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Partner sues for breach of contract and dissolution of business

| Nov 23, 2014 | Business Litigation |

When partners in a North Carolina business are in a dispute that leads to business litigation and is disruptive to the operation of the business, this often leads to a legal dissolution of the partnership. The dissolution may be formalized by court order; or, it may initially have occurred by the actions or omissions of the partners. Furthermore, where one partner has been wrongly “shut out” of the partnership, the court may order reimbursement to that partner for damages resulting from the breach of contract of the other partners.

In a recent partnership dispute in another state, a partner sued his two partners for shutting him out of the business for a period of several years. The partners failed to pay his partnership owner’s share to him when he stopped working, and then continued to take the man’s share of the profits over an eight-year period. In any dispute involving restaurant earnings, the plaintiff will have a challenge in proving what the company was earning in gross sales.

In this case, a subpoena for the computer records of all credit card and cash sales produced a sketchy, incomplete response that covered a little less than just one year of operations. The court held them responsible for that “purposely inadequate record keeping” that was conducted to hide the confiscated funds from the plaintiff. The court allowed the plaintiff’s expert to use the records that were turned over to compute an extrapolation of prior earnings.

Instead of ordering an outright dissolution of the partnership, however, the court ordered that the two operating partners purchase the ousted partner’s share for $1.2 million within 90 days. If they fail to make the purchase, however, a liquidating trustee will be appointed to dissolve and liquidate the business. Partnerships are founded on a contractual agreement between the parties called a partnership agreement. When there is a breach of contract regarding the agreement by one or more partners, the remedies indicated by this case are generally applied in North Carolina as well as all other states.

Source: litinsider.com, “Judge Orders Forced Buyout of Restaurant’s 3rd Partner“, Ben Bedell, Nov. 5, 2014

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