Geoffrey Gelman, Respondent,v.Antonio Buehler, Appellant.BriefN.Y.February 7, 2013To Be Argued By: PAUL R. NIEHAUS Time Requested: 15 Minutes New York County Clerk’s Index No. 101535/2009 Court of Appeals STATE OF NEW YORK GEOFFREY GELMAN, Plaintiff-Respondent, —against— ANTONIO BUEHLER, Defendant-Appellant. REPLY BRIEF OF DEFENDANT-APPELLANT d PAUL R. NIEHAUS NIEHAUS LLP 1359 Broadway, Suite 2001 New York, New York 10018 Telephone: (212) 631-0223 Facsimile: (212) 624-0223 pniehaus@niehausllp.com Attorney for Defendant-Appellant Antonio Buehler August 24, 2012 - i - TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................... ii PRELIMINARY STATEMENT .................................................................... 1 FACTUAL RESPONSES ............................................................................... 2 ARGUMENT .................................................................................................. 3 I. The Appellate Division Improperly Reinstated Plaintiff’s Breach of Contract Claim ................................................................................... 4 A. Any Allegation of a Particular Undertaking Must Provide Appropriate Particularity ............................................................ 5 1. Under Any Standard, Respondent Has Failed to Allege a “Particular Undertaking” ........................ 8 B. Any Definite Term Must Stand on its Own ............................... 9 1. Respondent’s Own Allegations and Arguments Show That There was No Definite Term ............ 11 CONCLUSION ............................................................................................. 13 - ii - TABLE OF AUTHORITIES Cases Girard Bank v. Haley, 332 A.2d 443 (1975) .............................................. 6, 7 Haines v. City of New York, 41 N.Y.2d 769 (1977) ................................. 9, 10 Hardin v. Robinson, 178 A.D. 724 (1st Dep’t 1916) ..................................... 6 Harshman v. Pantaleoni, 294 A.D.2d 687 (3d Dep’t 2002) .......................... 5 Napoli v. Domnitch, 18 A.D.2d 707 (2d Dep’t 1962) .................................... 7 Prince v. O’Brien, 234 A.D.2d 12 (1st Dep’t 1996) ...................................... 4 Sanley Co. v. Louis, 197 A.D.2d 412 (1st Dep’t 1993) .................................. 5 Wahl v. Barnum, 116 N.Y. 87 (1889) ............................................................. 4 Statutes N.Y. Partnership Law § 62(1)(b) ................................................................ 4, 6 1 PRELIMINARY STATEMENT Respondent’s opposition papers present a welter of disjointed arguments apparently designed to convince this Court that Appellant and Respondent knowingly and voluntarily bound themselves to a partnership for two (or four, or six, or nine, or more) years based on nothing more than a vague business plan. As detailed below, Respondent’s own arguments show that the alleged partnership was for neither a definite term nor for a particular undertaking, because not even Respondent can say with certainty when or how the partnership was to end. But more importantly, nowhere does Respondent address why this Court should fundamentally alter New York’s partnership law by effectively reversing the presumption that oral partnerships are presumed to be at will. Under Respondent’s proposed regime, virtually any partner could allege that a partnership was for a “definite term” or “particular undertaking,” based on nothing more than a vaguely-defined or aspirational goal, or by permitting a court to import a “definite term” based on a divination of the parties’ intent. The Court should decline Respondent’s invitation, and should reinstate the ruling of the trial court. 2 FACTUAL RESPONSES Most of Plaintiff-Respondent Gelman’s background facts are drawn from the allegations in his Amended Complaint. However, in an attempt to show that the operation of a “search fund” was a “particular undertaking” in and of itself, Respondent draws on allegations and sources not contained in the record on appeal. (Resp. Br. p. 8-10, 22) While such attempted additions to the record may be inappropriate, Respondent’s focus on the “search” phase of the alleged partnership merely highlights the lack of particularity in the endeavor and the indefiniteness of the term. 3 ARGUMENT After struggling to reconcile the diverse threads of New York partnership law, Respondent’s brief ultimately argues that a partnership is for a “particular undertaking” any time a partnership has a “specified result,” that is “capable of accomplishment at some time.” (Resp. Br. p. 14) Respondent then argues that the partnership at issue had a “specified result,” and therefore could not be dissolved at will. Respondent’s legal theory is not well-founded in New York law, and fails to address the numerous