Partnership Disputes & Alternative Dispute Resolution

on May 31, 2014 by James Hunt

Jim Hunt2After building a successful business, occasionally partners will disagree on the direction of their business.  When that occurs, a partnership dispute arises.  New York partnerships are governed by the New York Partnership Law. In addition, the partnership agreement will supplement the statutory requirements and help define the rights and obligations of the business partners.  It can be helpful to have an attorney review the law and the partnership agreement with you to fully understand the document and the issues that pertain to the partnership dispute.

 

Partnerships are, often, very personal relationships, with a significant history between the partners.  As a result, a partnership dispute can be as emotional and personal as a divorce.  To ensure that you are protected from some of the emotional attacks, it is important to ensure that your role in the business is well-documents.  If you are responsible for the books, then they should be reviewed with counsel to ensure that your obligations under the agreement are being fulfilled.  It is not uncommon for partners to claim fraud, theft, and breach of fiduciary duties.

Partnership disputes are often ripe for mediation.  Partnership mediation involves a third party neutral who can work with the parties and their counsel, to define the issues, discuss alternatives, and help the partners come to an agreement that satisfies both partners.  Our experienced attorneys often work with our clients during the mediation process to ensure that the legal requirements of the partnership agreement are being honored with a mediated settlement.  Keep in mind that mediation is a voluntary process, but is strongly encouraged before proceeding to more formal dispute resolution, like arbitration or mediation.

If mediation is unsuccessful, or the parties cannot agree to mediate, then arbitration should be considered.  Regardless of the nature of the partnership dispute, it is probable that the dispute could be arbitrated, especially if the partnership agreement requires arbitration.  The partners can agree to arbitrate the dispute.  Often it is in both partner’s interest to arbitrate the dispute to keep the internal dispute out of the public eye; if a lawsuit is filed, it becomes public record and the issues contained in the dispute may give your competitors an advantage.  Generally, if partnership agreement is breached or misconduct or wrongdoing has occurred, an arbitrator has the power to direct dissolution of the partnership and define the rights and obligations of the partners.

If arbitration is not contractually required, or the parties cannot agree to arbitrate, then a lawsuit can be started seeking to define the rights of the partners.  This litigation often results in a claim to dissolve the partnership and apportion the profits and losses between the partners.  Needless to say, this process results in the partnership being dissolved and the two partners going their separate ways.

The attorneys at Slater, Tenaglia, Fritz & Hunt, P.A., provide clients with experienced legal representation.  We handle many types of business disputes on behalf of corporate clients, including Fortune 500 Corporations and individuals throughout New York, New Jersey, Pennsylvania and nationally. Our attorneys handle cases from pre-litigation negotiations through litigation to obtaining and enforcing judgments.  If you need assistance, or are interested in learning more, please contact us by phone at (201) 820-6001 in New Jersey or (212) 692-0200 in New York. We can also be found on Facebook, Linkedin, Twitter, Google+, Youtube and the Internet. All initial consultations are free of charge.