What Are Your Legal Options When Faced with a Partnership Dispute?
When faced with a shareholder or partnership dispute, your best best course of action will be a “proven course of action” that first identifies the facts concerning your partnership, the legal rights associated with your partnership interests and the actions of your partners. Once the "partnership playing field is assessed" action will be required to "rebalance the negotiating playing field" by adopting a litigation strategy focused on action and pre-emption.
When speaking with your partnership lawyer, understand that there is a proven course of action - I know because over many years I have seen and used it in action. How this proven course of action is adopted and utilized will depend on facts specific to your dispute.
The following are some factors that will influence a course of action that is right for you:
- Percentage of Equity Interest. Are you a minority partner (less than 50%), an equal partner or a majority partner? Your legal rights and legal strategy will vary depending on your status as either a minority, equal or controlling partner. Each status – minority, equal and controlling – have their own litigation advantages and disadvantages.
- Control of Critical Assets. Whether or not you control or possess significant influence over critical business assets of the business. The assets I am referring to are typically not the tangible assets but rather the intangible relationship type assets and relationships that involve customers, suppliers and critical employees. Your control over these assets will greatly influence and determine the right course of action for you. While it is always better to control these assets, if you don’t, there are absolutely proven courses of action that may be taken to “rebalance” this playing field.
- Agreement Provisions. The terms of your partnership, shareholder or member operating agreement will naturally influence your legal rights and legal strategy. The most common agreement provisions to look out for relate to voting rights, majority rights, dissolution, non-competition, arbitration and buy-out rights. Less common but definitely important are agreement provisions that identify specific duties of partners, officers or directors and provisions that guarantee or fix an individuals employment status and/or roll as an officer or director. Although agreements are important, if structured properly, there are proven courses of action to help mitigate against an Agreement provision that may be detrimental to your current negotiating position.
- Pre and Post Dispute Actions of Your Partner. Partnership disputes follow consistent patterns of behavior that involve the actions or inactions of a particular partner. Actions undertaken by your partner will play a critical role in how your rebalance the playing field and develop an effective litigation strategy. These actions will, almost always, play the biggest role in your litigation strategy and I can tell you that, more often than not, this is where many cases are won or lost. A proven course of action requires that you consult with your attorney to strategically gauge your actions and to honestly document the improprieties of your partner through accurate business communications. Note: I am not talking about lawyer letters.
- Your Goals. Whether or not you wish to maintain your equity interest, structure a favorable buyout of your equity interest or the equity interest of your partner, dissolve the business or establish a new competing business. Your specific goals must play a critical role in the planning and structuring of your negotiation and litigation strategy.
To learn more about a proven course of action and plan to protect and defend your interests as a New York or New Jersey partner, shareholder or member, contact partnership and shareholder lawyer at 800.976.4904
The Partnership Dispute Guide
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