OC Dispute Resolution Services, LLC

Focusing on Divorce & Business Mediation

We are committed to providing mediation and dispute resolution services designed to accomplish one thing - - RESOLUTION!  Our mediator's are experienced, tenacious, compassionate and skilled at resolving cases just like yours.  Whether it takes two hours or sixteen hours, we are there for you.

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What do you do when your business partners lock you out?

What do you do when your business partners lock you out? You started the business together, but now they want nothing to do with you. You know you have rights, but what are they? Depending on what steps you took before entering the partnership, this process can be simple or complex.

1.  What Does A "Lock Out" Look Like?

A "lock out" can occur in a variety of ways. Some examples include: o Your partners are taking away your duties o Your partners are excluding you from the management and control of the business o Your partners are voting without you o Your partners are refusing to show you the books o Your partners are keeping all the profits for themselves o Your partners have changed the locks to the business without telling you o Your partners have stopped communicating with you o Your partners have shut down your work e-mail and phone Whether you've been locked out of the business depends on the facts and circumstances of your case.

2.  What Will A "Lock Out" Do To The Partnership?

Typically, a "lock out" operates as a dissociation of the excluded partner from the partnership. Depending on your case, the dissociation may be "wrongful" or permissible. Dissociation does not automatically lead to the winding up and dissolution of the partnership (except for in two-person partnerships), but it does mean that the other partners intend to carry on the business without you. Rappaport v. Gelfand (2011) 197 Cal.App.4th 1213. Even if you cannot prevent your dissociation from the partnership, you may be entitled to certain remedies.

A. Partnership Agreement

If you and the other partners entered into a Partnership Agreement before starting the business, you may save yourself some time and expense by revisiting the Agreement. A Partnership Agreement typically lays out the rights and obligations of the parties. Many Partnership Agreements will address, among other things, the following: 1. Your interest 2. Your voting rights 3. You authority to manage and control the business 4. Dissociation options 5. A dissolution strategy 6. How decisions will be made 7. How responsibilities will be divided 8. How disagreements will be resolved 9. What will happen to the business in the event of death, divorce, or illness If you have a valid Partnership Agreement, then your remedies upon a lock out may be limited to those provided for in the Agreement.

B. Default Partnership Obligations

If you do not have a valid Partnership Agreement, the law prescribes certain default provisions for operating a partnership. In applying these provisions, the general rule is that everything is divided equally amongst the partners. Corp. Code ? 16401. This means that the partners share in the management, control, voting, losses, profits, liabilities, assets, and debts. Therefore, if you do not have a Partnership Agreement and the other partners choose to lock you out, their conduct may be in violation of these default provisions. As such, you may be entitled to a remedy.

C. Default Provisions re Dissociation

As previously mentioned, a "lock out" typically leads to dissociation, even if it is done in violation of the law. Dissociation means that you have been excluded from the partnership and can no longer conduct business in its name. The extent of your remedies will depend on whether the dissociation was wrongful or permissible. Corporations Code, section 16601 lists events causing dissociation. Absent a Partnership Agreement, a partner may be lawfully expelled from the partnership by a unanimous vote of the other partners if: 1. It is unlawful to carry out business with that partner; 2. There has been a transfer of all/substantially all of that partner's interest; 3. That partner is a corporation that has filed for dissolution, has had its charter revoked, or has been suspended; or 4. That partner is a partnership, limited partnership, or limited liability company that has been dissolved and is winding up A partner may also be lawfully expelled by judicial determination, bankruptcy, death, and more. Corp. Code ?16601.

D. Dissociation Remedies

If you have been lawfully dissociated in accordance with the above-referenced default provisions, your remedies may be limited to the buyout price of your interest in the partnership. However, if you have been dissociated under circumstances outside the scope of these provisions, you may be entitled to damages for wrongful dissociation. These damages include offsets, accrued interest, attorney's fees, costs, and expert fees, in addition to the buyout price of your interest. Corp. Code ? 16701(i).

