From Allies to Adversaries: Asian Immigrant Business Disputes and U.S. Litigation
- Jeff Chang
- Nov 18
- 11 min read
Your client gave someone $200,000 in cash to start a restaurant. No receipt. No written agreement. Five years later, the business is doing well, but your client receives nothing while their "partner" pays himself $180,000 annually. When you ask to see the partnership agreement, there isn't one.
Or there is an agreement, but it gives the majority shareholder unilateral control over compensation, distributions, and essentially all major decisions. Your client signed it without having their own attorney review it because they trusted the relationship.
Or perhaps it's your parent. You're helping them with their business affairs and discover they've been working for years in what they believed was "their" company, only to find they were never actually made a shareholder.
I encounter these situations regularly in my practice. The relationship-based business practices that function well within Asian immigrant communities can become serious vulnerabilities when partnerships break down. And here's what many don't want to acknowledge: the exploiter is often someone from the community who identified vulnerability and took advantage of it.
Understanding Why This Happens
If you're trying to help someone in this situation, you need to understand the cultural context.
In many Asian business cultures, presenting formal written contracts between partners signals distrust. For someone starting a business with another community member, providing detailed shareholder agreements can feel like planning for betrayal. It runs counter to deeply held values about relationships and loyalty.
So agreements happen over dinner instead. One person becomes the majority shareholder and handles operations. Others contribute capital or sweat equity, and trust their partner to manage fairly. Everything remains flexible: compensation, profit splits, major decisions. When everyone acts in good faith, this approach can work well.
The concept of guanxi captures this dynamic perfectly. It represents the web of relationships and mutual obligations in Chinese business culture. Similar concepts exist across Asian communities. Trust and relationship come first. Documentation can wait, or may not seem necessary at all between people with genuine relationships.
The problem isn't the approach itself. The problem is that it creates opportunities for exploitation. Newly arrived immigrants, individuals with limited English proficiency, and those unfamiliar with American legal protections are particularly vulnerable to community members who position themselves as helpers while actually functioning as predators.
What You'll Find When You Look
When you're reviewing the situation, here's the typical pattern:
The majority shareholder pays himself $150,000 annually to manage a small restaurant or retail store, work that should command perhaps $60,000. He authorizes year-end bonuses for himself. He hires his own family members at inflated salaries. Then he tells the minority shareholders there's nothing left to distribute.
Or he's quietly started a competing business using company resources, company customers, and company employees. Your client discovered this by accident, perhaps seeing a bank statement, business card, or having a customer mention it.
Or one day he simply announced he's buying everyone out at a fraction of what their shares are worth. Take it or leave it. When they refuse to sell, he makes their situation difficult by cutting off financial information, excluding them from decisions, or terminating their employment if they work for the company.
Sometimes these individuals genuinely were friends or family and circumstances changed. Financial success can alter relationships. But often they're individuals who specifically naive immigrants or those with limited English proficiency, positioning themselves as community helpers while systematically extracting value from the business.
The minority shareholders trusted based on shared cultural background and community ties. By the time they recognize what's happening, they have no way to prove what was actually agreed to.
"We Don't Need Papers Between Family"
When you discuss documentation with your client or family member, you'll hear variations of the same response: "He said we were like brothers." "She told me we don't need contracts between family."
Sometimes they genuinely are related. Sometimes they're from the same village. Sometimes their families have known each other for generations. But often the "partner" simply invoked shared cultural background and community connections to establish false trust.
There's another variation you'll encounter. Documentation exists, but your client signed it without fully understanding the implications. Perhaps they didn't have independent counsel review it. Perhaps the attorney who drafted it was recommended by the majority shareholder. Perhaps they understood the terms but believed their partner would act fairly regardless of what the agreement said.
These agreements often contain language like: "The Managing Member shall have sole authority to determine compensation for all officers and employees." "Distributions shall be made at the sole discretion of the Board of Directors." "The President shall have exclusive authority to make all decisions regarding the day-to-day operations and strategic direction of the Company."
