California Business Divorce: Lessons Learned, There Is No Better Defense Than A Proper Offense

Stradling represented a California limited liability company (and two of its owners) who terminated the employment of a third owner for violating company policy, including allegations of sexual harassment. The company also removed that person as a member and manager of the LLC per the terms of the operating agreement. That person commenced arbitration against the company for wrongful termination and removal from the LLC.

In arbitration, our litigators argued that the termination and removal were proper because the terminated owner violated company policy and was a toxic force within the LLC. Agreeing with our arguments regarding termination and removal, the arbitrator found there was just cause for the company’s actions. The arbitrator then determined a buy-out amount as set forth in the operating agreement as to that person’s ownership interest.

Despite the terminated owner’s grandstanding and repeated attempts to shift the blame to the company and others, Stradling’s litigators focused on the facts, proved their case, and achieved another excellent result for the client.

However, there is more to this story than “client retains Stradling” and “Stradling wins.”

Getting the right result was not so simple.

The client came to us with a contract that was ambiguous, at best.  As a result, although our client prevailed on the wrongful termination claim, it still had to pay more than they wanted on the buyout claim. Sadly, this happens all the time in business divorces when contracts are not certain and clear.

What is the moral of the story?

Although it might seem obvious, new business partners need a proper, comprehensive contract tailored for them by proven counsel who know how these scenarios will play out both inside and outside of court. What they don’t need are a handshake, a “one size fits all” contract, or an agreement cut and pasted from the internet.

Stradling delivers not only this distinct and specialized expertise in forming companies and effective contracts, but also the formidable and efficient litigation skill necessary to enforce those contracts when disputes can and do ensue.