Shareholder/Member/Partner Disputes

 

Business owners use the term “partner” to refer to any number of different types of business relationships.  Generally speaking, a business owner will refer to fellow shareholders in a corporation or member in an LLC as a “partner”.  While not technically accurate at law, use of the common descriptive vernacular appropriately identifies the nature of the relationship between business owners and the effort to apply their collective resources, skills and experience to their mutual benefit. 

Naturally, given the complexity of transactions, contracts, governance and compensation structures, business disputes can often arise.  Representation of individuals in relation to partnership and business interest and control disputes requires a unique combination of skills, knowledge and experience.  Principles of corporate governance, tax, statutory law, common law duties among business owners and general business principles converge, and the resulting conflicts are complex, personal, and emotionally charged.  The often separate worlds of litigation and transactional law collide.  

Effective representation of a shareholder/member/partner in relation to the entity and fellow business partners requires strategic legal advice from attorneys who are well versed in the key factors which are at play and the risks associated with each potential outcome.  Our commercial litigation group offers sophisticated, strategic representation and decades of collective experience in complex business transactions and disputes.  As such, our team is uniquely qualified in untangling even the most complex disputes to help you reach the most favorable result for a particular set of facts. Our attorneys will take the time to investigate the circumstances surrounding your dispute in order to protect your interests and help you avoid unnecessary risk or liability.

Should your dispute prove to be insurmountable, dissolution may be the best course of action.  We are well versed in all aspects of this process as well, and can guide you through it to ensure that assets and debts are fairly divided and your interests and rights are well protected throughout this difficult negotiation.

Shareholder/Member/Partner disputes can arise over a number of factors, including:

• Disputes over language in shareholder agreements, operating agreement, partnership agreements, and limited liability agreements

• Succession issues

• Financial disagreements, undisclosed earnings or secret dealings

• Breach of contract or fiduciary duty

• Partnership or shareholder buy-outs

• Underperformance of a partner

• Personal and managerial conflicts

• Deadlocks – where two equal partners cannot agree

• Oppressed minority shareholder disputes

• Fraud • Embezzlement

• Business disparagement

• Leaking of trade secrets

• Disclosing sensitive information

In addition, our experienced attorneys can help you or your business develop strategies to avoid or minimize future disputes.

Representative matters:

• Represented shareholders in litigation reaching resolution providing for extraction of a 50% shareholder from a multi-million dollar commercial sheet metal contractor after such shareholder sued for shareholder oppression and “freeze out”;

• Represented an entity in action for forced disassociation of a 49% percent member in multi-million dollar chemical manufacturing and distribution limited liability company triggered by the disassociating member’s alleged breach of fiduciary;

• Represented disabled shareholder in claims of oppression and breach of fiduciary duty brought by fellow shareholders based on unequal distributions and self-dealing and, subsequently, in claims brought by creditors of the entity alleging fraudulent conveyances while insolvent;

• Litigated and eventually negotiated exit of a founding partner in a physician’s practice triggered by shareholder’s purported acts and omissions exposing the practice to liabilities;

• Represented minority shareholder in claims of oppression based on the majority shareholders’ exclusion of the minority from management, access to financial information and termination of employment resulting in sale of the minority shareholder’s interest at a premium;

• Represented minority shareholder in claims for breach of fiduciary duty based on majority shareholder’s transfer of assets from jointly held entity to a separate entity owned solely by the majority shareholder in violation of the Uniform Fraudulent Transfers Act;

• Represented 49% shareholder in claim against 51% shareholder alleging fraud and misuse of corporate funds and company assets;

• Represented corporation in dissenter’s rights case;

• Appointed Receivers over the affairs of a Pennsylvania corporation by Judge Jeffrey Trauger of the Bucks County Court of Common Pleas in divorce proceeding where the multi-million dollar corporation at issue was the main marital asset, employing both parties in the divorce, and management of the entity was 
  contested;

• Appointed Receivers over the affairs of a defunct non-profit to oversee liquidation and distribution of assets including historically recognized real estate holdings;

• Represented minority shareholder in consolidating ownership of jointly held entity by acquiring secured creditor’s position and leveraging that position to induce majority shareholder guarantors to transfer ownership interests.