Your client signed because they trusted the relationship. They didn't anticipate that "sole discretion" would mean the majority shareholder paying himself $200,000 while claiming there's nothing left to distribute. They didn't imagine "exclusive authority" would be used to exclude them from every meaningful decision.
The person who said "we're family, we don't need to worry about the details" now has counsel pointing to those broad grants of authority, arguing he's operating entirely within his contractual rights.
The Cash Problem
This issue is particularly difficult for accountants who discover it after the fact, or adult children reviewing their parents' business arrangements.
Many immigrant businesses operate partly in cash. Restaurants, retail stores, service businesses. Cash investments, cash distributions, cash bonuses, informal loans between partners that were never documented.
There are various reasons this occurs. Historical skepticism of banking institutions. A desire to help each other without unnecessary complications. Or simply replicating business practices from their home countries, where such arrangements functioned adequately. Sometimes it's the predatory partner who specifically encourages cash transactions because they're more difficult to trace.
When these cases reach litigation, proving cash transactions becomes extremely challenging. Your client provided their partner $150,000 in cash? Without receipts, bank records, or contemporaneous documentation, proving it requires substantially more than testimony alone. The company compensated them $3,000 monthly in cash for five years? Courts look for corroborating evidence: witnesses, deposit patterns, anything beyond self-serving testimony. Their ownership was supposed to be 40% but the corporate documents reflect 20%? The written records will generally control absent clear evidence of fraud or mistake.
Here's what makes this especially difficult. Once your client admits to cash payments and unreported income during litigation, they may face serious credibility problems. Tax authorities may take interest. More significantly, opposing counsel will attack their credibility on every point: "You admit you violated tax laws for years. You maintained off-book transactions. Why should the court credit your testimony about what was supposedly agreed to?"
If you're an accountant who's discovered these issues, you face a difficult position. You cannot help your client prove transactions that were never properly documented, and the tax implications create additional complications.
When Flexibility Becomes a Liability in Asian Immigrant Business Disputes
In many Asian business cultures, written contracts serve as starting points rather than final terms. The real agreement exists within the relationship and evolves as circumstances change. When costs increase, prices adjust. When quality requirements shift, the parties work it out. The relationship takes precedence over the specific terms on paper.
This flexibility represents an actual business strength. It enables Asian business networks to adapt quickly and maintain long-term partnerships through changing market conditions.
However, in American courts, the written contract typically controls the dispute. While courts may consider evidence outside the written agreement under certain circumstances (to clarify ambiguous terms, to demonstrate fraud or duress, or when the written document clearly wasn't intended as the complete agreement), they generally treat a clear, integrated written contract as the definitive expression of the parties' agreement.
When the contract states $50 per unit without ambiguity, the fact that the parties have been transacting at $45 for two years based on verbal modifications may not alter what the court enforces. The opposing party will characterize those adjustments as voluntary accommodations rather than contractual modifications.
I've see this dynamic destroy supplier relationships. A manufacturer and distributor collaborate successfully for five years under a basic written agreement supplemented by numerous informal arrangements. When a dispute eventually arises, each party holds a fundamentally different understanding of what was promised. Both operated in good faith based on their cultural assumptions about how business relationships function. Both suffer in litigation because the court focuses on the written contract terms rather than the parties' actual course of dealing or mutual understanding.
Preparing Them for Litigation
If you're referring a client to litigation counsel or helping a parent through this process, they need to understand what American litigation entails.
Discovery means the opposing party obtains every email, text message, and messaging app communication, including WeChat and WhatsApp. Depositions involve hostile questioning designed to identify inconsistencies. Trial involves cross-examination, an aggressive challenge to credibility.
For business owners from cultures that emphasize harmony and face-saving, this process can be deeply unsettling. For those who relied on trust rather than documentation, it can be particularly damaging.
