This afternoon‚ in the second day of trial of a partnetship and shareholder dispute‚ the case settled. The terms of settlement were actually much more favorable than my client wanted and‚ amazingly‚ did not require much negotiation. So‚ what happened?‚ what changed?
- Why was my client offered a much more favorable settlement / lower buyout terms today‚ than the many prior occasions when I attempted to settle the case (by the way‚ in this case I was representing the majority shareholder and our settlement involved a favorable buyout of the minority shareholders)?
- Why‚ by this afternoon‚ was my client offered much more favorable terms than those buyout terms discussed earlier in the morning?
ANSWER: Preparation. When parties get to the trial stage there is no more room for posturing or relying on questionable facts. Time and again‚ case and trial preparation will be as important to the outcome of your case as the actual facts. Consider that this preparation is a process that must offur throughout your lawsuit and while the majority of cases settle‚ if your case does not settle‚ both you and your shareholder attorney better be prepared to proceed with a succient and effective trial preparation.
SOME FACTORS TO CONSIDER‚ INCLUDE:
- Litigation and the "discovery process" (involving depositions‚ dociument demands‚ corporate records and valuations) must be understood and undertaken as a serious task that is necessary to prepare your case for trial. That is to develop and document admissable evidence and facts that will prove your case. It is critical to understand the significance of the discovery process since‚ in the end‚ it could make or break your case.
- CORPORATE RECORDS – If you plan on introducing and relying on corporate records‚ like records that contain shareholder loan records‚ bonuses‚ stock ownership‚ have you identified the location of these records‚ has you lawyer issued subpoenas to obtain these records and are they in admissible form. If you are relying on tax returns and records‚ has your attorney ordered "certifiedd" copies from the Internal Revenue Service? Also‚ if you are the party who kept and maintained these corporate records you must review the appropriate procedure for having these records entered into evidence at the time of trial.
- THIRD PARTY WITNESSES – Time and again‚ I am treminded how persistence pays off. Third party witnesses‚ like support staff‚ outside consultants‚ brokers and other third parties familiar with your partnership and business dispute may be critical to proving your case. Far too often‚ attorneys overlook third-party witnesses who may reveal information decisive to your case.
- BUSINESS VALUATIONS – In cases involving shareholder and partner buyouts‚ liquidation and minority shareholder oppression‚ business and share valuations (prepared by a licensed and certified accountant) naturally‚ are relevant and an important step to take. However‚ be aware that "not all valuations" are created equal and‚ many times‚ perople rely on valuations that are prepared based upon incomplete data and inadequate accounting methodologies. I have seen many attorneys and adversaries rely on expert valuation witnesses who‚ ultimately‚ fall apart during trial. That is their testimony is discredited and their valuation rejected.'
WHY IS THIS INFORMATION IMPORTANT?
Because if the first time you learn about these missteps is at the time of your trial‚ then‚ I would‚ assume you will have learned the hard way and at great expense. If you are faced with a partnership and shareholder dispute and have not yet started a lawsuit or‚ your lawsuit is at the inception stage then consider and understand that the discovery process is critical and not "just some legal steps" to be followed until someone settles or you go to trial. Always engage in a cost-benefit analysis and consider that if you are not serious about your lawsuit and if your lawyer is not absolutely persistent in building your case‚ then in the end‚ your losses or limited recovery may far outweigh the money you may or may not have saved in cutting corners during the litigation process.
I am an advid proponent of settling cases. But to effectively obtain a settlement that will benefit you‚ you must be persistent and actively engage in the discovery process. In the case that we settled today‚ certain steps (third-party depositions‚ filing of pre-trial motions and a detailed document review process) turned up evidence that our clients never imagined existed. Its amazing the things you find why you actively search.