Your business partner could bring legal action for many reasons as a business partnership lawyer knows all too well. If you communicate openly, this shouldn’t come as a surprise. Partners should have a process for working out their disagreements before “going nuclear” with a lawsuit.
If you’ve been served with court papers, one of them should be the complaint filed with the court. It should include the facts your partner believes provide grounds for the claim and their legal basis. If there are multiple partners, all who’ve been sued should be listed as defendants (though each may have a unique lawsuit against them).
The first thing you should do after getting this complaint is call your lawyer. If the person has represented the business, check to see if the same one represents the plaintiff (the partner suing you). If it is, you need to call someone else. Depending on the situation and the claims, an attorney representing a business and one partner suing another may have ethical/professional conflicts that may prevent that representation.
Why Should I Get Legal Representation?
Depending on the lawsuit, the potential costs of not handling this properly could be:
- Bad publicity
- Your lowered standing in the community
- Harm to your business and brand
- The loss of customers, clients, and employees
- A lot of money, and
- Your ownership interest in the business
If your relationship with this partner is so bad they sue you, an experienced attorney can do many things to help you deal with this.
Your attorney can explain why you’re being sued and discuss the underlying facts. They will probably ask you many questions to get to the bottom of the issue so they can give you an opinion on the lawsuit’s strengths and weaknesses and suggest different courses of action as our friends at Focus Law LA can explain.
How Might This Be Resolved?
Your attorney can act as your go-between. They can speak for you, so you need not do that yourself. If you start talking to the plaintiff (or anyone else) about the dispute, you risk making admissions that could be used against you in legal proceedings. Your attorney may be able to negotiate a way for the partners to continue to operate the business despite the lawsuit.
In the short term, if the parties feel they can still work together, they may negotiate duties and responsibilities that each will take (to try to “stay away” from each other) to reduce the chances of more conflict. This may buy some time to allow a complete resolution of the conflict.
Your attorney could help negotiate a settlement. There are different ways this may happen, including:
- Partnership disputes are often resolved by one partner selling their ownership share to the other partner(s). If that mechanism isn’t spelled out in an ownership agreement, it can be worked out through negotiations
- Another option may be selling the business so both parties can walk away from it to start new ventures
- If there’s still goodwill amongst the parties, they may negotiate changes in how the business is run to satisfy all those involved. This may resolve the problems or be just a temporary “ceasefire” where both parties try to run the business. If they can’t put the disputes behind them, they’ll have to do something more drastic and lasting
If a solution can’t be reached, the parties could try mediation and reach an agreement with the help of a neutral third party. If those involved want to avoid a costly and public trial, they could have the conflict decided through arbitration. Failing that, if more negotiations can’t end the dispute, it could be resolved at a trial.
Before any of this happens, you need to talk to your attorney to learn about your legal rights, how they can be protected, and your options for moving forward.