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Business Disputes between Family Members in Family-Run Businesses

Running a business is hard enough even without disputes.  Business disputes are complicated enough even when the relationships involved are only professional.  But a business dispute between family members is even harder and more complicated, and often the functions of both family and business will grind to a halt.

Business disputes between family members are messy.   On top of business decisions and day-to-day operations is a layer of interpersonal history and lots of emotions.  Minor issues often become bigger issues, or you run into unique problems.  Most agreements are verbal or even unspoken, with little or nothing written in black and white in many cases.  Whether the business is family-owned from top to bottom, or the dispute happens to be between two or more people in an organization who just happen to be related, the situation quickly becomes a plate of spaghetti.

Most family business disputes revolve around one or more of the following: 

  • Decision-making: family members may disagree on issues like salary, benefits, hiring, sales, mergers, acquisitions, branding, and other matters.
  • Ownership, succession: often siblings or other family members will disagree on who should succeed the current owner (often a parent) or receive a controlling stake in the company.
  • Lack of written contracts: many business owners, partners, or other shareholders do not enter into legally binding agreements with family members, or any written agreements at all, because they figure “we’re family” or that a handshake or one’s word is enough, which may have been the case until a dispute arose.
  • Hostile takeovers: a child, spouse, or ex may be trying to gain control of a company, to the detriment of the company and perhaps against the wishes of the principal(s).
  • Fraud, embezzlement, or extortion: one party may have stolen from or cheated principals, employees, or shareholders, who may or may not be related.
  • Breaches of contract: these may involve a family member’s failure to perform fiduciary duties, violation of exclusivity agreements, violations of NDA, revealing of trade secrets, or simple failure to show up for work.
  • And many other situations.

Those business issues or others may be inflamed and complicated by family-specific issues, including:

  • Sibling rivalry
  • Favoritism (real or perceived)
  • Blended-family dynamics, perhaps involving stepparents, stepchildren, or stepsiblings
  • Family members’ feeling “passed over” for a promotion or other expanded powers
  • An adult child of an owner “still being treated like a kid”
  • Nepotism
  • Efforts to avoid the appearance of nepotism or other favoritism
  • Incapacitation or inability to perform duties

Litigating a family business dispute may not solve all of the problems, but leaving things as they are typically just makes things even worse.  Family business litigation is never ideal, but it may be the “least-bad” way for deserving parties to get what is rightfully theirs, and to minimize further collateral damage to other family members, to employees, and to the business as a whole.  A legal resolution may also provide clarity to all parties, and may make disputes less likely to happen in the future.

Resolving Business Disputes Between Family Members on a Contingency Basis

It is possible that we can litigate your dispute case on a contingency basis, rather than on a pay-as-you go hourly basis.  Probably because of the dispute and possibly for other reasons, your money may be tied up temporarily.  We understand that, which is why we may be able to work you in such a way that you only pay a percentage of the settlement or judgment if and when we win your case and you collect your award.  You can find out more about the contingency business litigation option here.

Contact OC Business Litigation Attorney Mark Chatow

Mark Chatow is an experienced business litigation attorney in Newport Beach, who focuses on helping businesses right the ship when things go wrong.  He works with clients of all sizes throughout Orange County, Los Angeles County, and throughout Southern California.  Whether you’re a controlling owner or a minority shareholder, whether the business is large or small, or whether the business is new or generations old, you can call Mark to discuss your family business dispute and the next steps to a fair resolution.