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The Passionate World of Business Divorce: Some Tips for Counsel - Chapter 67 - AAA Handbook on Mediation - Third Edition

Author(s): 
Robert A. Harris
Page Count: 
6 pages
Published: 
April, 2016
Practice Areas: 
Categories of Disputes,
Commercial Disputes,
Dispute Resolution & Litigation,
ADR
Author Detail: 

Robert A. Harris is a General Counsel for Clayton Holdings, LLC. He serves on the roster of the American Arbitration Association. His practice involves litigation, arbitration and mediation of business disputes. He served as the Chair of the ADR Section of the Connecticut Bar Association for three years. He contributes a monthly column on ADR issues to the Connecticut Law Tribune.

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Description: 

Originally from:

 
THE PASSIONATE WORLD OF BUSINESS DIVORCE: SOME TIPS FOR COUNSEL

Robert A. Harris

I. Introduction
Much of my 22-year legal career has involved litigating and arbitrating disputes between owners of closely-held businesses, many of which are family owned. The time often comes when the owners decide they no longer wish to work together. Whether certain owners will depart, or the business will be terminated altogether, the parties usually are quite angry and frustrated and they blame each other for everything. These feelings create conditions ripe for litigation. It usually takes several months after a lawsuit is filed before passions cool sufficiently to even try to negotiate a settlement. But by that time, the parties have already incurred substantial legal fees and their business has already been damaged. Even if rationality ultimately prevails and their attorneys are able to help them negotiate a business divorce, all sides will receive a share of a badly damaged carcass.
Business divorces involve a myriad of legal issues: Have the parties fulfilled their financial and fiduciary obligations to each other? Are there employment agreements that have continuing obligations, such as provisions against competitive employment and customer solicitation? What will happen to the employees of the business, especially when one business is being divided into two? Will the business, assuming it is going to continue, have to move to different premises? (This could be the case if the premises were leased or subleased from the divorcing parties). What financial obligations are owed to the owner of the premises? Do the parties have a buyout agreement?