Buy-Sell Agreements in Action: Why ADR Matters

In essence, alternate dispute resolution (ADR) provides valuable alternatives to traditional litigation, offering parties the opportunity to resolve their disputes in a more efficient and amicable manner.

Generally, ADR can be less expensive than attorney fees. ADR includes mediation and arbitration.

A Real-World Example

For example, assume that a Texas resident named Bill, who is in his forties, has owned stock in the family business—Better Gardens Inc.—since he was a teenager. Bill married Sue when they were in their early twenties. Both worked for the corporation from the date of their marriage into their mid-forties, when Sue filed for divorce.

A Buy-Sell Agreement had been in place for ten years. The last valuation of the company occurred two years before the divorce proceedings began. The valuation was $25,000,000.

Bill and Sue hired lawyers and couldn’t come to an agreement on the division of Better Gardens. The parties went into mediation. The mediation didn’t resolve the issue. Sue and her lawyer continued to assert that Sue was entitled to a portion of Bill’s interest.

The case went all the way to the Texas Supreme Court, which held that the community estate was entitled to reimbursement for Sue’s hard work. That reimbursement was a part of the community estate, and Bill retained his separate property interest in Better Gardens.

Lesson: ADR Saves Time and Money

Implementing the ADR process more clearly within the agreement might have saved the parties a lot of time and money.