Discovery often reveals the full scope of misconduct for the first time: company credit cards used for personal expenses, inflated compensation, board meeting minutes reflecting decisions made without minority shareholder participation, new contracts diverting business opportunities.
But here's what makes these cases particularly challenging. Even when discovery reveals extensive wrongdoing, the majority shareholder's defense often centers on the agreements themselves. Without a written agreement: "Show me the contract prohibiting this compensation. Show me the agreement requiring profit distributions."
With a written agreement granting broad discretionary authority: "The agreement grants me sole authority over compensation decisions. The bylaws give me complete discretion regarding distributions."
That said, even broad discretionary powers have legal limits. Massachusetts law recognizes that shareholders in closely held corporations owe each other heightened fiduciary duties. Majority shareholders cannot exercise their discretion in ways that are oppressive, fraudulent, or demonstrate bad faith, even when the corporate documents grant them broad authority. Legal remedies exist for shareholder oppression, including court-ordered buyouts, dissolution, or damage awards.
However, proving oppression requires demonstrating a pattern of conduct that substantially defeats the minority's reasonable expectations as shareholders. When your client relinquished most contractual protections based on trust in the relationship, establishing what constituted their "reasonable expectations" becomes significantly more difficult.
Your client believed the relationship provided protection. The majority shareholder ensured the documentation (or its absence) provided protection.
What Minority Ownership Actually Means
When reviewing your client's ownership stake or your parent's business interest, here's what you'll often discover.
Sometimes no written agreement exists. Other times an agreement exists but grants the majority shareholder complete discretion over all substantive matters: compensation decisions, distribution timing and amounts, information access, and major business decisions without requiring minority approval.
Your client signed this agreement based on trust in the relationship. Perhaps they lacked independent legal counsel. Perhaps they used an attorney recommended by the majority shareholder. Perhaps they understood the terms but believed their partner would act equitably regardless of the written provisions.
Without proper protections, minority ownership often means:
Minimal or no influence over compensation decisions (including the majority shareholder's own compensation)
No guarantee of distributions (even during profitable periods)
Limited or no access to financial information
Substantial difficulty selling shares (no ready market, no buy-sell provisions)
Vulnerability to ownership dilution
Even when agreements exist, they're often structured to create the appearance of partnership while providing the majority shareholder with extensive unilateral control. The minority owner possesses documentation showing 30% or 40% ownership, but in practical terms may have minimal ability to influence decisions or benefit from that ownership absent the majority shareholder's voluntary cooperation.
Another variation involves controlling shareholders who operate through proxy or "puppet" shareholders. The actual controller may hold only a minority stake on paper, or sometimes no shares at all, while family members, relatives, or trusted associates hold majority ownership. These proxy shareholders vote as directed, sign whatever documents are presented to them, and exercise no independent judgment. Your client believed they were partnering with the person actually running the business. They later discover that person doesn't hold controlling shares—instead, their spouse, adult children, or siblings do. The corporate formalities appear proper: board meetings occur, votes are recorded, minutes are maintained. But the proxy shareholders function merely as extensions of the controller's will. In litigation, this structure creates additional complexity in establishing who actually exercised control and breached fiduciary duties, particularly when the proxies claim they were simply following advice or didn't understand what they were signing.
I've also encountered cases where individuals were never made shareholders at all, merely promised equity that would be "handled later." They worked for years at below-market compensation, believing they were building ownership in the enterprise. When you examine the corporate records, you discover they were simply employees without any ownership rights.
This often represents the moment when adult children first recognize the problem's full scope: when they request to see the ownership documents and discover either nothing exists, or what exists provides minimal actual protections.
The Broader Impact
What makes these cases particularly sensitive is that they exploit genuine cultural strengths: the capacity to build trust efficiently, the effectiveness of relationship-based agreements, and the flexibility to adapt to changing circumstances. These practices have enabled immigrant entrepreneurs to build successful businesses for generations.
