IN RE: Edward B. JOACHIM and Stephen G. Frommer (2004)

Defendants move for an order pursuant to CPLR 3124 and 3126 compelling the Plaintiff, Stephen Frommer (“Frommer”) to produce certain documents and to appear for a further deposition and for other discovery including the deposition of Edward Joachim.   Frommer cross-moves for summary judgment on his claim that he was a ten (10%) percent equity partner in the now dissolved law firm of Joachim & Flanzig.

BACKGROUND

This action arises from the dissolution of the law firm of Joachim & Flanzig (“J & F”).  The parties have stipulated that May 10, 2002 was the date that the partnership dissolved.

Edward Joachim (“Joachim”) and Sheldon Flanzig (“Flanzig”) were equal equity partners in J & F for several decades.

At the heart of this aspect of this dissolution proceeding is Frommer's assertion that he was a ten (10%) percent equity partner in J & F when the firm dissolved.

Frommer apparently became an equity partner in J & F as of January 1, 1995.   A memo dated December 14, 1994 executed by Edward Joachim on behalf of J & F which states that Frommer would be a five (5%) percent equity partner in the firm as of January 1, 1995.   The memo was signed by Frommer acknowledging his interest in the firm.   This memo further confirms that it was the intent of Joachim and Flanzig to increase Frommer's equity interest in the firm in the future.

Thereafter, Joachim, Flanzig and Frommer contemplated the formation of a limited liability partnership.   Joachim, Flanzig and Frommer executed a Limited Liability Partnership Agreement dated March 16, 1996 which provided, among other things, that Frommer was to be a six percent (6%) equity partner in an entity to be known as Joachim & Flanzig, LLP.¹ However, the parties never filed a Certificate of Limited Liability Partnership with the Secretary of State nor did they publish the notice as required by statute in furtherance of the fully executed agreement of March 16, 1996.   See, Partnership Law § 121-1500(a).

The March 16, 1996 agreement was amended by an agreement dated May 25, 1999.   That portion of the earlier agreement which was not amended was specifically ratified and reaffirmed.   The May 25, 1999 agreement established that Frommer is a ten (10%) percent equity partner in Joachim & Flanzig.   Like the March 16, 1996 agreement, a Certificate of Limited Liability Partnership reflecting the terms of this agreement was never filed with the Secretary of State or published as required by Partnership Law § 121-1500(a).

Frommer alleges that J & F operated under the most recent agreement until the firm dissolved in 2002.   He asserts that the May 25, 1999 agreement conclusively establishes that he was a ten (10%) percent equity partner in J & F when it dissolved.

Frommer's assertion that he was a ten (10%) percent equity partner in J & F is confirmed by Joachim.

Flanzig is the only other person with actual knowledge of Frommer's status at J & F. Unfortunately, Flanzig is in failing health and is unable to submit an affidavit in opposition to Frommer's position.   Flanzig has not been deposed.   Sadly, his condition is expected to deteriorate to the extent that he will never be able to provide either oral testimony or a sworn written statement contesting Frommer's claim that he was a ten (10%) percent equity partner in J & F.

The opposition to Frommer's motion is based solely upon documentary evidence and the belief that further discovery will lead to evidence that Frommer was not an equity partner.

The documentary evidence upon which Defendants rely consists of the tax returns of J & F and documents relating to the manner in which Frommer received his compensation.   The income tax returns filed by J & F for the years 1998 through 2002 reflect that Joachim and Flanzig were the only partners in the firm and that they each had a fifty (50%) percent interest in the firm.   The income tax returns for these years were signed by Joachim on behalf of the firm.

Frommer received a K-1 from J & F for the years 1996 and 1997.   A K-1 is an Internal Revenue form which is attached to a partnership's income tax return.   It is provided to a partner reflecting the partner's share of income, credits, deductions and related financial information for the partnership's tax year.   This form includes the name and tax identification number of the partner and partnership, the type of partnership, the partner's percentage of profit sharing, loss sharing, ownership of capital and the partner's distributive share of the partnership's income, deductions and credits.   The K-1 provides the individual partner with information to be reported on his/her personal income tax return.

For the years 1998 through 2002, Frommer's compensation from J & F was reported as W-2 wages.   A W-2 is a form filed with the Internal Revenue Service by an employer and provided to an employee reporting the amount of wages paid by an employer to an employee, the social security, medicare and income taxes withheld.

Defendants assert that these documents are sufficient to raise questions of fact regarding Frommer's claim that he was an equity partner in firm so as to require a trial.

