Hammond v. Smith, Index No. 02441/2008, 4/22/16 (Rosenbaum, J.)

Partnership agreement; Meeting of the minds; Breach of Fiduciary Duty, Breach of Contract; Acceptance

By Meghan Lombardo | Staff Writer

Bruce W. Smith (“Defendant”) allegedly sought the expertise of Peter Hammond (“Plaintiff”) in establishing credibility for Amphibian Systems, Defendant’s business venture. Plaintiff owns a similar company, Lightforce Technology Inc., and the success of that company granted Plaintiff a level of perceived knowledge in the field. Plaintiff began immediately making contributions in the form of design expertise and traveled to multiple locations to draw in customers for Defendant. Plaintiff believed his efforts resulted in excess of $6 million in profits for the business and sought his portion of the profit from those sales.

Plaintiff commenced this lawsuit for (1) breach of partnership; (2) breach of fiduciary duties; and (3) breach of contract, seeking dissolution and an accounting, on the basis that Defendant failed to pay Plaintiff’s agreed upon share of profits. Pursuant to CPLR § 3212, Defendant moved for summary judgment to dismiss Plaintiff’s action, arguing the parties never reached a meeting of the minds because they did not share profits, losses, or liability, and did not jointly contribute capital to the company, thereby negating any requirement to pay Plaintiff his sought profits. The Court granted Defendant’s motion for summary judgment, holding the parties had not entered into a partnership because they never intended to share losses or liability.

First, there was no evidence of any risk for Plaintiff if the company was not profitable and Plaintiff did not incur any liability in establishing the business venture, whereas Defendant was personally liable to dissatisfied customers and creditors. Second, communications between the parties did not support an intent to form a definitive partnership. Specifically, Defendant’s several agreement proposals used clear language that they were to serve merely as a framework for further negotiations. Third, Defendant’s silence in response to Plaintiff’s offer of partnership percentages did not constitute acceptance and further indicated a lack of intent to form a partnership. The Court also noted that whether Defendant referred to the relationship as a partnership was irrelevant because the actions and communications of the parties revealed no partnership existed.

The court granted Defendant’s motion for summary judgment because Plaintiff failed to raise an issue of material fact in opposition to the motion.

Hammond v. Smith, Index No. 02441/2008, 4/22/16 (Rosenbaum, J.).

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