Travis & DeBlase PLLC represents businesses and business owners in disputes involving partnerships, LLCs, closely held corporations, and commercial relationships. Below are answers to common questions about business disputes in New York.
What types of business disputes does Travis & DeBlase handle?
We handle a wide range of business disputes, including partnership and LLC member disputes, shareholder disputes in closely held corporations, breach of fiduciary duty claims, business dissolution and buyout disputes, disputes over business valuations, non-compete and non-solicitation agreement enforcement, misappropriation of business assets, and disputes arising from business formation and governance. Our practice is focused on achieving practical, results-oriented outcomes that protect our clients’ business interests and financial positions.
What is a breach of fiduciary duty in a business context?
Fiduciary duties are legal obligations of loyalty, care, and good faith that business partners, LLC members, corporate officers, and directors owe to the business and to each other. A breach of fiduciary duty occurs when a person in a position of trust acts in their own self-interest at the expense of those they owe a duty to. Common examples include self-dealing transactions, diversion of business opportunities, misappropriation of business funds, competing with the business without consent, and concealing material information from other owners. In New York, breach of fiduciary duty claims can result in compensatory damages, disgorgement of profits, the imposition of a constructive trust, and in some cases, punitive damages.
My business partner is stealing from the company. What should I do?
If you suspect your business partner is misappropriating company funds or assets, you should take several immediate steps. Document everything you can by preserving financial records, bank statements, communications, and any other evidence of the suspected misconduct. Do not confront the partner before consulting with an attorney, as this can lead to destruction of evidence. Contact an experienced business dispute attorney who can assess your situation, advise on your legal options, and take swift action to protect the business. In urgent situations, your attorney may seek emergency injunctive relief from the court to freeze assets, prevent further dissipation, or compel an accounting. Under New York Lien Law Article 3-A, if the funds are construction trust funds, the diversion may also carry criminal liability.
Can I force my business partner out of the company?
The answer depends on the type of business entity, the terms of your operating agreement or partnership agreement, and the circumstances of the dispute. Many operating agreements and partnership agreements include provisions for the removal of a partner or member under specified circumstances, such as a material breach of the agreement or conviction of a crime. If the agreement does not address removal, or if the parties cannot agree, judicial dissolution of the business may be available. In New York, a court can order the dissolution of an LLC if it is not reasonably practicable to carry on the business in conformity with the operating agreement. For partnerships, dissolution may be available under the Partnership Law. In closely held corporations, shareholders may seek dissolution under Business Corporation Law Section 1104-a based on oppressive conduct by those in control.
What is a business dissolution proceeding?
A business dissolution proceeding is a legal action to wind up and terminate a business entity. This can be voluntary, where the owners agree to dissolve the business, or judicial, where a court orders dissolution based on specific statutory grounds. In a judicial dissolution, the court oversees the process of liquidating the business’s assets, paying its debts, and distributing any remaining value to the owners. Dissolution proceedings can be complex, particularly when there are disputes about the value of the business, the allocation of assets and liabilities, or the conduct of the parties leading up to dissolution. An alternative to dissolution is a buyout, where one partner or group of partners purchases the interests of the others, allowing the business to continue under new ownership.
How are business interests valued in a dispute?
Business valuation in a dispute context is a specialized and often contentious process. Common valuation methods include the income approach, which values the business based on its expected future earnings, the market approach, which values the business based on comparable transactions or comparable publicly traded companies, and the asset approach, which values the business based on the fair market value of its net assets. The appropriate method depends on the nature of the business, the purpose of the valuation, and the terms of any applicable agreement. Disputes frequently arise over the application of discounts for lack of marketability or minority interest, the normalization of earnings, and the selection of appropriate comparable companies or transactions. Expert valuation testimony is typically essential in business dispute litigation.
What role does the operating agreement or partnership agreement play in a dispute?
The operating agreement (for LLCs) or partnership agreement (for partnerships) is the foundational document governing the relationship between the owners. It typically addresses capital contributions, profit and loss allocation, management authority, decision-making procedures, restrictions on transfers of ownership interests, dispute resolution mechanisms, and procedures for dissolution or buyout. In a business dispute, the terms of this agreement are often the starting point for analysis. However, certain fiduciary duties and statutory protections cannot be entirely waived by agreement under New York law, so the agreement is not always the final word.
Can I recover lost profits if my business partner’s misconduct damaged the business?
Yes, lost profits can be recovered as damages in a business dispute, provided they can be proven with reasonable certainty. This typically requires demonstrating what the business’s profits would have been absent the partner’s misconduct, using historical financial data, industry benchmarks, and expert economic analysis. In addition to lost profits, you may be entitled to other remedies including disgorgement of any profits the partner obtained through their misconduct, an accounting of all partnership or business finances, and imposition of a constructive trust on assets improperly obtained.
Should I try to resolve my business dispute through mediation?
Mediation can be an effective way to resolve business disputes, particularly when the parties have an ongoing business relationship they wish to preserve, when privacy is important, or when the cost and time of litigation would be disproportionate to the stakes. However, mediation is not appropriate in all situations. If the other party is acting in bad faith, if there is an urgent need for injunctive relief, or if the dispute involves serious misconduct that requires judicial accountability, litigation may be the better path. An experienced business dispute attorney can help you evaluate whether mediation or litigation best serves your interests in a particular situation.
Learn More
For a comprehensive overview of our practice, visit our Business Disputes page. You may also find our guide on Breach of Fiduciary Duty in New York helpful.
How do I contact Travis & DeBlase PLLC about a business dispute?
Call (212) 248-2120 or email info@travisdeblase.com to schedule a confidential consultation. We will review the facts of your dispute, explain your legal options, and provide our honest assessment of the best path forward. Our offices are at 40 Wall Street, Suite 2508, New York, NY 10005.