A Narrative Approach to Business Partner Disputes


by Jeffrey Fink

April 2013

Jeffrey Fink

Business partners who enter the legal system to resolve their differences are rarely happy with the process.   A court’s range of remedies in a “business divorce” is generally limited to things like receivership, forced sale, dissolution, forensic accounting and award of damages.  The judge has little flexibility to impose solutions such as buyouts over time or internal re-arrangements that keep the business intact.  Family businesses have an extra layer of complexity, since legal remedies are not tailored to addressing the roots and consequences of troubling family dynamics.  Also, resolution can become difficult once partners get into adversarial lawsuit mode even if they have worked together cooperatively in the past.

Partners sometimes look to mediation to help resolve disagreements.  It can be effective.  Often, though, standard facilitative techniques fall short.  Since these types of disputes may require partners to engage in both dispassionate business analysis and processing raw emotions from a ruptured relationship, mediators may need to go beyond winnowing out interests from positions – or at least approach it from another direction.

Narrative mediation techniques can be useful tools.  They harness our cognitive tendency to make bits of information fit into consistent stories.  Most of the time, we then tune out information that does not fit neatly into the story line.  In the theoretical jargon, we live our lives through a series of overlapping and potentially conflicting “discourses” that range from the personal to the meta-stories that comprise our culture.  People can get stuck in a conflict story.  They become angry when others do not play the parts that are expected of them or feel agitated and guilty when they do not play the part that they expect of themselves.  The stories and resulting negative feelings can stand in the way of resolution.

If a mediator can help clients take a step back from a conflict story to realize that the same set of circumstances can also exist in other story lines, it may help them generate a story in which resolution is possible.  It can also help people realize that their partner may be telling himself a different story in good faith and is not necessarily being a bad guy.  Stepping back from the theoretical, each of these overlapping stories may also have at its heart an interest we can reach using a modified facilitative approach.

People consistently tell themselves some of the same stories in business partner disputes.  Mediators who know what to listen for will be ahead of the game. Arbitrators and collaborative practitioners may find it useful, too, to understand the stories the parties use to filter their explanations.  The following are some key examples.

1.Overarching Narratives.  Some narratives come from the broader culture, company culture or even from parties unconsciously continuing family dynamics:

