An employee, who is reasonably competent, complains that she is not treated respectfully by an associate. Management checks into the matter, finds that both sides are to blame, and issues the appropriate warnings. The employee then starts openly jotting down notes after conversations and lets it be known, through the grapevine, that she is thinking of filing a harassment complaint. The associate also starts documenting and makes noises about taking legal action because of what he deems false accusations. The situation deteriorates as factions form and various co-workers begin to avoid any interaction with both note-takers out of fear that they will get roped into a lawsuit. Management is reluctant to take any action against either employee because it fears litigation.
If management only had to deal with one employee or the other, there would not be a problem. Put the other person into the mix, however, and the chemistry is poisonous.
Management's mistake is adopting the traditional approach of trying to find a person to blame. Each of these people has individual merit. The problem is their relationship and that is also the key to the solution. Management should make it clear that it is not going to play the sucker's game of sorting out which individual to discipline when it is not an individual problem. They each have an obligation to make their relationship work for the good of the company. If they do not, then both of them should be transferred or fired because they failed in a crucial part of their job responsibilities: Working well with others.
Does that sound harsh? In my experience, the co-workers would have quietly cheered. They are tired of being dragged into a daily soap opera and forced to choose sides. Management rarely moves against both parties and often winds up defending having taken less severe action against one than against the other. When the relationship is the culprit, then more than one person must be corrected or removed.