May 26, 2021  |  Articles

Updates from Cades Schutte’s Coronavirus Response Team

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More than one year into the pandemic, with reopenings and vaccine rollouts moving forward, it appears that we are seeing the light at the end of the tunnel. The anticipated changes on the horizon may create even more legal questions. Cades Schutte’s Coronavirus Response Team, which was established to quickly and efficiently address the effects of COVID-19 on businesses and individuals, continues to provide support in many areas, including Bankruptcy and Creditors’ Rights; Corporate and Business Law; Education and School Law; Employment Law and Labor Relations; Estate Planning, Trust Administration, and Probate; Health Care; Litigation; Real Estate and Finance; and Tax. The following is a summary of some of the legal issues select Coronavirus Response Team members anticipate in the coming months.


Keep a look out for the Biden tax proposal legislation in 2021, which includes: (a) imposing the 12.4% social security tax (split between employer and employee) on income earned in excess of $400,000/year, (b) increasing the top individual tax rate from 37% to 39.6%, (c) increasing the tax rate on long term capital gains and qualified dividends from 20%to the ordinary income tax rate of 39.6% for taxpayers making more than $1 million/year, (d) disallowing the 20% qualified business income deduction for owners of S corporations, LLC, and partnership and sole proprietors making more than $400,000/year regardless of the type of business, (e) increasing the C corporation flat tax rate from 21% to 28%, (f) eliminating the real estate like-kind exchange tax deferral technique for taxpayers with income in excess of $400,000, and (g) reducing the estate and gift tax exemption from$11.7 million per person to $3.5 million per person, and increasing the top rate for the estate tax from 40% to 45%. With a blue sweep in the House and Senate, many of these tax proposals have a good shot at passing this year.

Chris S. Mashiba
Chair of the Tax Department


The effects of COVID-19 on litigation will likely be felt for years to come. In addition to the continued increase in remote technology for court hearings, depositions, and mediations, it is likely jury trials will continue to be delayed. We expect 2021 to be a busy year on the litigation front, with lawsuits over failed business transactions, force majeure clauses in contracts, business interruption insurance coverage, commercial lease issues, and alleged fraud related to government relief programs.

Lisa K. Swartzfager
Partner, Litigation

Bankruptcy / Restructuring

In view of the economic turmoil created by the COVID-19 pandemic, 2021 should continue to present challenging issues in the areas of bankruptcy and restructuring. Certain sectors such as retail, restaurant, hospitality, and travel may also see an increase in bankruptcy filings, loan defaults, and lease defaults. In response to the crisis, Congress, as part of the Consolidated Appropriations Act of 2021, temporarily modified certain rules under the Bankruptcy Code. For example, Congress temporarily modified the law relating to a tenant’s rent payments and the time period for assumption and rejection of commercial leases. This new law allows a commercial tenant experiencing “material financial hardship” due to COVID-19 to forebear its rent payment obligations until the earlier of 60 days after the filing of the bankruptcy case or the time within which a commercial lease is assumed or rejected under the Bankruptcy Code (extended from 120 days to 210 days). Congress has also enacted new rules governing preferential transfers under the Bankruptcy Code to assist commercial landlords. These new rules allow a commercial landlord to recover amounts due under its non-residential leases and negotiate related modifications without fear of having those funds “clawed-back” in the event its tenant files a bankruptcy petition within 90 days of that payment or modification (or within one year if the creditor is an insider or affiliate of the debtor). These new rules apply to payments or agreement modifications made after March 13, 2020 and will expire on December 27, 2022. However, it applies to bankruptcy cases filed before that date.

Theodore D.C. Young
Chair of the Bankruptcy and Creditors’ Rights Practice

Real Estate

While the economy is reopening and people and businesses are adjusting to the “new normal,” the impacts of the COVID-19 pandemic continue to be felt throughout the real estate sector. Sales transactions involving businesses and real estate remain active, however, the interpretation of force majeure clauses in contracts and leases, or what happens if an agreement has no such clause, remain hot topics and will require careful attention as clients prepare and protect themselves from future economic disruptions. Continuing uncertainty about the recovery of business revenue and jobs as well as state and federal relief programs presents additional variables to consider and model. We are diligently monitoring evolving federal and state laws, while tracking government relief programs including Paycheck Protection Program loans, rent relief assistance programs, CARES Act Provider Relief Fund, and the $1.9 trillion American Rescue Plan Act enacted recently to help clients navigate this complex environment.

Ryan M. Hamaguchi
Associate, Finance and Real Estate

This article was published as part of the Spring/Summer 2021 issue of ke kumu, Cades Schutte’s client newsletter. Read the full publication of ke kumu, which explores some of the laws unique to Hawai‘i.