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How to Use an Accounting under Florida Law to Hold a Business Partner Liable

BusPartners

Daily Business Review recently featured an interesting article addressing the issue of international partnerships in business litigation and how to obtain justice by finding a jurisdictional hook that allows the U.S. company to hold the international business partner liable. The answer lies in what’s known as ‘the right to an accounting.’ This refers to one partner seeking to obtain an accounting as to the entire business relationship.

Specifically, Florida law allows parties (i.e. in this context, a business partner) to seek an equitable accounting (i.e. settlement of claims and liabilities) upon demonstrating that there was a fiduciary relationship with the other party. It effectively permits a court to balance the equities and render justice between the parties even if one party is completely unresponsive (as can sometimes happen with international business partners).

Process Dictated By the Courts

In Florida the courts have mostly contributed to the law on this subject via case law (versus  legislation , which is very sparse on this subject). The process is broken down in two steps: First; establishing the right (via the existence of the partnership or another relationship that gives rise to a fiduciary relationship) and second; ensuring that the party owing the duty accounts in order to determine whether the fiduciary performed properly. Note that the fiduciary bears the burden of producing accurate, clear, itemized accounting detailing expenditures (receipts and associated materials included). Courts have analogized this process to discovery production in a civil case (however, discovery can be difficult–if not impossible–when it comes to parties abroad).

While the plaintiff has to prove that the defendant effectively stole money, the defendant’s failure to respond works against the silent party: In other words, failure to provide a proper accounting results in the assumption that the funds were mishandled by the party that did not respond. The plaintiff is then awarded the gross amount entrusted to the fiduciary.

In Forming Business Partnerships, Secure Your Florida Jurisdiction

Therein lies the reason why you want to work with Florida attorneys who are experienced in business litigation in coming up with your partnership agreement in the first place: In order to have jurisdiction and Florida law on your side, your partnership agreement usually needs to be entered into in Florida, with the partnership maintained in an office there as well. This is what puts the burden of production on the defendant and shifts the cost of discovery to them as well. If/when that defendant cannot produce an accounting (and/or if you are able to discredit the one provided with the assistance of your attorney), you then have a significant judgment in hand.

Savvy Florida Business Litigation Lawyers

If you foresee business litigation in your future due to suspicious behavior of your business partner, contact one of our experienced Florida business litigation attorneys at Moran, Sanchy & Associates to help ensure that you are on the right path to seeking justice.

Resources:

law.com/dailybusinessreview/2018/04/18/how-accounting-claims-can-be-game-changers-in-international-litigation/

floridabar.org/news/tfb-journal/?durl=%2Fdivcom%2Fjn%2Fjnjournal01.nsf%2FAuthor%2FABA7F96B6A0C63E185257A280068E032

courtlistener.com/opinion/1657569/fla-gaming-corp-v-am-jai-alai/?