September 30, 2022
Mediating Business Divorces
by Eric J. Wittenberg, Ironclad Alternative Dispute Resolution Services, LLC
Going into business with someone is like getting married. Many characteristics of marriage apply to business relationships: trust, loyalty, honesty, and commitment. Often, people spend more time with their business colleagues than with their families.
Consequently, it’s no surprise that ending business relationships can be as messy, costly, and unpleasant as a divorce. That’s why I call such situations “business divorces.”
Over my 35-year career, business divorces have constituted some of the most bitter and expensive pieces of litigation I have seen. I once represented a set of parties in litigation with their business partner that culminated in a grueling two-day hearing over whether the business should be dissolved. The case ultimately settled for exactly the same resolution proposed prior to litigation, but not before the parties incurred over $200,000 in legal fees. The lesson: the only ones who win in ugly business divorces are the lawyers.
In many instances, timely intervention by a skilled mediator can avoid significant cost and delay. Unfortunately, in the case mentioned above the one of the parties had to learn the hard way. However, that case was the exception and not the rule. More often than not, choosing an experienced mediator who understands these types of cases and who can come up with creative solutions to break deadlocks goes a long way toward avoiding the high cost, delay and acrimony associated with business divorces.
By involving a trained and skilled mediator, parties get an impartial and knowledgeable analysis of the strengths and weaknesses of their cases (and every case has its strengths and weaknesses). The objective analysis of a case’s strengths and weaknesses has real value because it allows the parties to see beyond their biased perceptions. Nothing that is said in a mediation can be used in evidence due to an absolute statutory privilege and people are encouraged to speak freely without fear of their words coming back to haunt them. The presence of a mediator can avoid much of the cost and delay associated with protracted litigation and can lead to mutually satisfying resolutions.