  • Stories of how one is expected to support oneself and provide for one's family;
  • Stories of how businesspeople are supposed to think and act, as well as how partners are supposed to behave toward each other;
  • Stories of the shared vision that brought the partners together in the first place;
  • Stories arising from shared experiences with customers, vendors, employees and each other;
  • Stories of what trust and fairness mean;
  • Stories of personal sacrifices and victories in building the business;
  • Stories of how to deal with external financial pressures;
  • Stories of whether and how to display emotion;
  • Stories of attachment to conflict; and
  • Stories of how to negotiate:  whining, wheedling, carping, blustering or collaborating.
2. Rights Narratives.  People see the role and limitations of the law and legal documents differently.  As a result, people tell different stories around them:
  • If we ever have to go to court about anything, the judge will see I’m the reasonable one.
  • The law is clear and on my side.
  • A contract is just the jumping off place for a discussion.
  • Why bother signing a contract? If my partner trusted me, he wouldn't keep asking for one. We have always had an unwritten understanding.
  • We need to keep our structure flexible to adapt to our changing business environment.
  • We need to spell out our rights and obligations as clearly as possible because clear lines mean fewer arguments.  
  • If we wait to discuss the rules of the road until we actually need to make decisions, it means fewer arguments.
  • The law implies all kinds of rights and obligations, including fiduciary duties.  Let’s just rely on those; or, alternatively, if my partner wants to rely on legal rights, I can do whatever I want unless he gets angry enough to sue me.
3. Narratives of Getting Stuck. People can become paralyzed for many reasons, including fear, personality, lack of information or conflicting emotions.  Some of the paralysis narratives that go through people's minds during business disagreements are:
  • I don't want this to be happening.  I should be able to make it stop.
  • I will be a bad partner if I do what my gut tells me.
  • I want to buy my partner out to make this go away; or, alternatively, I want my partner to buy me out to make this go away.
  • Everything is fine.  Isn't it?
  • I would be a failure if I let this fall apart, or if I am not decisive enough to resolve this.  On the other hand, if I were vindictive I would say the world should know what a failure my partner has been.
  • I’m torn between spending time on the business and time with my family.  My partner doesn’t get it; or, alternatively, she takes advantage of me.
  • It is my partner's fault for creating all these problems in the first place.  I know what changes he needs to make in order for us to continue on.  If he won’t, what’s the point of talking?
  • I do not need to make any changes in order for the business to continue.  Before we can talk, my partner needs to accept that our problems are not all my fault.
  • I should not have gotten involved in this business in the first place. However, I'll be damned if my partner makes me be the fall guy for everything that has gone wrong.
  • It's my business.  Why should I leave?  Why should I give her much if she leaves?
  • My life is this company and its people.  I do not want to cut it loose.
  • It would humiliate me to leave or to have to pay my partner to leave.
  • If my partner and I could communicate better, we would be able to make this company work.
4. Management Narratives.  Narrative mediation theory uses the term "discursive positioning" to describe how people position themselves within a narrative.  This positioning often gets very thorny around issues having to do with management, mismanagement and responsibility.
  • Somebody needs to be in charge.  In this case, it should be me.
  • My partner does not understand what the word "equal" means.
  • My partner is not doing what she's supposed to be doing. Things slip through the cracks.  It means that I have to take charge, whether I want to or not and whether the job really should be mine or not.
  • My partner is constantly criticizing me and undermining me.  She should keep to her own turf and stay away from mine.
  • My partner claims responsibility for everything that goes right and nothing that goes wrong.
  • Everyone should pitch in to do whatever is required.
  • I should get more respect and deference than my partner gives me because of my experience/expertise/job title/financial contributions/sweat equity/personal qualities/personal sacrifices/professional connections/family connections.
  • Someone of my gender/social class/education level is not at the same social level as someone of my partner’s background.  Whatever the law or legal documents say, my partner and I are not really equals.
5. Narratives of Money and Valuation. Money can be a proxy for non-monetary things.  Also, there is a natural inclination to want to increase the value of one's own holdings while decreasing the value of the other partner's.
  • I want to keep revenues up/down to keep the valuation high/low.
  • My soon to be ex-spouse or ex-partner does not deserve this business.
  • I need to maximize the economic value I receive, and damn my partner.  Too bad the potential for embarrassment constrains my actions.
  • Money means more to me than just purchasing power.  It is a measure of my worth to my family and, frankly, my partner.
  • My partner’s offer is not meaningful.  His “expert” valuation opinion is make-believe.
  • I want to seem reasonable, but this just feels like a raw deal.
  • This is private. I don’t want to involve third parties like judges, receivers or investment bankers when it comes to valuation.
  • I fear loss (however defined) more than anything else.
6. Narratives of Fraud and Deceit.  Few small businesses keep their books in strict accordance with Generally Accepted Accounting Principles or maintain the kind of financial transparency that partners might hope for.
  • I am a trustworthy partner who has been responsible for keeping the books all along.
  • The only reason my partner wants to look into financial details is because he does not trust me.
  • I just need to know.
  • There should have been more money in the business.  I’m pretty sure my partner engaged in fraud, conversion or breach of fiduciary duty. However, if I raise these issues he will start slinging mud back at me; or, alternatively, I must accuse him first to level the playing field.
  • We’re getting divorced.  I’m afraid her business credit card receipts will show details of her affair or other things I’d rather not know about.
  • My partner is betraying me by [fill in the blank].
7. Narratives of Identification With the Business.  Partners often conflate legal rights with what each one thinks he contributed.
  • I am the real business. I am the real partner.  Without my idea/invention/initial contribution/ongoing labor, this business would not exist.  No matter what the legal documents say, his role was and is less than mine.  We should therefore operate and value the business to reflect that.
  • I can’t accept a buyout with payments over time since he can’t run the business without me. 
  • I can’t let go of this business.  It has been my life.
8. Narratives of Third Party Debt.  Most businesses have some debt, even if only trade payables.  One of the issues is how to share this debt burden.
  • A creditor assumes a business risk when extending credit.  It’s just a contract.
  • A borrower has a moral obligation to repay a debt.
  • If I am not able to refinance the bank loans or other third-party debt after my partner leaves, there is no reason to let him off personal guaranties that he benefitted from.
  • If I leave, I shouldn’t bear any risk on bank guaranties.  Why should my personal finances be tied up in a business I no longer control?
9. Narratives Of Recruitment.  Disputants often try to recruit others to their side.  Many of those people will not be in the room.
  • Let me explain about loyalty and betrayal by peers, employees, other part owners, suppliers, customers and even our lawyers and accountants.
  • Our spouses and children used to be friends.
  • Our employees will be out of a job if we can’t fix this problem.
  • Our collective reputation rises and falls on news of this dispute.

 

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Some stories do not stand in the way of resolution.  To listen for the important ones, we should tune in to the emotional charge, to the repetition as the speaker rehearses well-worn arguments and to particular phrases that might have resonance in a slightly different version of the story.  If we ask the right questions based on those phrases, it may shunt the conversation onto different track, helping the partners construct a new story based on new or newly acknowledged information.  We can then either move out of the disputants’ way to let them find a resolution or use other tools to help them address the interests underlying the new story.



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Biography




Jeffrey Fink mediates business and family disputes, taking a clear and practical approach to dispute resolution. On the business side, he uses his extensive background as a transactional lawyer and outside general counsel to understand not just the law behind the disagreement, but the details of the disagreement and the reasons it arose. On the family side, he helps people untangle the emotional and practical aspects of their disputes to help them make difficult decisions. Jeff has a particular interest in partnership disputes and disputes at the intersection of business and family matters such as family businesses in divorce.



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Website: jfinklawadr.com

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 Chris ,   Plymouth MA    04/10/13 
 Would love to hear more! 
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Thank you for that framework of partnership narratives, Jeff! I couldn't think of one that you missed from my experience. Would love to read a Part II narrative example where you helped the parties "generate a story in which resolution is possible," particularly regarding who contributed the most value to the business.
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