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CALIFORNIA CORPORATE & SECURITIES LAW

Court Finds Use Of “P” Word Does Not Necessarily A Partnership Make

Last March, I wrote a couple of posts concerning the Nevada Supreme Court’s opinion in In re Cay Clubs, 130 Nev. Adv. 14 (2014).  Joint Venturer May Be Partner By Estoppel and “Don’t tell me not to worry, and please don’t call me partner”.  The opinion was concerning because the Court had found that statements in marketing materials referring to a “partnership of excellence” and a “partnership of . . . professionals” created a triable issue of fact with respect to the existence of partnership by estoppel. As I then noted, California’s statute, Corporations Code Section 16308, differs from Nevada’s, NRS 87.160. Last month, U.S. District Court Judge Lawrence J. O’Neill considered similar allegations in the context of California’s statute.  Nexlevel of Cal., Inc. v. CVIN, LLC, 2014 U.S. Dist. LEXIS 142890 (E.D. Cal. Oct. 7, 2014).  Judge O’Neill, however, recognized that people may use the term “partner” and “partnership” in a colloquial sense:

The Court acknowledges that case law analyzing and applying § 16308(a) is limited.  Nonetheless, MP does not provide—and the Court cannot find—any authority holding that two parties publicly describing themselves as “partners” or describing their relationship as a “partnership” is sufficient, without more, to establish a legal partnership, as MP [the plaintiff] suggests. Moreover, the SAC’s allegations indicate that CVIN and CENIC used the words “partner” and “partnership” in the colloquial sense of the word.

Id. at *24-25 (footnote omitted).  Despite Judge O’Neill’s common sense acknowledgement that a partnership is not created every time someone refers to another as a “partner”, these cases illustrate the vagaries of the law in this area.

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