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How I Survived a Legal Battle With My Business Partner

My former friend and business partner sued me in a drawn-out legal dispute. How I got through it, and how you can, too.

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I just received a stack of legal documents. It sits on my desk in a large manila folder, stuffed full of legalese and emails from a former friend and business partner who sued me 10 years ago in a lengthy partnership dispute.

Business co-ownership is just like a marriage. My partner and I went into it trusting, optimistic, and maybe even a little starry-eyed, never thinking it would end badly. Despite the best intentions and plans, partners can drift apart and priorities change. In fact, almost every business partnership I’ve ever known has become a contentious nightmare at some point.

As I looked through the file, long-forgotten memories came flooding back as a string of cautionary tales. What went wrong? Pretty much everything:

  • The 50/50 partnership we never doubted because we were such great friends and colleagues
  • The articles of incorporation that sadly didn’t include an exit clause
  • My partner’s refusal to share with me the financial books and records
  • The grueling 20-hour mediation in Delaware where we were incorporated
  • My purchase of her share in the business, painfully compounded by financial mismanagement and unaccounted funds
  • The legal fees she racked up at our corporate law firm, which represented her. I inherited those fees upon full ownership of the business.

Unwinding our partnership was tedious and painful. It had everything: A betrayal by someone I trusted. False accusations. Accounting landmines. Crazy legal bills. I had to keep my game face on for clients, and protect my employees. There were times I simply could not breathe.

How did I survive and bounce back to profitability within the first year?

1. The right attorney: I changed lawyers until I found the right litigator through a referral. He was 3,000 miles away, young, smart, responsive, and began work without a retainer. He defended me without having met me and taught me the value of “banana peels”: the things you need to give up to get closer to a resolution.

2. Keep employees focused: I tried to tell my employees enough so that they’d understand what was going on, but not enough to distract them. I needed them to keep the business moving forward. I promised to help them find new jobs if they wanted to move on -- and I was so grateful when they all stayed with me to rebuild.

3. Be prepared: I walked into the mediation with two huge binders and every piece of evidence at my fingertips. Emails were printed, reports were ready. The intensive research and prep work enabled me to feel confident and negotiate from a position of power.

4. Lean on loved ones: My husband was tremendously supportive and we made a formidable team in the mediation. My children, then in middle school, knew it was a frustrating time and understood why even moms needed to stand up to bullies. Friends boosted my spirits with pep talks and funny cards.

5. Create a triage team: As soon as I assumed full ownership of the company I hired a world-class accounting firm, including an accountant and a tax partner who untangled the mess I’d inherited and made sure everything was squeaky clean. My financial planner helped to quickly finalize the purchase details. Other colleagues provided advice on everything from stress management to communicating with clients and employees.

As painful as it was to go our separate ways, scanning through the paper remnants of the partnership has helped me reflect on how far I’ve come as a leader. On the loyal and productive team I’ve built. The client relationships I’ve earned. And the peace of mind that comes from knowing my financials are truly in order.

And just like a divorce, it wasn’t until I was forced to do it alone that I found the courage to achieve a new level of success -- and happiness on my own terms.

Last updated: Apr 4, 2013

RENE SHIMADA SIEGEL is founder and president of High Tech Connect, a unique consulting partner for expert marketing and communications. After a successful career in Silicon Valley, she founded her company 15 years ago while juggling three kids under the age of five.
@renesiegel




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