Ownership, Shareholder, And Partnership Disputes: 5 Common Causes Of Action In Litigation

Background business owners in a partnership disputes. Focus on Judge gavel Visual concept for a legal blog on the 5 common causes of action in litigation.

Business ownership disputes can arise when people with a financial interest in a business disagree about the direction the company is taking or how decisions are being made, or have concerns about accounting methods or how profits are being distributed.

Here, we identify some of the most common disputes between business owners and the legal theories that can be used to address them. While these are some of the most common claims, countless other business disputes and partnership disputes can develop.

RKPT’s business dispute and partnership dispute attorneys can help you avoid some of the most common causes of business ownership disputes and help you resolve them as quickly as possible.

Breach of Contract

Breach of contract is one of the most common claims advanced in a shareholder dispute or other litigation between business owners. Business owners may claim breach of contract when there are disagreements about the rights and responsibilities of business owners, including issues such as:

  • Ownership interests
  • Management duties
  • Compensation
  • Decision-making
  • Profit allocation
  • Dividends and compensation
  • Admission of new partners or shareholders
  • Buy-sell agreements

Whether you are seeking relief or defending against a breach of contract claim in a partnership dispute or shareholder dispute, RKPT’s experienced business litigation attorneys can analyze your contract, help you evaluate your options, identify potential remedies, and help you limit your exposure to future litigation.

Breach of Fiduciary Duty

Business owners rely on one another to act in the best interests of the business and other business owners. By law, business owners are in a fiduciary relationship and owe one another duties of loyalty, good faith and fair dealing, candor, and full disclosure.

When a business owner violates their fiduciary duties to the business, other business owners may be entitled to monetary damages or equitable relief such as accounting, forfeiture, profit disgorgement, or injunction.

Similarly, majority owners owe a fiduciary duty to minority shareholders and must act in the best interests of the business and other business owners. When the majority receives an improper benefit, minority shareholders may claim breach of fiduciary duty and seek damages or equitable relief.

Business Fraud

A business owner’s fiduciary duties prohibit them from engaging in fraud. Examples of fraud in a partnership dispute or shareholder dispute include:

  • Intentionally misrepresenting facts that are known to be false
  • Misrepresenting false information that is believed to be true
  • Fraudulent transfer
  • Misappropriation of trade secrets
  • Patent infringement
  • Trademark infringement
  • Embezzlement

A business owner who believes a business partner or fellow shareholder is stealing or engaging in fraudulent activity may bring a claim for fraud. To avoid fraud claims, business owners should create comprehensive plans to safeguard business assets and be prepared to enforce agreements when fraud or misrepresentation occurs.

Tortious Interference with a Business Relationship

Contracts are the lifeblood of any business. When someone unfairly disrupts a business’s contractual agreements or causes a partner or shareholder to breach the agreement, the company may have grounds to pursue a claim for tortious interference with a business relationship.

While claims of tortious interference often involve competitors and third parties, they can also include current or former partners who interfere with an existing or prospective business contract. Examples of activities that give rise to a claim for tortious interference with a business relationship include:

  • Violating partnership or shareholder agreements, or non-solicitation, non-compete, or confidentiality agreements
  • Client poaching
  • Fraud or misrepresentation
  • Obstructing business relationships with third parties
  • Forcing or threatening someone into violating a contract

To bring a claim for tortious interference, the injured party must show the defendant’s actions exceeded what would be considered “fair” competition.

Unjust Enrichment

When one party to a business agreement benefits at the expense of another, the injured party may have a claim for unjust enrichment. To prove a claim for unjust enrichment, the injured party must show that a benefit was received at their expense and the circumstances make it unfair for the other party to retain the benefit without compensation.

Claims for unjust enrichment are rare in partnership and shareholder disputes, but they may be an option when some business owners received business revenue but did not share it with other owners or shareholders.

Contact RKPT’s Business Dispute Litigation Attorneys Today

RKPT’s business litigation attorneys are experienced at representing business owners in partnership disputes and shareholder disputes. The best thing a business owner can do to avoid business disputes is to have a well-written ownership agreement that identifies the owners’ rights and responsibilities. However, even with the best agreements, business disputes can still occur.

Our business litigation attorneys work to try to resolve business disputes through mediation or arbitration. But when litigation is necessary, we will work to develop a sound strategy to achieve a successful result.

To learn more and put our experience to work for you, call (513) 721-3330 or contact us to schedule an appointment with a business litigation attorney at RKPT today.