Partnership Lawsuits: Business Litigation Between Partners

California’s Uniform Partnership Act Sets Forth The Law On Partnership Litigation

Partnership lawsuits in California are governed by the Uniform Partnership Act of 1994, which is found in the California Corporations Code.  Business litigation attorneys who handle partnership litigation should start there when looking at potential actions between partners or between a partner and the partnership.  Partnership law in California sets forth what a partner may or may not do with regard to problems in the partnership.

Potential Partnership Lawsuits

What can a partner do against his partners or the partnership as a whole?  California law allows a partner to (1) sue to enforce his or her partnership rights under the written partnership agreement, (2) sue to enforce his or her rights under California law, (3) sue to enforce rights of dissociation, (4) sue to compel a dissolution and winding up of the partnership, and (5) sue to enforce the rights of or protect the interests of a partner, including those arising independently of the partnership relationship.

Lawsuits To Enforce The Written Partnership Agreement

Business litigation attorneys who handle partnership lawsuits understand that the best preparation for a partnership lawsuit is to draft and agree upon a thorough partnership agreement before you even begin working together.  The purpose of the partnership agreement is not for those times when everyone is happy and working together well.  The partnership agreement is intended to figure out in advance what happens when the partners cannot agree.  If the parties have a well thought out partnership agreement—drafted and reviewed by an experienced partnership attorney, they will have a much better chance of avoiding partnership litigation in the first place.  And, even assuming that a future dispute devolves into business litigation between them, any future disputes will be more easily solved if procedures are set in place in the partnership agreement.

Lawsuits To Enforce Rights Under California Law

Partnership lawsuits arising under California law are often based on rights also set forth in the written partnership agreement.  However, even in cases where the partners did not enter into a written partnership agreement, California law grants partners certain rights.  In addition the written agreement may not supplant those rights.

The most common partnership lawsuits arising in partnerships without a written partnership agreement are probably for breaches of fiduciary duties and lawsuits to compel access to the partnership’s books and records.  A common first reaction in disputes between partners is for one partner to block the other partner from reviewing the books and records of the partnership.  Business litigation attorneys who specialize in partnership lawsuits know that this is the wrong first response.  Partners have a right, codified in California law, to review the books and records of the company.  Partners who refuse to allow another partner access to those records not only risk a court order compelling them to open up the books but will also be ordered to pay back the partner who is forced to hire an attorney to enforce this right.

Lawsuits To Enforce Dissociation

California’s Uniform Partnership Act sets forth a process for determining the buy out of a dissociating partner.  Should the partnership refuse to abide by this process, the dissociating partner can bring an action to enforce this process.

Lawsuits To Compel Dissolution Of The Partnership

There are a number of reasons that a partnership may be forced into dissolution.  There may be certain events set forth in the written partnership agreement which trigger dissolution.  The majority of the partners may vote for dissolution.  An event or law may render the partnership’s business illegal or may unreasonably frustrate the economic purpose of the partnership.  When any of the various reasons set forth in the Uniform Partnership Act occur but a majority of the partners do not agree to dissolution, a partner may file a lawsuit to have the court dissolution.

The important thing to remember for a partner facing a partner lawsuit is not that the partner know all of California’s laws relating to partnership but rather that you retain an experienced business litigation lawyer who specializes in partnership lawsuits and knows the relevant partnership laws.  The experienced trial attorney can spot the issues and advise you on the appropriate legal avenue for resolution.

Los Angeles partnership litigation attorney Laine T. Wagenseller specializes in real estate and partnership litigation.  He is the founder of Wagenseller Law Firm in downtown Los Angeles.  For more articles on partnership litigation and other business litigation topics, visit www.wagensellerlaw.com or contact Mr. Wagenseller at (213) 386-0371.