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Mediating Family Business Disputes

{3:42 minutes to read} In my previous blog post on this topic, I described some of the general issues that arise  What Would a Successful Family Mediation Outcome Be? by Gary Shafferduring a mediation involving an intra-family commercial dispute. These included:

  • Resentments built up slowly over time;
  • Allies and enemies;
  • Divergent recollections; and
  • Emerging “alternate truths.”

The first reported case involving these kinds of matters goes back a long way. It’s found in the book of Genesis, in the paradigmatic dysfunctional family story of Isaac, Rebecca, Jacob, and Esau. This story has stood the test of time for good reason. It highlights fundamental human wants, needs, hurts, sibling rivalry, parental favoritism, and the all-important question of “who is best suited to take over the family business?”

Isaac’s favorite was Esau, but Rebecca knew he wasn’t really the kind of guy with an operational mind. He liked the outdoors – hunting (maybe even golf) – whereas Jacob had what Rebecca thought were the smarts to handle the complexities of running a business.

In a mediation, this family might have figured out that Esau was the guy to play golf with prospective customers, whereas Jacob was the one who worked out the details of an agreement after the 18th hole. Pretty good synergy, and many businesses succeed because people figure out who’s best at doing what.

Succession planning is critical to the ongoing success of a family business, but it is fraught with danger. Expectations may differ for all sorts of reasons, but whatever the reasons, they need to be addressed before things blow up. Mediation can be used in many steps of the process, even before a dispute arises.

People running a business can often anticipate family related problems, but also may be hesitant to raise an issue they know can be awkward. Day to day, things work. Why upset the apple cart? Setting up a mediation to address problems can not only help avoid some of the awkwardness, but can smooth out bumps by giving people freedom to speak what’s on their minds, and exploring what they have been avoiding. And if a dispute has already gone to court? Mediation can, and often does, still work.

As in any mediation, it’s important people consider goals. What is the ultimate goal? Keep the business going? Maybe no one else in the family wants it. First generation immigrant families who start businesses often work extremely hard so their kids can grow up and become doctors and lawyers. And then wouldn’t you know it, the kids actually grow up and become doctors and lawyers. They don’t want to work in the diner, grocery store, clothing store, or factory that the first generation built up. What then? What if some of the kids are interested in the business, but others aren’t? What’s fair? What’s fair may have many different interpretations.

As for the mediation, people should consider what a successful—not perfect—outcome might look like, especially given their knowledge—often lengthy and detailed—of everyone involved.

Gary ShafferGary Shaffer
Shaffer Mediation

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An honors graduate of Harvard University and the Cardozo Law School of Yeshiva University, where he also served on the Law Review, Gary brings more than 30 years of litigation and negotiation experience to his practice as a mediator. He has successfully negotiated and mediated resolutions in family matters, employment cases, commercial disputes, personal injury cases, and major civil rights matters.

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