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Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 45670
Experience:  32 years of experience practicing law and a businessman.
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Hi, Im getting back to you regarding my business problem

Resolved Question:

Hi,

I'm getting back to you regarding my business problem as we discussed before, where my partners are deceiving me.

As per the information you shared with me, I have written a letter to them to request indemnities against any of their wrong doings, I would appreciate if you please take a look and comment if there is anything I did wrong or you would do differently.

[ To: XXXXX XXXXX their attorney
RE: Request for indemnities for breach of fiduciary duties
Please consider this letter as an attempt to settle our partnership dispute in a courteous manner and restore a legality of ABC, Inc. business activities.
In March of 2010 my partner X has admitted that during September 2008 - March 2010 my son has been working full time as my replacement without any compensation.

On or about May 05, 2010 it came to my attention that my partners, Y and X breached their fiduciary duty by paying themselves disproportional amount of salary that dramatically exceed the industry standard for similar job activities. Median National Salary for Bakery manager is $51,597; maximum is $66, 226. Bakery District manager salary at Panera Bread in NY is $36k-$75k; General Manager salary at Panera Bread, NY is $48,643.00; Manager salary at Panera Bread, NY is $41,127.00. My partners allocated to themselves the salary of $120k. After such discoveries were made, my partners voted me out from business management and dramatically decreased my share of profit distribution. For example, my partners’ salary has increased by 250% and my share of profit decreased by 50% comparatively with the last year.

Therefore Y and X breached their fiduciary duties by circumvented the profit distribution section of the partnership agreement by paying themselves disproportional high salaries. By voted me out they also breached paragraph 6.1 of the Partnership Agreement that states, “There shall be three Directors who shall manage the affairs of the corporation” and paragraph 15.2 that states, “Any modification of this agreement must be made in writing and signed by the partners.”

Besides it was discovered that my partners on a regular basis allegedly involve in illegal business operations such as: destroying financial record; issuing unwarranted checks to their wives; paying their personal expenses from business account (leased cars); and other very serious violations of the state and federal laws. They very well aware of such violations of the law but are absolutely confident that you will be able to protect them from such illegal activities.
Accordingly, I respectfully XXXXX XXXXX following:

1. To arrange audit of my partner’s activities

2. To stop all and any illegal activities in regard of our partnership agreement,
corporation law, state and federal laws.

3. Provide myself with indemnity in accordance with the result of audit and compensate for employment of my son during 09/2008-03/2010.

Please also inform my partners that they are not allowed to pay for any attorney’s fee or any other expenses in regard of my request from corporation account and advise them to reimburse ABC Inc. for attorney’s fee paid for draft of new PA.]


Thank you.
Submitted: 3 years ago.
Category: Business Law
Expert:  Richard replied 3 years ago.

I think that is good. The only thing I would add is that they reimburse you your ownership percentage interest times the excess salaries they paid themselves and their relatives over the national medians.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

If you have a follow-up question, please remember that there might be a delay between your follow up questions and my answers because I may be helping other clients or taking a break.

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 3 years ago.
Thank your for sharp comment.

1. Am I correct in my last paragraph of the letter, that they are not allowed to pay for their attorney from our Co. account. If I am correct, can you please provide a link to the law that supports this?

2. Otherwise, it may turn out that my partners will use up part of my share of profits to pay for their attorney to go against me and stop paying me anything at all. What would be my remedy if they continue to do this?

Thank you.
Expert:  Richard replied 3 years ago.

You're welcome. The attorney's fees will go to the prevailing parties. I would recommend that you provide that it is not appropriate for the partnership's lawyer to represent either of you because of the inherent conflict of interest and this what would be appropriate would be for you to each retain your own lawyers at your own costs. Inform them that to do anything different would be to cause one party to disproportionately pay the other's legal fees.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

If you have a follow-up question, please remember that there might be a delay between your follow up questions and my answers because I may be helping other clients or taking a break.

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 3 years ago.
I think I didn't make it clear that their attorney (the one whom I wrote the aforementioned letter) is not our partnership attorney, but an attorney my parterners hired to resolve our dispute.

They already paid him for his service from our corporate account and also paid for unwarranted draft of the new partnership agreement (where they expected me to waive my rights as we discussed some time ago) from the same account.

Does it change your answer knowing that it is not a partnership attorney I am addressing in my letter, but their own attorney?



Expert:  Richard replied 3 years ago.
I'm sorry. I would simply insist that you each pay your own lawyers and that it is not appropriate for the partnership to pay the lawyers of either partner to resolve a dispute among the partners.
Customer: replied 3 years ago.
Can you suggest how I can properly & legally insisit on this? Thank you.
Expert:  Richard replied 3 years ago.
I would just insist upon this in your letter. It is fairly standard for an individual to pay their own fees rather than to burden the company with the burden.
Customer: replied 3 years ago.
I am also affraid that my partners will retaliate for this letter and will stop paying my share completely. Is there a quick remedy for this?

Expert:  Richard replied 3 years ago.
You can file a motion for an injunction against them paying any compensation or distributions from the partnership to anyone until this has been resolved.
Customer: replied 3 years ago.
But in my case they do not even need profit, they have excessive salary.
Expert:  Richard replied 3 years ago.
That's why I said to get an injunction to stop all distributions and compensation so that this can be resolved without you being penalized.
Customer: replied 3 years ago.
Thank you very much and as the final follow up:

The business does a lot of cash transactions, that being said, is there any legal remedy to prevent them from hiding this cash and/or circumventing accounting process?

Also, if I'd like to hire you to help me with this in the future, are you open to this and if so, how can I reach you directly?
Expert:  Richard replied 3 years ago.

You're welcome. Cash is always difficult to track. If you suspect that, you would want to, during your suit, ask for discovery of all their bank accounts and transactions to see if there is any unaccounted for cash. Also, you could hire a private investigator and/or forensic accountant to monitor the activities.

 

I can always help you through here. JA won't allow us to exchange personal info and represent you outside this forum. I'm sorry!

 

 

Richard, Attorney
Category: Business Law
Satisfied Customers: 45670
Experience: 32 years of experience practicing law and a businessman.
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