The Pandemic Special with a Side of Shut-Downs: A Note on NYC's Restaurants in the Age of COVID-19

Abstract

SARS-CoV-2 is the virus causing the coronavirus disease (COVID-19). The World Health Organization (WHO) stated the virus originated in Wuhan, China. On March 11, 2020, the WHO declared COVID-19 a global pandemic. On the day of this declaration, New York City reported its first COVID-19 associated death. Three weeks after the discovery of the coronavirus, NYC accounted for 5% of the world’s confirmed cases, rendering the region a global epicenter. By May 2, 2020, New York City recorded 13,831 COVID-19 deaths, and estimated an additional 5,048 probable deaths. COVID-19 is infamous for its lethal effects: the Center for Disease Control listed COVID-19 symptoms that include “fever or chills, cough, shortness of breath or difficulty breathing, fatigue, muscle or body aches . . . . ” For individuals who are at higher risk of severe illness (young children, the elderly, and those with compromised immune systems), COVID-19 is deadly. Globally, and as current as January, 2021, the WHO reported 93,611,355 confirmed cases, and over two million deaths. When the pandemic struck the State of New York in March 2020, Governor Cuomo signed Executive Order No. 202, declaring a state of emergency. Shortly after this declaration, the Governor signed the “New York on PAUSE” Executive Order which required all nonessential businesses to shut down. Subsequent guidance clarified the meaning of “essential businesses,” which did not include restaurants. The COVID-19 crisis in New York City eviscerated most restaurants’ capacities to conduct their ordinary business activities. Even when New York City began entering its reopening phases, the economic ramifications of COVID-19 and the Executive Orders continued to pose unprecedented hardships for restaurants. Despite the substantial health risks of resuming restaurant work amidst a global pandemic, many restaurant owners concluded that reopening their businesses would be an unprofitable and dangerous affair. Accordingly, many restaurant owners diligently, although with great sadness, elected to close shop permanently. Commercial rent in Midtown Manhattan and throughout New York City is expensive. Rent may be as high as thousands of dollars per square foot. As such, the pandemic understandably caused landlords anxiety about lost income. Yet some landlords began pestering small business owners for rent. Beyond mere pestering, such landlords have threatened to sue for damages to recover the rent owed. This crisis ended lengthy, harmonious, and profitable businesses ventures. Amongst the myraid, unfortunate results of this pandemic, a new looming threat of unjust enrichment emerges. If landlords threatening to sue small restaurant owners for rent owed succeed, such owners would suffer a burdensome economic harm, in addition to losing their businesses. This crisis raises complicated questions of contract and property law regarding commercial leases in the event of unforeseeable emergencies: should defendants in breach of contract lawsuits be required to pay rent when performance of the paramount contractual terms, i.e., operating the business safely, become no longer possible? Does a global pandemic constitute an “act of God” which triggers force majeure clauses? And in the absence of such clauses, can the common law doctrines of impossibility of performance or frustration of purpose rise up to the defense of the small business owner? Can the State and City of New York solve this matter through legislation and ordinances? This Note explores these questions, while prescribing the need for force majeure clauses that clearly define pandemics and other imminent natural disasters as triggering events as the most powerful prospective solution. This Note will first discuss COVID-19’s impact on New York City from public health, economic, and administrative perspectives. The next part will delve into relevant pending legislation and enacted NYC ordinances that respond directly to the issue of commercial rent in this crisis. Part III discusses the state of the common law of contracts with respect to force majeure and impossibility of performance doctrine. Part IV includes legal analysis of four major areas of contract law in New York: impossibility of performance doctrine, force majeure, landlord-tenant obligations, and remedies. Fifth, the note will propose solutions to this crisis. Retrospectively, considering that many contracts do not presently include “pandemics” in their clauses, the impossibility of performance doctrine in the absence of force majeure can serve to protect small business owners. Prospectively, force majeure and material adverse effect clauses should specify “pandemics,” by constituting the strongest form of protection for any party adversely affected by unforeseeable, catastrophic events. Finally, the Note will conclude by summarizing the major arguments and themes, and will reemphasize the policy considerations of protecting small restaurant owners from unjust enrichments in the COVID-19 context.