Commercial Litigation

Tug of War
Strategic Legal Advocacy for Aventura Businesses

If your business is facing a commercial litigation issue, you may feel uncertain and concerned. These cases can have high stakes and far-reaching consequences, so it is crucial to consult a qualified professional who is familiar with this area of law. The commercial litigation attorneys at Stok Folk + Kon have represented numerous clients in Aventura and the surrounding areas, including individual entrepreneurs, small businesses, corporations, banks, and insurance and finance companies. We know how to handle matters that range from complex business disputes, breach of contract actions, and partnership dissolution to unfair competition and trade secrets.

Resolving Complex Issues Involving Multiple Parties

Multi-party litigation can lead to situations where it is difficult to agree on the ultimate objective, even when several people or entities share many of the same interests. Understanding and managing these overlapping goals is a crucial skill for legal professionals handling commercial litigation claims. Our firm is proud of our experience in this area, where we aim to address the questions and concerns of each party. Our goal is to inform our clients every step of the way regarding the pros and cons of each of the legal options at their disposal.

Disputes between business owners can arise from breaches of fiduciary duty, which can happen when someone managing the enterprise acts out of self-interest instead of considering what is best for those who own it. Clashes also may occur when parties struggle to agree on compensation or when a document is drafted in a way that lacks clarity. A breach of contract claim may be an option to consider when one party does not fulfill its obligations as laid out in an agreement. Unfair competition and trade secret cases can unfold when someone who is aware of confidential information integral to running a business exposes those facts or uses company secrets unlawfully for his or her personal gain. Partnership dissolution matters often hinge on actions for an accounting that fairly compensates each partner for what he or she should receive from the enterprise. As described below, several other scenarios can give rise to business disputes, and our attorneys are equipped to help you navigate each one.

Breach of the Implied Covenant of Good Faith and Fair Dealing

Breach of the implied covenant of good faith and fair dealing is a general cause of action that businesses can use for alleged misconduct by the other party that may not be expressly stated under the terms of the contract. Under this covenant, each party to an agreement implicitly agrees to act in good faith and not take any intentional action to stop the other party from reaping the full benefit of the contract. This promise between the parties is not expressly stated in the contract terms, but rather an implied understanding between the two contracting parties. This cause of action can commonly be used when a party, though technically abiding by the contract, fails to act in good faith. For example, if a client retains a law firm to settle a personal injury case, and the client rejects various settlement offers because it does not want to pay the contingency fee to the firm, that could be considered a breach of the implied covenant of good faith and fair dealing. Although the client is technically abiding by the agreement, i.e. acting as the client and receiving the services of the firm, it is not acting in good faith, and is keeping the law firm from benefiting from its part of the bargain.

Shareholder and Partnership Agreements

A shareholder/partnership agreement contemplates the end of a business relationship. This agreement serves as a contingency plan, detailing the rights of the involved parties should one of the parties decide to leave the business or have a sudden change in circumstances, such as a death or divorce. The shareholder and partnership agreement also outlines the responsibilities of the remaining parties. A knowledgeable attorney can help you draft this type of agreement so that, should a sudden change occur, a plan is in place to maintain the viability of the business and the remaining partners are not left litigating unresolved issues.

Breach of a Non-compete Clause

A non-compete clause is an agreement between an employer and employee regarding the terms of the employee’s future employment should the employee no longer work for the employer. Generally, this type of agreement prohibits the employee from becoming a competitor of the former employer—by either joining a business that is a known competitor of the former employer, or the employee striking out on his or her own, and working in the same field and in direct competition with the former employer. Remedies to this type of breach include monetary awards to the non-breaching party or equitable (non-monetary) relief, such as issuing a temporary or permanent injunction, blocking the employee from becoming a competitor to the former employer.

Breach of a Restrictive Covenant

A restrictive covenant is a promise by one landowner, often to another land owner, not to use the land in a particular way, or not to do certain things on the land. For example, a restrictive covenant may prohibit a landowner from constructing a building that is taller than three stories high on his or her land. If this promise is made to another land owner then the covenant is said to “run with the land,” meaning the obligation to use the land in a particular way is passed on to future land owners as well. There are generally two main remedies against a breaching landowner: a court could issue an injunction—an order prohibiting the breaching party from using the land in a way that violates the covenant; or the court could award damages to the party harmed due to the breach.

Shareholder and Partnership Disputes

Shareholder and partnership disputes usually occur between the managers of the company (usually the CEO and other officers and the Board of Directors) and the company’s shareholders. Disagreements can also arise among the shareholders themselves. If the involved parties cannot reach an agreement or come to any type of resolution, then legal action may be the only means to resolve the conflict. Conflict between these two types of parties can include claims such as: breach of contract, breach of fiduciary duty, wasteful use of corporate assets, differing interpretations of a partnership and shareholder agreement and disputes among minority shareholders.

Minority Owner Rights

An individual or business entity is a minority shareholder when the individual or company owns less than 50 percent of a corporation’s voting shares—this means that a minority owner does not have the authority to vote on major decisions regarding the corporation. By default, minority shareholders usually have the following rights: they can review the balance sheets and financial records of the company upon request, they are entitled to a share in the distribution of profits (if any), and they have the right to sue for breach of fiduciary duty at the perceived misconduct of a majority owner. When majority owners act in such a way that promotes their interests over that of the minority owners, this is called oppression of minority rights and minority owners may bring a cause of action against the majority shareholders.

