Joint ventures can be fantastic business arrangements when they work. You get to pool resources with another company, share the risks, and go after opportunities that would be impossible on your own.
But when they go south? They can get ugly fast.
At Eric Siegel Law, we’ve seen just about every flavor of joint venture dispute you can imagine. And we’ve learned that how you handle these conflicts from the start makes all the difference in where you end up.
What Actually Causes These Disputes
Most joint venture problems don’t just materialize overnight. They build from specific friction points that get worse over time until somebody finally snaps.
Money issues top the list. One partner thinks they’re putting in 60% of the work but only getting 40% of the profits. Capital contributions cause plenty of fights, too. The venture needs another $200,000 nobody planned for, and now you’re arguing about who should write that check.
Then there’s the whole question of control. Who gets to make the big decisions? Your agreement might say you both have equal say, but what happens when you fundamentally disagree about the direction of the business?
We also see a lot of disputes over intellectual property. Maybe your company develops a new process or technology during the venture. Who owns it? Can you use it in your other business ventures? These questions should’ve been answered up front, but they often weren’t.
And then there are the really nasty ones. Breach of fiduciary duty claims. That’s when one partner thinks the other is secretly competing with the joint venture or funneling opportunities to their own company.
Read Your Agreement First
Before you do anything else, pull out your joint venture agreement and go through it carefully.
That agreement probably tells you exactly how you’re supposed to handle disputes. A lot of these contracts have mandatory dispute resolution clauses built in. You might be required to try mediation first. Or maybe you agreed to arbitration instead of going to court.
If you ignore these provisions and just file a lawsuit, you can blow up your case before it even starts.
Your agreement might also have notice requirements, cure periods, or buyout provisions that kick in when disputes arise. All of this matters.
Maybe Try Mediation
Mediation can actually work pretty well for joint venture disputes. You bring in a neutral third party who sits down with both sides and tries to facilitate a resolution.
The benefits are real:
- It costs way less than litigation
- You can usually resolve things in weeks or months instead of years
- Everything stays confidential
- You can get creative with solutions in ways courts can’t
- Sometimes you can actually save the business relationship
But mediation only works if both sides genuinely want to resolve the dispute. A Bethesda commercial litigation lawyer can help you figure out whether mediation makes sense in your situation.
Arbitration Is Different
In arbitration, you’re presenting your case to an arbitrator who then makes a binding decision. If your joint venture agreement has an arbitration clause, you’re stuck with it.
Arbitration is usually faster than litigation, and the proceedings are private. But there’s a huge downside. Arbitration decisions are really hard to appeal. Even if the arbitrator makes what seems like an obvious legal error, you’re probably stuck with their decision.
When You Need To Sue
Sometimes you don’t have a choice. Litigation becomes necessary.
Maybe you tried mediation and it went nowhere. Maybe the other party is refusing to engage in good faith. Or maybe you need immediate court intervention because your partner is about to destroy company assets.
Once you’re in litigation, you get access to formal discovery. You can force the other side to turn over documents. You can depose witnesses under oath. And if you lose at trial, you can appeal.
But litigation is expensive. Really expensive. It takes forever. And everything you file becomes part of the public record.
Also, once you file a lawsuit, you can pretty much forget about salvaging the joint venture relationship.
Protect Yourself While This Plays Out
Start documenting everything right now. Every conversation, every broken promise, every time the other party fails to meet their obligations. This documentation becomes evidence later.
And keep performing your obligations under the contract if you possibly can. Courts really don’t like parties that use a dispute as an excuse to stop doing their own job.
Stop having important conversations over the phone without following up in writing. After every significant discussion, send an email summarizing what was said and what you agreed to.
You Need A Strategy
Joint venture disputes aren’t just about legal rights. They’re about business realities, too. Does it matter if you preserve this relationship? What are your exit options? If you win in court but spend $300,000 getting there, did you really win?
Whether you’re fighting over how profits get split, worried about a partner who seems to be playing games, or just trying to get out of a venture that stopped making sense, getting good legal advice early changes outcomes. A Bethesda commercial litigation lawyer can review your agreement with fresh eyes, give you an honest assessment of your legal position, and help you pick the strategy that protects your business without burning through resources you don’t need to spend.