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NY Business Divorce Information on Dissolution and Other Disputes Among Owners of New York Corporations, LLCs and Partnerships

A Judge’s Wise Words on Disputes in Family-Owned Businesses

Posted in Family-Owned Businesses, Settlement

In the last two weeks this blog featured an interview with a law professor about his scholarly writings on the subject of disputes within family-owned businesses (read here and here). Coincidentally, in the same two weeks I was engaged in a trial of a lawsuit pitting brother against brother concerning a substantial business started over 40 years ago by their recently deceased father.

The trial judge was Supreme Court Justice Alan D. Scheinkman  (pictured). Justice Scheinkman is Administrative Judge for the Ninth Judicial District and also presides over the Westchester County Commercial Division. The case settled after two days of testimony, with substantial assistance from Justice Scheinkman who, when negotiations foundered and with the parties’ consent, took on a mediator’s role.

From the outset Justice Scheinkman emphasized that the stakes in disputes involving family-owned businesses go beyond dollars and cents. After the parties reached settlement, Justice Sheinkman made some impromptu remarks on the record about the difficulties peculiar to business disputes among family members, and about the benefits of reaching accord through negotiation. I thought his words were wise. I thought his words were worth sharing with others who might be involved, either as business owners or as lawyers, in lawsuits over family-owned businesses.

This is what he said:

The courts of law are always difficult forums for the resolution of family disputes. We are, in many cases, constrained to treat a family dispute just the same and apply the same legal considerations as applied to legal disputes between people who are strangers to each other except they happen to be in business together, and when you have a history of disagreement that is as long as this one, the disputes become even harder.

And while you think, well, why would I know anything about this? Well, you sit here long enough and we’ve had a lot of commercial disputes, as I told the lawyers, that have involved father and son, mother and daughter. We’ve had two sisters. We’ve had brothers, boyfriend and girlfriend, boyfriend and boyfriend, girlfriend and girlfriend. It takes all types. And people who have a family or romantic relationship may go into business together and then they sometimes end up here and that adds an emotional component to a business dispute.

That is somewhat different than other types of business disputes. In part what that means is that, when you reach a settlement of a business dispute, either the parties will find a way to go on and continue to do business with each other as sometimes happens or they find a way in which they can separate and never see each other again. That’s a little harder to do with families.

I think that the parties did a wise thing in coming together and reaching their own, or at least tentatively, reaching their own agreement. As I’m sure your lawyers had an opportunity to tell you, there are always risks involved in litigation. No one could know, including myself, what the final outcome of the case would be and then there is always the family component, and sometimes finding a way, if you can, to put aside long-standing family grievances in and of itself has its own values, and even if you can’t see that today, it may be that as time passes and wounds heal, that you may find a way for the family to have a more productive, closer relationship than you have now and that is probably something that couldn’t happen with a Court decision because with Court decisions, there are people who perceive that they have won and people who perceive that they have lost and it only puts more salt into wounds.

With a settlement, while I’m sure each of you gave up hard fought strongly-held positions in order to come to a compromise, that’s in the nature of these things, that if you have come up with something that each of you, primarily Robert and Joseph, you have come up with something that you can live with, even if in your own perspectives it is not ideal, if you can live with it, then move on, go on with your lives, maybe find a way of reuniting your family, your families. I’m sure this is not as somebody, maybe it was Robert, said, this is probably not the situation that your father wanted. This is probably not the situation that your mother would have wanted or that anybody would have wanted. So we can’t undo the past. What we can only do is try to go forward with a better future.

So I commend you for making that decision, and I commend the lawyers. I think that I have sat on this case for a long time, and various motions, discovery, at the start of the trial and I know that Mr. Mahler is the lead lawyer on one side, Mr. Marsillo[*] is the lead lawyer on the other side, worked very hard for each of your clients, advocated very vigorously, but I think both of them and their colleagues didn’t lose sight of the fact that a lawyer’s job is not only to advocate for their client but to counsel their client and sometimes that means, while you assert a position as fairly and as strongly as you can, you may also recognize when you talk to your client that, you know, there are strengths and weaknesses to that position and provide some counseling as to how best to resolve a dispute. So I think in that sense both as counselors and as advocates, they have done a really good job, and you should be commended for choosing them and you should also be commended for listening to them. And I wish you all the best of luck and, don’t take this the wrong way, but I hope I don’t see you on Monday. Take care.

*William Marsillo of Boies Schiller & Flexner, my able opposing counsel in the case.