Over the course of a business partnership, aspects of the business may change that cause one partner to leave the business. So the question becomes, can you sue your business partner for abandonment under Maryland law? Generally speaking, Maryland law allows for this yet some circumstances of a partner’s exit may harm the other partners and the business as a whole.
In these cases, the abandoning business partner may be legally liable for the harms they have caused. However, filing a lawsuit is not always the only option to recoup the value lost. Settlement, mediation, and arbitration are all viable solutions to rectify the damage.
It can be difficult to navigate these complex paths, so we urge you to reach out to one of the experienced Maryland business lawyers at the Heyman Law Firm. Call us today at (410) 305-9287 to receive your free initial case evaluation.
What Happens When a Business Partner Leaves a Partnership in Maryland?
Generally, a person who is involved in a business partnership is not prevented by law from leaving a partnership in Maryland. When one partner decides to leave the partnership, the partnership entity is typically dissolved, meaning that it no longer exists as it previously did.
However, depending on the way that the partner left the business and the specific provisions of the existing business agreement, the abandoning partner’s actions could cause serious legal issues if handled improperly.
Conditions of Abandonment in Maryland Partnership Law
Maryland law allows an existing business owner to sue their partner for abandonment under specific circumstances. These allowable circumstances are listed below:
- The business partner’s actions are a breach of the partnership agreement
- The business partner intentionally or carelessly caused damage to the business
- The business partner put their own interests ahead of the business’ interests
- The business partner violated their fiduciary duties
- The abandonment involved fraud, theft, or embezzlement
- The abandonment involved the improper withdrawal of certain business interests, such as intellectual property
What is Breach of the Partnership Agreement?
In any case, not just with abandonment, a business partner that breaks the promises that they made as part of the partnership agreement opens themselves up to liability for the harm that their violation causes. In order to sue for breach of the partnership agreement, you must be able to prove the following elements:
- There was a valid, enforceable partnership agreement
- Your business partner violated one or more of the terms of that agreement
- Your business suffered as a result of the breach
This applies to abandonment in several contexts. For instance, if your partnership agreement stipulated a specific time duration for the partnership, leaving the partnership early could constitute a breach of the partnership agreement.
It is also possible that business partners who have decided to leave the partnership may not perform their contractual duties under the partnership agreement between that point and the time that they leave. While business partners who leave a partnership are not bound by the partnership agreement after leaving, they are still obligated to meet their obligations while they are still serving as partners and receiving payment for their roles. If a partner’s inactivity while they are still in their role causes the business harm, you could pursue legal action.
What is Breach of Fiduciary Duty?
A fiduciary duty is the highest legal duty that one person can owe to another. One’s role as a fiduciary also requires the individual to act honestly and straightforward in all dealings on behalf of the individual to whom the duty is owed. The specific set of duties required of these individuals depend on the entity or individual they are serving.
According to Maryland’s Uniform Partnership Act, any partner that wrongfully dissociates with the partnership is liable to the partnership and to the other partners for the damages that their action causes.
Alternatives to Suing a Business Partner for Abandonment in Maryland
In some situations, going to court may ultimately prove unavoidable. However, there are alternatives that you and your Maryland business attorney should explore prior to taking on the money and time costs of going through the judicial system.
You may consider negotiating with your business partner to determine terms of a settlement of any legal claim against the abandoning business partner. Settlement may still mean the termination of your partnership but will account for repayment of any losses caused by your business partner’s abandonment. This is particularly useful where you can identify the exact cost to the business caused by the abandonment. Saving on litigation costs by pursuing avenues other than a lawsuit may serve your partnership’s best interests.
The mediation process is another way that you can hash out professional differences without having to go to court. In mediation, both sides will discuss their dispute together in the company of an independent decision-maker who will work with both parties to find an equitable and amicable route for resolving the dispute.
Arbitration is a legally binding process that does not involve an actual court case. Many partnership agreements feature arbitration clauses that stipulate under which specific circumstances the parties should go into arbitration and how this process should be handled. You are permitted to have the assistance of an attorney in the arbitration process, even though it is not technically a court case.
If your partnership agreement does not contain applicable terms for arbitration and the other party is unwilling to cooperate on a settlement or mediation, going to court may be your only option. Before taking this step, however, it is important that you discuss all possible avenues with your dedicated Maryland business lawyer.
The Heyman Law Firm Can Help You File a Lawsuit Against a Business Partner in Maryland
To learn more about the options that you have at your disposal, contact the dedicated Maryland business attorneys at the Heyman Law Firm by calling our offices at (410) 305-9287. We can offer you a free initial case evaluation for your first call.