Surrender on Second Day of Trial

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Trial Update: Surrender on Second Day of Trial

Laine T. Wagenseller and Michelle K. Strassburg went to trial in Orange County Superior Court on behalf of our wheel distributor clients. After the second day of trial, the other side surrendered. They dismissed their entire action, released all of our clients and agreed to walk away.

We are very pleased at this great result for our client!

The Lawsuit: Our clients were being sued for partnership dissolution and accounting, involuntary dissolution of corporation, fraud and RICO [Racketeer Influenced and Corrupt Organizations Act] violations.

The Background: The parties worked together to develop a new line of custom alloy wheels for sale to retailers and wholesale distributors throughout the country. The brand was only marginally successful and our client ended the relationship.

The Allegations: The disenchanted partner sued, claiming he was ousted from the partnership and corporation, that our client was involved in a pervasive fraud that involved the criminal theft of hundreds of thousands of dollars relating to the importation of the custom wheels, criminal extortion, mismanagement of corporate funds and diversion of corporate funds to alter ego companies.

Our Litigation Strategy: On the first day of trial we were successful in getting the cause of action for involuntary corporate dissolution dismissed. We also asked that the court address the equitable (matters heard by the judge rather than a jury) partnership issues first and that the trial be bifurcated so that Corporations Code section 16801 standing issues could be resolved before proceeding further. We felt that we had a good chance to bring a motion to dismiss at the end of the bifurcated proceeding that would have resulted in the dismissal of the partnership dissolution and accounting cause of action. We were prepared to attack the other causes of action as well.

Accepting Dismissal? We advised the client on the possibility of continuing with the lawsuit and seeking judgment against the ex-partner for his share of the losses. However, we advised our client that, although we felt we could win on an affirmative claim against the partner for his share of the loss incurred by the business, there was little chance of collecting. Weighing the prospect of continued legal fees and the slight chance of collecting on a judgment versus the time, effort and stress of litigation, we recommended that our client accept the dismissal with a mutual release of all future claims. Our client agreed that his time was better spent building his business rather than engaging in lengthy and expensive litigation.

Lessons Learned: Partnership litigation is expensive and time consuming. Make sure that your partnership agreement is well thought out before entering into the partnership. When you end up in litigation, consider the economic and emotional impact of your lawsuit. If you do end up in partnership litigation, make sure you retain attorneys with a knowledge of the Uniform Partnership Act and other aspects of the California Corporations Code. We believe that our knowledge and experience helped our client beat this lawsuit even before the trial ended. We are also proud to deliver on our promise of results-oriented legal services for our client.

Wagenseller Law Firm is a full service business and real estate litigation law firm serving Southern California. We are proud of our friendly, responsive and cost-efficient services to our clients. Please visit our website at www.wagensellerlaw.com for more information or call us at (213) 805-7445.

Our real estate practice includes breach of contract, breach of lease, specific performance, ownership disputes, partnership disputes, partition, quiet title, neighbor disputes, boundary disputes and real estate fraud. We also draft and review purchase and sale agreements and commercial leases, including office, industrial and retail leases.

In our business litigation practice we represent clients in cases involving fraud, breach of contract, partnership fights, corporation dissolutions and other business disputes.

We are committed to working closely with the client to come up with solutions that achieve the client’s objectives in an efficient and cost-effective manner.

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