E. Fiduciary Duties

Whether or not you have a Partnership Agreement, fiduciary duties are applied in the same way. The courts have held that if the Partnership Agreement alters you or your partners' fiduciary duties to each other or the partnership, that provision of the Agreement is invalid. Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th 411. So what are fiduciary duties? Simply put, they're rights you and your partners owe each other and the partnership. Corp. Code ?? 16401, 16403, and 16404. Your fiduciary duties include: 1. The duty of care; 2. The duty of loyalty; 3. The duty of obedience; and, 4. The duty of good faith and fair dealing. Essentially, you are required to act in the best interest of the partnership at all times. Breaching your fiduciary duties has serious consequences under the law. Corp. Code ? 16405.

3.  Conclusion

herefore, if your partners' decision to lock you out of the business was a breach of their fiduciary duties to you or the partnership, they could be subject to liability, regardless of whether the dissociation was wrongful.

Who Pays the Attorney Fees in My Divorce?

A frequently asked question at the start of a divorce action is whether one spouse will have to pay some or all of the other spouse’s attorney fees. Until your lawyer has specific information, the most common answer is, “it depends”.

In order to assess the “it depends” factor, we start with Family Code section 2030, often referred to as the “need and ability” statute. The purpose of this Code section is to “ensure that each party has access to legal representation.” Frequently, the spouse that earned less income during the marriage is concerned that he or she will be “out-litigated” by the spouse with a higher income or access to more funds. Family Code section 2030 is intended to create a “level playing field” so that one spouse cannot take advantage of the other simply because one has more money than the other spouse. The law works to achieve “parity” or equity when there is a disparity or difference in income so the parties can retain independent lawyers to represent them through the divorce proceeding.

In order to establish the need and ability, the court will assess each of the parties’ incomes, assets, needs and ability to pay attorney fees. A “reasonably necessary” amount of fees and costs will be ordered if the court finds one party needs funds to retain legal representation and the other has the ability to pay his/her own fees plus the other spouse’s legal fees. Obtaining an attorney fee award is not always easy, and often highly contested.

A formal request must be filed with the court using specific forms along with supporting and factual declarations from the spouse seeking attorney fees and the lawyer setting out outlining anticipated (or already performed) work necessary to bring the case to a conclusion. At the court hearing each party may present their positions for or against the fee award. The court will consider each party’s position, and if it finds that a “need” and “ability” exist, attorney fees and costs will be ordered.

It is Important to Keep All Financial Records After the Date of Separation During Your Divorce Proceeding in California!

Keyword: keep financial records during divorce

If you are considering a divorce or have already filed for dissolution of your marriage, one of the most important things you can do is to keep good financial records. Not only will this help with the division of marital assets and post-divorce obligations, it will also assist in determining whether one spouse or both are entitled to a "credit", also commonly referred to as an "Epstein credit".

Also, keeping accurate records will assist your attorneys and reduce the amount of time and fees necessary to determine whether you or your spouse is entitled to a credit. The Irvine divorce lawyers of Brown & Charbonneau, LLP can help you present your records to secure your rights in marital property.

As a general rule, a spouse making payments from their post-separation earnings or other separate funds on a pre-existing community obligation will be entitled to a credit for payment made. For example, at the time of separation, the parties have an outstanding debt on a jointly held credit card and one of the spouses pays the balance down or pays it off entirely with his or her post separation (separate property) earnings. If the pre-separation debt was "incurred for the benefit of community", it is likely that the spouse paying the debt post separation will receive a "credit".

In the event that the debt, although incurred during marriage, was solely for the benefit of one party, the court may award the entire debt to the party that obtained the benefit of the purchase and now existing debt.

There is no automatic right to these credits - - you must affirmatively request reimbursement. Typically, credits are discussed and determined at the end of the case, and can impact the outcome of the final division of assets and debts. If you and your spouse agree that neither is entitled to a reimbursement, none will be ordered.

In the case where the paying spouse intended the payment as a gift, or if the payment is made on an asset to be retained by the paying spouse, the court may decline to order reimbursement. The court will also look at the financial circumstances of the parties, and may decline to order reimbursement if it would be unreasonable for the paying spouse to have expected reimbursement.

Before meeting with your attorney, gather as many statements for known debts and assets as possible or contact the company for a copy of the statements. Keep a record of any payment made by you or your spouse after the date of separation on community obligations, or payments made on the other spouse's behalf.

