A significant portion of America's legal structure centers on the goings-on of corporations. Unsurprisingly, the business world attracts lots of litigation. While you can't guarantee that you'll avoid corporate litigation entirely, it helps to know what's out there so you can prepare.
Here are four sources of corporate litigation.
Shareholder Disputes
The officers and employees of a corporation must run it in the interests of the shareholders. For the most part, this isn't contentious because shareholders tend to be people who believe in a company's mission or at least its financial direction.
However, time can change these feelings, and not all shareholders will sell their stakes. Some will fight for what they believe is the right direction for the company. In the most extreme cases, shareholders may sue to compel corporate officers to hear their voices. These cases of corporate litigation can get particularly ugly because they often involve people who know each other well.
Antitrust
Every company wants to leverage its advantages to maximize returns to its shareholders. In most sectors, that's a non-issue because enough companies actively contend with each other to form a fairly fluid marketplace. However, a company can become big enough that it might develop a monopoly against antitrust laws. Also, collections of companies may collude against the interests of the public.
There tend to be two sources of antitrust claims. First, the government often sues in its role as a good steward of the market. Second, competitors may sue if they feel a company has unfairly muscled them out of market share.
Fiduciary Duties
Companies, their officers, and their employees often serve in positions of fiduciary trust. A party has a fiduciary duty when the law recognizes someone's obligation to competently handle business on behalf of others. Breaches of fiduciary trust can lead to lawsuits that include demands for significant damages.
Especially if one company served in a particular role for another firm, the question of fiduciary obligations can get rough. For example, an accounting firm is often a fiduciary. A client corporation might determine that the accounting business violated that trust through negligent conduct in the handling of things like financial reports or due-diligence investigations.
Mergers and Acquisitions
Companies like to represent M&A activity as involving equals. However, there will always be doubts about who got what in return for a deal. Also, corporate can get especially spicy if a merger or acquisition falls apart and one side holds the other accountable for damages.
Share30 March 2023
