The case in question has been winding through the
Cineworld walked away from its deal to acquire Cineplex in
Judge
Cineworld claims it had the right because Cineplex strayed from "ordinary course," when it deferred its accounts payable by at least 60 days, reduced spending to the "bare minimum" and stopped paying landlords, movie studios, film distributors and suppliers at the start of the pandemic.
Cineplex argues it fulfilled all of its obligations and continued with an "ordinary course" for the industry. It claims Cineworld did not have grounds to terminate the deal because there was a clause exempting outbreaks of illness or changes affecting the motion picture theatre industry from being considered "material adverse effects."
But Cineworld said the clause should have no bearing on the case because it terminated the contract because of Cineplex's inactions and not COVID-19.
"If the court says, 'I think this dispute arose directly as a result of the impacts of COVID and we're going to analyze what happened in that lens, everyone is going to be very fascinated with this court and will follow it," said
The case will be of interest because while there is plenty of case law dealing with abandoned acquisitions and other material adverse effects, the novelty of COVID-19 means there is little in terms of precedent for lawyers to rely on or use to predict the outcome of litigation.
Wilson is just starting to see cases in which courts are being asked to consider what obligations parties have in pandemic times, but anticipates the pace will pick up.
In particular, he thinks courts will see more cases involving a party that entered into an obligation or contract that looked like a good deal before the pandemic, but then found it was a bad deal once COVID-19 spread.
If the judge applies a COVID lens to the Cineplex case, Wilson thinks it could give many companies hope for their own litigation and result in the case being appealed. It could even go all the way to the
"But if the court simply says COVID has nothing to do with any of this. Good faith and fair dealing has nothing to do with any of this. This is just a case about financial representations and warranties... it's not going to be all that of interest to people," Wilson said.
However,
While Cineplex has been the big case to watch in
The two sides eventually reached a revised deal that saw
"There is a whole bunch of companies that are in this very pandemic-specific situation where deals were announced with terms that had one view of the world and then the world changed completely," Golubov said.
"Nothing made sense anymore out of those old plans and so for them, these cases are going to be particularly relevant."
The Cineplex case, he said, is also key for the theatre industry's recovery.
Both Cineworld and Cineplex reported multimillion-dollar losses in recent quarters.
Losing the case would deepen those financial troubles because Cineworld is seeking
Cineplex is also seeking compensation for the
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