FORT LAUDERDALE BUSINESS LITIGATION: PARTNER SEIZES CONTROL OF PARTNERSHIP

Sometimes business deals result in disagreements between business partners about the direction of the business. This includes cases where a business partner acts improperly by trying to usurp control of the business and oust or “freeze-out” other partners. An example of this occurred in recent case filed in Pennsylvania, Harvey v. Tidemark Partners 1 LP. On October 10, 2024, a chef filed a Complaint against the partnership and his business partner claiming that his business partner improperly usurped control of the business, terminated the chef, and failed to pay the chef. The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration

According to the Complaint in Harvey, the chef and the business partner entered into a limited partnership agreement in 2019 to open a food hall. A food hall is an establishment where several chefs sell their food in an auditorium setting. The partner would be the primary financier of the business and the chef would manage the day-to-day operations of the food hall as the director of operations. The chef also made cash contributions to the business totaling $215,000, and obtained a loan of $100,000 for the business. The chef then spent the following five years preparing to open the food hall, including organizing, preparing plans, obtaining permits, completing regulatory compliance, hiring employees, arranging for chefs to become tenants at the food hall. He was not compensated for these activities, believing that, pursuant to the partnership agreement, he would be compensated with a share of profits after the food hall opened.

However, things went south in 2024. The partner began to assert more control of the business and usurped the chef’s duties as Director of Operations. This caused disputes between the chef and the partner. The chef claims that, in June 2024, his business partner gave him an ultimatum to sign an amendment to the partnership agreement that substantially changed the terms of the agreement or be terminated. The chef signed the amendment, which reduced his role to Operations Manager, was to receive an LPA distribution share of 23.7% if he remained the Operations Manager through the remainder of 2024, which would then decline to 14.04% on January 1, 2025. He was also entitled to receive a minimum salary of $75,0000 and an allotment of profits from his equity share that exceeded $75,000.00. Yet, shortly after signed this amendment, the partner and the partnership terminated him.

The chef brought counts of breach of contract, unjust enrichment, and failure to pay wages under a Pennsylvania statute. In his count of breach of contract, the chef claims that the partnership and the partner breached the partnership agreement by terminating him without justification, when the partnership agreement only allows for him to be terminated for cause. In his claim of unjust enrichment, he claims that he worked 25 hours per month for the business for several years, but he was never paid. In his claim of failure to remit wages, he claims that he should have been classified as an employee of the business and was therefore entitled to wages which the business never paid. The partner and the partnership have yet to respond to the Complaint.

Harvey is an example of a common business dispute. Partners will enter into an agreement to start a business, but then one partner wants to exert more control and look for ways to push others out. This shows the importance of having well-drafted business agreements to protect oneself from the unscrupulous actions of business partners, and, if necessary, even engage in litigation.

The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.