Anticipating and Mitigating the Coming Wave of COVID-19-Related Litigation and Government Enforcement Actions

Ruth Rauls, Partner, Saul Ewing Arnstein & Lehr, LLP, and Justin Danilewitz, Partner, White Collar and Government Litigation, Saul Ewing Arnstein & Lehr, LLP discussed COVID-19 litigation, including exposure risks, damages, and potential mitigation efforts during a Risk Readiness Special Coverage webinar.

Across all industries and practice areas, attorneys are predicting a wave of litigation and government enforcement actions stemming from the COVID-19 pandemic. Indeed, the first indications of a groundswell are already apparent, with both newly filed COVID-triggered private civil complaints and the first COVID fraud-related criminal prosecutions already underway.

On the enforcement side, prosecutors and regulators are responding to a variety of fraud schemes, including fraud and abuse in connection with the federal stimulus funds available under the CARES Act. Meanwhile, all of this is occurring against the backdrop of new state and federal legislation creating a legislative minefield for compliance professionals.

The speakers discussed the potential for an epidemic of fraud given the toxic equation of drastically deteriorating economic conditions, the $2 trillion stimulus package, and unemployment numbers consistent with those seen in the Great Depression.

Specifically with regard to SBA and PPP fraud risk, borrowers should have documented evidence of good faith certification for loan funding and provide accurate books and records of how funds were spent. Lenders need to conduct their own due diligence and good faith review of borrower representations and continue to follow standard compliance best practices (BSA/AML) and KYC policies.

On the civil side, potential claims will run the gamut, touching on employment-related issues and newly created statutory rights. With the overnight transition to remote working and the unexpected need to lay off or furlough large numbers of workers, employers can expect to see a variety of Fair Labor Standard Act claims and potential WARN Act violation allegations, both of which are uniquely situated for class and collective actions.

The speakers advised that although situations are fact specific, the COVID pandemic does not require a sea change in traditional risk mitigation approaches. With the speed at which new laws are emerging, employers need to stay up to date and understand the laws so that they can be knowledgeable about the decisions they are making and flexible to changes.

A recording of the webinar is available for download here.