The ongoing global coronavirus outbreak has set off a domino effect of event disruptions that will have fashion and entertainment attorneys poring over venue, sponsorship and insurance contracts to assess the damage.
In the past week alone, the city of Austin, Tex., moved to cancel South by Southwest, while the eyewear trade show Vision Expo East, originally scheduled for later this month in New York City, was also canceled. Gucci canceled its 2021 cruise fashion show in San Francisco that was to take place in May, while Ralph Lauren said it would cancel its fashion show in April. Tokyo Fashion Week was canceled, and the retail event Shoptalk was postponed to September. And there is still speculation about how the 2020 Summer Olympics in Tokyo will be affected, though the International Olympic Committee has so far indicated plans to proceed.
Amid the string of cancellations, some attorneys are turning their attention to the rarely invoked “force majeure” clause, often nestled in the boilerplate language within business contracts, which could be used to give parties a way out of an agreement under extreme circumstances wrought by a “superior force,” as the term translates from French.
However, applying a force majeure argument in the context of an outbreak may be challenging, attorneys said. Contracts typically explain such clauses as applying to acts of terror, or acts of nature such as earthquakes and tsunamis. Illness outbreaks, on the other hand, are seldom delineated as a force majeure event in contracts, though brands could invoke the provision by trying to make the case that serious public health concerns forced their hand.
“You can’t hold the event without risk to health and human safety, would be the force majeure argument,” said Douglas Hand of Hand Baldachin & Associates LLP, who said his firm is currently advising several clients on contractual issues relating to cancellations resulting from the COVID-19 outbreak.
The World Health Organization, which declared the outbreak an “emergency” in January, said in a situation report Sunday that there were more than 105,000 cases of COVID-19, the disease caused by the coronavirus. Federal and state officials in the U.S., including the Secretary of the Department of Health and Human Services and the governors of California and Pennsylvania, have made similar “emergency” declarations in order to dispatch more resources toward fighting the outbreak. New York State also declared a state of emergency this weekend, and Italy locked down the Lombardy region and other provinces, impacting 16 million people.
In the case of SXSW, the city of Austin made the decision to cancel the event, which prompted the festival’s organizers to say in a statement Friday that “SXSW will faithfully follow the City’s directions.” On Friday, the city of Austin said that Austin-Travis County officials also declared a “local state of disaster,” which they said would help the city take precautionary measures ahead of this month’s festival season.
Official government responses can help companies argue that the outbreak posed a strong enough risk to forego a planned event, or show that they explicitly directed them to shut down an event, experts said.
“It would be helpful to have a designation as an emergency by a government entity or an intergovernmental agency,” said Susan Scafidi, director of Fordham Law School’s Fashion Law Institute. “It’s the strongest possible argument that your hands were tied, that the force was stronger than you, and you couldn’t help but cancel.”
Event organizing involves a slew of contracts between organizers, brands, sponsors, venues, caterers, event design and decor, hotels and travel providers. A fashion show, for instance, may also involve contracts with modeling agencies, while a show that required the production of samples would likely involve manufacturing contracts.
“Every possible moment in the event can be touched by an issue related to the inability to perform the contract,” Scafidi said.
But force majeure provisions are meant to address extreme circumstances that make an event impossible to proceed with, and not necessarily apply to proactive measures to prevent the spread of an outbreak or to cancellations that anticipate that guests may simply not show up, attorneys said.
Companies invoking the provision to justify a precautionary cancellation or postponement can try to negotiate with event partners, or end up having to make the case to a court or an arbitrator, experts said.
“Fear of pandemic is not a force majeure event and fear is not a legally enforceable reason to cancel an event,” said Steven Adelman of the Adelman Law Group PLLC, who concentrates on sports and entertainment law, and represents parties involved in event organizing.
Companies may also look to generalized cancellation provisions in their contracts that speak to deadlines for cancellations and refunds. Event organizers, in particular, may be looking through their event insurance terms to assess whether they already include some kind of infectious disease coverage. Since the outbreak, however, this type of disease-related coverage is rare to come by, attorneys said.
Beyond contracts and the law, there are social and relationship dynamics at play in such an unusual instance of a global outbreak that has affected more than 80 countries. Postponing an event rather than outright canceling could shield companies from more liability.
“There’s a difference between a pure cancellation and a postponement,” said Scafidi. “Even a venue that is protected by draconian cancellation provisions might be flexible if they think the event might be rebooked, or if it’s a prominent client. And no one wants to be in the headlines for being the airline that was impossible to deal with, or an extremely difficult hotel chain.”