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New Jersey Shareholder and Partner Disputes: Important Factors to Consider to Protect Your Business and Equity Interests

Goals That You Should Have In Mind

All too common and often is the unfortunate reality of facing a serious dispute with your business partners and shareholders. After establishing a successful New Jersey business and after having invested significant capital, time and effort, you are now faced with the necessity of protecting your business and equity interests. Presented with this situation, it is critical to develop a plan for (a) protecting your interests, (b) confronting and addressing the wrongful actions of your partners, (c) avoiding unnecessary litigation, and (d) if necessary, proceeding with a smart and cost effective litigation strategy. The positive news is that, if approached properly, New Jersey partnership and shareholder disputes may be effectively managed and resolved.

Important Factors To Know And Consider Include

  • A Resolution Will Be Reached. Although things may feel out of control or beyond the point of resolution, it is important to know that, if approached properly, there is a very good chance that your dispute will be resolved either "pre-litigation" or during the initial phases of a lawsuit - that is long before a costly trial. Discussions with your partnership lawyer should include a pre-litigation game plan focused on the legal rights set forth in your partnership or shareholder agreement (if you have one) and the substantial rights and equitable remedies afforded under New Jersey law. Understand that a resolution will eventually be reached, and your legal strategy should consider the possibility of positioning yourself to maximize a potential pre-litigation settlement and resolution.
  • Understanding the Role of "Cost Effective" Litigation. Litigation by itself and without a clear plan and strategy is a waste of both time and money. There is a place and time for litigation and, when approached properly, litigation may serve as the most cost effective option and tool available to you. Litigation works best and is cost effective when (a) faced with a partner or shareholder who is diverting corporate assets, funds or business opportunities, (b) when you are a partner or shareholder who lacks control of the business or, for one reason or another, you are at a negotiating disadvantage, and (c) when faced with the endless prospect of time consuming and unproductive negotiations.
  • Private Mediation (During Litigation) is Extremely Valuable. Far too often - after litigation is commenced - attorneys put on blinders where they consider nothing other than just proceeding with endless discovery and motions. Once litigation is commenced, assuming that it has been approached properly and aggressively, chances are that the playing field has been leveled or at least stabilized, and, at this juncture, you should discuss with your attorney the potential benefits of private mediation. Private mediation affords the parties an opportunity to consider settlement negotiations in a non-binding and informal setting where the parties meet and discuss the case with a neutral third party mediator. My experience with private mediation is that retired New Jersey judges do a good job of facilitating an effective settlement negotiations.
  • Remain Aggressive and Diligent. What I am referring to is your approach and your attorney's approach to both litigation and settlement. In terms of litigation both you and your attorney must aggressively and consistently meet all legal deadlines and, at all times, stay ahead of your partner and his or her attorney. Far too often attorneys get involved in litigation, are actively involved in the case at first and then they just ignore the case, miss deadlines and let precious time slip away. So stay aggressive with both your litigation and the pursuant, or at least considerate of potential settlement opportunities.

One interesting fact that I have consistently found to be true is that when you take an aggressive, non-yielding approach to pursuing litigation, more often than not, favorable settlements are reached. So, understand that there is a formula and plan that you should actively discuss and evaluate with your partnership lawyer. Your participation and input is critical.

Learn More

Order a complimentary copy of Mr. Internicola's book "The Partnership Dispute Guide". To learn more about your legal options when faced with a partnership, shareholder, or member dispute contact Mr. Internicola by email or phone at (800) 976-4904 or (718) 979-8688.

Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

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