When Actions Speak Louder Than Contracts: A Legal Victory in Partnership Dispute
In business, partnerships often grow from personal relationships, and when things go wrong, the legal complexities can be staggering. Recently, we had the privilege of representing a client in a partnership dispute that resulted in a large recovery for our client.
This case is a reminder that even without formal agreements, the law can still protect your business interests.
The Case: A Partnership in Practice, If Not on Paper
Our client came to me with a case in shambles. He needed new counsel from previous and prolonged blunders through the course of litigation that left his chances of recovery bleak. I took the case. I should say that we took the case, because I wasn’t alone. Our team of attorneys and paralegals cleaned up the record, and we removed the fluff and honed in on the primary causes of action.
Fundamentally, this was a partnership dispute. Our client and the defendant had set out to form two businesses and share the profits. The problem was, they did little in writing. They informally set the stage, and each took on their individual roles in the businesses to generate revenue and bring in profit—profit that they both shared.
This business venture all started with a fierce friendship, as many business ventures do. The pair had known each other for many years. They were friends, and their friendship progressed quickly into the realm of business. The projects they started together included restaurants, bars, and eventually construction. Throughout their ventures they undertook their projects as partners, both contributing their experience and skill for the common goal of mutual profit.
But for a host of reasons, the relationship between these partners deteriorated, and the defendant began hiding business activities from our client. The pair grew apart and the friendship soured. Eventually, the defendant in this case denied the existence of a business partnership altogether, claimed sole ownership of the business’ ventures, claimed all the profits for himself, and destroyed or lost all evidence of the money that our client was entitled to. My client was at a loss, with sparse documentation to prove a partnership—no partnership agreement, no operating agreement, no written contract—he was left in the precarious position of needing to prove the existence of a partnership when that existence was nowhere to be found in a written partnership agreement.
Building the Case: Proving the Partnership
While our client had little documentation to prove the partnership, we knew actions could speak louder than contracts. We gathered evidence that demonstrated their partnership through their behaviors and interactions over the years. Text messages, loan documents, profit-sharing arrangements, and witness testimonies all pointed to the reality of their business relationship.
We argued that over the years, the pair had acted like partners. They made business decisions as partners, they talked to each other daily over text messages as partners, they had member meetings as partners, they listed themselves on loan documents as partners, they split profits as partners, and they both had access to the company accounts as equals. Their clients knew them to be co-owners in a business for profit. And that is what we had to show to the court. And we did.
Under Washington law, partnership creation is set in stone. And it’s easy to create a partnership. It has little to do with the paper trail, and much to do with whether the parties associated as co-owners of a business for profit. A partnership is a distinct legal entity that can own property, even if it is only titled in the name of one of the partners. And this was a case where the business entities involved were only listed in the name of one individual—the defendant, and not our client.
The Trial: Uncovering the Truth
When their relationship soured, my client was swindled out of his business, his profits, his salary, and even his home that the pair shared. The case was bitter and laced with the wreckage of a long friendship destroyed. It was our job to get to the bottom of it and to prove a truth that existed all along. A truth that was adamantly denied by the other side.
We pursued the case with the aim of proving the existence of a partnership between the involved parties, thereby affirming our client’s rightful claim to a share of the profits. Despite the defendant’s claims that our client was merely an employee with no stake in the business, the court ruled in our favor. The verdict came after an exhaustive trial where the only available means of proof—witness testimony—proved crucial. Given the defendant’s destruction of pertinent documents, our reliance on witnesses to testify about the business revenues and partnership was vital. The court found our witnesses credible, contrasting sharply with its view of the defendant’s testimony. This case underscores the value of persistence and the strategic use of witness testimony in the face of scant documentation.
When we called the defendant to the stand, we probed him to admit his failings. And he did. He admitted that he had fiduciary duties. He admitted to breaching them. He admitted to destroying or failing to protect records in the case, he admitted to falsifying tax documents and underreporting revenue, and he admitted to taking separate projects and receiving revenue and profits that he did not share with our client pursuant to the terms of the pair’s partnership agreement.
At trial, we exposed the defendant’s misconduct. He admitted under oath to breaching fiduciary duties, falsifying tax documents, and destroying records. Through witness testimony and cross-examination, we proved the existence of the partnership and our client’s entitlement to a share of the profits. The court ruled in our client’s favor.
Key Takeaways
This case underscores the legal protections that can apply even in informal business dealings.
Our client achieved a favorable judgment, and we were privileged to guide him to this well-deserved victory. Remember, regardless of the informality of your business arrangements, your legal rights and interests remain protected. You are entitled to the fruits of your labor and contributions to any business venture, regardless of subsequent disputes or claims by your partners.
If you find yourself in a similar scenario, rest assured that your rights are safeguarded by law, and that our litigation team is equipped to help you claim what is rightfully yours.
