Southex Exhibitions, Inc. v. Rhode Island Builders Association, Inc.
279 F.3d 94 (1st Cir.2002).
In 1974, RIBA entered into an agreement with SEM, a professional show owner and producer, to produce RIBA’s home shows. In 1994, Southex acquired SEM’s interest under the 1974 agreement. The two had a falling out and Southex sued enjoin the RIBA 2000 home show, alleging that they had a partnership:
(1) a 55-45% sharing of profits;
(2) mutual control over designated business operations, such as show dates, admission prices, choice of exhibitors, and “partnership” bank accounts; and
(3) the respective contributions of valuable property to the partnership by the partners.
The District Court ruled in favor of RIBA.
Did a partnership exist?
(1) The 1974 Agreement was simply entitled “Agreement,” rather than “Partnership Agreement.”
(2) Rather than an agreement for an indefinite duration, it prescribed a fixed (albeit renewable) term.
(3) Rather than undertake to share operating costs with RIBA, SEM not only agreed to advance all monies required to produce the shows, but to indemnify RIBA for all show-related losses as well.
- State law normally presumes that partners share equally or at least proportionately in partnership losses.
(4) Although RIBA involved itself in some management decisions, SEM was responsible for the lion’s share.
(5) Southex not only entered into contracts but conducted business with third parties, in its own name, rather than in the name of the putative partnership.
- As a matter of fact, their mutual association was never given a name.
(6) Southex stipulated at trial that it never filed either a federal or state partnership tax return.
Regarding the 55-45% sharing of profits:
- Evidence of profit sharing does not necessarily mean that a partnership exists – the determination depends on assessment of the totality of the circumstances.
Regarding the contributions of valuable property:
- Their mutual endeavor simply involved a periodic event, i.e., an annual home show, which neither generated, nor necessitated, ownership interests in significant tangible properties
As you can see, determining whether or not a partnership exists requires a totality of the circumstances analysis.