Business Litigation Basics

Lawsuits between businesses are often an unavoidable part of doing business. When commercial disputes cannot be resolved amicably or through negotiation, businesses must seek assistance from courts or arbitrators through business litigation. Whether it involves a private individual, a partnership, or a corporate organization, these lawsuits usually involve similar types of complex legal issues.

While resolving business disputes without the expense and time of litigation is generally preferable, it is not always possible. Understanding the basics of business litigation can help you protect your rights and your company's interests. For state-specific business resources and compliance guidelines, you can also consult the New Jersey Business Action Center.

Breach of Contract

Contracts are the foundation of practically every business transaction. The failure to perform a contract in accordance with its terms constitutes a breach of that contract, for which substantial damages may be awarded. Breach of contract claims are among the most common forms of business litigation, often resolved through negotiation, arbitration, or a formal lawsuit.

Shareholder Disputes & Fiduciary Duty

A breach of fiduciary duty can cause severe strain between business partners or shareholders in family businesses, partnerships, closely held corporations, or limited liability companies (LLCs). Each member or partner has a legal obligation to act in good faith and with loyalty to the others.

If a member violates that obligation - through self-dealing, embezzlement, or mismanagement - they can be held liable for damages. In some cases, a court may order the offending member to sell their interest in the business to the other members, or even order the dissolution and sale of the business to the highest bidder.

Intellectual Property Disputes

Businesses regularly end up in court over the unauthorized use of trademarks, copyrights, or patents, collectively known as intellectual property. Any infringement on or misuse of a trademark or copyright is grounds for business litigation. Because these cases usually involve questions of federal law, they are frequently handled in the United States District Court.

Commercial Insurance Disputes

If commercial insurance companies undervalue or deny a fair claim, businesses can employ litigation to recover their losses. Insurance companies sometimes attempt to avoid fully paying a legitimate claim by using confusing wording in the contract or by employing unlawful adjusting practices.

Additionally, insurance brokers and agents often fail to properly assess a client's needs, resulting in devastating losses from under-insurance when a catastrophe occurs. Litigation can hold these parties accountable.