How Can a Commercial Litigator Help With Shareholder Disputes?

How Can a Commercial Litigator Help With Shareholder Disputes?

How Can a Commercial Litigator Help With Shareholder Disputes

As a shareholder, you may have to litigate a dispute. A violation of a shareholder agreement or another conflict can cost you your investment. You may have suffered damages, or you might face future harm. Never try to handle these high-stakes matters alone.

If you have a legal dispute regarding your shareholder rights, never wait to discuss the matter with a Chicago shareholder litigation attorney. Hire them now to give them time to assess the situation and determine your options. Waiting too long can compromise your legal case and put you in a difficult position when the litigation occurs.

Your attorney plays many critical roles throughout your case. They will direct litigation strategy before and during your lawsuit, explain aspects of the litigation process, and go over your legal options with you. This guidance and representation is your best chance to protect your shareholder rights.

Shareholder Rights Disputes that Require an Experienced Attorney

Here are some common examples of shareholder rights disputes:

  • Oppression of minority shareholders - Those in control of the company cannot take any action that oppresses shareholders, such as freezing them out or wrongful termination of employment.
  • Refusal to share information with shareholders - Shareholders have the right to inspect the corporate records, and they can sue a company if it refuses to disclose information or makes misstatements.
  • Diversion of profits - The company should invest profits back into the company or declare a dividend. If other shareholders pay themselves excessive salaries or bonuses, they may face a lawsuit for breaching the shareholders' rights.
  • Breach of contract - The shareholder agreement might impose obligations on the company and its management. They can face a lawsuit when they fail to comply with these terms. Failing to observe the terms of a buy/sell agreement is an example of noncompliance.
  • Breach of fiduciary duty - The directors and management owe a fiduciary duty to the company. They can face a lawsuit when they 1) fail to exercise due care in making corporate decisions, 2) put their interests above the company, and engage in conflicts of interest.

Damages that You May Seek in a Shareholder Lawsuit

If you file a shareholder lawsuit, you might seek:

  • Financial damages you have suffered due to the breach of the agreement
  • An injunction from the court that prohibits certain behavior (while injunctions are rare, the court can issue one if money alone will not restore your rights)
  • Punitive damages if the breach of your rights was knowing and willful 
  • Appointment of a receiver to conduct the daily business of the company while resolving the dispute

The right shareholder litigation lawyer can review the harm you suffered and determine what legal relief you should seek in your lawsuit.

Everything Begins With the Language of the Shareholder Agreement

Your rights and obligations come from the shareholder agreement. This document is a contract, and the other side has specific obligations and duties they owe you. However, you need to understand your rights before taking a position in your dispute. You may believe the shareholder agreement says something about your rights, but you must confirm that before proceeding with the dispute.

A commercial litigation attorney will review the shareholder agreement and give their opinion about how it relates to the situation. Then, they can determine the best path forward and execute your plan. No one-size-fits-all approach works for all shareholder disputes. An attorney can almost always identify some nuance.

A Commercial Litigation Attorney Advises You on Strategy Before the Lawsuit

Litigation between shareholders and a company does not arise overnight and in a vacuum. A protracted dispute usually leaves shareholders with no choice but to litigate, which occurs against the backdrop of your shareholder agreement.

You need advice early in the dispute process to keep things from worsening and escalating into a lawsuit. There are times when you may have no choice but to sue, but you want to avoid litigation if possible.

A shareholder litigation attorney can keep you out of court. If you engage an attorney early in the process, they can communicate with the other party on your behalf to resolve the issue. You can reach a settlement or even agree to modify the shareholder agreement that will satisfy all involved parties.

Your attorney can draft letters and handle communications on your behalf, and they can also suggest practical solutions to what seems like a thorny and complex dispute. There is more than one way out of a dispute, and litigation is just one of your options. Without the right negotiation, you might resolve the matter satisfactorily without even filing a court case.

An Attorney Can Resolve the Dispute Without a Trial 

Litigation does not exclusively mean that you will have a trial in your case. Instead, it refers to the formal process of resolving disputes between parties. 

Sometimes, it means you will go through the entire court process. In other instances, litigation means you can settle the matter without going to court for a trial. You can even avert a court case entirely if you can engage the other party ahead of time and negotiate an agreement.

However, you may also need to take aggressive legal action at the outset of the case. Talking with the other side can help, but you may not have any time to waste before taking the case to court. Management might harm your rights and lower the value of your investment, and you can’t always wait before you turn to the legal system.

