Resolving Ownership Disputes in Dental Partnerships
Partnership disputes can disrupt patient care, staff morale, and cash flow, while draining the equity you spent years building. Whether you face a deadlock over an expansion strategy, a forced buyout demand, or allegations of financial misconduct, the proper legal framework and rapid triage can help preserve practice continuity and your ownership stake.
Dealing with a dispute? Call (800) 499-1474 now for a consultation.
Key Takeaways for Dental Partnership Dispute Resolution
- Standstill agreements and temporary restraining orders may stop partners from locking you out of practice management systems, freezing bank accounts, or soliciting patients while disputes proceed through mediation or arbitration
- Buy-sell agreements with clear valuation formulas and shotgun clauses or Texas shoot-out provisions accelerate negotiated exits and reduce litigation costs
- Fiduciary duty claims for self-dealing, undisclosed compensation, or diverting referrals carry serious liability and may justify partner expulsion, damages, or disgorgement of profits under partnership agreements
- Non-compete and non-solicitation provisions control post-exit practice radius, patient record ownership, and staff recruitment, with enforceability varying by state law, geographic scope, and duration
Common Triggers for Dental Partnership Disputes
Partnership conflicts rarely emerge overnight. Early warning signs include disagreements over associate hiring, capital calls for equipment upgrades, profit distribution formulas, or one partner’s plan to affiliate with a dental service organization. When informal conversations fail, disputes escalate into formal demands for accounting, buy-sell invocations, or threats to dissolve the practice entirely.
Common dispute triggers include:
- Buy-in and earn-out disputes when newer partners claim the entry price was inflated or the production thresholds promised were unattainable
- Strategic deadlocks over opening a second location, signing a DSO management services agreement, or exiting a PPO network that paralyze operations when partnership agreements lack tiebreaker provisions or supermajority vote requirements
- Breach of fiduciary duty allegations when one partner discovers undisclosed side income, lease terms favoring a related entity, or expense reimbursements lacking documentation
- Financial pressure from declining reimbursement rates, rising overhead, or post-pandemic patient volume shifts that amplify underlying tensions
Absent clear governance rules and dispute resolution paths, partners might resort to lockouts, bank account freezes, or unilateral vendor contract cancellations that jeopardize patient care and staff payroll.
First Steps When a Dental Partnership Dispute Arises
Swift action protects your rights, preserves evidence, and may prevent irreversible harm to practice operations.
Document Events and Request Partnership Records
Document the timeline of events, communications, and financial anomalies before memories fade or records disappear. Request a complete set of partnership books and records: tax returns, profit-and-loss statements, capital account ledgers, patient accounts receivable aging reports, and vendor contracts.
Many states grant partners statutory inspection rights, and a prompt written demand initiates the compliance deadlines. Organize correspondence chronologically and preserve text messages, emails, and voicemails that establish context for disputed decisions or alleged breaches.
Review Your Partnership Agreement for Dispute Resolution Provisions
Review your partnership agreement, operating agreement, or shareholder agreement for dispute resolution provisions. Most well-drafted dental partnership agreements require mediation or arbitration before litigation, specify valuation methods, and outline notice periods for withdrawal or expulsion.
If your agreement is silent on key issues, strategic amendments or a negotiated standstill might prevent immediate escalation. Identify governance clauses that control voting thresholds, capital contributions, and profit distribution formulas.
Secure Access to Critical Systems and Accounts
Secure access to critical systems and accounts. Partners locked out of practice management software like Dentrix, Eaglesoft, or OpenDental lose visibility into patient schedules, billing, and clinical notes. Similarly, frozen bank accounts or revoked credit card access can halt payroll and vendor payments.
A temporary restraining order or preliminary injunction might restore access while the underlying dispute proceeds through mediation or arbitration. Document any lockout attempts immediately and notify vendors, banks, and staff to prevent unilateral changes to signatory authority.
Engage Forensic Accounting When Financial Misconduct Is Suspected
Engage forensic accounting if financial misconduct is suspected. Undisclosed cash transactions, inflated expense reimbursements, or diverted lab fees require tracing bank deposits, credit card statements, and third-party vendor invoices.
Forensic experts reconstruct cash flow, identify anomalies, and provide litigation-ready reports that support breach of fiduciary duty or fraud claims. Early engagement prevents document destruction and establishes baseline financial metrics for valuation disputes.
How Dental Partnership Dispute Lawyers Help
Dental partnership dispute resolution begins with rapid triage and securing interim relief when warranted.
Strategy and Valuation in Dental Practice Ownership Disputes
Resolving ownership disputes in dental partnerships involves evaluating fiduciary duty claims, partnership tax implications, and the enforceability of restrictive covenants under state law.
Wood & Delgado works with forensic accountants and valuation experts to quantify goodwill, accounts receivable, and equipment values using income multiples, fair market value appraisals, or capitalized excess earnings formulas acceptable to courts and arbitrators.
Negotiation and Mediation for Dental Partner Buyouts
Dental practice partner buyout negotiations include standstill agreements that freeze material actions, detailed accounting demands with statutory citation, and buyout term sheets addressing price, payment terms, patient record ownership, staff retention, and non-compete scope.
Our mediation preparation includes credible valuation support and fallback positions that protect practice continuity.