contrary precedents. More important, Respondent’s proposed interpretation is far too blunt an instrument to be an effective rule of law. Without appropriate boundaries, the unvarnished phrase “specified result,” could encompass virtually any partnership activity, fatally undermining the long-standing presumption that oral partnerships are at-will. Employing a pure “specified result” standard would also draw the law far afield of the statutory phrase “particular undertaking.” Indeed, Plaintiff-Respondent’s own arguments highlight the danger in applying a loose definition of “particular undertaking” or even “specified result.” Respondent’s brief argues that the alleged partnership could have ended with a variety of scenarios, including the possibility that the partnership would never have found a business in which to invest. This 4 multiplicity of potential endings is the antithesis of the “definite term,” or “particular undertaking” required to avoid the presumption of an at-will partnership. Defendant-Appellant therefore urges the Court to clarify the partnership law by making clear that determining whether a partnership is for a “definite term” or a “particular undertaking” are two separate analyses, and by requiring a party to provide the specifics of a particular undertaking. But under any definition or pleading standard, Plaintiff-Respondent in this matter has failed to show that the alleged partnership was anything other than at-will. I. The Appellate Division Improperly Reinstated Plaintiff’s Breach of Contract Claim Respondent does not dispute that New York Partnership Law § 62(1)(b) permits dissolution of a partnership “by the express will of any partner when no definite term or particular undertaking is specified.” N.Y. Partnership Law § 62(1)(b). Nor does Respondent dispute the long-standing presumption that an oral agreement to form a partnership for an indefinite period creates a partnership at will. See Prince v. O’Brien, 234 A.D.2d 12 (1st Dep’t 1996), citing Wahl v. Barnum, 116 N.Y. 87, 97 (1889). 5 Instead, Respondent attempts to convince the Court to adopt an expansive reading of the phrase “particular undertaking” to encompass any “specified result,” that can be accomplished “at some time.” Respondent further urges the Court to permit judges to import a “definite term” into a partnership agreement based on the parties’ “intent.” Prior precedent and sound policy require the Court to reject this interpretation. A. Any Allegation of a Particular Undertaking Must Provide Appropriate Particularity The heart of Respondent’s argument is that a partnership is for a “particular undertaking” if it has as its goal a “specified result” that can be achieved “at some time.” (Resp. Br. p. 14)1 Respondent further argues that “effecting a specified result in no way requires any details about how the result is to be accomplished.” (Id.) In other words, Respondent argues that striving for any aspirational goal whatsoever, even without any agreement between the partners regarding how that goal is to be reached, constitutes a 1 Respondent’s attempts to distinguish Sanley Co. v. Louis, 197 A.D.2d 412 (1st Dep’t 1993) and Harshman v. Pantaleoni, 294 A.D.2d 687 (3d Dep’t 2002) are both unavailing and irrelevant. There is simply no rational basis to believe, as Respondent urges, that the cases turned on facts not reported in the opinions, and no basis to believe that they would have been decided differently if Respondent’s hypothetical facts were added to the mix. But as noted in Appellant’s opening brief, while Sanley Co. and Harshman each held unequivocally that the partnerships were at will, specific real property was already identified and held by the partnerships in each case, and thus neither case examines in detail how much specificity a plaintiff must provide in order to allege a “particular undertaking.” (App. Br. p. 13-14) That is the fundamental question before this Court. 6 “particular undertaking.” The Court should reject this major departure from New York partnership law. Respondent bases his argument on a phrase contained in Hardin v. Robinson, 178 A.D. 724, 729 (1st Dep’t 1916), aff’d 233 N.Y. 651 (1918) coupled with a quote from a Pennsylvania case, Girard Bank v. Haley, 332 A.2d 443, 447 (Penn. 1975). As an initial matter, Hardin was decided in 1916. The current Partnership Law, section 62(1), was passed in 1919. The current law refers only to “particular undertaking,” and not to a “specified result.” Thus Hardin cannot be deemed to put a gloss on the Partnership Law, and should not be considered precedential. But in any event, nothing in Hardin indicates that court intended the phrase “specified result” to encompass the accomplishment of a goal by unspecified means, particularly as the partnership in Hardin had the readily-identified, narrow, and