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Business litigation between family owners is dismissed by court

Many businesses in Oregon are owned and managed by families. Such companies are generally very successful, but that does not mean that they are all immune from having internal conflicts. There are many reasons why family-run businesses may become involved in business litigation that pits family members against each other.

One case that was recently dismissed by a federal court judge is an example of how conflicting interests may ignite a family dispute in a highly successful company. The plaintiffs in the case were a mother and her two children, who were shareholders in a family-owned business, the Tarter companies. The lawsuit claimed that their cousin, the president of the company, conspired with other persons and entities to divert over $70 million in cost savings to their own benefit.

The federal district court recently dismissed the case on the grounds that the plaintiffs had not “plausibly alleged” that they were injured as shareholders. It is unclear from the press reports, but in many instances, an order dismissing the complaint for insufficiency of the allegations would give the plaintiffs a reasonable time to file an amended complaint. That appears to have happened in this case because the plaintiffs issued a statement indicating their commitment to following the case through to a final ruling on the merits.

A preliminary dismissal of the complaint is not a determination on the merits of the issues raised by the plaintiffs. Instead, it is based on deficiencies of a legal nature that may be repaired in some cases by a more explicit complaint. A true decision on the merits would involve the filing of all pleadings, going through discovery, pretrial proceedings and then a trial on the merits of the claims. In Oregon, a motion to dismiss the complaint is often filed in a federal court case by the business litigation defendants. 

Source: kentucky.com, “$70 million family business legal dispute dismissed by judge”, Greg Kocher, Jan. 24, 2018

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