COVID-19: Business Courts’ Response to the Crisis

Sign up for our Coronavirus roundup email.
Visit our Coronavirus resource page.

Seyfarth Synopsis: In the wake of COVID-19, courts that deal with a high volume of commercial litigation, including the U.S. District Court for the Southern District of New York, the New York State Commercial Division, and the Delaware Court of Chancery, are adjusting their practices and schedules.

Courts across the nation are making significant changes in their day-to-day procedures and calendars in an effort to curb the COVID-19 pandemic. A common refrain, and rightfully so, is that courts are now focused on essential needs rather than ordinary business disputes.[1] However, the financial uncertainty caused by the virus has created great concern for every sector of the economy. Parties in commercial litigation have been left asking when, and how, their cases will continue to move forward.

Each of the three courts discussed in this Legal Update—the SDNY, the New York State Commercial Division, and the Delaware Chancery Court—are known for their high quality service and large volume of business litigation, and, as of March 23, 2020, have issued standing orders of varying kinds making changes that will impact that body of litigation.

The SDNY Suspends Jury Trials and Focuses on Emergency Matters

The Chief District Judge for the Southern District of New York issued a series of standing orders which provide that the United States Courthouses in Manhattan, White Plains, and Poughkeepsie remain open, but physical access to those courts will be restricted to narrow categories of people as identified by the court,[2] and that, among other things:

• All civil and criminal jury trials in SDNY scheduled to begin before April 27, 2020 are suspended.
• Compliance with all trial-specific deadlines scheduled to begin before April 27, 2020 is at the discretion of the presiding judge.
• Jury trials that began prior to March 16, 2020, and have not yet concluded, are not impacted.
• Individual judges may continue to hold hearings, conferences, and bench trials in the exercise of their discretion, but are “strongly encouraged to conduct court proceedings by telephone or video conferencing where practicable.”[3]

In addition, SDNY issued a subsequent directive,[4] effective March 23, 2020, stating that:

• Civil Case Operations will proceed at the discretion of the individual judge. Importantly, in-court appearances will be “limited strictly to Emergency Matters, and even these should be conducted by teleconference or (if the presence of witnesses is required) videoconference if possible.”[5]
• All in-person civil proceedings will operate out of a limited specific number of courtrooms within the Thurgood Marshall Courthouse as well as the Charles L. Brieant Courthouse.
• For emergency civil matters, the emergency civil part will operate up until 4:00 p.m. daily out of the Daniel Patrick Moynihan or Thurgood Marshall Courthouses (depending on who is on duty) in Foley Square, including any argument on applications in civil matters for temporary restraining orders or other emergency relief. Any “[a]pplications to participate by teleconference will be entertained and decided by the presiding judge.”[6]

New York State Commercial Division Is Impacted by Statewide Changes

The Commercial Division has not, of yet, issued separate guidance, although several measures have been adopted by New York State court system, which impacts commercial litigations and that includes:

• All non-essential functions of the courts have been postponed until further notice.
• Pending trials have continued to conclusion, with no other civil trials to be commenced until further notice.[7]
• Effective immediately, “no papers shall be accepted for filing by a county clerk or a court in any matter” except for a few “essential” filings.[8]
• Additionally, on March 20, 2020, Governor Cuomo issued an executive order which, among other things, tolled “any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including . . . the civil practice law and rules . . . the uniform court acts, or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof” until April 19, 2020.[9]

In determining who currently has access to the courts, “essential” matters include, among other things:

• Mental hygiene applications and hearings, temporary orders of protection “including but not limited to matters involving domestic violence,” and emergency applications related to the coronavirus.[10]
• “Any other matter that the court deems essential.”[11]

Other than those matters that fall within the catch-all, it appears that no provision has been expressly made for business litigation in the New York commercial division. However, some commercial division judges have relied on the catch-all to continue with their operations remotely.[12] Manhattan’s New York County Supreme Court, Civil Branch, has advised that “essential applications” may include commercial proceedings. However, rather than the judge assigned to the case, an ex parte judge will assess whether an application is truly essential. In those instances, the court has indicated that these matters will be handled remotely through Skype Business.[13]

The Delaware Chancery Court Goes Virtual

On March 16, 2020, the Delaware Chancery Court issued a standing order implementing “enhanced protective measures” in the Chancery Court to “address the public health threat caused by COVID-19.”[14] Effective March 16, and continuing for 30 days, “all hearings and trials shall be conducted only by telephonic or other electronic means,” and if that is not practicable, the hearing or trial shall be continued.[15] While a party may request an in-person hearing by motion, “the moving party will bear the burden to demonstrate good cause for having an in-person hearing and that all other means of conducting the hearing are impracticable under the circumstances.”[16]

Furthermore, on March 22, 2020, Delaware Chief Justice Collins J. Seitz, Jr. ordered all court facilities closed to the public until at least April 15, 2020, noting that courthouse staffing across the state would be reduced to “focus on handling emergency and essential matters . . .”[17] In accordance with that order, on March 23, 2020 the Court of Chancery released a statement that it will be placing a dropbox near the entrance of each courthouse where the Court of Chancery operates to accept filings from individuals who do not have the ability to file documents electronically, asking anyone who utilizes that dropbox to telephone the court to let it know.[18] Cognizant that “many hearings and schedules will have to be adjusted, perhaps multiple times,” the Court noted that it will “be solicitous of granting any reasonable requests for extensions and we urge practitioners to be flexible and to work together cooperatively to do the same without the need for court involvement whenever possible . . .”[19]

