Vincent Serafino | "Fifty Shades of Grey" Lawsuit in Texas Reveals Fraud and Disloyalty
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"Fifty Shades of Grey" Lawsuit in Texas Reveals Fraud and Disloyalty

A Texas jury found that a partner used fraud to cheat a business partner. Follow these tips to help you avoid conflict in your business partnerships.

The racy and popular "Fifty Shades of Grey" books have been big moneymakers for a number of individuals and businesses around the world. Unfortunately, one woman had to resort to litigation in order to obtain her fair share of the proceeds.

Lawsuit Filed By Fort Worth Partner Pays Off

A small publishing house, comprised of four partners, published the first book of the trilogy in 2011, later selling its publishing rights to Random House as the book quickly flew to the top of the bestseller lists. Unfortunately, one of the partners, Amanda Hayward, tricked the others - including plaintiff Jennifer Lynn Pedroza of Fort Worth - out of their rightful partnership shares of profits, allowing Hayward to keep all of the royalties for herself. Pedroza received mere pennies on the dollar and filed a lawsuit.

As reported in Texas Lawyer, the jury ruled in Pedroza's favor, paving the way for her to recover losses in excess of $10 million, a number that has now been determined by forensic accountants. The jury found that Hayward failed to uphold her duties as a partner and fiduciary and committed fraud against her three partners.

Following the jury's verdict, Pedroza's attorneys at Vincent Serafino Geary Waddell Jenevein, P.C., in Dallas, asked the court to apply equitable remedies, including a constructive trust. The court has now ordered Hayward to deposit $10 million into the registry of the court by September 25.

Five Tips For Protecting Yourself In A Business Partnership

While you may not have a multimillion-dollar dispute on your hands, a disagreement with your partners can cost you precious time and money. Following these top tips may help you avoid conflict and legal disputes in your business.
  • Put your partnership agreement in writing. While you may think this is an obvious step, many partners are family members or good friends, and they do not want to appear mistrusting by asking partners to sign on the dotted line.
  • Establish how partners will be compensated. Compensation is often more complicated than dividing income based on each partner's percentage of ownership. Expectations may be widely varied due to capital contributions, personal loans and sweat equity provided by different partners.
  • Limit each partner's ability to bind the partnership. Within the partnership agreement, clearly establish the decision-making rights of each partner. This is especially important when incurring debt or creating business contracts on behalf of the partnership. If your partnership is unable to meet its obligations, creditors may pursue your personal assets.
  • Outline a strategy for dispute resolution. Internal business disputes will arise, and how they are resolved can make or break your partnership. Develop and use a strategy for resolving your conflicts in the event of a deadlock. Whether it is through mediation, arbitration or the counsel of a trusted business lawyer, strive to resolve disagreements before they end up in court.
  • Plan what will happen at the end of the partnership. Every partnership ends, whether due to disability, death, retirement or heading in different directions. Have an established buyout plan before you need one to help ensure that it is fair.

No matter how informally your business partnership began, take steps to protect your partnership and personal interests. An experienced Texas attorney can advise you of your rights and responsibilities as well as help you avoid and resolve conflicts.