Remedies in Florida Partnership Disputes

Last month, we discussed some key considerations for resolving partnership disputes through mediation or arbitration. In that article, we covered some of the benefits and limitations of each of these forms of alternative dispute resolution (ADR), and we also covered some circumstances in which ADR may not be the best option for resolving a dispute between partners. This month, we’re taking a look at the remedies that a Miami partnership dispute attorney can help partners pursue—whether in ADR or in litigation.

Practical Considerations for Approaching Partnership Disputes in Florida

Before we discuss the remedies that are available in Florida partnership disputes, it is important to emphasize that, generally speaking, partners have a substantial amount of flexibility when it comes to determining both (i) what remedies they want to pursue and (ii) how they want to pursue them. A major factor guiding these decisions is whether they want the partnership to remain together. If the primary goal is to preserve the partnership and continue working together, this presents a very different set of considerations than a scenario in which at least one partner is prepared to part ways.

In the former scenario, the focus will generally be on amicable dispute resolution—which will most likely mean pursuing mediation if the partners are unable to reach an amicable resolution on their own. In the latter scenario, arbitration or litigation is much more likely; and, rather than looking for a way to come to terms, the partners will each be focused on protecting their own independent best interests. This is where potential remedies come into play.

Potential Remedies in Disputes Between Partners

Let’s say you are prepared to part ways. Or, maybe your partner is prepared to part ways, and there simply isn’t a viable solution for keeping your partnership intact. In this scenario, what remedies can (and should) you seek in your partnership dispute?

Generally speaking, these are the options you have available:

1. Injunctive Relief

When necessary, partners can seek injunctive relief to prevent conduct that violates their contractual rights or that causes harm to their business. For example, if another partner is using the partnership’s trade secrets or customer list to establish a competing business, this is a scenario in which injunctive relief may be appropriate.

Importantly, partners can seek injunctive relief on an emergency basis when warranted. If another partner’s conduct threatens to cause (or is actively causing) immediate and irreparable damage, this is a scenario in which an emergency request for temporary injunctive relief may be appropriate. An order for temporary injunctive relief will prohibit (or “enjoin”) the offending conduct while the partnership dispute is pending, and then the judge will issue a final order (if warranted) at the end of the proceedings. This final order may mirror the original order for temporary injunctive relief, or it may contain additional or alternate prohibitions.

As a corollary to injunctive relief, in some cases, a request for specific performance may be warranted as well. Specific performance is essentially the opposite of injunctive relief. Rather than prohibiting a partner from engaging in certain conduct, an order for specific performance requires the partner to take a certain action—which is usually an action that the partner has already agreed to take. For example, if a partner is refusing to make an additional capital contribution, seeking specific performance as a remedy to compel the capital contribution may be a viable solution.

2. Monetary Damages

A second option is to seek monetary damages. Monetary damages are a common remedy in partnership disputes, and they can be based on either (i) a partner’s (or the partnership’s) actual losses or (ii) a stipulated damages amount set forth in the partnership agreement (referred to as “liquidated damages”). Partnership agreements can also place caps on monetary damages awards, and insurance coverage and other practical considerations will frequently come into play as well.

Except in cases involving claims for liquidated damages, monetary damages are intended to compensate partners (or partnerships) for their actual losses resulting from a contractual breach, fiduciary breach or some other type of legal wrong. This makes calculating or estimating the partner’s (or partnership’s) actual losses a critical early step in the process. If another partner’s conduct is continuing to cause monetary losses, then a claim for damages and a claim for injunctive relief may both be warranted. In this scenario, it will be important to document the ongoing monetary losses resulting from the partner’s conduct as well—as these losses should also be included in the claim for monetary damages.

3. Judicial Dissolution

If there is no hope of an amicable resolution, then seeking judicial dissolution may be necessary as well. While partnership agreements typically include provisions for dissolution in the event of an irresolvable dispute, disagreements over how to effect the dissolution (including how to distribute the partnership’s assets) can themselves lead to the need for arbitration or litigation. In these scenarios, one or both partners may ask the judge to dissolve the partnership and dictate the terms of their separation.

However, while seeking judicial dissolution is an option when necessary, favorable dissolution terms are not guaranteed. Frequently, judicial dissolutions leave both partners somewhat dissatisfied. Recognizing that this is the case, disputing partners will often be willing to at least make a good-faith attempt to find a mutually agreeable path forward. This is one of many areas in which an experienced Miami partnership dispute attorney can help, and if negotiations break down, having an experienced attorney on your side will allow you to promptly pursue mediation or litigation—and all appropriate legal and equitable remedies—as and when necessary.

Speak with a Miami Partnership Dispute Attorney at Edelboim Lieberman

If you are dealing with a partnership dispute in Florida and would like to know more about the options you have available, we invite you to get in touch. We represent partners and partnerships in mediation, arbitration and litigation statewide. To speak with an experienced Miami partnership dispute attorney at Edelboim Lieberman in confidence, please call 305-768-9909 or inquire online today.