Running a business with a partner can have many advantages. However, when partnership disputes arise, they can disrupt operations, harm your company’s reputation, and adversely impact its bottom line. If your business partner has failed to uphold their obligations to the company or has breached their fiduciary duty to the other partners, it may be necessary to take legal action to safeguard your interests.
There are several steps to take when suing a business partner in New York, including the following:
1. Review Your Partnership Agreement
It’s essential to thoroughly review any partnership agreement entered into with your business partner before pursuing a lawsuit against them. This document helps partners avoid unwanted liability and can help you determine whether there are valid grounds to sue your partner. Importantly, it should outline each partner’s rights, responsibilities, the process for dispute resolution, and reasons for removing a partner. It should be noted that some partnership agreements also include clauses that require disputes to be resolved outside the courtroom using mediation or arbitration. If so, the method of alternative dispute resolution specified in the agreement must be adopted.
2. Determine Whether it is Necessary to Take Legal Action
In many cases, a dispute with a business partner can be resolved amicably — and litigation is not necessary. Before you take your dispute into the courtroom, it’s vital to determine whether you have viable grounds to sue your partner, and whether the conflict can be resolved with open and honest communication. Common reasons it may be necessary to sue a business partner in New York include the following:
- Fraud
- Misrepresentation
- Breach of contract
- Breach of fiduciary duty
- Misappropriation of funds
- Abandonment of the partnership
- Negligence
In some cases, mediation or arbitration can be used to help settle disputes and preserve business relationships without judicial intervention. But while these options are often more efficient and cost-effective than litigation, they may not be appropriate in cases involving egregious misconduct or an unwillingness to compromise.
3. Gather Documentation and Collect Evidence
If your business partner has committed misconduct, it’s important to begin documenting your case as soon as possible. If your case is brought into court, you will need to demonstrate the damages you or the business sustained due to the partner’s actions. Evidence that can be used to document the partner’s wrongdoing and the harm you suffered can include financial records, emails, text messages, invoices, contracts, meeting minutes, digital evidence, bank statements, ATM withdrawal receipts, and surveillance footage. It’s also a good idea to maintain a detailed log of any incidents that have occurred to help build a solid case.
4. Consult with a Business Attorney
In the event you are considering suing a business partner, it’s crucial to consult with an experienced and knowledgeable business attorney. They can assess your case and best advise you regarding your legal rights, recourse, and options. Depending on the nature of your claim, various remedies may be available to you under the law — including both monetary and equitable remedies. An attorney can also assist you with gathering the evidence you need to prove your claim and help you navigate the complexities of the legal system.
5. File a Lawsuit
If all attempts to resolve the partnership dispute outside of court have failed, filing a lawsuit might be your only option. To sue a business partner in New York, you must first file a summons and complaint in the Commercial Division and serve it on the appropriate party. After the lawsuit has been filed, the discovery phase of litigation will commence. This involves exchanging relevant information between the parties — and is vital to building a strong case. If a settlement is not reached at any point during the litigation process, the case will proceed to trial.
Contact an Experienced New York Business Attorney
If you operate a business with partners, it’s critical to take legal action when necessary to protect your business and its bottom line. Offering committed counsel and strategic solutions for business owners across Long Island, Barnes & Barnes, P.C. provides representation for a wide range of commercial matters, including business partner disputes. Contact us at (516) 673-0674 to schedule a consultation.
