I often assist with internal business disputes. Today I want to summarize that process.
Many thousands of people set up Wyoming and Colorado companies every month. Some of those companies end up in disputes between the owners. This can be due to many factors. Some of the most common factors are (1) differences in opinion about the direction of the company; (2) misuse, waste or even theft of company assets; (3) mismanagement of the business; (4) resentment about the lack of effort by the other owner; and (5) disagreement over splitting up when one owner decides to retire or move on from the business.
Whenever I am contacted by someone with an internal business dispute, I take a close look at the situation and determine as best as possible the strengths and weaknesses of my client's position. From there, we formulate a plan to negotiate a reasonable resolution and a negotiation strategy. Then we negotiate - sometimes with me in the background, at other times with my full involvement in the discussions. The negotiations often lead to an agreement in principle to resolve the dispute. Next, I draft the agreement that resolves the situation, or review a draft provided by the other side. After discussion with my client, I improve and modify the agreement in conjunction with the other side. Then the agreement is signed. Afterwards, I follow up or am actually involved in the payment process.
Sometimes the negotiations do not lead to a resolution. This can be for many reasons. Usually, it is for the simple reason that the parties do not agree on what is a fair resolution. It may be that one party or both is being unreasonable in their assessment of the case. Other times it may be due to the fact that the parties are too far apart. This can lead to a dispute resolution process. This means that I will often represent my client in civil litigation in court, or possibly arbitration. Many factors go into determining whether to sue on an internal business dispute. Generally speaking, litigation is the lesser of two evils in resolving internal business disputes. What I mean by that is that litigation is only used to avoid losing your investment in time, energy and money in the business. But litigation is not an ideal situation as it is costly and often risks destruction of the business itself.
When resolving an internal business dispute through litigation, one must be mindful of whether arbitration is required. Arbitration is a private process where disputes are resolved in a simplified process similar to court. Parties are sometimes required to resolve disputes through arbitration because of a contract provision that binds them. If there is no such binding provision, then the parties are free to move forward with a court lawsuit.
I have litigated business disputes in federal and state courts. In Wyoming, there is also a newly created Chancery Court which focuses on the litigation needs of businesses. I have had a couple of cases in that court too. The choice of court depends upon many factors and in some cases there are legal restrictions that will channel your decision.
If your internal business dispute has to be resolved in court, brace yourself for a multi-month or even years long process. Even a case where both sides endeavor to resolve it quickly can take many months. The quickest way to resolve a dispute in court is through mediation. This occurs frequently in court cases. Mediation is a process where the parties meet with a neutral third party (often an active or retired judge) and each present their side. The neutral party tries to work out a resolution that is acceptable to both sides. Many cases are resolved through mediation.
For those cases not resolved through mediation, the case can proceed for quite a while longer. During this time period, the case may settle as a result of the direction set at mediation. If not, then the case goes to trial, where it is resolved.
If you find yourself in a business dispute, please contact Clyde Hutchins at your earliest convenience. I can be reached through the contact page, or I can be reached by telephone at (970) 488-1857.