Arbitration and Litigation for Dental Partnership Deadlock
Dental partnership deadlock resolution may require temporary restraining order motions for lockouts or account freezes, partner expulsion actions under partnership agreements, and minority owner oppression claims or receivership petitions when dissolution is unavoidable.
Jurisdictional issues across state lines and payor credentialing, lease assignment, and DSO consent requirements often complicate ownership transition, so it is important to work with experienced dental partnership attorneys.
Post-Resolution Implementation and Dental Partnership Dissolution
Amended partnership agreements, joint venture unwinding, capital account reallocation, and patient record transfers, all completed in accordance with HIPAA protocols, complete the resolution process.
We coordinate with CPAs to address K-1 allocations, goodwill amortization, and rollover equity tax treatment when partners exit to pursue acquisitions or DSO affiliations.
Key Negotiation Levers in Dental Partnership Disputes
The terms you negotiate, not just the buyout price, determine your financial outcome, practice access, and post-exit options. Understanding valuation methods, buy-sell mechanisms, restrictive covenants, and governance controls gives you leverage in settlement discussions and arbitration or litigation outcomes.
Valuation Methodology and Dental Practice Appraisal
Valuation methodology drives settlement ranges in dental practice ownership disputes. Goodwill multiples based on adjusted EBITDA, discounted cash flow projections, or comparable sales can yield materially different prices. Accounts receivable aging reports and equipment appraisals distinguish fair market value from replacement cost.
Neutral third-party valuation or binding average-of-experts formulas break impasses over uncollectible receivables or obsolete equipment.
Buy-Sell Agreement Triggers and Shotgun Clauses
Buy-sell agreement triggers, like death, disability, retirement, or voluntary withdrawal, carry different valuation and payment timelines. Shotgun clauses and Texas shoot-out provisions let one partner name a price, forcing the other to buy or sell at that figure.
Structured earnouts, seller financing, or phased buyouts spread payment over time when buyout prices exceed liquidity or borrowing capacity.
Restrictive Covenants and Post-Exit Options
Non-compete radius and duration determine whether a departing partner might open a competing dental practice nearby, while non-solicitation provisions control access to former patients, staff, and referring specialists.
Courts scrutinize geographic scope, time limits, and whether restrictions protect legitimate business interests without unduly restraining the dentist’s livelihood.
Governance, Deadlock Resolution, and Fiduciary Duty Claims
Supermajority vote requirements for major decisions, such as facility leases, DSO affiliations, and new partner admissions, can paralyze operations when partners disagree.
Mediation or arbitration clauses expedite resolution, while tiebreaker provisions assign casting votes to managing partners or outside advisors.
Fiduciary duty claims for self-dealing, undisclosed conflicts, or diversion of partnership opportunities may justify damages, disgorgement of profits, or partner expulsion.
FAQ for Dental Partnership Dispute Resolution
How Do We Handle a Deadlock if Our Partnership Agreement Doesn’t Address It?
Negotiate a standstill agreement to freeze material decisions, consider voluntary mediation to explore buyout or dissolution terms, or petition for judicial dissolution if operations are paralyzed and no contractual remedy exists.
Which Valuation Methods Are Used for Dental Practices?
Common methods include income multiples of adjusted EBITDA, fair market value appraisals of goodwill based on comparable sales, accounts receivable aging at net realizable value, and equipment appraisals at fair market value or depreciated replacement cost.
Can a Partner Be Expelled or Forced to Sell?
Expulsion is possible if the partnership agreement permits removal for cause, such as breach of fiduciary duty, criminal conduct, or license suspension, and follows notice and cure procedures, with valuation and payment terms specified in the governing documents.
What is the Revised Uniform Partnership Act (RUPA)?
The Revised Uniform Partnership Act (RUPA) is a newer version of the Uniform Partnership Act, adopted by many states, that aims to modernize partnership law.
RUPA addresses some of the ambiguities and shortcomings of the original UPA, particularly regarding the entity status of partnerships, partner dissociation, and dissolution. It provides a more comprehensive framework for governing partnerships.
How does a non-compete clause affect a departing dental partner?
A non-compete clause restricts a departing dental partner from practicing dentistry within a certain geographic area for a specified period after leaving the partnership. The enforceability of such clauses varies by state law and depends on the reasonableness of the geographic scope and duration, and whether the restriction protects legitimate business interests.
Courts scrutinize these provisions to ensure they do not unduly restrain a dentist’s livelihood.
What is the difference between mediation and arbitration in dental partnership disputes?
- Mediation involves a neutral third party who facilitates discussions between partners to help them reach a mutually agreeable resolution. The mediator does not make decisions, and the outcome is not binding unless the parties agree to it.
- Arbitration, on the other hand, involves a neutral third party (or a panel of arbitrators) who hears evidence and makes a binding decision. Arbitration is typically less formal than litigation but more formal than mediation.
Should We Choose Mediation, Arbitration, or Court for a Dental Partnership Dispute?
If your partnership agreement mandates mediation or arbitration, comply with those provisions first. Mediation is faster and more confidential, while arbitration produces binding awards. In contrast, litigation offers broader discovery and appellate review but takes longer and becomes a public record.
Protect Your Practice and Partnership Rights
Partnership disputes jeopardize patient care, staff stability, and equity value when left unresolved. Call (800) 499-1474 to discuss standstill strategies, valuation frameworks, and exit negotiations that preserve practice continuity and your ownership stake.