particular undertaking of purchasing and reselling a specific, pre-identified business. Id., 178 A.D. 724. Girard, aside from being a Pennsylvania case: (i) does not use the phrase “specified result,” but the more grounded “particular undertaking,” and (ii) involved a continuing, indefinite business 7 relationship thus obviating the need to parse the meaning of “particular undertaking” more closely. Girard, 322 A.2d at 447.2 More fundamentally, none of Hardin, nor any of the two dozen cases that have cited Hardin, nor any case cited by Respondent, have ever held that a “result” or “goal” to be achieved through unknown means constitutes a “particular undertaking.” See, e.g., Napoli v. Domnitch, 18 A.D.2d 707, 708 (2d Dep’t 1962). Under Respondent’s standard, if two college students agreed to form a partnership that would continue until the partners were “multi-millionaires,” the partnership would not be at-will. Respondent’s proposed interpretation would view this partnership as having a particular undertaking (the minting of multi-millionaires) even though the students had absolutely no plan, project, product, or even any idea of how to actually earn such money. That is why Appellant has urged the Court to clarify the appropriate pleading standard for alleging that a partnership was for a “particular undertaking.” A party must be required to provide sufficient detail to permit 2 There is no need for the Court to risk confusing New York law by importing different legal principles or reasoning from other states cited by Respondent. (Resp. Br. p. 30-36). Moreover, each of the citied cases is readily distinguishable from the instant matter because the partnerships variously involved written agreements with readily identifiable purposes, because the parties had actually committed to an ancillary contract involving a lease or license of specific duration, or because the parties had agreed to continue the partnership until a debt had been repaid. None of these factors is present in the instant case. 8 the other party to understand exactly what “undertaking” is being alleged, and to permit the court to draw a reasonable inference that the parties had actually agreed on a particular undertaking. 1. Under Any Standard, Respondent Has Failed to Allege a “Particular Undertaking” As set forth in Appellant’s opening brief, under any reasonable rubric Plaintiff-Respondent’s allegations fall well short of framing a “particular undertaking.”3 But Respondent’s brief highlights another serious flaw that undermines his claim even under Respondent’s own standard – Respondent himself cannot identify when the alleged “particular undertaking” would be accomplished. At page 23 of his brief, Respondent states that if the partnership did not identify an appropriate business to purchase during the “search” phase of the partnership, it would terminate after two years. (Resp. Br. p. 23) In doing so, Respondent admits that he cannot state with certainty whether the “particular undertaking” will be accomplished: a) simply by 3 See, App. Br. p. 11-12. Briefly, Respondent has failed to identify: (i) any specific investors; (ii) any specific business (or even industry) in which the partners would invest; (iii) how the search for a business would be conducted; (iv) how much additional money would be raised to purchase the unidentified business; (v) how the partnership would increase the value of the business; (vi) what metric they would use to determine that the business had generated an appropriate return (if ever) for investors, (vii) how the partnership would achieve any liquidity event, (viii) how the partners would divide any profits with investors; or (ix) whether the partnership would continue after the liquidity event. 9 searching for a business for two years, or b) only by identifying, purchasing, operating, and selling a business. It cannot be both, else there would be no particularity to the undertaking. Thus, even under Respondent’s proposed standard that a “particular undertaking” is equivalent to a “result” or “goal,” his claim must fail because he cannot identify the result or goal that would conclude the partnership. B. Any Definite Term Must Stand on its Own In arguing that the partnership at issue was for a “definite term,” Respondent makes the same error as the majority opinion below by simply incorporating Haines and other contract cases into partnership law without examining the effects of such incorporation.4 See, e.g., Haines v. City of New York, 41 N.Y.2d 769, 772 (1977). Appellant’s initial brief has already shown that permitting a court to “supply” a missing term of duration would reverse the common law and statutory presumption that absent a clear manifestation that the partnership is for a definite time or for a particular purpose, the