So many of our clients do business with one or more partners.  We set up partnership agreements and we handle partner disputes (and, to my knowledge, we have never had a partnership that we set up end up in a dispute or litigation). 

Litigation is expensive and partner dispute litigation can potentially be one of the most expensive types of litigation (not only because of the potential legal fees, but the consultants and expert witnesses who are frequently required as part of the litigation process).  So, if you are in a business partnership, you owe it yourself and your family to manage your relationship with your partner(s) to minimize the risk of future dispute. 

In virtually every partner dispute we have litigated, the warning signs were there before the complaint was filed.  Often, they were there when the partnership was first set up.  So, to help you stay out of court and avoid disputes, we are offering this series of 12 blog posts to alert you to the 12 Warning Signs You’re Headed for a Lawsuit with your Partner.

INTRODUCTION

Joint ventures or partnerships–the coming together of two or more parties for a common purpose–can be one of the most powerful ways to do business. When done correctly, joint ventures can help all involved achieve more than they could do by themselves, do business more safely by diversifying their risk, grow their business, save time, connect with like-minded individuals, have more fun, hold each other accountable (in a positive sense), and ultimately make more profits for all. However, whenever two or more people do business together and money is involved, there is the potential for disagreement, disputes and disaster.



This is the first of 12 warning signs (derived from the author’s decades of experience handling real estate partnership formations and disputes and discussions with other real estate lawyers and investors) that you may be headed for a lawsuit with your joint venture partner. If you encounter one of these, it does not mean you will definitely end up in litigation with your partner. It is a “warning” that you should heed and try to take immediate action to deal with it. If you are already in a lawsuit with your partner, consider the following as a checklist to use when forming your next joint venture to minimize the chance you will end up in a dispute with that partner.

 

#1: Communication Breakdown
A joint venture or partnership is a business marriage. And, just as in marriage, good communication is probably the single most important requirement to maintain a healthy business relationship. If your partner “goes dark” on you, if they stop answering your phone calls or e-mails, or if you start noticing a different tone in their voice, those can all be signs that your joint venture is in trouble. I had a client once who called me one day and was extremely concerned and furious because he arrived at his office that morning only to discover that the locks had been changed and he couldn’t get into his own office! When I asked him if he knew what happened, he replied that when he called his business partner to find out if he knew what was going on, his partner told him “I’ve been trying to talk to you for weeks about our problems and you keep ignoring me. This is what I had to do to get your attention!” Don’t let your relationship degrade to such a severe breaking point. If your communication with your business partner starts to deteriorate, that is the #1 sign your relationship is in trouble. Take the initiative ASAP and start a candid, non-confrontational conversation with your partner to ask how they are doing and whether there is anything going on with your partnership that has been troubling them. Then, LISTEN!


Check back tomorrow for Part 2

 

If you are entering a partner relationship of any kind, call us.  We can help you set it up to minimize the risk of future disputes.  If you are having troubles with a current partner, call us.  We can help. For more information about this topic, contact Jeff Lerman at 415-454-0455 x234 or [email protected].