Business break-up cases require a complex, interdisciplinary approach to solving problems associated with the fractured relationships between the owners of a closely held company. A business divorce attorney must have an in-depth knowledge of corporate, employment, contract, and business tort law. It is important when selecting an attorney to represent you or your company in a shareholder or member oppression case that you select someone who knows more than simply corporate divorce law.

Employment Issues

Business break-up cases often involve employment issues because the owners are usually also employees of the business. That employment relationship can trigger a host of legal issues such as: employment discrimination claims; wage and hour claims; and restrictive covenant litigation. Owners of closely held companies often assert that the termination of their employment was not only oppressive, but discriminatory.

In a previous blog posting, I addressed a New York case where a female shareholder successfully asserted that her mistreatment was due to being a woman, an Erie County, New York Supreme Court Justice found. That blog discusses how the allegations could have resulted in liability under State and federal anti-discrimination statutes.

Moreover, owners often execute restrictive covenants. There are various types of restrictive covenants. Some prohibit former employees from working in a similar industry for a reasonable period of time, within a reasonable geographical scope. Others prohibit former employees from soliciting customers or co-workers they worked with during the course of their employment. Another form of restrictive covenant prohibits a former employee from working with or for customers they worked with during the course of their employment. Clearly, if the departed owner signed one or multiple forms of a restrictive covenant, those issues will arise in the business divorce case.

Sometimes former employees will assert that they were not paid in accordance with state wage and hour laws. Those laws generally require employers to pay their employees for their work, pay a minimum wage, and in some cases pay employees overtime. An understanding of wage and hour law can be extremely important if those issues arise in an oppression case.

Business Torts

Often business tort issues will be included in a business break-up case. Owners/employees generally owe certain fiduciary duties to the company and the other owners. For example, if an owner decides to leave the company, they cannot start working for their new employer or start a new competing company until they correctly terminate their relationship/ownership. An owner or employee who does not follow the law would expose the terminating owner to business tort liability under the theory that they breached fiduciary duties.

Likewise, owners are usually prohibited from usurping opportunities from the company. Business divorce litigation often involves allegations that one or more of the owners failed to bring a contract or business opportunity to the company.

Business break-up cases often involve the misappropriation of trade secrets, as well as confidential and proprietary information. A business divorce lawyer should understand how to prosecute and defend those claims.

In summary, companies or individuals who are searching for the right attorney to represent them in an internal dispute relating to a closely held company should consider what experience and knowledge the lawyer has in these other related, important legal disciplines.