Your attorney may have to take more immediate action in court, seeking an injunction that protects your rights throughout the case. The court may issue an order that mandates or forbids a certain action as an interim step while the case proceeds. The injunction will come at the outset of the case while the rest of your lawsuit proceeds through the litigation process.

Your attorney will determine whether you need to take immediate legal action, and they will draft the motion to the court that seeks the injunction. They will also determine what remedies you may pursue if you file a lawsuit.

A Commercial Litigation Attorney Will Represent You in Court

You need a commercial litigation attorney if your case goes to court. If your shareholder lawsuit involves a closely held company, you may need to deal with intense emotions as well as complex and time-consuming legal issues. Each shareholder may have an attachment to the business that can make them want to fight to the end.

Your attorney will prepare for the beginning of your case by learning more about your situation and reviewing the applicable law. If you are suing, your lawyer will figure out the grounds for the case and how your facts fit into existing legal precedent. They approach the matter with an objective perspective, which can help when dealing with emotional parties.

A Commercial Litigation Lawyer Drafts Your Early Case Filings

A lawyer will draft a strong and thoroughly investigated complaint that begins your litigation, file the complaint with the court, and serve the papers to the other side.

The defendant will invariably file a motion to dismiss the case.

If you face a lawsuit, your lawyer will draft the answer to the complaint. Equally important, the lawyer will review your case to determine whether you have any usable affirmative defenses and advise you on whether you can file a counterclaim against the defendant. You have limited time to file your answer, so your lawyer should start working on these documents immediately after someone files a lawsuit against you.

As mentioned, the defendant will likely move to have the case dismissed or can seek to transfer the case venue to another court. Your attorney will draft the replies to these motions, arguing against the case's dismissal and giving reasons why it should remain in the current court.

The Most Important Work Your Commercial Litigation Lawyer Does Is in Discovery

While many think of the final trial as the place where your attorney does the most crucial work, it is only one part of your case. Much of your attorney's work occurs during the discovery process, when you gather evidence to help build your case. 

Discovery requires a thorough lawyer who knows how to overcome roadblocks to get the proof you need. Your lawyer will also frame your questions and requests for information to lead to the production of relevant evidence.

Specifically, your lawyer will:

  • Draft interrogatories that pose specific questions to the other side
  • Draft requests for the production of documents
  • Draft requests for admissions
  • Conduct depositions of witnesses for the other side
  • Defend you when opposing counsel is taking your deposition
  • Go to the judge to file a motion to compel when the other party is not producing the documents

The hope is that you can build a strong case during the discovery process because the evidence you obtain here will form the basis for the case your lawyer will present at trial. The more evidence you can get at discovery, the stronger your lawsuit will be in court.

Your Lawyer May Negotiate a Settlement Agreement

Your lawyer can also help negotiate a settlement agreement that will end the dispute before it reaches a trial in court. If you have a strong discovery process, you can negotiate a settlement better.

Both sides may have a motivation to avoid a trial because it creates risks for everyone, so many cases settle. An attorney can engage in mediation or go through numerous proposals to reach an agreement with the other side.

If the other party refuses to settle, you may need to litigate in court. An attorney will call witnesses and present evidence that demonstrates the facts in the case. Once your attorney can establish facts in your favor, the judge or jury will apply the law to these facts before reaching a decision.

You Must Contact an Attorney Early in the Dispute

The time to contact a commercial litigation attorney is as soon as you realize you are in a dispute, even if you are still a long way from litigation. When you have an attorney on your case from the beginning, they can place you in a better litigation posture.

Waiting to hire an attorney can leave you at a disadvantage. Even if you do not know for sure that the other side has hired an attorney, you can assume they have. Without a commercial litigation lawyer, you put your rights at risk. While you can hire a lawyer anytime, lawyers help you most when they have time to do their job.

In fact, litigation attorneys can represent you from the very beginning of the matter, working backward to keep you out of a situation that might eventually end up in court. You can avoid a dispute entirely with an explicit and well-drafted shareholder agreement.

Peter M. King, Shareholder Litigation Attorney in Chicago
Peter M. King, Shareholder Litigation Attorney in Chicago

Consult a litigation attorney during the drafting process of the contract. The lawyer can craft an agreement that protects your legal rights, advise you on specific situations that can lead to litigation, and suggest how to draft the contract to avoid legal issues in the first place.

Hire a Business litigation lawyer to avoid misunderstandings; the shareholders' agreement is the most effective way to lay the groundwork for a harmonious relationship.