Information About Business Litigation

Business litigation refers to the process of carrying on a business-related lawsuit in a court of law. This process includes all of the legal matters handled before, during, and after the actual trial itself, and is often lengthy and very complex. Lawsuits are initiated by the plaintiff, who seeks a legal remedy against the defendant. A favorable decision for the plaintiff usually results in monetary compensation for the plaintiff or an injunction. An injunction is a court order that forces (or prevents) the defendant to carry out a certain action.

Business litigation is a very wide-ranging area of the law. Contract disputes, securities fraud, antitrust violations, liability claims, and class-action suits are just some of the different issues that business litigation encompasses. Oftentimes lawsuits are either internal (between partners or members), or between two different businesses.

Shareholder Litigation

Litigation that occurs between partners, members, or stockholders is referred to as shareholder litigation. In partnerships and limited liability business structures, partner or member disputes usually arise over a breach of contract or fiduciary duty claim.

The breach of a partnership agreement or an operating agreement constitutes many breach of contract claims made by a business partner or member. A breach of contract occurs when any provision of a contract is not honored by a party to that contract. In order to win a lawsuit, there are four elements of a breach of contract claim that a plaintiff must prove:

That the contract at issue is valid
That the plaintiff performed their part of the contract
That the defendant didn’t perform a certain aspect of the contract
That the defendant’s breach caused damage to the plaintiff

The fourth element that must be proved is called causation. The plaintiff must be able to show that the defendant’s breach was the causal factor to the plaintiff’s loss. Generally, a plaintiff will have a good case when they are able to prove all four of these elements. However, even if a breach existed, if it did not cause any economic damage to the plaintiff there will usually not be any compensation awarded.

When a plaintiff wins, they are usually granted compensation for the amount of their loss. In a partnership, after finding a defendant guilty, the partners may have the option of voting out the guilty partner or keeping him onboard.

Breach of Fiduciary Duty

Partners and members of a business enterprise have a fiduciary duty to the other owners and the business itself. A breach of fiduciary duty occurs when a fiduciary (a principal, beneficiary, or trustee) profits or acquires another type of benefit as a result of one of three things:

Having a conflict of interest
Having a conflict of duty
Taking advantage of being a fiduciary

Conflict of Interest

A fiduciary cannot put his interests before those of the business. Furthermore, a fiduciary cannot perform actions that are not in the best interests of the business.

Conflict of Duty

A fiduciary cannot have conflicting fiduciary duties. For instance, a real estate agent cannot represent a buyer of a house if his company represents the party selling the house because each party’s best interests cannot be represented.

Taking Advantage of Being a Fiduciary

A fiduciary cannot profit as a result of taking advantage of their position. Opportunities for fiduciaries may arise because of their position, and they must make known to all partners any profit they receive as a result of being in the position they are in. The fiduciary can keep the profit only if the other partners give their consent.

In order to win a breach of fiduciary duty claim, the plaintiff must prove that the defendant is in fact a fiduciary and that the duty was broken. Courts will usually force guilty defendants to provide any profit they received with the other partners, or when benefits are hard to calculate the court will order the defendant to pay the plaintiff compensation.

Litigation Between Separate Businesses

The main reason why one business will bring a lawsuit against another is due to a breach of contract claim. A breach can be minor, major, fundamental, or anticipatory, and as a result a guilty judgment can result in different types of compensation. A breach can be the result of failure to deliver goods or services, or any other failure to perform a promise mentioned in the contract. As stated above, there are four elements that a plaintiff must prove in order to win a breach of contract lawsuit:

That the contract at issue is valid
That the plaintiff performed their part of the contract
That the defendant didn’t perform a certain aspect of the contract
That the defendant’s breach caused damage to the plaintiff

Once proven, the defendant will most likely have to compensate the plaintiff for their loss, and may still be ordered to perform the action that they initially breached in the contract (specific performance). They may also be forced to pay liquidation damages, which are damages that are agreed to in the contract in case of a dispute.

Hiring a Business Litigation Attorney

Having a business litigation attorney can be a huge factor in whether or not you win your lawsuit. Business litigation is very complex and incorporates many complicated elements that are necessary in determining, for instance, whether or not a contract was breached. Business litigation attorneys are able to examine the intricacies of your specific case and help you prove whether or not all of the complicated elements that make or break a lawsuit are evident.