Chicago Business Litigation Lawyer Blog
By Peter S. Lubin and James V. DiTommaso
You own half of a company you helped build, and the other owner has turned on you. The distributions stopped, but the salary he pays himself did not. You asked to see the books and got silence. Maybe he changed the password on the shared drive, put his brother-in-law on payroll, or started a side venture that looks a great deal like yours. You do not know whether you are about to lose the business, your investment, or both, and every day you wait feels like a day he is using against you.
When owners go to war, the winner is usually the one who moves first and moves correctly. This is a plain guide to what an Illinois commercial litigator actually does to protect an owner in a partner dispute, in the order the work usually happens, so you know what to ask for and what to expect. The law gives you more leverage than the other side wants you to realize.
Can I force my business partner to show me the company’s books?
Yes. Illinois gives owners a statutory right to inspect the company’s records, and that right is one of the sharpest early tools you have. In a corporation, 805 ILCS 5/7.75 lets a shareholder examine the books and records for a proper purpose, and it punishes a company that wrongfully refuses with “a penalty of up to ten per cent of the value of the shares owned by such shareholder.” In an LLC, 805 ILCS 180/10-15 gives a member the right to inspect and copy company information for a proper purpose and requires the company to respond to a written demand within ten days.
In our experience litigating these disputes in Cook and DuPage County, the records demand comes first because the documents tell the real story. The minutes, the distribution history, the payroll records, and the related-party contracts show how the company has actually been run, and a stonewall in the face of a proper demand becomes evidence of its own.
Does it matter whether we are a corporation, an LLC, or a partnership?
It changes the statute you use, the remedy you can ask for, and sometimes the price on the way out. A corporation is governed by the Business Corporation Act, and the key remedies statute for a closely held company is 805 ILCS 5/12.56. An LLC is governed by the Limited Liability Company Act, 805 ILCS 180, and by its operating agreement, which often carries more weight than the statute. A general partnership follows the Uniform Partnership Act, 805 ILCS 206. The first thing a good litigator does is read your governing documents, because a shareholder agreement, an operating agreement, or a partnership agreement may already set a buyout formula, a valuation method, or a dispute procedure that controls the fight before it starts.
How do I get a court to
step in fast?
You ask for a temporary restraining order or a preliminary injunction. When assets are being drained, a partner is diverting customers, or records are disappearing, you do not wait for the case to
grind through discovery. Illinois lets a court act immediately under 735 ILCS 5/11-101. To win that relief, the Illinois Supreme Court in Mohanty v. St. John Heart Clinic requires a party to show “(1) a clearly ascertained right in need of protection, (2) irreparable injury in the absence of an injunction, (3) no adequate remedy at law, and (4) a likelihood of success on the merits of the case.” A well-supported motion filed in the first days of a dispute can freeze a company’s bank accounts, stop a sale, or preserve the evidence before the other owner cleans it up.
Can a court remove my partner or put a neutral in charge?
Yes, in the right case. Section 12.56 lets a court appoint a custodian to run the business or a provisional director to break a deadlock, and 805 ILCS 5/12.55 provides for that neutral tie-breaking
director. These remedies matter most when one owner has seized control and locked the other out. Conduct that is oppressive or fraudulent, orthe waste of company assets, opens the door to relief even where there is no formal deadlock.
What claims do we actually file?
The heart of most owner cases is breach of fiduciary duty. Owners of a closely held Illinois business owe one another real duties, and as the court held in Anest v. Audino, shareholders in a close corporation owe each other fiduciary duties similar to those of partners in a partnership. Around that core claim, a complaint often adds an action for an accounting, a shareholder oppression count under 805 ILCS 5/12.56, and, where the facts support them, claims for fraud, conversion, usurpation of a corporate opportunity, and misappropriation of trade secrets. The claims are chosen to match what the other owner actually did.
Am I suing for myself,
or for the company?
This sounds technical, and it decides who controls the case and who keeps the money. An injury the company suffered, like diverted profitsor wasted assets, usually belongs to the company and must be pursued derivatively, on the company’s behalf. An injury that is yours alone can be pursued directly, in your own name. As the court explained in Small v. Sussman, a shareholder whose real injury is an injury to the corporation must sue derivatively, on the company’s behalf, and only a direct injury to the shareholder himself supports a suit in his own name. Getting this right at the pleading stage keeps a good claim alive, and getting it wrong can hand the other side an early dismissal.
What is my share worth if I am forced out, and can they discount it?
If the case ends in a buyout, the number turns on a definition, and Illinois law favors the owner being bought out. Under 805 ILCS 5/12.56(e), fair value means “the proportionate interest of the
shareholder in the corporation, without any discount for minority status or, absent extraordinary circumstances, lack of marketability.” The other side will argue your minority stake should be marked down because it is a minority and because the stock would be hard to sell. Illinois courts are not always required to accept that especlally if you have engaged in no wrongdoing . In Jahn v. Kinderman, the Appellate Court affirmed that a trial court “was not even required to apply any discounts” to fair value but a court which can consider equitable principles can add a minority discount when there is wrongdoing. On a valuable company, refusing those discounts can move the payout by a seven-figure sum.
My partner is leaving. Can he take clients, staff, or trade secrets?
Not freely. While he remains an owner or officer, he owes the company a duty of loyalty, and competing against it or diverting its opportunities during that time is a breach. The Illinois Trade Secrets Act, 765 ILCS 1065, protects the company’s confidential customer data, pricing, and processes if the company took reasonable steps to keep them secret. Any non-compete he signed is governed by the Freedom to Work Act, 820 ILCS 90, which sets its own rules and salary thresholds. The line the law draws is between fair competition and theft, and the record
you preserve early is what proves which one happened.
What should you do in the
first week?
Move deliberately, and move before the other owner sets the terms. First, preserve everything and put the company on notice not to destroy records, because the email and the accounting entries are where these cases are won. Second, send a written records demand and use the statutory inspection right. Third, do not sign anything, and do not put a buyout number in writing, until counsel has valued the business, because a careless figure becomes the ceiling in every later negotiation. Fourth, if assets are being drained or a partner is looting the company, ask the court for emergency relief before the money is gone. Fifth, bring in counsel who actually tries these cases, because the credible threat of a 12.56 petition, a custodian, and a no-discount buyout is what moves the other owner to a fair deal.
A partner who has turned on you is counting on your hesitation. Illinois law is built to reward the owner who acts, and the first month usually shapes everything that follows.
Big-firm firepower, with the partners on your case
Peter S. Lubin and James V. DiTommaso are Chicago business litigation lawyers who try cases throughout Illinois. Peter is a University of Chicago Law School graduate who has taught trial practice there for decades and is an Illinois Super Lawyer. He has served as lead counsel in more than one hundred class actions and has handled more than one hundred shareholder, LLC, derivative, breach of fiduciary duty, and fraud matters on both the plaintiff and the defense side. Crain’s Chicago Business credited him with the largest class action settlement
of its year, a forty million dollar recovery. The firm has been named DuPage County Law Firm of the Year, and its lawyers have represented companies including McDonald’s, Motorola, and Experian and have litigated against adversaries including AT&T and General Motors. James DiTommaso is a Chicago-Kent College of Law graduate with a certificate in business law who served with the Illinois Appellate Court and argued a case before the Illinois Supreme Court. When you hire this
firm, the lawyers whose names are on the door handle your case.
If your co-owner has turned on you, the sooner you move, the more of the company and your investment you can protect. Call DiTommaso Lubin, P.C. at 630-333-0333 for a free consultation, or contact us online.