BUSINESS PARTNERSHIP DISPUTES

BUSINESS PARTNERSHIP DISPUTES: AGGRESSIVE LITIGATION FOR BUSINESS DIVORCES

Business partnership disputes, often referred to as business divorces, can be one of the most contentious and complex areas of commercial litigation. When partners, shareholders, or members of an LLC disagree on critical business matters such as management, control, or profit distribution, the results can be financially devastating. At Fox & Moghul, we have successfully litigated numerous business partnership disputes in Virginia and Washington, D.C., and have a reputation for aggressive representation and successful outcomes.

Recognized as one of America’s Top 100 Civil Defense Litigators, and having secured multi-million dollar verdicts for clients, including a $565,000 jury verdict in a business fraud and construction case, Fox & Moghul stands at the forefront of business litigation. Our team is frequently sought out for its expertise in fiduciary duty litigation, derivative suits, and complex business disputes.

Litigation in Business Partnership Disputes

Disputes between business partners often escalate into full-blown litigation when there is a breach of fiduciary duty, fraud, or disagreement over the control of the business. At Fox & Moghul, we aggressively represent clients involved in business divorces, ensuring their financial interests are protected and that they achieve the best possible outcome, whether through litigation or negotiated settlements.

Key Litigation Areas in Business Partnership Disputes:

• Breach of Fiduciary Duty: Members and shareholders owe duties of loyalty, good faith, and fair dealing to the entity. When one member or shareholder engages in self-dealing, mismanages funds, or makes decisions that harm the business, they may be in breach of these duties.
• Direct vs. Derivative Suits: In a direct suit, a partner brings a claim based on personal harm, while a derivative suit allows a partner to sue on behalf of the business when the company itself has been wronged. Understanding the difference is critical to the success of a claim. Our article “Direct vs. Derivative Claims: Permitting Direct Shareholder Actions for Closely Held Corporations” offers a detailed explanation of these suits. You can also reference our chart here for more insight.
• Minority Shareholder Oppression: Minority shareholders are often at a disadvantage in closely-held corporations or LLCs, where majority shareholders can manipulate decisions to their own benefit. Fox & Moghul has extensive experience in litigating minority shareholder oppression cases, ensuring that minority owners are treated fairly and their rights are protected.

What is a Derivative Suit?

A derivative suit is a type of lawsuit brought by a shareholder or member of a company on behalf of the company itself. This occurs when a business is harmed by the actions of its directors, officers, or partners, but the individuals controlling the company refuse to take action. In such cases, a derivative suit allows the shareholder to step into the company’s shoes and sue the wrongdoer for damages.

Example of Derivative Suit:

• Breach of Fiduciary Duty: A derivative suit might be filed if the majority shareholder is using the company’s assets for personal gain, harming the company in the process. A minority shareholder can file a derivative suit to recover damages for the business.

At Fox & Moghul, we have successfully represented clients in both direct and derivative suits, recovering damages on behalf of businesses that were defrauded or mismanaged. Our understanding of these claims allows us to strategize effectively, ensuring that our clients’ interests—whether as individuals or as representatives of the company—are fully protected.

Notable Business Partnership Dispute Litigation Successes

• Success # 1: Multi-Million Dollar Partnership Buyout for Virginia LLC: Fox & Moghul represented a majority member in a Virginia-based real estate investment LLC. The partnership dispute centered around allegations of breach of fiduciary duty by the minority member, who was accused of mismanaging the LLC’s financials and self-dealing. After months of contentious negotiations, we successfully obtained a favorable buyout settlement for our client, securing full ownership of the LLC while ensuring the minority member was adequately compensated. Our approach preserved the value of the business while resolving the dispute amicably.
• Success # 2: Reinstatement of LLC Voting Rights for Minority Member: In a highly complex case, Fox & Moghul represented a minority LLC member who had been unfairly dissociated from the business and stripped of their voting rights. The case involved a portfolio of real estate properties in Northern Virginia, and our client had contributed both capital and management expertise. We successfully argued that the dissociation was wrongful and achieved a court-ordered reinstatement of our client’s membership rights and voting privileges, allowing them to retain their interest in the business. This victory ensured that our client could continue to participate in the company’s operations and share in its future profits.
• Success # 3: Shareholder Dispute in Virginia Tech Startup: Our client, a co-founder and shareholder in a Virginia-based technology startup, faced a situation where the majority shareholders attempted to force a buyout at an unfair valuation. Fox & Moghul aggressively litigated on behalf of the client, challenging the undervaluation and breach of fiduciary duty by the majority shareholders. The case was resolved through mediation, where we secured a significantly higher buyout offer for our client, reflecting the true value of their contributions and equity in the startup. This resolution allowed our client to exit the company with a financial outcome that was fair and favorable.
• Success # 4: Partnership Dispute in DC-Based Restaurant Group: In this case, Fox & Moghul represented a member of a high-profile restaurant group in Washington, D.C. The dispute involved several partners, with one partner accused of misappropriating funds and failing to disclose key financial information. We successfully negotiated a settlement in which our client received substantial compensation and exited the partnership on favorable terms. Additionally, we secured a confidentiality agreement to protect our client’s reputation in the local business community.

Fox & Moghul is uniquely positioned to handle both types of claims, providing strategic legal counsel to ensure that your interests, whether as a shareholder or business owner, are protected in the courtroom.

Why Choose Fox & Moghul for Business Partnership Disputes?

At Fox & Moghul, we pride ourselves on our ability to handle the most complex and high-stakes business partnership disputes. Our firm has achieved a reputation for excellence, having been named among America’s Top 100 Civil Defense Litigators and Virginia’s Go-To Business Lawyers. Our extensive litigation experience, combined with a deep understanding of fiduciary duty law and shareholder rights, enables us to secure favorable outcomes for our clients.

In addition to our successful litigation record, we regularly publish on business law topics, including our well-regarded article “Direct vs. Derivative Claims: Permitting Direct Shareholder Actions for Closely Held Corporations”. This thought leadership ensures that our clients receive cutting-edge legal advice informed by the latest developments in business law.

Contact Fox & Moghul

If you’re facing a business partnership dispute, contact Fox & Moghul today at 703-652-5506 to schedule a consultation. Our aggressive and experienced litigation team is ready to fight for your rights and protect your financial interests in any business divorce.