When is a force majeure clause specific enough to excuse performance in the COVID-19 era?  We are about to find out.

The Republican Party of Texas (“RPT”) recently filed suit against the City of Houston and its Mayor, Sylvester Turner (“Mayor Turner”), Houston First Corporation (“HFC”) and its President, Brenda W. Bazan (collectively the “Houston Defendants”) for cancelling the contract to hold the Texas Republican Convention in Houston between July 13 and 18, 2020.  The City’s action came as Texas consistently posted (and, as of the date of this article, continues to post) over 10,000 new novel coronavirus infections per day, the Texas Medical Center (the largest medical complex in the world) has reported near-capacity conditions at its ICUs, and Governor Abbott has issued an Executive Order requiring the use of face coverings.

1.     The Background

 The Republican Party of Texas scheduled its semi-annual political convention at the George R. Brown Convention Center (the “Convention Center”) in Houston from July 13 to July 18, 2020. On July 20, 2017, to secure the use of the Convention Center for its use, RPT and HFC entered into a lease for the dates of May 11, 2020 to May 17, 2020 (the “Original Contract”). However, because of COVID19, on March 30, 2020, RPT and HFC entered into an amended lease (the “Amended Contract”) to secure the Convention Center from July 13, 2020 to July 18, 2020. The primary purpose of the convention is elect delegates to the Republican National Convention and electors to the Electoral College.

On July 8, 2020, HFC sent RPT a notice letter terminating the lease contract, citing the unprecedented scope and severity of the COVID19 epidemic in Houston, compounded by mounting scientific evidence of the significant risks by assembling a large indoor event as the basis for cancellation. One day later, RPT filed its lawsuit.

2.    The Legal Arguments

a. HFC

HFC relies on the force majeure clause contained in Section 12 of the Original Contract and Paragraph 3 of the Amended Contract as its basis for contract cancellation. We have previously discussed the potential applicability of force majeure clauses the COVID-19 pandemic.

HFC asserts that the definition of “force majeure” in the Original Contract includes “epidemics in the City of Houston,” as well as emergency governmental declarations and other occurrences of like nature. HFC further asserts that the Amended Contract clarified the force majeure definitions to include “pandemics affecting Houston or preventing use and occupancy of the [George R. Brown Convention Center]; and order materially and substantially restricting the size of gatherings at the facility.” Notably, the clause in the Original Contract and Amended Contract were written when the COVID-19 pandemic was already declared and, therefore, contain language that is more specific about epidemics than contracts written months or years before.

In its termination letter, HFC stated that the COVID-19 outbreak, its consequences (specifically the increase in cases in the Houston area since Memorial Day), and efforts by governmental authorities and public health officials to control the spread of the disease amount to force majeure under the Original Contract and Amended Contract.

b. RPT

 RPT argues, in part, HFC’s use of the force majeure clause is inappropriate pretext and politically motivated; and the Texas and US Constitutions protect RPT’s right to hold the convention. Since RPT and HFC can perform the contract, safely, RPT argues, HFC’s use of the force majeure clause is invalid on its face.

RPT claims that HFC’s termination of the Amended Contract was politically motivated.  It argues that the RPT has worked with the convention center personnel to implement common-sense safety measures to facilitate a safe and productive convention experience for the attendees.  It appears that RPT’s position is that Mayor Turner, a Democrat, did not want the Republican convention in Houston and used the pandemic as subterfuge to terminate the Amended Contract.

In language that is certain to incite and lend insight, RPT asserts that it has as much of a constitutional right to assemble in Houston as protestors recently exercised to protest against police brutality.  RPT alleges that both are protected political speech occurring in protected assemblies of people seeking to petition the government, protected under both the Equal Rights Clause of the Texas Constitution and the Right of Association and Right of Assembly under the US Constitution.

RPT claims HFC canceled the lease contract, not because the City of Houston cannot safely host the convention, but because the Houston Defendants do not want to perform, which according to RPT is not a valid reason.

3.    The Outcome

 On Monday, July 13, 2020, in a 7-1 ruling, the Texas Supreme Court dismissed RPT’s appeal seeking to hold the convention in-person. While the Texas Supreme Court agreed RPT has Constitutional rights to hold its convention; those rights do not allow RPT to “commandeer use of the [Convention] Center.” On the same day, the Harris County District Court ruled against RPT’s request for equitable relief, effectively destroying any chance for an in-person convention and prompting RPT, after a 53-4 executive meeting vote, to hold the convention virtually.

Although we have not read the Texas Supreme Court’s decision, we can expect the Court to have considered, among other things:

• • • Whether the spike in COVID-19 cases and the resulting consequences were unforeseeable;
    • Whether HFC and RPT are able to actually perform the contract; and
    • Whether COVID19 is sufficiently disabling to HFC to prevent performance of the Amended Contract.

 

Although the fight between RPT and HFC was not construction-related, the same principles would apply to force majeure clauses in construction contracts.

In determining whether a force majeure clause provides the protection you seek, it is always advisable to consult with legal counsel.  The attorneys in our Austin and Dallas offices are available to answer any questions you may have.

 

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