South Carolina Court Considers What Must Be Alleged In Order To Create a Partnership; Here the Plaintiff Failed

South Carolina Court Considers What Must Be Alleged In Order To Create a Partnership; Here the Plaintiff Failed

      In a recent decision from a federal district court in South Carolina, it considered a complaint alleging there to have existed a partnership.  The court found those allegations lacking, and as well rejected the notion that the use of the term “partner” was enough to create a partnership.  Dombek v. Adler, Civ. Act. No. 2:18-CV-391-RMG, 2019 WL 459019 (D. S.C. Feb. 5, 2019). 

      Something weird was going on here.  Defendant Adler was an attorney hired to represent a venture involving the plaintiffs, they having “invested hundreds of thousands of dollars in a venture to export freshly mined gold ingots from the Democratic Republic of Congo through an attorney in Nairobi, Kenya.”  In connection therewith “Adler represented that he would serve as legal counsel for the enterprise and any risk of loss would be covered by his insurance.” But then:

The plan fell apart and the gold shipment was ultimately seized and retained by the sellers even after the Plaintiffs paid hundreds of thousands of dollars to secure its release.  The Plaintiffs allege that Adler failed to do basic due diligence on the sellers, failed to set up appropriate legal instruments to protect their investments, and paid himself for his work in the scheme.

       Adler denied any liability, and asserted as part of a counter-claim that he along with the Plaintiffs Dombeck and Cossano had “entered into a partnership, and therefore they are all jointly and severely liable for any claims against the partnership.”

      The court would entirely reject a suggestion that a partnership existed.

      In order for a partnership to exist, there must exist an agreement to share the profits and losses of the venture.  In this instance, the court found that “Adler, however, fails to allege that Dombeck or Cossano intended to share in profits or losses.” Further, Adler indicated that he was for himself assuming all liabilities of the venture.  On that basis, the court was able to reject the creation of a partnership and the resultant fiduciary obligations. 

       With respect to Adler’s reliance upon the use of the term of “partnership” in certain communications, it was held that “the mere use of the term ‘partner’ in the colloquial sense does not suffice to allege a partnership.” The court went on to find that the use of the term “partner” could not overcome Adler’s failure to argue that there was an agreement to share in the profits and losses of the venture.