we resolve partnership and shareholder disputes
You are operating a successful business with several partners. Unfortunately, there are disputes brewing between you and your partners concerning various business issues, whether it be finances, hiring practices, or general business strategy.
You may think you can turn to the company lawyer to resolve the dispute. But the company lawyer represents the company as an entity, and thus cannot represent any of the company's equity holders individually. In other words, a company lawyer can help resolve disputes, but they can't take sides.
At a certain point, you may think it's time to lawyer up by retaining your own outside counsel. But before taking that drastic step, and incurring the enormous cost, disruption and stress of litigation, consider bringing in an outside mediator to work things out between you and your partners.
As a neutral, an outside mediator overcomes these barriers to prompt resolution of partnership disputes:
A mediator has no conflicts of interest because he or she does not represent anyone, has no allegiance to any individual, and does not provide legal advice. Accordingly, there are no constraints on the mediator’s ability to speak in confidence with each partner in the business and uncover their hidden concerns, interests and needs. The confidentiality of such conversations will be protected against disclosure by agreement, and in most cases by applicable law as well.
The cost of mediation is a drop in the bucket compared to the legal fees that the business, and each of the partners will incur if a partnership dispute escalates into litigation. A court fight that lasts several years can easily cost hundreds of thousand or even millions of dollars in legal fees and other expenses.
Plus, there is the severe business and personal disruption caused by discovery, which obligates all parties to (i) collect, process, review and produce vast amounts of electronic documents (such as emails and text messages) from multiple data sources (often including personal devices), and (ii) devote time to preparing for, traveling to, and testifying at depositions. And if the case does not settle beforehand, add the cost, stress and time commitment of a trial.
Business partners involved in a dispute should also consider that, because litigation is public record, competitors may gain access to trade secrets that emerge during the litigation that the court refuses to keep under seal.
In comparison to litigation, the costs and burdens of mediation are miniscule. Even then, to encourage mediation of partnership disputes, Merge Mediation Group shares the risk of mediation with parties so that half the mediator's fees are refunded if the mediation fails.
Unfortunately, there is little question that litigation wrecks relationships, perhaps permanently. The tendency for pleadings and motion papers to paint the other side in the worst light will inevitably lead to mudslinging that ends the possibility of reconciliation even after the lawsuit ends. This is perhaps the most tragic aspect of litigation between business partners.
It doesn't have to be that way. Even if business partners are having trouble making decisions together, disagreements over business issues do not need to become personal. Even if the business is divided, there is substantial value in preserving the opportunity to collaborate on future business deals and other matters.
By providing opportunities for dialogue, collaboration and problem solving, mediation engenders positive feelings that help preserve and even strengthen business and personal relationships. Maintaining positive relationships will yield dividends far into the future even if the partners decide to go their separate ways.
Using mediation to keep partnerships out of litigation protects employee morale. When a partnership dispute ends up in court, employees are likely to take sides, or jump ship to work elsewhere if they think business operations will suffer because of the litigation.
Likewise, customers may sense that the owners of the business have become distracted by litigation, and take their business to competitors.
Mediation keeps things quiet and thereby minimizes the impact of a dispute on employee morale and customer loyalty, thereby preserving the value of the business while the dispute is resolved.
Adverse publicity often accompanies business lawsuits, especially if the owners are prominent members of the local business community. Negative publicity can damage a business, including a loss of customers and goodwill. In contrast, mediation offers an opportunity to resolve disputes quietly without any negative press.