Common Business Disputes That Lead To Litigation

Seasoned business owners, managers, and executives all understand that conflict is a part of business. There are many situations that can lead to a dispute between two parties. A breach of contract, a shareholder disagreement, or an employment issue can cause friction in day-to-day operations and stand in the way of progress.

However, not every dispute leads to the courtroom. In fact, most business disputes can be resolved amicably through negotiation or mediation. But when a win-win outcome cannot be achieved, parties may find themselves pitted against one another in litigation.

What are common disputes that lead to litigation? In this blog post, we discuss three such situations so that you can quell a litigious conflict before it arises.

Breach of Contract

Contracts are necessary in almost every part of the business world. However, it's common for a business to experience a breach of contract when one or more parties on a contract fail to meet their obligations. If not addressed in a timely manner, a breach of contract can cost a business time, capital, and human resources.

For instance, a factory that relies on the supply of materials to build widgets may have a contract with a supplier for those materials. If the supplier fails to supply the materials as stipulated in the contract, the factory could suffer lost revenue. Depending on the situation, the factory may have standing to sue for a breach of contract.

Of course, this type of dispute can arise in any number of businesses operating in any number of industries. From technology providers to wedding photographers, a breach of contract is just one way businesses can find themselves entangled in litigation.

Employment Disputes

Employment disputes commonly arise when employers infringe on the rights of their employees. The reason for employment conflict can vary significantly, ranging from the restrictive boundaries placed on you after leaving an organization to workplace discrimination based on your sex, gender, race, or religion. Federal and state laws provide recourse for employees who have experienced discrimination and harassment.

Common employment disputes include:

• Wrongful termination
• Wage and hour disputes
• Family and Medical Leave Act violations
• Breach of employment contracts
• Wage disputes
• Employee Retirement Income Security Act violations
• Retaliation claims

While the actions above may entail federal employment law, there can be other legal issues that relate to employment that lead to litigation. Examples include breach of employment agreements, disclosure of trade secrets, breach of a noncompete agreement, and disputes related to severance agreements.

Shareholder Disputes

Shareholder conflicts arise when minority shareholders claim that the organization's executives or majority shareholders failed to act in the organization's best interests. Common causes of shareholder conflicts include:

• Breach of shareholder agreement
• Conflicts of interest
• Fiduciary misdeeds
• Excessive compensation

Shareholder disputes are likely to be contentious, as all parties hold a financial stake in the business. The legal issues can be complex and the human element can be complicated, which is why shareholder disputes can often end in litigation.

Get Help from a Business Litigation Attorney

We hope that you are able to avoid a business dispute that leads to litigation. But if you find yourself in a situation in which litigation is likely, you should consult with a business attorney to explore your options. 

At Foster Massengill, PLLC, we acknowledge that every party has its needs and goals. We get to know our clients and help them take a common-sense approach to resolving business disputes. If you need legal representation for your business, we can help. Contact us today to schedule a consultation.