Alabama Supreme Court Addresses Family Business Dispute

The Alabama Supreme Court recently issued an important ruling in Kevin Schlichting v. The Schlichting Family, L.L.C. (February 14, 2025), a case that highlights the complexities of family-owned business disputes. This decision underscores the importance of clear governance structures in closely held businesses and the role of courts in resolving intra-family conflicts.

Background of the Case

The dispute centered on Kevin Schlichting , a member of The Schlichting Family, L.L.C., a family-owned business. Kevin alleged that other members of the LLC had engaged in actions that undermined his rights within the company, including financial mismanagement and exclusion from key business decisions.

The trial court ruled against Kevin, finding insufficient evidence to support his claims. When Kevin appealed, the Alabama Supreme Court reviewed the case but ultimately affirmed the lower court’s decision without issuing an opinion , as permitted under Rule 53 of the Alabama Rules of Appellate Procedure .

Legal Implications

While the Supreme Court’s decision did not include a written opinion, its affirmation of the lower court ruling has several important takeaways for business owners and family members involved in LLCs:

• The Importance of Operating Agreements – Clear, well-drafted operating agreements can help prevent disputes by outlining decision-making authority, financial responsibilities, and conflict resolution mechanisms.
• Judicial Deference to Trial Courts – The Alabama Supreme Court’s choice to affirm without opinion suggests that it found no significant legal errors in the trial court’s ruling, reinforcing the importance of strong trial-level legal strategies.
• Challenges of Family-Owned Businesses – Disputes within family businesses can be particularly contentious, as they blend personal relationships with financial and managerial issues. Having legal safeguards in place can mitigate such conflicts.

Lessons for Business Owners

Family-owned businesses should take proactive steps to avoid disputes like the one seen in this case :

• Draft and Review Operating Agreements Regularly – Ensure that governing documents are up to date and reflect the current structure and expectations of the business.
• Establish Dispute Resolution Procedures – Mediation or arbitration clauses can provide alternatives to litigation, reducing costs and preserving family relationships.
• Maintain Transparent Financial Practices – Open communication and financial transparency can help prevent misunderstandings that lead to legal battles.

Final Thoughts

While the Alabama Supreme Court’s affirmation without opinion leaves some questions unanswered, the Schlichting v. Schlichting Family, L.L.C. case serves as an important reminder of the legal and financial risks inherent in family business disputes. Whether you are starting a family LLC or already managing one, seeking legal guidance to ensure strong governance and prevent future conflicts is essential.

If you have questions about family business law, LLC disputes, or legal strategies to protect your interests, Ryan & Rouse is here to help. Contact us today for a consultation. 256-801-1000