In the American legal system, however, these same practices create vulnerabilities. Predators within immigrant communities understand this dynamic thoroughly. They know precisely which cultural norms to invoke to avoid documentation and accountability.
The damage extends well beyond financial losses. When these disputes destroy business partnerships, they frequently tear apart families and fracture community networks. Relatives cease communication. Community organizations split into competing factions. The next generation observes these outcomes and internalizes distrust.
If you're an attorney or accountant working with these communities, you've likely observed this pattern repeat itself. If you're an adult child watching your parents navigate this situation, you're witnessing firsthand how cultural strengths can be weaponized against well-intentioned people.
Why These Cases Are Different
If you're an attorney who has encountered these issues tangentially, perhaps while handling an estate matter or divorce, you've likely noticed they don't conform to standard business dispute patterns. The documentation problems are more severe. The cultural dynamics affect everything from evidence gathering to client communication. Opposing counsel may not understand (or may deliberately mischaracterize) why these arrangements developed as they did.
If you're an accountant who has discovered these problems while reviewing financial records, you've experienced how the documentation gaps make even basic inquiries impossible to resolve definitively. You can often piece together what likely occurred, but establishing proof is another matter entirely.
If you're an adult child attempting to help your parents, you're navigating a difficult position: understanding American legal requirements while respecting the cultural context within which your parents operated their business. Explaining to them why their trust was misplaced, or more accurately, why their trust was exploited, can be painful.
These situations benefit significantly from early recognition. Once they progress to full litigation with entrenched positions, available options narrow considerably. However, warning signs often appear earlier: one-sided control, opaque financial arrangements, resistance to providing information, agreements that appear protective but contain broad grants of discretion.
The challenge these cases present is that they require understanding both dimensions: the cultural norms that made these arrangements seem reasonable, and the American legal framework that now governs the dispute. Dismissing these business owners as unsophisticated entirely misses the point. They operated successfully using practices that function effectively within their cultural context. Someone else weaponized those practices against them.
Chang Law Group represents businesses and individuals in complex commercial disputes involving partnership breakdowns, shareholder oppression, and business divorce matters. We work with Asian immigrant business owners, their families, and referring counsel in business disputes where cultural business practices intersect with U.S. legal requirements.
If you're an attorney or accountant who has encountered these issues, or if you're trying to help a family member navigate a business dispute involving documentation problems, one-sided agreements, or minority shareholder oppression, contact us for a consultation. We can analyze the specific situation, evaluate available legal remedies under Massachusetts law, and develop strategies for protecting the client's interests.
These disputes often involve tight deadlines—statutes of limitations, corporate formalities, and procedural requirements that can foreclose options if not addressed promptly. Early consultation can make a significant difference in preserving legal rights and exploring resolution options.
For business owners: If you're concerned about your ownership position, experiencing exclusion from business information or decisions, or seeing warning signs of exploitation, consulting with counsel familiar with both the legal issues and the cultural context can help you understand your rights and options.
Disclaimer: This article is for informational and educational purposes only and does not constitute legal advice. It is not intended to create an attorney-client relationship between the reader and Chang Law Group or any of its attorneys. The law regarding business disputes, shareholder oppression, fiduciary duties, and contract interpretation is complex, varies by jurisdiction, and depends heavily on specific facts and circumstances.
This article contains generalizations that may not apply to your particular situation. Business litigation involves numerous procedural, evidentiary, and strategic considerations that cannot be fully addressed in a general article. You should not take any action or refrain from taking action based solely on information in this article.
If you are involved in or anticipating a business dispute, partnership conflict, or shareholder disagreement, please consult with qualified legal counsel regarding your specific situation. An attorney can review your particular facts, applicable law in your jurisdiction, available evidence, strategic options, and potential remedies.
Chang Law Group does not guarantee any particular outcome in any legal matter. Past results do not guarantee future outcomes. Every case is unique and must be evaluated on its own merits.