Defendants have demanded that Frommer produce his personal income tax returns, Form 1040 from 1996 to 2002, all W-2's and K-1's and 1099's received from J & F for the period 1996 through 2002, the Schedule C of his income tax return for the years 1996 through 2002 and all documents relating to retirement plans for 1996 through 2002. Frommer has refused to produce these documents.   Frommer has also refused to testify about these items at his deposition.

If the Court directs production of these items, Defendants seek a further deposition of Frommer relating to the material contained in these documents.

Defendants also want to depose Joachim regarding Frommer's claim of partnership in J & F.

DISCUSSION

A. Summary Judgment-Standard

Summary judgment is a drastic remedy which will be granted only when it is clear that there are no triable issues of fact.  Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 508 N.Y.S.2d 923, 501 N.E.2d 572 (1986);  and Andre v. Pomeroy, 35 N.Y.2d 361, 362 N.Y.S.2d 131, 320 N.E.2d 853 (1974).   See also, Akseizer v. Kramer, 265 A.D.2d 356, 696 N.Y.S.2d 849 (2nd Dept., 1999).

The party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law.  Zuckerman v. City of New York, 49 N.Y.2d 557, 427 N.Y.S.2d 595, 404 N.E.2d 718 (1980).   Once the party seeking summary judgment has made a prima facie showing of entitlement to judgment as a matter of law, the party opposing same must come forward with proof in evidentiary form establishing that triable issues of fact exist or must demonstrate an acceptable excuse for its failure to do so.  Zuckerman v. City of New York, supra;  Davenport v. County of Nassau, 279 A.D.2d 497, 719 N.Y.S.2d 126 (2nd Dept., 2001);  and Bras v. Atlas Construction Corp., 166 A.D.2d 401, 560 N.Y.S.2d 467 (2nd Dept., 1990).

The party seeking summary judgment must clearly establish to the court that there are no triable issues of fact.  Leo v. Gugliotta, 212 A.D.2d 761, 624 N.Y.S.2d 856 (2nd Dept., 1995);  and Daliendo v. Johnson, 147 A.D.2d 312, 543 N.Y.S.2d 987 (2nd Dept., 1989).   Summary judgment should be denied if there is any doubt as to the existence of a triable issue of fact.  Freese v. Schwartz, 203 A.D.2d 513, 611 N.Y.S.2d 37 (2nd Dept., 1994);  and Miceli v. Purex Corp., 84 A.D.2d 562, 443 N.Y.S.2d 269 (2nd Dept., 1981).

When deciding a motion for summary judgment, the court must view the evidence in a light most favorable to the non-moving party and must give that party all of the reasonable inferences which can be drawn from the evidence.  Negri v. Stop & Shop, Inc., 65 N.Y.2d 625, 491 N.Y.S.2d 151, 480 N.E.2d 740 (1985);  and Louniakov v. M.R.O.D. Realty Corp., 282 A.D.2d 657, 724 N.Y.S.2d 70 (2nd Dept., 2001).

B. Frommer's Motion for Summary Judgment

 “A partnership is defined to be a contract of two of more persons, to place their money, effects, labor or skill, or some or all of them, in lawful commerce or business, and to divide the profits and bear the loss in certain proportions.”  Pattison v. Blanchard, 5 N.Y. 186, 189 (1851).   See also, Manning v. Whalen, 259 A.D. 490, 20 N.Y.S.2d 364 (3rd Dept., 1940);  and 15A N.Y. Jur.2d Business Relationships § 1379.

 A partnership results from an express or implied contract.   Martin v. Peyton, 246 N.Y. 213, 158 N.E. 77 (1927);  and Partnership Law §§ 10, 11.   The rights and obligations of the partners arise from, and are fixed by, their agreement.  Levy v. Leavitt, 257 N.Y. 461, 178 N.E. 758 (1931).

 Where there is a written agreement between the parties that is clear and unambiguous and sets forth the full understanding and obligations of the parties, the agreement controls, and the court should find that a partnership exists as a matter of law.  Martin v. Peyton, supra;  and Silverman v. Caplin, 150 A.D.2d 673, 541 N.Y.S.2d 546 (2nd Dept., 1989).   See also, Bailey v. Broder, 1998 WL 13827 (S.D.N.Y.).

 Where the parties have entered into a clear and unambiguous agreement, parol or extraneous evidence or evidence of contemporaneous negotiations may not be admitted to vary the terms of the agreement.  Neiman v. Backer, 167 A.D.2d 403, 561 N.Y.S.2d 811 (2nd Dept., 1990);  and Matter of Rosmarin, 107 A.D.2d 689, 484 N.Y.S.2d 44 (2nd Dept., 1985).