Credits and reimbursements can become complex and complicated. It is best to discuss these issues with your Irvine, CA divorce lawyer and assist them by keeping records of all your known debts that you and your spouse were paying on the date of separation.

What are the various terms for child custody and what do they mean?

Legal Terms Relating to Child Custody

If you are going through a divorce and you have children, you will hear certain legal terms relating to the custody of your children. In order to prepare you for court and continued discussions with your attorney, below are some of the most often used terms relating to child custody:

1. Legal Custody: The rights and responsibilities of parents to make decisions relating to the health, education and welfare of their children.

2. Joint Legal Custody: Both parents share in the right and responsibility to make decisions relating to the health, education and welfare of their child.

3. Sole Legal Custody: One parent has the right and responsibility to make decisions relating to the health, education and welfare of their child.

4. Physical Custody: The parent with whom the children live; how much time the children spend with each parent; how day-to-day responsibilities are fulfilled.

5. Joint Physical Custody: Children spend a significant amount of time with each parent.

6. Sole Physical Custody: Children reside primarily with one parent and have visitation with the other parent.

7. Visitation: Time that a non-custodial parent has the children and is responsible for them.

8. Supervised Visitation: Visitation is limited to situations in which a third party, specified by the Court is present. Supervised visitation may occur when there is a need to protect children because of drug or alcohol abuse, child abuse or neglect; family violence, or other serious problems, or when children are getting to know an absent parent.

How Does Estate Planning Factor Into My Divorce?

In the midst of a divorce, it is easy to forget that in a happier moment in your married life you and your spouse created a Will or a Revocable Trust. Many people recognize the importance of preparing a Will or Revocable Trust in the event you or your spouse become incapacitated or die while you are married. Estate planning is even more important when you have minor children. But what happens to your Estate Plan, the Will or Revocable Trust, when you and your spouse are divorced?

In the case of divorce, a Revocable Trust created by you and your spouse during marriage is typically terminated at the time your divorce becomes final and is included as an order in the divorce Judgment. You will have to prepare a new Estate Plan as an unmarried person.

If your Estate Plan was not jointly prepared with your ex-spouse, and you have sole control over the terms of your Estate Plan, you need to update your Estate Plan to remove your ex-spouse as a beneficiary from any portion of your estate including any bank or financial accounts, retirement plans or life insurance, as well as from any fiduciary roles.

You should also update all health directives in which you nominated your now ex-spouse as the person with legal authority to make health decision on your behalf in the event you are incapacitated and unable to make those decisions. When you update your plan, it is also important that you incorporate all assets awarded to you in the divorce and delete any asset that was awarded to your spouse.

It is helpful to your divorce lawyers if you make them aware of any estate planning and provide them with a copy of your estate documents when discussing your divorce.


How does mediation and arbitration differ?

Alternative Dispute Resolution (ADR) is any means of resolving a dispute without litigation.  The two most common types of ADR are mediation and arbitration.

Mediation is a process through which the parties meet with a neutral third party and negotiate.  The neutral third party is known as a mediator.  Unlike a judge, a mediator does not hear both arguments and make a decision.  A mediator helps the parties to see both sides of the argument and allows them to find a solution on their own.  Mediators are typically trained to facilitate these negotiations, so their input can be helpful.  However, the decision is ultimately left to the parties.  They can agree on a settlement or proceed with litigation.

On the other hand, arbitration is more like a hybrid of mediation and litigation.  Like mediation, arbitration involves the help of a neutral third party.  This neutral third party is known as the arbitrator.  Like a judge, the arbitrator allows the parties to make their arguments and present some evidence.  After both sides have finished, the arbitrator renders a decision in favor of one party.  If the arbitration is binding, then the arbitrator’s decision usually carries the same weight as a judgment.  If the arbitration is not binding, the parties may proceed with litigation or additional ADR.

Mediation is usually less expensive than arbitration, but both are generally less expensive than litigation.  While litigation may take years, mediation and arbitration do not typically take more than a few days.  Unless you are subject to binding arbitration, mediation and arbitration generally have the same effect, in that the parties are free to disregard the proposed solutions.

If you are considering mediation or arbitration, OC Dispute Resolution Services can help.  Give us a call today at (714) 505-5655 or visit us online at www.ocdispute.com.

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