Commercial litigation starts usually starts off as a dispute among shareholders or partners of a small company or partnership. Almost to a man (or woman), these clients have one thing in common. The commonality is that they did NOT get appropriate legal work done at the inception of a business relationship with friends, family or third parties that they thought they “knew”. The start of a new business venture is exciting and thus, this excitement sometimes spurs people into thinking that they should just get the actual business venture started and the rest will take care of itself. The “rest” that they don’t want to deal with is the hardest, most tedious part; i.e., what entity structure will be used, who owns what percentage of the entity, who will govern and how, voting parameters, minority protections, termination of the relationship, buy outs, divorce, death, disability, penalties for failure to make additional capital contributions or breach of the contract, how to deal with bad actions, financial transparency, law to be used and venue. These are just a few of the hard parts that clients (and to be honest, most people) don’t think about. The fun part is making money and starting the venture when the ideas are flowing and celebration is in the air! However, it is precisely when a venture starts making money that greed, envy, control issues and other nasty problems begin to surface. And invariably, someone is getting the short end of the stick in terms of financial and voting control, financial transparency, and the like. So how to deal with a partner who will not account for the money, refuses to give you the books and records, or worse, says that these concern other investors and therefor all is confidential? Well, unless there are real parameters built into the governance documents, signed by all the business venture owners, the answer is expensive litigation. Even with governance documents, if they are poorly written, litigation is often the only way to deal with the stalemate between business owners. Litigation is very expensive. Contrary to what most people perceive, litigation is not Atticus Finch going to one hearing and arriving at the truth of the matter. Litigation involves discovery, production of documents, someone to do the analysis of the finances, court reporters at depositions, subpoenas, motions to exclude evidence or dismiss some or all of the case, motions too numerous to mention here, experts to testify about key issues, and lots and lots of client time spent dealing with the everyday decisions that must be made with his/her lawyer. And how does one pay for all of this? Contingency agreements in business litigation are rare, simply because it is client’s mistakes which make that unpalatable. Some of the blame for the situation is almost always resides with the shareholder or partner, if we are honest about where the trouble starts. So what to do? Hire THE SPENCER LAW FIRM and allow us to protect your business in any disputes you have against your other partners or shareholders.
by Bonnie Spencer | Nov 29, 2022 | Businesses