Significantly, Defendants do not deny the terms of the 1995 memo or the 1996 or 1999 agreements.   They assert that since the agreements were never filed with the Secretary of State or published as required by statute, that the limited liability partnership never came into existence and, further, that the agreements do not establish a partnership relationship among Joachim, Flanzig and Frommer.   Defendants further assert that the income tax returns filed by J & F, which were signed by Joachim, which establish that Joachim and Flanzig were the sole partners in J & F are sufficient to create questions of fact requiring a trial.

 A limited liability partnership is a general partnership which acquires certain limited liability characteristics upon registration with the Secretary of State.  Partnership Law § 121-1500.   See also, 16 N.Y. Jur.2d Business Relationships § 2271.   The primary purpose and advantage of the limited liability partnership is that upon registration the partners are not personally liable for the debts, obligations or liabilities incurred by the limited liability partnership.  Partnership Law § 26(b)(c)(d);  and 16 N.Y. Jur.2d Business Relationships § 2275.

 The failure to file or publish the notices required by statute prohibits the limited liability partnership from maintaining an action or special proceeding in the name of the limited liability partnership until the certificate has been filed and the notice has been published.   It does not, however, affect the rights of the parties to the agreement.  Partnership Law § 121-1500(a);  and 16 N.Y. Jur.2d Business Relationships § 2290.

 In this case, the agreement between the parties is clear and unequivocal.   The May 25, 1999 agreement states that Frommer is a ten (10%) percent equity partner in J & F. The agreement provides that Frommer is to be allocated ten (10%) percent of the profits and bear ten (10%) percent of the losses.

 This is not contradicted by the any admissible evidence.   The affirmations of David Bolton, Esq., submitted in opposition to the motion are of no probative value since he does not have personal knowledge of the facts surrounding the relationship among Joachim, Flanzig and Frommer.   See, Bras v. Atlas Construction Corp., supra;  and Zuckerman v. City of New York, supra.

Defendants' reliance upon ACLI Government Securities, Inc. v. Rhoades, 813 F.Supp. 255 (S.D.N.Y.,1993) is misplaced.  ACLI Government Securities deals with the burden and indicia of proof needed to establish the existence of a partnership in the absence of a written partnership agreement.   In this case, the parties have a written partnership agreement.   In fact, the parties have more than one partnership agreement which reenforces the view that Joachim and Flanzig intended to have Frommer as a junior partner at increasing percentages of the firm's profit and losses.

Defendants' reliance upon Partnership Law § 11(4) is also misplaced.  Partnership Law § 11(4) creates a statutory inference that receipt of a share of the profits in a business is prima facie evidence that one is a partner.   No such inference may be drawn if one receives payment of such profits as wages.  Partnership Law § 11(4)(b).  Such an inference is unnecessary in this case since the parties have a written partnership agreement establishing Frommer's ten (10%) percent equity interest in the firm.

 Curiously, neither Daniel Flanzig nor Cathy Flanzig, named Defendants herein and children of Sheldon Flanzig, submitted an affidavit in opposition to Frommer's motion.   While they were not members of J & F, they were both associated with the firm.   If they had information which would have contradicted Frommer's claim that he was an equity partner, they most certainly would have submitted same to the Court.   Certainly, evidence which is inadmissible at trial such as hearsay statements can be utilized to establish issues of fact to avoid summary judgment.  Levbarg v. City of New York, 282 A.D.2d 239, 723 N.Y.S.2d 445 (1st Dept.2001).   See generally, Phillips v. Joseph Kantor & Co., 31 N.Y.2d 307, 338 N.Y.S.2d 882, 291 N.E.2d 129 (1972).

C. Defendants' Cross-Motion for Discovery

Defendants' assertion that they need additional discovery including the deposition of Joachim to properly oppose Frommer's motion is without merit.

CPLR 3212(f) provides that summary judgment may be denied where “․ facts essential to justify opposition may exist but cannot then be stated.”   In such a case, the court may either deny the motion or direct further discover so that the evidence needed to oppose the summary judgment can be obtained.

 Mere speculation or hope that discovery will reveal material or relevant information necessary to defeat summary judgment is insufficient.   The party asserting that evidence could be obtained through discovery which would defeat the summary judgment motion must demonstrate to the court a good faith factual basis for that belief.  Connecticut Indemnity Co. v. Travelers Ins. Co., 300 A.D.2d 530, 752 N.Y.S.2d 560 (2nd Dept., 2002);  Cooper v. 6 West 20th Street Tenants Corp., 258 A.D.2d 362, 685 N.Y.S.2d 245 (1st Dept., 1999);  and Cooper v. Milton Paper Co., Inc., 258 A.D.2d 614, 683 N.Y.S.2d 911 (2nd Dept., 1999).   Defendant have failed to do so.

