United States: Business Divorce Part III: A Divorce Without Litigation

Last Updated: February 15 2018
Article by Kevin Pratt

In Part I of our four-part Business Divorce series, we discussed the value of knowing your options when pursuing a business divorce. Part II discussed the opportunity cost of discovery. Now, in Part III, we will address resolving a business divorce without litigation.

Business litigation takes a significant amount of time and money. In most instances, litigating a business divorce through a verdict at trial runs counter to a business's profitability goals. However, there are notable exceptions in which a business will benefit from litigation during a business divorce.

In this installment of our Business Divorce series, we will take a closer look at the calculus that goes into deciding whether to pursue a business divorce resolution without litigation, or whether to proceed to trial.

* * *

Business Litigation Alternatives: Arbitration and Mediation

In most cases, there are two alternatives to litigating a case through trial in open court: arbitration and mediation. There are benefits and drawbacks to each choice, and the best option depends on the specific details of your conflict and business divorce.

Arbitration is a method of dispute resolution involving one or more neutral third parties agreed to by the disputing parties, whose decision is binding and, in most cases, cannot be appealed. Many business contracts include an arbitration clause. Arbitration is a strong choice because it can be significantly faster and more economical.  Also, the hearings are private. However, the informality that makes this process faster and less expensive also may make the decision hasty, which is complicated by the reality that, in many cases, there can be no appeal from an arbitrator's decision.

Mediation is a method of non-binding dispute resolution involving a neutral third-party who tries to help the disputing parties reach a mutually agreeable solution. Like arbitration, mediation is private as well as less costly and less time-consuming than a trial. Unlike arbitration, the two parties work together as a team to find a solution. The process is less rigid and creative problem-solving is often used. The downside of mediation is that it requires two relatively friendly and open parties who are willing to work together and compromise as well as a skilled, experienced, and unbiased mediator.

* * *

Nine Questions Businesses Should Ask Before Deciding On Litigation

Taking another party to court is a big decision that could have serious consequences for your business, especially if the trial is related to a business divorce. Winning a case can be a boon, but it could also cost you time and resources that ultimately harm your company. Losing a case can be a huge setback that could even shutter your business.

When deciding whether to litigate a business divorce through trial, businesses should ask and answer the following questions:

Is there potential value with the threat of litigation versus the reality of litigation?

The uncertainties and costs of litigation may motivate an adverse party to be more accommodating in pre-litigation negotiations than the party otherwise would be if a lawsuit is underway. On the other hand, be careful not to threaten litigation if you are unwilling to follow through with the action when negotiations go bad.

Will litigation prevent immediate harm?

For example, if the adverse party is pursuing key customers, employees, records, or trade secrets, then a business owner may be forced to move immediately to protect those vital interests through active litigation. Otherwise, the business could be irreparably harmed by doing nothing.

Should litigation be pursued to force a break-up?

If it has become impossible for the owners to conduct business together, then a business owner may be forced to pursue a judicial dissolution of her company through an active litigation posture. This may be especially true if the other party is not willing to work with you on a solution.

Is there a possibility of your company becoming a defendant?

This question is counterintuitive because when you, as the business owner, are deciding whether to go to trial, you necessarily focus on all the ways you have been aggrieved. However, every business owner owes it to herself to evaluate whether and to what extent the adverse party will claim you aggrieved them. Understanding, and accepting the possibility of, an adverse verdict against you on a counterclaim must be considered before going to trial.

What is the respective financial strength of each party?

If there is a resource discrepancy between the parties, then the party with greater resources may derive a tactical benefit from pursuing litigation. There may be value in the threat of litigation if one party has significantly more resources.

How important is time in resolving the dispute?

If the parties are concerned about a protracted business divorce resolution and its impact on the business's viability, then the parties should consider an alternative dispute resolution because these alternatives adjudicate the dispute more quickly.

How important is confidentiality?

Confidentiality is maintained more easily through an alternative dispute resolution. However, if a party strongly desires to publicize the alleged wrongdoings of an adverse party, then a trial in open court likely will be more desirable.

How complicated and technical are the relevant business issues?

The more complicated an issue, the more value in resolving your business divorce through alternative dispute resolution because, in most instances, a third-party mediator agreed upon by both parties will have a better understanding of the sophisticated business issues than a judge, whose background may not be business-oriented.

Would the business divorce be resolved through equitable relief granted by a court?

Understanding what type of relief is being sought, i.e., your preferred outcome in the divorce is critical in evaluating whether to pursue a trial in open court or an alternative dispute resolution. Judges may be better suited to grant equitable remedies, such as a temporary restraining order, a permanent injunction, or specific performance.

* * *

Discuss Your Business Divorce Legal Options With The Attorneys At Lincoln Derr

The team of business divorce attorneys at Lincoln Derr can help your business analyze the cost-benefit of the alternative dispute resolution process by analyzing your business divorce and helping you answer the above questions. Our experience includes trying hundreds of cases to verdict. Each of the above questions highlight which dispute resolution is most likely to provide your business with the preferred outcome. Once we understand your business dispute, its preferred outcome, and the best path to resolution, we will get to work.

To ask our North Carolina business attorneys a question, learn more about our legal services, or schedule a meeting, please contact Lincoln Derr today.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Kevin Pratt
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions