Partnership and Shareholder Litigation

The Los Angeles partnership litigation lawyers at Wagenseller Law Firm handle partnership litigation in the Los Angeles Superior Court and throughout Southern California

Partnership litigation attorneys, whether in Los Angeles or elsewhere, must have the legal knowledge and experience specific to partnership disputes. The partnership litigation attorneys at Wagenseller Law Firm have handled numerous partnership lawsuits. Moreover, our attorneys have successfully settled or resolved many of those cases while also taking other cases to trial when needed. Lawsuits over partnership issues or agreements will often implicate issues and requirements set forth in California’s Corporations Code. This can include the Revised Uniform Partnership Act, the Uniform Limited Partnership Act or the Revised Uniform Limited Liability Company Act. [The ‘members’ of a LLC are not partners but their relationship works in similar ways and we have used the phrase ‘partners’ to refer to general partners, limited partners and LLC members]. Not all business litigation attorneys have the experience or knowledge to properly handle a partnership lawsuit.

In Los Angeles attorneys are plentiful. A good amount of those attorneys have actually handled business litigation. Some Los Angeles business litigation attorneys have experience with partnership litigation specifically. Even fewer of those business litigation attorneys have built successful careers handling partnership litigation or have ever even handled a partnership lawsuit trial. At Wagenseller Law Firm our partnership litigation attorneys have a track record of success in handling, resolving and trying partnership lawsuits in the Los Angeles Superior Court and elsewhere in Southern California.

Partnership and Shareholder Litigation

  • Breach of Contract
  • Breach of Fiduciary Duty
  • Fraud
  • Accounting
  • Corporate Dissolution
  • Corporate Accounting/Right to Inspection and Audit
  • Demand for Corporation Books and Records

Breach of Contract

Partnership agreements are written contracts between the partners. Limited Liability Company members will have a written LLC Operating Agreement. Partnerships and limited partnerships will usually have a written partnership agreement. These contracts will govern how the relationship is set up and, if thorough, what will happen in the event of a dispute.

Partnerships can be the most important relationship a business owner or property owner can enter into and it makes sense to spend time with an experienced partnership attorney figuring out the terms of that partnership. In the exciting beginning stages of a partnership, when money is low, time is tight and relations are good, many partners fail to spend the time and money thinking through all of the intricacies of a partnership relationship. Do not skip this step! Partnership agreements do not seem all that important at the beginning of the relationship but they are extremely important when the relationship falls apart and litigation ensues. The Agreement should set forth what happens when one of the partners dies or gets divorced. Suddenly you may become partners with an ex-spouse or a partner’s child or children. What happens when a partner declares bankruptcy? Or how do the partners separate when they simply do not get along anymore?

When partnership disputes go into litigation, the first cause of the complaint will typically be for breach of contract relating to promises owed under the partnership agreement. Of course there are many partnerships in which the partners do not have a written agreement but they may have an oral contract or an implied-in-fact contract. An attorney may file a partnership lawsuit on behalf of a partner even though the contract is only oral. An experienced partnership trial attorney is important in this case in order to determine whether the partner has the necessary evidence to be able to establish his or her case.

Breach of Fiduciary Duty

A breach of fiduciary lawsuit is premised on the idea that the defendant owes the plaintiff a special duty, such as that arising in a partnership setting. Just as an attorney owes his client a fiduciary duty based on their relationship of trust, a partner usually owes his partners a fiduciary duty. An experienced partnership lawyer will know the intricacies of partnership law, especially if the entity is a Delaware LLC versus a California LLC. At Wagenseller Law Firm our business litigation attorneys have handled litigation and lawsuits on behalf of both California and Delaware LLCs.

The idea behind a fiduciary duty is that the party who owes a fiduciary duty to another, such as a partner, must act in the highest good faith towards the other. A partner may not take advantage of the partner or steal partnership opportunities for his own gain. A partnership attorney will know what fiduciary duties are waivable or can be modified in the partnership or operating agreement.

