Joint-Venture Partner Litigation

When two or more parties decide to carry out a single business enterprise for profit, there is an agreement to share profits and losses, and both parties have the right to control the enterprise (even if that right has been delegated) then you may have a joint venture.   

Joint ventures allow two companies to join forces, creating something they could not have created alone by contributing different skills and assets to the project. You can create a joint venture even if you aren’t in business with the other party in a jointly-owned corporation or LLC.

When they work, a joint venture can be flexible and highly profitable. Yet, at times, joint ventures disintegrate or joint venturers breach the legal  duties they have to each other. When they do, disputes can become large enough to warrant the use of litigation.

It’s usually best to secure a joint venture with a formal contract. When you have a contract, disputes may refer back to the contract, and breach of contract litigation may be possible.

Nevertheless, in California, under certain circumstances a “joint venture by conduct” may be created. When that happens, both partners take on equal rights, duties, and liabilities unless they create a written agreement that says otherwise. 

Both joint venturers become fiduciaries to one another in regard to taking actions that impact the partnership, and both  have a legal responsibility to deal with one another in good faith.

Ideally, you’ll prevent disputes by working with a business lawyer before you form the venture.

For example, a business lawyer can conduct due diligence on your behalf, ensuring that your proposed partner is someone worthy of your time and trust. They can also create a joint venture agreement that protects you should the partnership sour.

The agreement should be clear and comprehensive, and should outline both what both partners expect to receive from the partnership as well as what both parties intend to contribute.

In some cases, mediation, or even a calmly worded letter from a business attorney will be enough to end a dispute. Your partner may not know the law or may not understand the obligations that they incurred when they began working with you. 

However, you always have the option to pursue litigation for damages when a joint venture partner has violated their fiduciary duty, failed to uphold their end of the relationship, tries to get more money out of the venture than they have a right to, or uses the venture to damage your business in some other way.

If a joint venture partner has caused $200,000 or more in damages, then we may be able to take your case on contingency, which allows you to pay only for hard expenses unless we settle or collect on a judgment.  While paying for legal fees on an hourly basis as you go is often less expensive in the long run–particularly if you believe your case will settle quickly–we understand that you may not be able to pay for extensive litigation. Contact us to schedule a case review so that we can evaluate your case and determine whether a contingency attorney fee option may be available and make sense for your matter. You can find out more about the contingency business litigation option here.