Its a Good Business Practice to Keep Any Disputes Between Owners of a Business In-House
Video Transcribed: Tulsa Cannabis Business Attorney Isaiah Brydie coming at you with another video. And this video is going to be all about dispute resolution, mediation and arbitration. So, as a general matter, it’s usually a best business practice to keep any disputes between owners of a business in-house, as much as possible.
That’s why for most operating agreements on limited liability companies, they already have baked in arbitration provisions. So with that you would have the opposing parties coming together. Usually there’s a third party mediator in place. Whether that actually is a third party or is the attorney on behalf of businesses is left up to the operating agreement. It could just be some money that they grab off of the street depends on what the operating agreement says.
And that any disputes between the owners are resolved there in that arbitration first. With that each side can lay out their cases on what needs to happen and everything like that. And then from there, hopefully there’s some sort of resolution that the business can then follow through on going forward.
Depending again, going back to those fiduciary duties that I mentioned before, if there is that potential of a violation of fiduciary duties, courts are split on whether or not there still needs to be that arbitration that happens.
It’s my general practice that depending on the severity of the fiduciary duty breach, then the remaining owners of the business, depending on what the transaction is, may be required by their fiduciary duties to actually potentially file litigation on behalf of the business to protect their business from an interested parties conduct or from the breaching parties conduct and also to protect themselves. But it’s a case by case basis. Intelligent minds can disagree.
Going on from there, if there is no resolution to the mediation, that is when you’re probably looking at potentially following through with filing a lawsuit, either on a potential breach, or maybe because there is again that violation of fiduciary duties, or maybe even potentially as well, because you’re assuming as a minority shareholder or a minority interest in the business, and you need to protect yourself and you need to protect the business or for a whole host of other things.
So, yeah, that’s a general prerequisite to actually filing suit against your other business partners or other members of the business is doing that in house arbitration. Thank you guys for watching.