A Louisville Business Dispute Lawyer Discusses Prevention and Remedies
Generally, a business dispute involves a conflict or disagreement between an employee and employer, business partners, employer and high-level employees, or two or more businesses. A Louisville business dispute lawyer can give you options in how to resolve these issues.
Disputes with Partners or High-Level Employees
Conflict may also arise between your business and your high-level employees (e.g. officers, directors, managing members of LLC’s, shareholders, partners, vice presidents, CFO, CEO, certain high-level managers, etc.).
High-level employees have a fiduciary duty to your company that requires them to make informed decisions and place your company’s interest above their own personal interests. If that high-level employee breaches his or her fiduciary duty, your company could suffer significant financial loss.
When your company has high-level employees, it may be advisable to have a contract that at least states:
Duties. The contract should expressly (and implicitly) state the employee’s duties including his or her:
- Fiduciary duties;
- Obligation to act in good faith;
- Obligation to deal fairly;
- Duty of care; and,
- Duty of loyalty to the company.
Consideration. For agreeing to the terms of the contract, the contract should expressly state what the employee receives in return. Depending on the circumstances, the consideration could be:
- New employment;
- Promotion to the high-level position; or
- A raise if the employee is already at the high-level position.
Breach. If the employee violates the contract, the consequences should be indicated in the contract.
Unfair competition is a general term that is often used to describe business practices that give a competitor an unfair advantage in the marketplace. Often times, the unfair competition is caused by the actions of a former employee (e.g. vice president, CEO, manager, supervisor, partner, etc.). They may:
- Take and use or sell your trade secrets or confidential and proprietary information;
- Set up a competing company within close proximity to your business; or,
- Take away your customers or employees.
One way to prevent your employees from stealing and selling or otherwise utilizing confidential information or competing unfairly with your company is to have an agreement that embodies the following promises:
- Non-compete.This would restrict the employee from creating or working for a competing business within a specified geographical radius for a certain duration following termination of the employee’s employment.
- Non-disclosure or confidentiality. This would prohibit the employee from revealing any confidential or proprietary information or trade secrets.
- Non-solicitation.This would prohibit the employee from soliciting your employees, current or potential customers and clients, current or potential vendors or business deals for the employee’s personal gain and to your detriment.
These promises could be made in separate agreements or in one agreement. Learn more.
Disgruntled Former Employee
If you fired an employee, the employee may become embittered and angry with your company. The former employee may speak ill of your company on social media or job seeking websites. He or she could also try to sue your company. One way to prevent this is to have the employee sign a separation agreement upon termination of employment in exchange for a severance package. Learn more.
Once a legally binding contract is made, the law requires each contracting party to abide by the agreement. Unfortunately, business partners, employees, or other parties to the contract may violate or breach that contract.
Enforcing the Contract
When a breach occurs, the courts will enforce the contract. Kentucky judges have a duty to interpret and enforce the contracts according to the intent of each of the contracting parties. A well-written contract will leave minimal questions; but a poorly written one may open loopholes. Learn more.
When enforcing a contract, the judge will:
- Ascertain the intent of the parties from the plain meaning of the words in the contract. The law presumes each party knew the meaning when they agree to the contract.
- If the words lack clarity, the judge may consider the circumstances of the parties.
- The judge may also consider the past dealing of the parties if there was a prior business relationship.
- Lastly, when everything else fails, the judge may consider “parole evidence,” including any memoranda, notes, or witness testimony that may shed light on the parties’ intent.
Once the judge determines the intent and enforceability of the contract, the judge may enforce the contract by ordering the other party to specifically perform the contracted duty.
If, however, the breach cannot be cured, then you are left with recovering your damages. There are several types of damages that may be sought:
- General damages. The most common and recoverable is to receive monetary compensation for your economic losses you suffered due to the other party’s breach.
- Incidental damages. Closely related to general damages are incidental losses you suffered due to the breach. These could be costs related to:
- Find alternatives to the services the breaching party failed to provide; or,
- Minimize the damages your business suffered due to the breach.
- Special damages. These are recoverable in certain situations, such as loss of profit. To recover, you must prove that:
- You were in a “special circumstance”;
- The breaching party knew of the special circumstance and consequences at the time the contract was made;
- As a result, you suffered economic losses.
- Interest damages. These damages are only recoverable in cases involving money obligations. Kentucky law entitles you to recover from the breaching party an 8% interest on liquidated debt (specific monetary obligation owned under a contract). Generally, the interest damages cannot be recovered on your losses or costs.
- Litigation damages. These include court costs and your attorneys’ fees. Kentucky permits you to recover the filing fee and original cost of depositions taking during litigation, but not attorneys’ fees unless the contract specifically states those attorneys’ fees are recoverable.
Quantum Meruit Doctrine
It must be noted that unless otherwise stated in the contract and depending on the circumstances, if the breaching party partially performs, you may still owe the breaching party for that partial performance. Quantum meruit is a legally fail-safe doctrine designed to prevent one party from benefiting from another party for free when some kind of compensation was expected.
As an experienced and knowledgeable Louisville business dispute lawyer, I can advise you on:
- How to prevent anticipated business disputes;
- How to protect your business and business interests;
- What to do if a business relationship or former employee threatens your business.
Whether it is to start a business, enter into a business partnership, hire highly skilled employees, fire employees, enter into a business deal with another business, or exit your business, I am available to answer your questions and needs. Contact my office at (502) 561-3455 or by completing the form on this website.