When a promise leads to a lawsuit, no one wins. That may seem obvious to us, here, now, from a remove, yet it happens over and over again.
We have a friend who did some fairly involved business planning for a family-owned company in the Northeast about five years ago. It was somewhat complicated – two sisters were the owners, husbands, children, grandchildren all worked in different capacities, each owned small pieces of the closely held corporation. What took it from somewhat complicated to outright stressful, however, was the incredible animosity between the sisters. Some would say hate. Their offices were as far apart as they could possibly be and still be under the same roof. They both issued orders to the employees, usually countermanding each other’s last decision.
The rest of the family had adapted to the dysfunction, made jokes about it, dealt with it as easily as possible by ‘translating’ the sisters’ orders to the employees. In reality, that means they compromised on nearly everything. But, the company was remarkably successful, sales were through the roof.
A Succession Plan
Each sister wanted their half of the company to be taken over by their children – the ones who worked in the business. A problem: one sister had two of three children working in the company, the other had one daughter and two grandchildren. Another problem: the sister with one child was extremely close to the oldest child of the other sister, her niece.
Promises of Shares
That sister was extremely ill a year before our friend started planning. Her niece spent weeks by her bedside. Literally. The sister said loudly and often that her niece ‘was like a daughter' to her. On death’s door she promised her niece she would give her a share of her ownership. Recovered, she promised her niece she would give her a share of her ownership. Back at work, finally, she told everyone she was giving the niece a share of her ownership.
Nobody objected. The niece, in fact, became a sort of conduit to the sister, making it a bit easier for everyone else to deal with her, removing her mother from having to interact with her sibling, always a good thing. Because of this added responsibility, the scope of the niece’s duties increased almost daily, she received one or two raises but no change in title. The company never used employment contracts for family members.
The niece kept working longer hours, doing special jobs. When she balked at working weekends, she was reminded that she was getting a chunk of her aunt’s shares. Everyone – everyone – there heard the promises; they were, in fact, impossible to miss.
This was still going on when our friend finished his work with the company. He urged the sisters to hire separate estate lawyers, he urged the sister to draw up a contract with the niece. Of course, none of that happened – if it had, we wouldn’t be writing about it.
A Broken Promise and a Lawsuit
The sister died; her half of the company went to her daughter. All of it. The niece received nothing. The niece is suing. At least half the people who heard the daily promises are the ones who directly benefit if the niece is unsuccessful. Her odds are not good.