Takeaways

Due to COVID-19, courts that deal with high volumes of business litigation are taking drastic steps to reduce unnecessary in-person contact, from New York’s federal and state courts effectively suspending non-essential matters to the Delaware Chancery Courts’ embrace of telephonic and virtual litigation. Some judges have embraced technology and are operating virtually. As courts and other government actors continue to address this unprecedented public health crisis, further measures may be implemented in the coming days and weeks. Please be sure to check the relevant courts’ website, the individual judge's rules or reach out to any member of the Seyfarth team for the most up-to-date information.

 

[1] See, e.g., Memo, New York State Courts (March 19, 2020), https://www.nycourts.gov/whatsnew/pdf/covid-memo-031920.pdf (“Judges and staff in all [open] courts are performing ‘essential functions’ – court functions that cannot be postponed without serious consequences to the parties involved”).

[2] McMahon, J., Revised Standing Order, M10-468 (March 16, 2020), https://nysd.uscourts.gov/sites/default/files/pdf/covid-19/Re_%20Entry%20into%20Courthouses%20(20%20MISC%20155).pdf.

[3] See McMahon, J., Standing Order, M10-468 (March 13, 2020), https://nysd.uscourts.gov/sites/default/files/2020-03/20%20MISC%20154a%20(002)%20-%20In%20Re%20Coronavirus-COVID-19%20Pandemic.pdf (incorporated by reference in Revised Standing Order, supra n. 2).

[4] Friedland, Edward, “Covid-19 Protocols,” SDNY (March 20, 2020), https://nysd.uscourts.gov/sites/default/files/2020-03/COVID%20Memorandum%20-%20FINAL.pdf

[5] Id. Even the Second Circuit has begun hearing virtual oral arguments, which will be livestreamed to the public, with its first oral argument teleconference on March 19 while the courtroom “sat empty.” See McParland, Tom, Oral Argument Teleconferences in Face of Coronavirus (March 19, 2020), https://www.law.com/newyorklawjournal/2020/03/19/maiden-voyage-on-a-stormy-sea-2nd-circuit-holds-1st-set-of-oral-argument-teleconferences-in-face-of-coronavirus/?kw&slreturn=20200221100645.

[6]Friedland, supra n. 4 at 2.

[7] Marks, J. “Updated Protocols,” New York State Unified Court System (March 15, 2020), http://www.nycourts.gov/whatsnew/pdf/Updated-Protocol-AttachmentA3.pdf.

[8] Marks, J., “Administrative Order of the Chief Administrative Judge of the Courts” (March 22, 2020), https://www.nycourts.gov/whatsnew/pdf/AO-78-2020.pdf. Id. at Ex. A.

[9] See Cuomo, Andrew, Executive Order Continuing Temporary Suspension and Modification of Laws Relating to the Disaster Emergency (March 20, 2020), https://www.nycourts.gov/whatsnew/pdf/EO-202.8-ocr.pdf.

[10] See supra n. 8 at Ex. A. See also Press Release, “Virtual Court Operations to Commence in NYC Mid-week,” (March 22, 2020), https://www.nycourts.gov/LegacyPDFS/press/PDFs/PR20_07.pdf (discussing commencement of virtual operations in New York City Criminal Court and New York City Family Court).

[11] Id.

[12] For example, New York County Commercial Division Justices O. Peter Sherwood and Andrea Masley have implemented new Part Rules in response to COVID-19 and the Commercial Division of the 8th Judicial District is continuing to permit counsel to contact the clerk’s office if they believe their matter is essential. See, Sherwood, J., Temporary Part 49 Rule Supplement (March 23, 2020), https://www.nycourts.gov/LegacyPDFS/courts/comdiv/NY/PDFs/part49-temporary-rules.pdf; Masley, J., Temporary Part Rules for Part 48 (March 20, 2020), https://www.nycourts.gov/LegacyPDFS/courts/comdiv/NY/PDFs/Part48-Temporary-Rules.pdf.

[13] See also Temporary Procedures, New York County - Civil Term (March 19, 2020), https://www.nycourts.gov/legacypdfs/courts/1jd/supctmanh/PDF/Temporary-Procedures.pdf.

[14] Bouchard, J., “Standing Order No. 2 Concerning COVID-19 Precautionary Measures” (March 16, 2020), https://courts.delaware.gov/rules/pdf/Court-of-Chancery-Standing-Order-No2.pdf at 1.

[15] Id.

[16] Id.

[17] See Press Release, “All Delaware Court Facilities Ordered Closed to the Public Until April 15, 2020,” (March 22, 2020), https://courts.delaware.gov/forms/download.aspx?id=120568.

[18] See Statement from the Court of Chancery (March 23, 2020), https://courts.delaware.gov/rules/pdf/Chancery-Stmt-re-Admin-Order.pdf.

[19] Id.