Partnership Disputes
& Business Divorces

The attorneys at the Warren Law Group understand that a business partnership can be a lot like a romantic partnership in that sometimes major disputes arise and a “divorce” may be necessary in order for the partners to move on with their lives. Suing a business partner is often necessary to recover losses or damages incurred by the behavior of a business partner. When this occurs, disputes can be resolved through mediation, third-party arbitration, or brought before a judge in state or federal court. Events that give rise to legal adjudication requiring an attorney may develop swiftly or over time; so, if you suspect misconduct, it is important to document it immediately as an attorney can use that to determine the best course of action regarding your case.

There are many different forms of “business divorce” cases, each of which requires an experienced attorney with knowledge of the subtleties of each type.

Breach of Fiduciary Duty

From the moment a partnership is formed, each partner is imbued with fiduciary duties to each other and to the business itself. The fiduciary duties of loyalty, obedience, care, and disclosure are implied in any agreement between individuals and entities entering into a partnership-type relationship with one another, regardless of whether the partnership is a corporation, LLC, LLP, or other type of legal entity. When a partner breaches these duties, either accidentally or intentionally, the aggrieved partner must take action, either through mediation, arbitration, or litigation, in order to be made whole.

Partnership Dissolution

As a result of a partner’s misconduct, partnerships may be dissolved of their own accord or through judicial decision. In some cases, dissolution can be avoided if the remaining partners come to a new agreement on how to proceed with the partnership entity. More commonly, partnerships are broken up and wound down as a result of partnership disputes. After dissolution, the partnership’s financial liabilities are paid and the remaining assets are distributed to the partners in accordance with the governing agreement.

Accounting Actions

Each partner has a right to be fully informed about the activities of the partnership entity regardless of their percentage of ownership. As such, partners have an absolute right to review the financial records resulting from a business partnership at any time. They may request a review of the books if they suspect unfair payouts, hidden profits (or losses!), theft of opportunity, or for any reason at all. Litigation occurs, generally, when accounting is denied to the requesting partners—the denial itself constitutes breach of fiduciary duty and may be indicative of further misconduct.

Fraud

Fraud occurs when an intentional or negligent misrepresentation of facts by one partner is relied and acted upon by the other(s)—especially to their detriment. These cases may involve false inducement to enter a contract, misappropriation of funds and property, and can sometimes result in potential criminal liability for the partner that committed the fraud. An experienced attorney can cut through complexity and ambiguity in fraud cases. Parsing out your case, determining the facts, collecting the evidence, and resolving ambiguities all aid in presenting the matter before a judge, mediator, or arbitrator and increase the chances of an advantageous result.