What Are Your Legal Rights When a Partner Is Sabotaging Your Business?

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Article By: Marc Newman

A Leading Commercial Litigation Attorney in Michigan

What Are Your Legal Rights When a Partner Is Sabotaging Your Business?

Published on: January 15, 2021

Can I sue for sabotage in workplace
When you have worked hard to build a business, having someone try to sabotage it is devastating.

This situation is even more upsetting when it is your partner that is sabotaging your business.

Luckily, you have rights as a business owner. There are a number of steps you can take to protect your business, up to and including suing for sabotage in the workplace.

The capable partnership dispute attorneys at Miller Law know what to do. They can help you understand your options and advise you on the course of action that will best protect your business.

What Is Business Sabotage?

Business sabotage occurs when someone does something to undermine your business. Examples include:

  • Diverting business or investor funds for personal use;
  • Taking business opportunities for themselves or another business;
  • Interfering with the company’s business deals or business relationships;
  • Committing criminal acts that undermine the business or its trustworthiness;
  • Misappropriating the company’s intellectual property; and
  • Violating nondisclosure or noncompete agreements.

Often, sabotage is intentional. A partner could be actively trying to undermine the business so that they can steal the business’s assets for themselves or start their own competing business.

In other cases, a partner sabotaging a business doesn’t actually intend to harm it. But by putting their own interests ahead of the business’s interests, they can nevertheless cause severe damage.

Can I Sue for Company Sabotage in Michigan?

Suing for sabotage in the workplace is a drastic step, but one you should seriously consider taking if your partner is sabotaging your business. Depending on what your partner has done, there may be several different grounds to sue.

Breach of Contract

Any time you consider suing a business partner, you should look to the terms of any contracts between you. These may include your:

  • Partnership agreement,
  • Operating agreement,
  • Bylaws, Shareholder Agreement, or Articles of Incorporation,
  • Employment agreement, and
  • Noncompete agreements.

If your partner’s actions violated the terms of any agreements between you, the terms of the contracts might provide you remedies beyond what the law offers.

Breach of Fiduciary Duty

All partners owe each other fiduciary duties to put the interests of the partnership above their own interests. If a partner has done something to sabotage your business, it is possible that they have violated their fiduciary duties.

Tortious Interference

Tortious interference occurs when someone interferes with your business relationships or contracts. This cause of action typically requires you to prove that:

  • The interfering person knew about your contract or relationship;
  • You were reasonably likely to realize a benefit from that contract or relationship;
  • The interference was intentional and improper; and
  • You suffered damage as a result of the interference.

If your partner has been diverting business opportunities to themselves, it’s possible you could prevail on a tortious interference claim.

For example, it might be tortious interference if your business partner convinced someone to break their contract with your business and instead make a contract directly with the partner or another business they own.

Conversion

Conversion is the civil equivalent of a theft charge. It allows you to pursue a claim directly against someone who has stolen from you.

In fact, under Michigan law, you can even pursue a conversion claim based on the person’s improper use of your property, even if they didn’t steal it. If you can show that your partner damaged your business by using business property for their own purposes, you may have a conversion claim.

In fact, Michigan allows you to ask the court for three times your actual damages if you can prove conversion.

Civil Conspiracy

If your business partner conspired with others in sabotaging your business, you may also have a claim for civil conspiracy. A civil conspiracy claim requires you to prove that your partner acted with at least one other person to commit an unlawful act by unlawful means.

Civil conspiracy is not a claim on its own but must be combined with another claim where you can show you suffered damage. For example, if your partner worked with another person to embezzle company funds, you might have a claim for civil conspiracy.

What Remedies Are Available Under Michigan Law If My Partner Is Sabotaging My Business?

The remedies available to you for company sabotage will depend on the claims you bring. Typically, you will be able to seek damages to compensate you for losses you suffered as a result of the sabotage. Additionally, you might seek:

  • An injunction preventing the partner from continuing their unlawful activities;
  • An order dissolving the partnership;
  • Statutory damages for certain claims like conversion;
  • Specific remedies outlined in a contract with the partner; or
  • Attorney fees if available under a contract or statute.

Additionally, if your partner’s activity was criminal, you should consider sharing evidence with the police. It’s likely that the State will want to charge your partner with a crime if their actions are serious enough.

Why Work with a Michigan Lawyer?

As you can see, there are many potential claims and remedies that can arise from a partner sabotaging your business. It’s important to speak with an experienced partnership dispute lawyer who can advise you of the best action to take.

The Miller Law Firm has been helping businesses with their legal needs for nearly 25 years. Our attorneys have an intimate understanding of business and partnership law, and we are anxious to help you protect your business. Call or contact us today, and let us answer your questions.

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