How Three Business Partners Almost Lost $6 Million Because of a Commercial Dispute

How to avoid costly litigation through dispute resolution

Their business was falling apart before their eyes,
they were destined for litigation, but then…

When emotions get fired up, logic and business sense can often get tossed out the window. Over the years, I’ve seen many situations where smart, experienced entrepreneurs will throw away millions of dollars just to prove that they are in the RIGHT.

For example, a short time ago, three partners in a multi-million international enterprise contacted our team for help. The partners were locked in a bitter battle that was destroying their business.

One of the men had been a silent partner. Every month the business paid him while he traveled the world. The other two managed the day-to-day operations. The dispute arose when the silent partner, concerned with how the business was being run, started to become more actively involved. Although the other two partners objected to this and asked him to stop, he continued what he was doing.

Despite attempts to resolve the dispute, the situation escalated.

The partners decided to put the business up for sale. However, they were told by the broker that if the dispute went to litigation, it would potentially lose them up to $4 million. Even worse, if one of them filed to dissolve the partnership, they would lose everything – $6 million.

When they contacted us, the situation was dire. We immediately implemented our unique 8 step process to resolve the dispute.

The eventual outcome was that the partners implemented the terms of the new partnership agreement to discharge all expenses and liabilities and distribute the net assets of the partnership post sale of the business.

Everyone was delighted with the results!

But it could have been a lot worse because the partners made a number of mistakes that could easily and quickly escalated the dispute and triggered litigation.

Here are some of the mistakes they made as well as other common ones, so you can avoid a few of the dispute resolution problems that these men faced.

Dispute Resolution: The Keys to Success

  • First Mistake –  They lost the ability to communicate with each other
    Their communications had become nasty, negative,, accusatory and inflammatory. Their mistake was not to take swift action to rectify this.  Following our engagement one of our first steps was to take control of the inter-partner communications as part of containing and deescalating the dispute. We brought a swift end to the damaging emails and text messages. We set up a protocol to ensure that all communications were channeled through us to promote constructive dialogue.
  • Second Mistake –  They were focusing on the people rather than the problem  
    When we were brought in things had got really nasty and everyone had descended into the blame game. We worked with all partners to move them out of this rut and into identifying their core interests and chief commercial objectives, and then aligning all dialogue and communications to exploring options to protect those interests and achieve the desired outcomes.
  • Third Mistake –  Engaging in actions or using words that served only to alienate and aggravate the other partner and escalate the dispute.  
    We introduced behaviour and conduct rules that ensured that each partner felt respected and valued and was given a constructive role to play.
  • Fourth Mistake –  Taking too long to accept that they needed help from skilled commercial dispute resolvers to manage the dispute resolution process.
    This mistake took them very close to the brink of self destruction.
  • Fifth Mistake – Fighting over interpretation of clauses in an outdated partnership agreement rather than recognising the need for a new and better one that would better serve their interests.
    By shifting their focus and perspectives from fighting over the carcass of a redundant agreement to working collaboratively and creatively on what they needed to have in a new and fresh agreement that would facilitate achieving the best possible outcome for each of them, we managed to dissipate the negativity, fear and competitive confrontation and convert it into a collective ambition to find ways to solve the problems and achieve the goal of making a good sale and maximising their net profit.

It is all too easy to make these mistakes when you are caught up in the heat of a dispute. Litigation is very often the result, but it need not be so. Most disputes, if properly handled, can be successfully resolved early, cost effectively and without harming important relationships.

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