A common question we here is “How do I sue my business partner?”. Disputes between owners and business partners can arise in a lot of forms. A typical case we see is one owner is taking or hiding money from other owners. Another typical case or one owner is restricting access.
Our first step when hired in that situation is to make a demand for access. That prompts the other party to hire an attorney who will respond to the request.
This often yields access is statutory other owners have certain rights with respect to access and inspection to the company’s books and records.
Under the advice of counsel, owners typically do not continue withhold this information. In the event that fails, we can seek court intervention.
What can court intervention provide for business partners?
A court can order access and in some circumstances can order a third-party to run the business. This is called a receiver.
A receiver will ensure the owners’ rights are being observed and recognized. Also, that the assets to which many have a claim are being preserved.
This may be an appropriate move particularly when one owner is suspected to be moving or wasting company funds.
When there is a reasonable concern that the wrongdoer is taking money or moving money… or engaging in other wrongful activities, this conduct can be difficult to remedy after the fact.
If somebody takes money and they spend it, even if you file and win the lawsuit, it takes a couple of years. In that time the wrongdoer easily could have disposed of the money. So even though you’ll have a judgment it won’t be feasibly collectible.
The idea of a receivership early on is to handle the situation immediately. This is so that assets are not wrongfully wasted when there’s somebody else who has an ownership interest.
While a receiver is an extreme remedy, in Arizona there isn’t a required showing of imminency. The judge has great latitude and discretion with respect to deciding when to appoint a receiver.
That means that if you can persuade a judge that it’s likely there are some wrongdoing going on or a dispute between the owners that cannot be resolved.
In that case a judge may appoint a receiver so that a third party can handle the business’ affairs well the lawsuit is pending.
Typically a receiver quest request accompanies a lawsuit for damages as well. The purpose and remedy is that the status quo can be maintained while the lawsuit proceeds.
That way the wrongdoer is held accountable the business interests and the interests of all owners are protected in the meantime.
How do I get started?
We are routinely involved with receivership applications on both sides of the fence seeking them and defending them. If you are in a business dispute call us about whether this is appropriate remedy.
If a fellow owner has filed an application for receiver that you disagree with call us to discuss options and how to mount a defense.