Shareholder Disputes & Governance
Business disputes among partners, shareholders, managers, or others (particularly in closely held companies), can be life-altering for key stakeholders, and can preserve or destroy a business. An equity interest in a private business is often an owner's primary financial asset, and the resolution of an ownership dispute may significantly affect the owner's financial future. Sometimes ownership and control are themselves on the table—with parties at risk of losing the benefit of their long term personal and professional contributions to the business that they helped build.

A competitive advantage
Many law firms treat these disputes as strictly litigation matters. At Tonkon Torp, we take a more holistic approach. Depending on the facts at issue, our business lawyers may lead a team committed to resolving the problem, with litigation used as one of many tools available to achieve a positive outcome.

The ultimate resolution of a shareholder dispute often involves a business transaction. When they can add value to the project team, we will bring in a tax lawyer, a corporate expert, a commercial contract lawyer, a mergers and acquisitions professional, or other lawyers in our business department to develop the best structure to resolve a dispute.

The structure of our firm lends itself to seamless team collaboration because our practice is integrated across departments and practice groups. We have long understood that an interdisciplinary approach better meets our clients’ goals, putting our attorneys in a better position to resolve disputes among business owners efficiently and successfully.

Recent examples of our successful approach include matters in which:
  • We assisted the minority owners of a professional services business in taking control of the company from the majority owner in arbitration by bringing Oregon statutory claims while negotiating contract and valuation issues.
  • We simultaneously favorably resolved IRS and foreclosure issues for family shareholders in the middle of a multi-year business sale dispute. We then obtained a multi-million dollar settlement for our clients – impossible to achieve without primary contributions by our litigation, tax, M&A transaction, and real estate lawyers.
  • We worked with the former President of a private-equity backed business services company to negotiate equity valuation procedures, and manage and present an equity valuation conclusion, resulting in an increase in his equity valuation redemption payout from $0, as proposed by the controlling owner, to over $8 million. This outcome was achieved through substantial reliance on our corporate finance expertise.
  • We supported the founder and minority owner of a local, closely held technology company in a contested valuation and buyout proceeding resulting in an increase in her equity redemption payment of more than $1.5 million, a result substantially dependent on the corporate and corporate finance expertise of the business attorneys on our client team.
  • We assisted the majority partners in a local professional services firm in negotiating their withdrawal from their partnership and establishing their own leading practice with their long-time clients.
  • We protected the majority owners of a manufacturing company from a minority shareholder who refused to redeem minority shares under a shareholder agreement, resulting in an award to our clients of specific performance, a new share valuation, and significant attorney fees.
  • We helped a majority member of an LLC wrest back control of a large recycling outfit after a minority member took illegitimate steps to lock the majority member out of the business. We helped by finalizing an unfinished business transaction and cleaning up corporate record-keeping prior to arbitration.
  • We assisted a company in redeeming its former CEO’s shares after a dispute over valuation by leveraging Oregon’s dissenters’ rights statutes and petitioning the court for a judicial appraisal, resulting in a reasonable parting of ways.
  • We leveraged a cash-out merger, coupled with breach of fiduciary duties claims, to motivate a former chief executive officer and minority shareholder of a closely held technology company to surrender his ownership interest in exchange for a release of claims and small redemption payment.
  • We provided counsel to the board of directors of a closely held business that enabled it to preserve its business operations and continue to grow in the midst of a dispute among the shareholders of the business.
  • In a case involving Delaware, Florida, and Oregon law, we assisted a minority owner of a highly-successful startup in securing a substantial, favorable settlement after the majority owners attempted to freeze him out of the benefits of a merger.

Maximized value
Collaboration isn’t just about achieving favorable financial settlements – it can also decrease the length and cost of the dispute. Adding appropriate business, corporate and financial knowledge to a dispute brings a different perspective, which can lead to creative solutions not considered in pure litigation. Our approach often saves our clients time and money, and may also reduce conflict and preserve relationships.

We are cognizant of how costly contesting a business breakup or other ownership dispute can be. We work with our clients to provide options that allow them to pursue their best course of action, without being controlled by immediate cost. These options may include a modified or contingent fee structure aligned to the detail of a client's dispute and available resources, with full payment made upon an equity purchase or other liquidity event.

Alternatives to litigation
Our team approach to business breakups can also result in less litigation. Business breakups can be emotionally charged, which often adds motivation for the parties to have their day in court. While we support courtroom solutions when needed, we begin our work with an astute interpretation of the situation, employing the collective knowledge of our blended litigation/business legal team to assess and recommend all available alternatives. We do not treat lengthy, expensive, and uncertain litigation as the de facto course of action.

Client-focused solutions
For a client involved in a business breakup, our blended teams keep one overarching goal in mind—what are the most efficient means to achieve the client's goals? More than anything else, this approach keeps our work streamlined and keeps the focus on the client and their legal and business options during a critical period in their business lives.

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Jeffrey  Cronn
Practice Area Co-Chair

Jeffrey Cronn

Partner

503.802.2048
jeff.cronn@tonkon.com
Anna  Sortun
Practice Area Co-Chair

Anna Sortun

Partner