Corporate Deadlock Disputes

Corporate deadlock arises when a corporation’s shareholders cannot agree on a major decision involving the corporation. Depending on the corporation, there may be an agreement or contract in place that provides guidance as to what steps to take when this type of disagreement occurs. In the most extreme of scenarios, the parties will either litigate in court or a party may decide to no longer be a shareholder. Common outcomes of corporate deadlock include a shareholder offering to buy the shares of the conflicting shareholder or have the conflicting shareholder buy out the shareholder who initiated the deadlock. Resolving corporate deadlock can be a complicated and lengthy process, and experienced legal counsel can help you skillfully handle this type of dispute.

Executive Compensation

There are many facets to consider in developing executive compensation packages, and our knowledgeable legal team can help. This process usually includes attorney consultation on such matters as stock-based incentive plans, deferred compensation options, retirement arrangements, and severance agreements. Businesses may also need legal guidance to ensure that they are complying with various tax and securities laws and corporate governance requirements.

Buyout Agreements and Buyout Rights

Also called buy-sell agreements, buyout agreements are contracts that govern the behavior of the parties upon the exit of one of the partners from the business. If a partner decides to start another business or retire, for instance, the buyout agreement delineates the authorized behavior of the remaining parties. Buyout agreements govern decisions such as what specific events precipitate a buyout (retirement or a partner becoming disabled, for example); the buying price for a partner or shareholder’s interest; and which parties in particular are permitted to purchase the exiting party’s interest in the business.

Self-Dealing

Self-dealing arises when a fiduciary takes advantage of a business opportunity or transaction that benefits the individual rather than the beneficiary. For example, if a corporate officer used corporate funds or assets to finance a personal business matter, the officer has generally engaged in self-dealing. The harmed beneficiary, which would include the shareholders in the previous example, can bring a cause of action against those who engage in self-dealing, and if successful, the individuals may be required to reimburse any monies gained from his or her self-dealing.

Corporate Compliance

Corporate compliance involves creating, implementing and overseeing policies and procedures that ensure that a company is abiding by applicable government and industry regulations. A team of knowledgeable attorneys can help a business entity create a corporate compliance program to ensure that the company and its members are conducting business appropriately. Further, corporate compliance often includes enlisting attorneys to defend corporations against allegations of regulatory violations.

Restructuring Transactions

If a company is financially distressed, it may attempt to restructure itself in hopes of creating a more viable and profitable corporation. Restructuring transactions can include debt and equity exchange offers and the purchase and sale of distressed assets. Other issues that are involved with restructuring include mergers and acquisitions, tax and real estate matters.

Corporate Dissolution

There are many reasons why a business may want to close its doors. Dissolving can be a mutual, voluntary decision made by business partners or it can occur as the result of legal action taken by some but not all of the company shareholders. Whatever the reason for closing down a business, legal counsel can oversee the process and ensure that all winding down procedures are executed properly. Dissolution includes selling the company’s property and assets, paying off corporate debt to the extent possible and distributing any leftover profits to shareholders, members or partners.

Derivative Claims

When the actions of a corporation’s management harm the corporation, the company’s shareholders can take legal action to prevent further harm. This resulting cause of action is called derivative litigation. Shareholders may bring this cause of action against any third-party actor causing harm to the company. Typical actions that may cause shareholder litigation include conflicts of interest, failure to properly execute a sale or merger of the company, breach of fiduciary duty, fraud, insider trading and waste of corporate assets.

Damages and Remedies for Business Owners to Pursue

A common remedy that may be available to a business that prevails in a commercial dispute may consist of compensatory damages, which are intended to reimburse a party for any financial loss that resulted from a breach of contract or another type of harm. In contract cases, the party in breach may need to pay liquidated damages, or a prearranged sum of monetary compensation stated in the agreement. A plaintiff in this type of dispute also can seek incidental damages, which are intended to reimburse a party for losses that were an indirect result of the breach but foreseeable given the circumstances. When a defendant has acted in an especially egregious or reprehensible way, remedies like compensatory or liquidated damages may be supplemented by punitive damages in rare cases. These are awarded with the aim of deterring others in a similar position from behaving in the same way.

Non-monetary remedies that a business can pursue may include rescission, which is essentially a cancellation of a contract, or reformation, which is when the agreement is modified. In very rare situations, such as those relating to unique goods, specific performance might be available. This refers to a court order requiring a party to carry out its obligations as set forth in a contract.

Alternative Dispute Resolution

Arbitration can be a useful method to resolve a commercial litigation dispute. In this process, a neutral person hears the evidence from both parties and makes a decision that is binding on them. Arbitration is often chosen when everyone involved desires a definitive outcome within a particular time frame. Mediation is another option for those in commercial disputes. It allows parties to come to a resolution through the help of a neutral third party, but it doesn’t guarantee an outcome. The mediator does not make a final decision, but rather helps the parties communicate in a way that could foster a resolution.

Discuss Your Complex Commercial Litigation Matter with an Aventura Attorney

Since commercial litigation cases can be multifaceted and challenging, they should be handled by a team of experienced attorneys. At the firm of Stok Folk + Kon, our skilled business lawyers work closely with clients in Hollywood and the surrounding areas to provide them with the representation they deserve. We work diligently and efficiently to help you pursue a favorable outcome. Call us today at 305-935-4440 or contact us through our website for a consultation. We proudly represent clients throughout Florida, including communities in Broward County like Pembroke Pines, Hollywood, and Fort Lauderdale.