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Mediation as an Alternative Dispute Resolution Tool

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SJP_1423v1At some point in a business dispute, many business owners consider mediation—either by choice or by court order. Regardless of how the idea of mediation comes about, mediation is an important alternative dispute resolution tool that business owners in disputes may want to consider.

Mediation is an alternative dispute resolution process where a neutral third party, a mediator, facilitates discussion between disputing parties. While the mediator assists in settlement communications, the parties retain all decision-making power. This is unlike arbitration, where the arbitrator makes a binding decision. Generally, mediation begins with an opening session where all parties and their counsel are together in one room. The mediator usually explains the process, gets everyone in attendance to sign a confidentiality agreement (settlement discussions at mediation are confidential and generally for settlement purposes only), and allows each party or their counsel the opportunity to make a statement regarding their side of the story. After the initial joint session, the mediator usually breaks the parties into “caucuses” where each party and their counsel are placed in their own room. The mediator then goes back and forth between the parties’ rooms and listens to each party’s story and assists in helping the parties reach a mutually satisfactory agreement.

There are many potential benefits associated with mediation. First, the parties are in control of the results of mediation. Mediation is not binding unless the parties reach an agreement, and thus, no party can be forced to agree to something they are not satisfied with. Second, at mediation, the parties have the opportunity to craft their own solution to the dispute. This may be the only time the parties will be able to control the outcome of the dispute. Additionally, parties can include creative provisions in a mediation settlement agreement that they might not otherwise be able to include. For example, the parties may put a confidentiality provision or a non-disparagement provision in their mediation agreement. Such provisions could prevent third parties from learning the terms of the settlement agreement and prevent the parties from making negative comments about each other or each other’s business. Third, if mediation is successful, the parties generally save significant costs and time that would otherwise be spent in litigation. Successful mediation can also help parties put their dispute behind them and move on with their lives.

While the benefits of mediation are overwhelming, mediation is not always successful. There is no formula that can accurately predict the likelihood of success in mediation. Additionally, mediations are often only successful when both parties to a dispute move into their uncomfortable zone in order to meet somewhere in the middle. In successful mediations, generally neither party feels like they were the “winner,” but both parties feel that the result is better than the alternative.

This article is not intended to establish an attorney-client relationship and is not intended to confer legal advice. No attorney-client relationship should be inferred in the absence of a written and executed engagement agreement that expressly indicates the creation of an attorney-client relationship.

Written by: Heather Wagner

A business owner’s action to inspect the books and records of the business

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home-imageAre you a business owner who has been denied access to your business’ books and records? Whether you desire access because you suspect your fellow business owner is doing something inappropriate or merely to determine the financial state of your business, you may want to consider sending a demand (and if necessary, file a subsequent action) to inspect the books and records of your business. This is an expedited way to get information about a company and this process could serve to show you what is going on in the company or could even lessen suspicion if the records inspected actually reveal no wrongdoing.

The first step is to send a demand to inspect your business’ books and records under the applicable Georgia statute. Georgia law contains specific statutes governing this right for both LLCs and corporations. The limited liability company statute provides that a member, at the member’s expense, may inspect and copy any LLC company record upon reasonable request during ordinary business hours. If the LLC refuses to permit the authorized inspection, the member demanding inspection may apply to the court to allow for this inspection. If the LLC cannot establish that the member is not entitled to the requested inspection, then the court may award the petitioning member his attorney’s fees.

The corporate statutes, on the other hand, are more detailed and differentiate between the various types of records that can be demanded. Some records (i.e., articles of organization, bylaws, resolutions regarding number of directors, resolutions creating one or more classes of shares, shareholder meeting minutes, communications to shareholders over the past three years, list of names and addresses of directors and officers, and most recent Secretary of State annual registration) can automatically be inspected during regular business hours at the corporation’s principal office if the shareholder gives the corporation written notice of his demand at least five business days before the inspection date. On the other hand, certain meeting minutes, accounting records of the corporation, and the record of shareholders can only be inspected if, in addition to the above requirements, (a) a shareholder’s demand is made in good faith and for a proper purpose that is reasonably relevant to his legitimate interest as a shareholder, (b) he describes with reasonable particularity his purpose and the records he wants to inspect, (c) the records are directly connected with this purpose, and (d) the records are to be used only for the stated purpose. Courts have found that seeking inspection to ensure proper corporate governance and to determine if corporate waste, mismanagement, and other breaches of fiduciary were occurring to be proper purposes.
In sum, whether you are an owner of an LLC or a corporation, Georgia law provides a statutory means for you, as a business owner, to obtain access to your business’ books and records in an expedited manner.

This article is not intended to establish an attorney-client relationship and is not intended to confer legal advice. No attorney-client relationship should be inferred in the absence of a written and executed engagement agreement that expressly indicates the creation of an attorney-client relationship.

Written by: Heather Wagner

Breach of Fiduciary Duty Claims May Proceed Against Resigned Directors

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 columnsAre you a shareholder who suspects one or more directors of a corporation have breached their fiduciary duties to you, but feel that you have no recourse because they have resigned?  If so, you may be in luck.  A recent Delaware case found that a company’s directors can still be held personally liable for acting in bad faith and failing to exercise oversight of the corporation, even after they resign from the Board.  Thus, directors cannot automatically exonerate themselves by resigning.  While Georgia law is not identical to Delaware law, Delaware is an innovative leader in corporate law, and this case could represent a hopeful trend for shareholders seeking recourse against directors who resign when facing trouble.

This article is not intended to establish an attorney-client relationship and is not intended to confer legal advice. No attorney-client relationship should be inferred in the absence of a written and executed engagement agreement that expressly indicates the creation of an attorney-client relationship.