When to Sue Your Business Partner

It may be a hard decision to make but sometimes there are unfortunate situations when suing a business partner is your only option. No one gets into business expecting to sue their partner but business disputes happen to the best of us. However, you may have little to no choice in the matter. If a co-owner is acting in a manner that is harming the business, litigation may be the only option. If you do decide to sue your business partner, an experienced business litigation attorney can help to make the best of a difficult situation.

From Patrick's interview for the Masters of the Courtroom series on ReelLawyers.com.

When you form a partnership, both partners hope they will be able to work together to make the company a long-term success. Unfortunately, there are many circumstances when this simply does not happen. While not all disputes will justify suing a business partner, there are times when legal grounds for a lawsuit exist. Here are a few examples of when litigation may be warranted:

• Fraud or theft. If your business partner stole money or property from the company, it may be time for a business divorce. Fraud and theft involve dishonesty which inevitably erode trust and cause relationships to deteriorate. Business partners who are the victims of fraud or theft can sue to dissolve the partnership and recover what was stolen.
• Breaches of fiduciary duties. Business partners owe an obligation to each other and the company to act with honesty, loyalty, and in good faith. Those fiduciary duties may be breached when a partner acts in his own best interests instead of doing what is right for the company you have created together. When a partner breaches his fiduciary duties, litigation may be the best option to save the company from such detrimental conduct.
• Breaches of the partnership agreement. When you set up the partnership, hopefully you both signed a partnership agreement that outlined each partner’s rights and responsibilities to the company and each other. This document constitutes a contract between the partners. When a partner breaches this contract, the partner who was the victim of such a breach can sue for damages.

It is important to note that this list contains just a few examples of situations that may justify bringing a legal claim in civil court against a business partner. Consulting an experienced partnership dispute attorney can be invaluable in determining if you have a legal claim against your partner and exploring all options available to you.

Litigation can be costly and time-consuming and may not be the best method of resolving disputes between business partners. Suing your business partner will likely make it impossible to continue working together and may even threaten the ability of the business to continue as a going concern. Filing a lawsuit may expose a company’s internal conflicts to public scrutiny as documents filed in lawsuits are usually public record. A competent business divorce attorney can help you explore alternative methods of dispute resolution (often referred to as ADR) such as mediation or arbitration. These options can be more private, less costly, and can sometimes lead to better outcomes than litigation.

Mediation is a common form of ADR in which a trained, neutral mediator attempts to facilitate a settlement between the partners. Arbitration is often more formal and can resemble a trial but takes place out of the public eye. It is conducted by a neutral arbitrator or panel of arbitrators who have specialized training and certification in dispute resolution.

Super Lawyers named Chicago business dispute lawyers Peter Lubin a Super Lawyer and Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. With offices in Chicago, Elmhurst and Wilmette, we’re proud to offer more than thirty years of experience in a vast range of disputes in business law arenas. We’ve litigated cases involving: auto fraud, franchise and dealer termination, breach of contract, complex class action, copyright, partnership, and shareholder oppression suits, non-compete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes.

Whether it’s a class action lawsuit or another complex dispute that needs unraveling, we would be pleased to discuss your needs and challenges and our ability to meet them during a Free consultation. It doesn’t matter where you’re located in the Chicagoland area, from Northfield to Naperville, we’ve got a convenient location near you and more, importantly, an ability to hear not just listen. Call us at 630-333-0333 or via our website by clicking here. We look forward to speaking with you.