks. Anything else you guys have to add about this subject? I think we covered it pretty good, and I really do think this is a fairly unique occurrence that kind of gives everyone pause, and to look to the future for when something else like this inevitably crops up.

It’s not something necessarily like a hurricane that comes and is over and everyone recovers. Who knows how long this is going to last? Who knows if it's going to mutate into something else? Who knows what the next thing is from a health standpoint that's going to come up? So, thank you guys for joining us. I really appreciate it.

Warner: Thanks for having us.

Grimes: Absolutely.

Davidson: And thank you all for listening to this Meetings Today Podcast. I am Tyler Davidson, vice president and chief content director. Thanks again to Joshua Grimes and Tyra Warner, and head on over to our website at MeetingsToday.com. We also have great risk management [articles]—and a few articles specifically regarding COVID-19—from Brenda Rivers. So there's some great, very actionable tips there that you can check out.

So head on over to MeetingsToday.com. We also have our podcast section if you liked what you heard today, with many other topics from industry leaders that have been discussed. So thanks for joining us and have a wonderful rest of the day.

[End transcript]

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