One of us has a boat and the other has fishing gear. Let’s go into business! There might be nothing like the joy and excitement of a nascent business in which the hearts of business partners flutter and their eyes glisten with hope and excitement about their eventual success and good fortune, except maybe young love.
And just as young lovers are rarely in the mood, early on, to negotiate break-up terms “just in case,” eager business partners tend to back-burner many of the hard questions. People tend to suppress negativity at the outset even though a sober look at the probabilities would probably suggest that this substantial risk should be addressed early on.
For business litigation lawyers, this pervasive human flaw means job security. There will never be a time when humans won’t join together in efforts to grow things, build things, and create wonders and greatness for themselves, their families, and their communities. There will never be a time when a significant number of these efforts won’t fail for one reason or another and, when that happens, some percentage of the time former friends, family, or partners will tear at each other with anger and blame.
Putting aside the obvious implicit advice that entrepreneurs and new business ventures would be wise to retain dispassionate outside counsel to devise business plans at the outset that include a variety of scenarios, including failure, what advice would a Minnesota litigator give to parties to a business break-up?
1) Fight fair. 2) Hire competent outside counsel to navigate this risky terrain a.s.a.p. (it is rarely too early (see above re: the blinders of young love), it is never too late).
This past month the Minnesota Supreme Court denied the petition for review of a Minnesota Court of Appeals decision in a bitter minority shareholder fight involving a company called Camas, Inc., and a joint effort called Blue Lily Farms, LLC.
The case is noteworthy in that it highlights the significant discretion exercised by Minnesota courts to effect justice, to impose and enforce a shareholder’s “reasonable expectations,” to stamp out “unfair prejudice” — plainly vague concepts. People involved in closely held Minnesota businesses need to “play nice” when things degrade, when the sharp knives come out.
Minnesota courts may act decisively and adversely toward the party or parties thought to be dishonest, opportunistic, scheming, or manipulative and the Minnesota Supreme Court may not be particularly sympathetic on appeal.
Seth Leventhal is a Minnesota business litigator who is aware of the subtle complexities that complicate closely held company disputes and who helps clients navigate them as best as possible.