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DeVona v. Zeitels

United States District Court, D. Massachusetts

August 23, 2016

DENNIS R. DEVONA, Plaintiff,
v.
STEVEN M. ZEITELS Defendant. STEVEN M. ZEITELS, M.D. and ENDOCRAFT LLC, Counterclaim Plaintiffs,
v.
DENNIS R. DEVONA Counterclaim Defendant.

          MEMORANDUM & ORDER

          Indira Talwani United States District Judge

         I. Introduction and Background

         Plaintiff Dennis R. DeVona (“DeVona”) claims that Defendant Steven M. Zeitels (“Zeitels”) wrongfully dissolved a partnership with DeVona with respect to co-ownership and management of Endocraft, LLC (“Endocraft”), a surgical instrument design, development, and sales business. Complaint [#1], Count II (Rhode Island Uniform Partnership Act), Count III (breach of fiduciary duty) and Count IV (breach of contract). Before the court is the Motion by Defendant Steven M. Zeitels, M.D. for Summary Judgment as to Partnership Issues [#171]. Zeitels contends that he is entitled to summary judgment on these three counts on the ground that there are no facts sufficient to support DeVona’s claim that a partnership ever existed.[1]Additionally before the court is Zeitels’ Motion to Strike [#184] certain evidence DeVona attaches to his opposition. As set forth below, the court finds that the challenged evidence should not be stricken and that there is a genuine dispute of material fact as to whether DeVona and Zeitels formed a partnership. Accordingly, the motion for summary judgment and the motion to strike are DENIED.

         III. Discussion

         1. Summary Judgment Standard

         A movant is entitled to summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine dispute of fact exists if an issue can be resolved in favor of either party. Calero-Cerezo v. U.S. Dep’t of Justice, 355 F.3d 6, 19 (1st Cir. 2004). A fact is material if it has the potential to affect the outcome of the case. Id. In reviewing a motion for summary judgment, the court takes all properly supported evidence in the light most favorable to the nonmovant and draws all reasonable inferences in his favor. Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir. 1990). The moving party bears the burden of showing an “absence of evidence to support the nonmoving party’s case.” Celotex Corp. v. Cattret, 477 U.S. 317, 325 (1986). Where that burden is met, the nonmoving party “must adduce specific facts showing that a trier of fact reasonably could find in his favor.” Murray v. Warrren Pumps, LLC, 821 F.3d 77, 83 (1st Cir. 2016) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986)).[2]

         2. Rhode Island Partnership Law

         Under Rhode Island law, “[a] partnership is an association of two (2) or more persons to carry on as co-owners [of] a business for profit.” R.I. Gen. Laws § 7-12-17. “Partnership, ” however, “is a notoriously imprecise term, whose definition is especially elusive in practice.” Southex Exhibitions, Inc. v. R.I. Builders Ass’n, 279 F.3d 94, 100 (1st Cir. 2002) (applying Rhode Island law). A written document is not required to form a legal partnership. Loft v. Lapidus, 936 F.3d 633, 636 (1st Cir. 1991) (citation omitted). Instead, “a partnership contract may be implied based on acts and words evidencing intent.” Id. at 637.

         Where a partnership is sought to be proven through a particular partnership agreement, the question of whether a partnership exists is a question of law. Filippi v. Filippi, 818 A.2d 608, 618 (R.I. 2003) (citing Boston & Colo. Smelting Co. v. Smith, 13 R.I. 27, 34 (R.I. 1880)) (finding question of partnership matter of law where partnership was sought to be proven without evidence outside of the contract). However, where there is no express partnership contract, a party claiming the partnership’s existence may rely on extrinsic evidence to show that the parties intended their business relationship to be a partnership, and the inquiry becomes a question of fact. Southex Exhibitions, Inc., 279 F.3d at 98; T.G. Plastics Trading Co. v. Toray Plastics (America), Inc., 958 F.Supp.2d 315, 327 (D.R.I. 2013). Moreover, “the intent of the parties to a partnership agreement is the critical factor in determining when a partnership commences, and the parties’ intent should be ascertained as a question of fact.” 59A Am. Jur. 2d Partnership § 78 at 276. The court assesses the “totality of the circumstances” to determine whether the parties had such an intent. See Southex, 279 F.3d at 101. For example, courts have considered, inter alia, whether the parties shared in the profits of the business relationship, the parties’ respective contributions to the business relationship, the parties’ “rights in management, ” whether third parties understood the parties to be partners, and whether the parties filed a state or federal partnership tax return. See id. at 99-103; Acinapura v. Natalizia, No. PC 1999-2007, 2003 WL 22048717, at *5 (R.I. Super Ct. 2003). No one indicium of partnership is conclusive. Southex, 279 F.3d at 101.

         3.Analysis

         DeVona contends that he and Zeitels went into business together around 1997, and that that partnership continued even after Endocraft was created. Pl.’s Resp. Def.’s Statement Undisputed Fact ¶¶ 6, 10 [#178] (“Pl.’s Stmt.”). Zeitels claims that DeVona was not his partner, and instead, beginning in 1999, was a contractor of Endocraft.

         Zeitels sets forth several arguments as to why he and DeVona cannot be found to have formed a partnership. First, Zeitels argues that he and DeVona did not share in the profits of the business.

         Profit-sharing is prima facie evidence of a partnership. R.I. Gen. Laws § 7-12-18; see also T.G. Plastics, 958 F.Supp.2d at 328 (the party claiming partnership must actually share in the profits, not merely in a percentage of the sales). However, while profit-sharing is a “particularly probative indicium of partnership formation . . . it does not necessarily follow that evidence of profit sharing compels a finding of partnership formation.” Id. at 101. For example, evidence that one party received profits in the form of employee wages can rebut “the evidentiary presumption created by profit sharing.” Id.; R.I. Gen. Laws § 7-12-18(4)(ii) (“The receipt by a person of a share of the profits of a business is prima facie evidence that he or she is a partner in business, but no such inference is drawn if profits were received in payment . . . As wages of an employee. . .”).

         In support of his motion, Zeitels points to the Independent Sales Representative Agreement between DeVona and Endocraft. Def.’s Statement Undisputed Fact ¶ 3 [#174] (“Def.’s Smt.”). Zeitels contends that, under this agreement, DeVona shared in no profits with Zeitels and that the payments DeVona received from Endocraft were for DeVona’s services as an independent contractor. Aff. Steven M. Zeitels ¶¶ 9-10, 20 [#173]; Ex. C (Independent Sales ...


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