If you think about it, a business partnership is no different than any other relationship. For it to work, there must be mutual respect, trust and cooperation. Without any or all of those, the relationship can easily fall apart. Sometimes the damage is irreparable. Sometimes the relationship is salvageable. In many cases, the outcome hinges upon how you handle a dispute with your business partner. Here are some options for resolving these disagreements.
Consider negotiating with your business partner
Before resorting to costly, time-consuming and unpleasant litigation, try to resolve the dispute through negotiations.
As long as you feel comfortable, you can approach your partner about this directly. If not, you can always have your lawyer draft a letter. This letter should state your case and advise your business partner that you are open to negotiations before you pursue other options. In either case, negotiations will only work if both of you are still open to frank communication and compromise.
Mediation is often required in California
Mediation is another cost effective option to litigation that is often mandated by California courts. In mediation, a neutral person facilitates the discussions. His or her job is to help you and your business partner identify the issue(s) at the heart of your disagreement and come up with a solution you can both live with.
To do so, the mediator may encourage you to utilize certain techniques, such as active listening . This is a strategy in which one person “has the floor” for a specified period (usually a few minutes). As long as one person is speaking, the other cannot interrupt. This approach is designed to give each person a better understanding of how the other feels, and why. With greater understanding, it is easier to agree on a solution.
Assuming you and your business partner reach an agreement through mediation, it will likely be documented in writing and subject to court enforcement if necessary.
Act based on the stipulations in your management or operating agreement
Many businesses have an operating agreement, management agreement or bylaws. Each includes comprehensive rules for running the business, including what should happen in the event of a partnership dispute. For example, a management agreement may mandate that partners attempt to resolve any serious disagreements through mediation, or even arbitration .
Think of arbitration as the “middle ground” between mediation and litigation. It is more formal than mediation, but offers more flexibility than traditional litigation. In arbitration, one or more independent experts, called arbitrators, hear each party’s arguments. The arbitrator(s) take all of the evidence and testimony into account to determine the outcome. This final determination is called an “award, ” and is not subject to appeal in most cases.
Depending on how your management agreement is written , you may have the ultimate say-so in certain circumstances. It may also allow you to buy your partner out if a dispute cannot be settled through negotiations, mediation and/or arbitration.
Take the matter to court
If all else fails, there is always litigation. If the case goes to court, it may be resolved at trial. Getting to that point is usually costly and time-consuming. How much it will cost depends on several factors including but not limited to the extent of pre-trial preparation required. And because California’s Court dockets tend to be packed, your case could take months – or even years to get to trial.
Even so, litigation may be your best, or only option in some circumstances. In that case, it is essential to have an experienced business litigation attorney on your side. Contact the Law Office of Parag L. Amin to learn more about how we can help you resolve your business partnership dispute today