/>iWhat do you do if your dispute with your business partner is so severe that you see no alternative to filing business divorce litigation, but feel the lawsuit itself might harm the company?
Business divorce litigation can get ugly. When one business partner is claiming that there are problems so significant that someone has to go – meaning you want to either get bought out or buy out your partners – the very fact that such a dispute exists might damage the company in several ways. Banks, vendors, or suppliers can get wind of the litigation and suddenly decide that they don’t want to do business with you anymore. Or they can change the terms on which they will do business. For example, I have seen more than one company suddenly be placed on COD status simply because a shareholder oppression lawsuit was filed.
Such a reaction by others in the industry often makes sense and is not necessarily unreasonable. When you consider that business divorce litigation often entails making very nasty allegations against your partners – stealing, diversion of opportunities, concealing financial information – it is no wonder that your industry may see your company in a new, negative, light.
There are several ways such negative publicity may be avoided. For example, agreeing to arbitration – which is private, not public – would keep the world from seeing the company’s “dirty laundry.” But both sides must agree to this (barring a pre-existing arbitration agreement). If one of you wants out of the company, that person may have less of an incentive to keep the dispute private. In fact, making the issues public by one who doesn’t intend to stay in the company can be wielded as a weapon.
When analyzing how to deal with a problem business partner, there are more things to consider than whether you have a claim or not. Can the issue be resolved without litigation? Should it? Is it in the company’s best interest to keep the dispute private rather than go public? Which is in your best interest or gives you the most leverage? If the approach that is in your best interest is not necessarily in the company’s best interest, do you care? Should you?
You should not have to strategize these issues on your own. Contact a shareholder dispute attorney who can help you come up with an entire game plan for how to proceed at the outset taking all of these competing interests into account. The choices you make up front may be the difference between achieving your goals, or not.
