Young v. Jones
816 F. Supp. 1070 (D.S.C. 1992)

Facts:
PW-Bahamas, an accounting firm, issued an unqualified audit letter regarding the financial statement of a company. The report was falsified. Plaintiffs, relying on the letter, deposited $550,000 in a South Carolina bank. The funds disappeared and this action was brought against the Bahamian firm and its United States affiliate (PW-US). P argued:

(1) The two operated as a partnership; or, in the alternative,
(2) were partners by estoppel.

P referenced a brochure that described PW as one of the “world’s largest and most respected professional organizations, with over 28,000 PW professionals in 400 offices throughout the world that can be called upon to provide support for your reorganization and litigation efforts.”

  • However, the plaintiffs didn’t contend that the brochure submitted was seen or relied on by them in making the decision to invest.

Issue:
Can a partnership by estoppel be established when the party alleging the partnership did not rely on the representation?

Holding:
No.

Reasoning:
“A person who represents himself, or permits another to represent him, to anyone as a partner in an existing partnership or with others not actual partners, is liable to any such person to whom such a representation is made who has, on the faith of the representation, given credit to the actual or apparent partnership.”

Here, there was no evidence or allegation that credit was extended on the basis of any representation of a partnership existing between PW-Bahamas and the South Carolina members of the PW-US partnership.

Partnership by Estoppel:

(1) Representation of a partnership; and
(2) Reliance by third party on that representation.