Business Disputes The State Laws that Govern Commercial & Business Disputes
By J. Rutledge Young, Jr.
Do you suspect a breach of fiduciary duties? Misappropriation of funds?
If have a commercial or business dispute with another person, partner or entity that you need handled, South Carolina has laws to help and protect you.
Disputes between businesses can be intense and complicated, with multiple factors and individuals at play. If you have a business dispute with a partner, limited partner, LLC member, LLC, corporation, shareholder, bank or professional association, South Carolina has statutes and case law that can provide help.
While your business dispute may be governed by its own written agreement, such as an Operating Agreement for a Limited Liability Company (or LLC) or loan documents with a bank, these agreements and actions of the players are all governed by the same set of statutory and case laws.
Here’s an example: Let’s say you’re concerned how the manager of an LLC is handling the corporate affairs. You suspect the manager has breached his/her fiduciary duties, self-dealt, misappropriated corporate funds or opportunities, or otherwise acted unlawfully.
What steps should you take?
In South Carolina, you should start by giving written notice of your concerns to that manager. If that doesn’t solve the problem, you may start a Judicial Dissolution/Accounting action in state or Federal Court. Or maybe you prefer an Arbitration or Mediation to try to fast track the solution to the problem.
Your Business Dispute Case in Court
SC Code Section 33-44-101 deals with LLCs; whereas 33-44-801 sets out why a Court can dissolve a LLC.
If your case is brought to state or federal court, here is the checklist that a Judge will apply:
(4) … upon entry of a judicial decree that:
- The economic purpose of the company is likely to be unreasonably frustrated;
- Another member has engaged in conduct relating to the company's business that makes it not reasonably practicable to carry on the company's business with that member;
- It is not otherwise reasonably practicable to carry on the company's business in conformity with the articles of organization and the operating agreement;
- The company failed to purchase the petitioner's distributional interest after giving effect to provisions of the operating agreement modifying or superseding the provisions of Section 33-44-701; or
- The managers or members in control of the company have acted, are acting, or will act in a manner that is unlawful, oppressive, fraudulent, or unfairly prejudicial to the petitioner (that’s you).
A Litigation Partner You Can Trust
Duffy & Young has handled many commercial disputes, both giving advice and negotiating for clients to help avoid protracted and sometimes expensive litigation. But if that does not work, Duffy & Young also has experience bringing or — if you get sued — defending actions in state and Federal Court.
Over the past several years, we have:
- Represented a limited liability partner in a dispute concerning negative capital account funding requirements in a Limited Partnership Agreement.
- Worked out a forbearance agreement and deed in lieu of foreclosure to get a bank off our client’s neck in a failed real estate development.
- Hired and worked with a regional accounting firm to have a financial review and compilation report prepared to show that a manager/member and parties related to him were using corporate funds for personal economic gain.
- Prosecuted to successful conclusion judicial dissolution actions against LLCs.
- Prosecuted to a successful conclusion an action against a national real estate company and its Appraisal Division for an inaccurate appraisal designed to get the client to purchase the property for the inflated appraisal price, only to find that the property was worth much less after being purchased.
- Modified Declarations, Restrictive Covenants and Bylaws governing HOAs and POAs to reflect updated circumstances.
- Set up entities to purchase Notes and Mortgages from lenders at discounted prices.
Duffy & Young has excellent relationships with experts in the fields of accounting, banking, real estate appraisal, commercial real estate valuations, and breaches of fiduciary and other duties, which we use to assist clients who have business or commercial disputes that need our legal advice and support in resolving their cases.
Read more about the different types of business dispute cases we've worked on.