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Southex Exhibitions, Inc. v. R.I. Builders Ass'n - 279 F.3d 94 (1st Cir. 2002)

Rule:

Even though the Uniform Partnership Act specifies five instances in which profit sharing does not create a presumption of partnership formation, codified at R.I. Gen. Laws § 7-12-18(4)(i)-(v), there is no authority for the proposition that the evidentiary presumption created by profit sharing can be overcome only by establishing these five exceptions, rather than by competent evidence of other pertinent factors indicating the absence of an intent to form a partnership (e.g., lack of mutual control over business operations, failure to file partnership tax returns, failure to prescribe loss-sharing). Thus, undisputed evidence of profit sharing does not compel a determination that parties formed a partnership.

Facts:

Rhode Island Builder's Association, Inc. ("RIBA") contracted with Sherman Exposition Management, Inc. ("SEM") to produce home shows. The contract was assigned to Southex Exhibitions, Inc. ("Southex"). RIBA became dissatisfied and hired another exhibitor to do its home shows. Southex argued that the contract showed a partnership was formed as it provided for (1) a 55-45 percent sharing of profits; (2) mutual control over designated business operations; and (3) the respective contributions of valuable property to the partnership by the partners. Southex sued RIBA to enjoin a home show (alleging that an agreement for the exhibitor to produce home shows for the association established a partnership), for breach of the partnership agreement, and for wrongful dissolution. The United States District Court for the District of Rhode Island denied a preliminary injunction and ruled that no partnership agreement existed.

Issue:

Does a partnership exist between RIBA and Southex?

Answer:

No

Conclusion:

The appellate court agreed with the district court that no partnership was formed as (1) the assignee had entered into contracts and conducted business with third parties in its own name, (2) the venture was never given a name, (3) there were no partnership tax returns filed, (4) there was no jointly owned property, (5) the term "partners" appeared only once in the contract, (6) the contract was not labelled as a partnership agreement, was devoid of the provisions usually found in a partnership agreement, and contained other provisions inconsistent with an intent to form a partnership. There was no partnership by estoppel as the assignee had not exercised due diligence to clarify the terms of the agreement.

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