October 27, 2022
A lot of people strive to make decisions with cool, clear, rational minds. However, it’s really hard to avoid that most primal force: emotion. This is especially true in stressful situations — and few situations are more stressful than litigation. At times, this means that even the most rational people want an outcome that is not only just: they may also want one that provides them with a sense of victory or revenge or they just want the whole thing to go away.
This means that a big part of our role in advising people in disputes is helping them manage the emotional turmoil and stress of a dispute or litigation. We do this by, among other things, having clients identify their primary goals so they can focus on what is most important, while, perhaps, shining a light on how their emotions and fears may push them away from these goals. Doing this work at the start often helps clients position themselves to best resolve disputes to their satisfaction and can make the entire process more efficient.
We also try to help clients think through the decision-making process and recognize the emotions raised by a particular situation. This helps clients avoid rushing to a conclusion just to get the stress over with, which can have big ramifications, especially when it comes to deciding when and whether to settle.
In practice, this means that we help clients understand not just the law, but what they’re going through and what they’re feeling. In other words, a big part of our job is making sure clients don’t get in their own way. We do this by helping clients dissect their emotions and how that fuels their decision-making process. Is it fear? What exactly are you afraid of? Is it anger? Is that anger clouding your judgment, impelling you not to settle when that’s the best call? Is it the anticipation of potential relief, of just getting this all behind you as quickly as possible, that might cause you to make a rash decision? Looking into the future, how will you feel one year, two years from now if you do X? What could cause you to regret that or feel good about that? We’ll talk about what you’re experiencing, try to identify the dominant emotions and what’s causing them, and use the knowledge to make decisions that will quell fears, satisfy desires and help achieve the best resolution.
Given that most disputes settle, a key aspect of this decision-making process is also figuring out the value of settling. Are you worried that the costs of continued litigation outweighs the potentially greater financial result of not settling now? How did you make that determination? At the beginning, we approach this by assessing the case. We work backwards from the client’s goal, examine the possible rewards and costs — and, again, the emotions associated with both. Together, we establish the basis for the entire process going forward that enables us to stay firm, focused and on track.
March 8, 2022
A good part of my practice involves disputes between company co-founders or co-owners. Although people seem to think I’m crazy when I say this, it’s a type of work I find particularly satisfying because it requires a combination of legal knowledge, problem-solving, and empathy.
As a result, I’m frequently asked for advice about what to do in this type of situation. While there’s no perfect answer, here are my top five tips:
One: If you have documents governing the company, you need to review them. Ideally, there’s a written document that says how the company and its owners are supposed to operate and that document addresses your circumstances.
If that’s not the case for you, don’t panic! This is very common. A lot of people never get around to documenting how a company is going to operate.
In the absence of a formal agreement signed by all of the company’s owners, there are some other sources that may clarify things. For starters, the law of the state where the company was formed may provide some guidance. In addition, emails, texts, and other communications between co-owners, as well as past practices, can also help fill in gaps.
Two: Recognize that even if you have straightforward and clear documents, there’s almost always a significant human element involved in resolving this kind of dispute. This means it’s important to be clear about what you want and what you’re willing to give up. For example, is your prime goal ousting a co-founder or co-owner? Or, are you more interested in reframing your relationship and setting up new lines of communication? Do you simply want to exit the business and move on from a relationship that has become toxic?
Three: Think about what you want to do if you can’t get your preferred outcome and develop a list of priorities.
Four: Consider the possible roadblocks to a resolution. Some are obvious — having enough money to buy out a co-founder or an operating agreement provision that requires unanimity. Others are less obvious. For example, are you concerned about letting go and moving on to the next thing? Is your co-owner someone who enjoys fighting?
Once you’ve identified these roadblocks, think about what you can do to remove them or lessen their impact.
Five: Work with a skilled professional or professionals. This can be a lawyer, but it can also be a mediator or a coach. The important point is that you have an outsider who can serve as a sounding board and suggest options and different strategies.
Please reach out if you have any questions.
April 25, 2017
One of the most common, if not the most common, issue I’ve dealt with as a lawyer is what happens when the owners of a business stop being able to work together. This can happen in any form of small business – a corporation, a partnership or a limited liability company. It doesn’t matter. I’ve seen numerous variations on this, but the basic idea and problem is the same: people start a business together and either don’t write down their understanding about how they will operate or, they write an agreement, stick it in a drawer and never think about whether it needs to be updated.
Why does this happen? In my experience, there are two basic reasons: either everyone is so focused on making the business a success and working super hard that there’s just no bandwidth left to think about an agreement governing the relationship between the owners, or there’s already some conflict lurking that no one really wants to talk about. Sometimes, it’s a combination of both.
In either case, the lack of any governing document or an accurate governing document becomes a big problem when there’s a problem. This can happen when an owner dies, wants to retire or is arrested. (Yes, that happens.) It can happen when the person who has always been considered the “junior partner,” is suddenly bringing in the most business and wants a bigger share of the business’ profits or when a partner is no longer contributing at a level commensurate with his compensation. It can happen when the owners reach an impasse over a big personnel decision or how to move the business to the next level.
What happens? At some point, the issue comes to a head. There’s a good deal of frustration and hard feelings between the owners who end up having to hire attorneys to work out the issues. Not an ideal situation. If you didn’t have the bandwidth to deal with these issues when you were starting a business, this isn’t any better. f there was something no one wanted to talk about, you’re definitely going to have to talk about now, and it’s probably going to be even less pleasant because there’s been months or years of frustration and hard feelings added to the conflict. Even worse, the owners can’t work out their issues and are stuck running a business together. Obviously, that’s not good for the owners, employee morale, or the company’s bottom line.
If, having read this, you’re thinking that an agreement governing your business might be a good idea, what should you do? Start by thinking about how you want your business and your relationship with the other owner(s) to work. Ask yourself and the other owner(s) some questions: Do all owners have an equal say in the management of the business? Do all owners receive an equal share of the profits (or losses) of the business? Could this change? Are there certain decisions that can be delegated to a subset of the owners and, if so, what are those issues? What’s the mechanism for resolving disputes? How can a new person come into the business? What happens if you raise money? How does someone exit the business? What about if that person doesn’t want to leave?
Once you’ve done this, talk to a lawyer.
