Uncategorized / 05.15.2014

Partnership Disputes: Some Keys to a Favorable Resolution

Samir Dahman and the attorneys at KJK regularly represent parties in partnership disputes, which are basically business divorces.  As often occurs, partners that were once in agreement can no longer continue to operate together, as both sides feel they are being slighted.  While handling such cases, there are several essential factors that contribute to KJK’s success and that are important in any partnership dispute.

Partnership Agreement

  • First, and perhaps most obviously, the existence of an agreement or contract which forms the partnership is vital to successfully fighting for a client’s rights in a partnership dispute.  This could vary from a detailed contract between partners to an operating agreement in an LLC to a simple email outlining the general terms of the agreement.  Even informal or oral arrangements between partners can be enforced.  In whatever form it takes, this contract and the existence of a partnership is vital to any claim that may be made.  Claims for breach of contract, unjust enrichment, and breach of fiduciary duties of care and loyalty all hinge on having a current and enforceable agreement among the partners.
  • Ideally, partners can resolve their differences before getting lawyers involved, and if not, with lawyers before filing suit.  Because of the cost, time, and stress of litigation and potential damage to a business, alternatives to litigation should be considered.

Litigation

  • In the event pre-litigation efforts fail, a cogent, detailed, and well-researched complaint is pivotal.  A good complaint communicates strength, preparation, and resolve.  Sometimes, such a move will push unwilling partners to the bargaining table.
  • The next critical stage in any partnership dispute is the discovery process.  Propounding discovery on the other side requires a balancing act of targeting requests to areas of suspected or known wrongdoing while keeping the requests broad enough to force production of all relevant documents or information.  Interrogatories and requests for production of documents/inspection/admissions are all effective ways to gain information and keep the pressure on.  In the opposing side’s response, it’s possible to receive thousands of documents even with well-targeted requests.  This can seem overwhelming, but can be handled effectively.
  • One way to efficiently deal with thousands of documents is to have an organized document management system.  Although time consuming, this is essential to having a quick and effective way of organizing and analyzing vast amounts of data.  The document management system can be used and referred to throughout the case when putting together pleadings, memos, settlement demands, etc.  It allows for someone to quickly find relevant information.
  • Anther effective way to keep the pressure on the opposing side and gain useful information is subpoenaing third-parties in the case.  The same document management system can also be used to organize third-party documents that are produced.
  • During discovery, adversaries will make their own request for documents and information.  Oftentimes, they will relate to irrelevant issues or turn into mud-slinging fests.  Requests like this can be objected to and avoided.  In otherwise responding, it is important to know what objections can be made and when to utilize them.

Mediation

  • As discovery nears completion and more information is known to all parties, many partnership disputes use mediation to attempt to come to a resolution before filing motions for summary judgment or going to trial.  Organization and analysis of all the information gained in discovery becomes critical at this stage.  Having documented evidence of the opposing side’s breach of the partnership agreement or any other wrongdoing in relation to the partnership provides an upper hand when entering settlement negotiations.  Creating a succinct and powerful settlement demand helps strengthen your position and can lead to a favorable resolution.
  • Oftentimes partnership disputes end at the mediation stage when the various sides are able to come to an agreement and understand the risks, costs, and benefits of continued litigation.  As outlined above, a thorough discovery process of requesting information and documents from adverse parties and third-parties and analyzing that information is essential to a successful resolution.  Such diligence during discovery and the settlement negotiation process can lead to success in any partnership dispute.

If you are a partner and have questions about a potential dispute with your partners, please contact the experienced partnership dispute lawyers at KJK for assistance.