partnership is one at will. (App. Br. p. 18-19) That showing 4 Respondent does not attempt to defend the majority’s circular reasoning that the partnership “had a definite term, namely, to achieve the liquidity event.” (iii) 10 will not be repeated here. Respondent’s brief does not rebut Appellant’s argument, but simply assumes that an about-face is appropriate. Although not fully fleshed-out, Respondent also seems to expand on the Appellate Division’s ruling by arguing that allowing a court to determine an end date to a partnership would best reflect the parties’ intent. (Resp. Br. p. 17-18) But the law already establishes what constitutes appropriate proof of the parties’ intent – that they entered into a partnership for a “definite term” or a “particular undertaking.” If no such proof is evident from the face of the partnership agreement (oral or written), or if a plaintiff cannot allege such terms, then the agreement is clear and there is no reason to resort to extrinsic evidence in an attempt to divine the parties’ intentions. See, Haines v. City of New York, 41 N.Y.2d at 772. Bringing the argument full circle, if the parties to a partnership agreement have not specified a “definite term” or “particular undertaking,” then allowing a court to supply such a term renders Partnership Law § 62(1) moot, because any partnership lacking a definite term will be supplied with one. Appellant therefore respectfully urges the Court to reject the notion that a court may “supply” a “definite term” where none has been agreed to by the partners. 11 1. Respondent’s Own Allegations and Arguments Show That There was No Definite Term Finally, and again regardless of the specific legal rubric applied, Respondent’s own allegations and arguments show that the parties did not agree on a “definite term” for the alleged partnership. In point of fact, Plaintiff-Respondent’s Amended Complaint never specifies when the partnership was to end. (79-85) But Respondent now argues that the partnership could have ended after two years if the partners did not find a suitable business in which to invest (Resp. Br. p. 23), or it could have ended upon a liquidity event (Resp. Br. p. 26). Presumably, it also could have ended if the partners identified a business but were unable to raise sufficient funds to purchase it. Moreover, while Respondent has placed great emphasis on the assumption that a “liquidity event” would occur within seven years, there is absolutely no basis to further conclude that even if the liquidity event did occur, then the partnership would be concluded. In the Amended Complaint, Respondent alleges that the liquidity event could be a sale, an initial public offering, or “some other liquidity event” (80), and in his brief to this Court, argues that the “liquidity event” is “defined as a point where investors have the ability to recover their invested capital.” (Resp. Br. p. 27) While these allegations imply that after the liquidity event any relationship between putative investors and the partnership would be 12 ended, nothing in any of these allegations or arguments requires or even suggests that the partnership itself would end. Indeed, if the “liquidity event” turned out to be an IPO, there would be every possibility that the partnership would receive IPO shares, and would thus continue. In sum, Respondents’ own allegations and arguments claim that the alleged partnership could have ended after two years, any time between two and nine years, or at some further time in the future. Absent a clear agreement between the partners as to a “definite term” for the partnership – or even any plain allegation to that effect – the partnership must be deemed at will, and Respondent’s Amended Complaint dismissed. * * * 13 CONCLUSION This matter provides the Court an opportunity to more firmly establish the conceptual framework for analyzing when an oral partnership is for a “definite term,” or a “particular undertaking,” and to clarify the parameters for alleging and proving when a partnership is encompassed by either of those phrases. Appellant urges the Court to clarify existing law by adopting the framework set forth in Appellant’s papers, and to reject Respondent’s invitation to overturn centuries of common law and statutory presumptions regarding at-will partnerships. But regardless of the standard employed, under no interpretation of the Partnership Law has Respondent alleged that the partnership at issue was for a “definite term” or a “particular undertaking.” CERTIFICATE FOR IDENTICAL COMPLIANCE I, Keisha Boynton, certify that this electronic Reply Brief of Defendant- Appellant is identical to the filed original printed materials, except that they need not contain an original signature. Dated: August 23, 2012 _______________________ Keisha Boynton /s/ Keisha Boynton