In California the fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care. These duties include a duty to account to the partnership for business conducted during the partnership (and in the winding up of the partnership). See “Accounting” below. A partner may also not act on behalf of someone adverse to the partnership while dealing with the partnership. This includes a duty to refrain from competing with the partnership. A duty of care means that a partner must refrain from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of the law. A partner must also act with an obligation of good faith and fair dealing.

A Los Angeles partnership litigation attorney will be able to ascertain when a partner has violated his duty of loyalty or duty of care to the other partners. In many partnership agreements and LLC operating agreements the partners or members specifically allow a partner or member to pursue other business in the same line of work (such as investing in other property with other partners).

Fraud

A fraud cause of action in a partnership lawsuit will usually involve the partner’s lie or, probably more common, concealment of certain information from the other partners. A fraud cause of action requires that a plaintiff establish a misrepresentation or concealment of a fact which the party has a duty to reveal. Because of the fiduciary duties between partners, any type of misrepresentation or concealment can rise to the level of fraud. However, fraud also requires that the aggrieved party not have known the truth about the misrepresented or concealed fact. An experienced business litigation attorney can help you evaluate whether a partner’s lie rises to the level of fraud by meeting the various requirements of a fraud cause of action. While many litigation lawyers will assert a cause of action for fraud, that cause of action does not always survive. A partner who sues for fraud in California must also show that he or she reasonably relied on the alleged misrepresentation or failure to disclose and that the reliance led to damage. Each of these elements of a fraud cause of action can cause both attorneys and clients problems at trial. The partnership litigation attorneys at Wagenseller Law Firm in downtown Los Angeles have successfully plead and proved fraud causes of action in partnership lawsuit and have also disproven fraud causes of action against our clients.

Accounting

An accounting cause of action is just what it sounds like—an accounting to determine where the money went and what the damages are. Typically, the accounting is necessary to prove the other causes of action for breach of fiduciary duty, fraud and breach of contract as well. While a business litigation attorney will handle the partnership litigation, the attorney will also need the help of a forensic accountant on accounting matters. Accounting can be a long and involved process and the trial attorney will need to be able to establish each transaction with evidence, showing where the money came from and where it went.

Corporate Dissolution

When legal disputes arise among shareholders, especially in a close corporation, a lawsuit for corporate dissolution will often follow. Dissolution of the corporation can be either voluntary or involuntary but obviously litigation would involve an involuntary dissolution. An attorney may file a lawsuit for involuntary dissolution when either the directors or shareholders of the corporation are deadlocked or there is fraud and mismanagement in the corporation. There are certain requirements for who may file for dissolution and how many directors or shareholders must be involved in the decision. The corporation may also in some circumstances purchase the shares of the shareholder bringing the action. An experienced corporate litigation attorney will be able to guide you on these issues.

Corporate Accounting/Right to Inspection and Audit

The crux of many corporate lawsuits against directors and officers is money. Oftentimes plaintiffs believe that a director, officer or dominant shareholder is stealing money—often subtly or outright. The litigation attorney who prepares a lawsuit against the corporation and its directors and officers may allege breach of fiduciary causes of action but will usually also include an accounting cause of action. The litigation attorneys, working closely with forensic accountants, will seek the financial records of the corporation and investigate where the money has gone. Although the accounting cause of action asks for an accounting, the actual accounting will be conducted as part of the discovery in the lawsuit and will be an integral part of determining the damages arising from the fraud and breach of fiduciary duty causes of action.

Demand for Corporation Books and Records

Corporate shareholders who suspect that the directors, officers or other shareholders are being untruthful about the financial situation of the company may not have anything on which to actually base their suspicions. However, even though the California Corporations Code gives a shareholder the right to inspect the corporation’s books and records, the company management may refuse to cooperate. The shareholder can file a writ of mandate with the Superior Court asking the court to compel the corporation to allow the inspection of the books and records. Corporate litigation lawyers who are familiar with this expedited procedure can secure the corporation’s books and records (while also showing management that the shareholder is serious about pursuing answers to his or her questions).

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Partnership and Shareholder Litigation Insights

The Wagenseller Law Firm has experience handling a variety of partnership and shareholder litigation matters.

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