Jack, Janet and Chrissy each own one third of, and are employed by, an LLC that operates a successful business. Jack and Janet tire of Chrissy and undertake to freeze her out of the business. Either out of spite or in an attempt to create leverage, Janet takes a computer necessary for the day to day operations of the business and hides it away. Chrissy promptly emails Janet to tell her that she’s fired. Chrissy then calls a friend at the local police department and reports that a former employee stole a company laptop. The police go to Janet’s house to confront her. Janet admits to taking the computer and the police arrest her. Janet spends the weekend in jail. On Monday morning, a prosecutor looks at the file and determines that the laptop belongs to a company of which the accused owns 33%. Based on this, the prosecutor concludes that the dispute is of a civil nature rather than a criminal matter and drops the charges. Janet hires a lawyer and sues Chrissy for malicious prosecution, false arrest, and false imprisonment.
Several years ago, I represented the Chrissy in this story. The case went all the way to a jury trial. Chrissy “won,” but only after spending two years in litigation, and tens of thousands of dollars defending herself.
That experience informs my skepticism of the utility of involving law enforcement in a business dispute. In the vast majority of situations, you would do well not to do so. Below are some factors to consider before getting law enforcement involved in a business dispute:
- Law enforcement generally stays out of civil matters. If the police or a prosecutor get a sense that there is an existing business relationship between the accuser and accused and the dispute does not involve violence, they are unlikely to get or stay involved.
- Calling the police might get you sued. If charges are dropped or the accused is acquitted, he or she may have a claim against you for false arrest, false imprisonment, or malicious prosecution. Even if you had a good faith basis on which to press criminal charges and are ultimately successful in defending the civil claim, you will pay for it in time, money, and aggravation.
- Just because you’re the one who calls the police doesn’t mean that you won’t be the one leaving in handcuffs. The police will conduct their own investigation and may be skeptical of your story. And with his liberty on the line, don’t be surprised if your business partner tells the authorities some nasty things about you, whether true or not. Depending on who the police believe, you may be the one who ends up arrested.
- You have no control over the criminal process. You will have little to no say in the scope or duration of a criminal investigation. Information generally flows one way in these matters, and that’s towards law enforcement. You may have little idea about the status of the investigation for months or even longer.
- Information or property you need to run your business, or to pursue civil claims against your business partner, could be impounded as evidence. In criminal prosecutions, it is important for law enforcement to demonstrate a “chain of custody” for evidence. This insulates them from criticism by the defense that evidence is somehow tainted. Police often impound the items in an evidence locker, sometimes for months or even years. Your need for an item to run your business will take a backseat to law enforcement’s interest in preserving the chain of custody.
- If you threaten criminal prosecution in an attempt to strengthen your negotiating position, you could be prosecuted for extortion. You don’t want that. Don’t do it.
There are many good reasons not to involve law enforcement in a business dispute. This is not to say you should never do so. If your business partner inflicts or threatens violence on you or anyone else, dial 911. If your business partner is defrauding customers, lenders, or the government, notify the authorities. But, if you or your business is the primary victim of your business partner’s conduct, you may be best served by talking to a lawyer about your civil remedies before you call the police.
Healthy business relationships are an essential component of business success. When disputes cause business relationships to sour, declining productivity and revenues are sure to follow. Bill works with business owners to bring successful and efficient resolution to a wide variety.