Litigation, where parties in a dispute present their respective sides of the story in front of a judge, is typically stressful and expensive. Therefore, many business partnership contracts include arbitration clauses that require the parties to resolve their disputes outside of court in the presence of an arbitrator. On the one hand, arbitration can allow the parties to resolve their disagreements relatively quickly and inexpensively. On the other hand, it is harder to ensure the impartiality of arbitrators than of judges, and the party that insisted on arbitration from the beginning is usually at a major advantage. Whether to follow an arbitration agreement or proceed to litigation is not always a straightforward matter. If you are involved in a dispute with your business partner and are wondering whether arbitration is a satisfactory path for resolution, contact a San Diego business partnership dispute lawyer.
The Dentons Arbitration Dispute
The complexities of whether to arbitrate or litigate can be seen in the following example. Dentons is the fifth largest law firm in the world, with offices in several U.S. cities and in 76 other countries. It is involved in an ongoing dispute in which two of its partners have accused each other of shady or fraudulent activity. The problems started when Jinshu John Zhang, a Dentons partner, won a $35 million contingency fee. Zhang claims that he was within his rights as an agent of Dentons to have part of the fee paid directly to him, but Dentons CEO Mike McNamara claimed that Zhang’s actions constituted self-dealing. Zhang, meanwhile, alleged that McNamara had forged a letter from a client, ordering a payment sent directly to Dentons. In the spring of 2021, Zhang emailed the U.S. board, describing McNamara as a “massive fraud” and calling for his removal as CEO. On May 5, Dentons terminated Zhang’s employment, and on July 2, it removed McNamara from his position. Zhang claims that Dentons wrongfully terminated his agreement in retaliation after he reported McNamara’s alleged wrongdoing to the board. Dentons claims that Zhang’s allegations against McNamara are “false and slanderous.”
Zhang filed a lawsuit against Dentons in California, pursuant to the California Labor Code. Meanwhile, the parties also engaged in arbitration in New York, and the California courts paused the case, pursuant to the California Code of Civil Procedure. In August 2021, the California court ruled to honor the New York arbitration agreement. Now Zhang must withdraw his lawsuit from the California court and pay $30,000 in fees.
The moral of the story is that the question of arbitration versus litigation is not a simple matter. A business law attorney can help you figure out which California laws apply to your case and can help you proceed appropriately with arbitration, litigation, or both.
Contact Foldenauer Law Group About Complex Business Partner Disputes
A business dispute lawyer can help you if you have tried to resolve your dispute with your business partner through arbitration, but doing so only made things uglier. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.