Sparring Partners

Partnerships seem to be breaking up faster than marriages these days. And it's not always happening behind closed doors.

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Simon and Blanchard*, both in their seventies, have been in business together for 10 years. That is, if you can call it "together": The foyer of Kelso Chemical is no bed of roses. For example to avoid meeting Blanchard, Simon purposely doesn't get to his office until 9:30 a.m. Blanchard has been there since before 9:00, dictating a memo to Simon. This he gives to his secretary who delivers it to Simon's secretary. When Simon gets in and reads it, he will dictate one back to his secretary, who will pass it on to Blanchard's secretary. The two founders of Kelso haven't talked to each other for the past three years. The air is so thick with discord that even their secretaries, each siding with her own boss, barely pass the time of day.

Although many companies can operate smoothly despite the strain of bickering partners, Kelso has been buffeted as much as a business can, short of dissolution. And, in fact, even dissolution is in the offing, a prospect brought about by the partners' unwillingness to iron things out between themselves. A court-appointed receiver now oversees operations, officially protecting the assets of the company for creditors and employees while the parties are working out a reasonable plan of dispersal, but in practicality protecting each partner from being laid waste by the other.

Unfortunately, the receiver wasn't yet present when Simon threw a pot of water at Blanchard. In the successful plea for receivership before the Pennsylvania Supreme Court that describes the harmfulness of the bitter relationship to a profitable business, Blanchard claims the water was hot; Simon insists it was cold. Nor was the receiver there on a later occasion when one of Blanchard's sons insulted Simon and started a shouting match, rousing the older Blanchard himself from his desk, whereupon he threw a punch at Simon. Simon's glasses were broken and he was knocked out; this time it was cold. The next morning, Simon had his lawyer lodge assault charges in criminal court.

That exchange was but the last sour note in a sequence that has drawn the two erstwhile friends into a glissando of suspicion and distrust. It was a process that once begun, proved irresistible to both -- a common momentum among business associates who, for whatever reason, discover that they don't like each other but are helpless to resolve their differences.

One of Blanchard's early antagonisms, for instance, was to hire his son without asking Simon. Simon thereupon installed his own daughter on the payroll. Blanchard, the operating officer, took it upon himself to dilute some of the chemicals to save manufacturing costs. Then Simon, the financial brains of the partnership, decided that if Blanchard could effect such change without conferring with him, then, dammit, he would run the pension plan by himself. Blanchard claims that Simon made imprudent investments. In disgust, he altered the locks on all the office doors.

Lock changing, a traditional weapon of battling spouses, is representative of many other not-so-subtle tactics borrowed from conventional domestic warfare by disaffected business associates. Indeed, simmering business squabbles can flare up as vehemently as any bedroom dispute. In one case of premeditation on record at the American Arbitration Association in New York City (see "In Search of Help," page 48), a co-owner suddenly picked up his long-term counterpart in the midst of a conversation, heaved him out the door, threw his belongings after him, then barred the astounded business partner from the premises with a bolt he had installed that morning.

Observes attorney Steven B. Levy, whose Chicago practice is concentrated on resolving business disputes, "Locking out the other person happens every day. 'Partner, don't come back,' is the unmistakable message." Another lawyer newly involved in the business battleground sees lock changing as an effective instrument of leverage, calculated to convince the suddenly barred associate to acquiesce to settlement terms favorable to those remaining within. It takes several days for the locked-out partner to obtain a court hearing, and he then has to consult a lawyer at considerable expense. Meanwhile, the hours tick by frighteningly while the banished party can only imagine what unspeakable acts are transpiring inside.

But at Kelso, the hardened Simon was not dissuaded by simple locks: He broke his way in. Blanchard accused Simon of wanton destruction of property -- or at least of the half that was his. Not to be one-upped, Simon denied Blanchard access to Kelso's books. That being the case, Blanchard decided to sell off some of the company's inventory to retail outlets he still had interest in outside the business. He would leave it to Simon to figure out how to enter -- and live with -- the barely licit transaction.

And so it went. Eventually the partners agreed that Kelso wasn't big enough for both of them. One had to go. But which one? In a Solomanesque solution of which lawyers have devised several variations, the two partners decided that one would draw up a buy/sell proposal, and the other could accept it by either buying or selling. Through a coin flip, it fell to Simon to draft the conditions. These he submitted to Blanchard, and waited for the response. It never came. The intransigent Blanchard was torn, to acquiesce even now somehow would be to give in to Simon.

Such dilemmas have fueled the growth of a whole new service industry -- business-dispute resolution -- as more and more feudingpartners have turned to outside referees like attorney Levy for help. Levy himself found out just how strong the market was when he placed an ad in a local trade publication offering legal counsel to businesspeople involved in arguments. The illustration in the ad showed a neatly suited man reaching into the company till and another three-piecer with his hands around the ganef's neck. The caption read, "Partner Problem? When it Comes to Money, Sometimes Even Brothers Fight." A delighted Levy was inundated with responses.

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