Court Dismisses Claims That Parties Entered Into Partnership

In an Opinion, dated May 24, 2023, in Offshore Exploration & Prod., LLC v. De Jong Capital, LLC., 2023 NY Slip Op 50502(U), Justice Robert R. Reed granted defendant’s motion to dismiss the plaintiff’s causes of action for: (1) a declaratory judgment that the parties entered into a partnership; (2) breach of the partnership agreement; and (3) for breach of fiduciary duty that partners owe to each other. After determining that Texas law applied based on having more contacts with the action that New York, the Court explained:

Under contract formation principles, where the parties have agreed that no binding or enforceable obligations will be created unless certain conditions are met those conditions must be met for a partnership to exist (Energy, 593 SW3d at 741; Arnold v Caprielian, 437 SW2d 620, 625 [Tex App 1969]). Where parties agree that they are not partners until they sign a formal written agreement, no partnership exists until the signatures are made (Energy, 593 SW3d at 741; also Anubis Pictures, LLC v Selig, 2021 Tex. App. LEXIS 1580, 2021 WL 805214, *13, 2021 Tex App LEXIS 1580, *40 [Tex App 2021]; Wright v Hernandez, 469 SW3d 744, 758 [Tex App 2015] [about contracts in general]).

As stated above, section 15 of the partnership agreement provides that it becomes effective when signed. In addition, section 6 of the confidentiality agreement states that the parties have no obligation to each other, apart from the obligations therein, until they have executed a definitive agreement. The agreement was never signed and did not become enforceable. The second, third, and fourth causes of action based on partnership are dismissed.

The attorneys at Schlam Stone & Dolan frequently litigate whether contracts have been formed, including partnership agreements. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.