 Frommer's documented claim that he was a ten (10%) percent equity partner is not going to change with a further deposition.   Additional discovery of documentary evidence is not going to change Frommer's position either.

Likewise, the deposition of Joachim will not lead to the discovery of material sufficient to defeat Frommer's motion for summary judgment.   Joachim has submitted both an affidavit and affirmation confirming that Frommer was a ten (10%) percent equity partner in J & F. Joachim's affidavit and affirmation are both consistent with the documentary evidence;  the May 25, 1999 written agreement and those which preceded it.

Defendants concede that the May 25, 1999 agreement was signed by Flanzig and that Flanzig was competent to sign the agreement when he executed it.

 The affidavit of Defendants' accountant to the effect that Frommer was not a partner is of no probative value.   Expert testimony is admissible to help clarify issues involving professional or technical knowledge that is beyond common knowledge or experience.  Weiner v. Lenox Hill Hosp., 88 N.Y.2d 784, 650 N.Y.S.2d 629, 673 N.E.2d 914 (1996);  and DeLong v. County of Erie, 60 N.Y.2d 296, 469 N.Y.S.2d 611, 457 N.E.2d 717 (1983).   Whether a partnership relationship exists is determined by the parties' written partnership agreement (see, Martin v. Peyton, supra;  and Silverman v. Caplin, supra) or, if the parties do not have a written agreement, the intent of the parties as evidenced by objective factors such as sharing in profits and losses, exercising joint control over the business and its property and possessing an ownership interest in the partnership.   See, M.I.F. Securities Co. v. R.C. Stamm & Co., 94 A.D.2d 211, 463 N.Y.S.2d 771 (1st Dept.), aff'd., 60 N.Y.2d 936, 471 N.Y.S.2d 84, 459 N.E.2d 193 (1983).   The determination that a partnership exists and that a person is a partner in the partnership is one for which expert opinion is not necessary notwithstanding alleged tax code violations in how the partnership and the parties conducted their internal affairs.

 Before considering the opinion of an expert, the court must make a preliminary determination as to whether a the person is an expert in the field in which the person is rendering an opinion.   In determining if a person is an expert, the court must determine if the person has the requisite skill, training, education, knowledge and/or experience so that the opinion of the expert can be considered reliable.  Matott v. Ward, 48 N.Y.2d 455, 423 N.Y.S.2d 645, 399 N.E.2d 532 (1979);  and Miele v. American Tobacco Co., 2 A.D.3d 799, 770 N.Y.S.2d 386 (2nd Dept., 2003).   In this case, Defendants' expert is an accountant.   He has no legal training, education, skill, knowledge or experience.   Therefore, he is not qualified to render an opinion which calls for an opinion relating to the legal relationship among Joachim, Flanzig and Frommer.

Finally, the fact that discovery has not been completed does not preclude the grant of summary judgment.  Bosio v. Selig, 165 A.D.2d 822, 560 N.Y.S.2d 196 (2nd Dept., 1990).   See also, Landes v. Sullivan, 235 A.D.2d 657, 651 N.Y.S.2d 731 (3rd Dept.1997).   The Defendants have failed to establish that there is any factual or reasonable basis to believe that additional discovery will uncover any evidence which would refute Frommer's claim that he was a partner in the Joachim & Flanzig law firm.   See, Middle Village Assocs. v. Pergament Home Centers, Inc., 184 Misc.2d 552, 708 N.Y.S.2d 840 (Sup.Ct. Nassau Co.2000).   Where Plaintiff has made a prima facie showing of entitlement to judgment as a matter of law and Defendant has offered only speculation that discovery will uncover material sufficient to defeat summary judgment, the Court should grant Plaintiff summary judgment.   See, Saunders v. Baker, 285 A.D.2d 497, 727 N.Y.S.2d 169 (2nd Dept., 2001);  and Pineda v. Kechek Realty Corp., 285 A.D.2d 496, 727 N.Y.S.2d 175 (2nd Dept., 2001).

Accordingly, it is,

ORDERED, that Defendants' motion for an order compelling Frommer to produce certain documents and to appear for a further deposition and for a deposition of Joachim is denied:  and it is further,

ORDERED, the Frommer's motion for summary judgment on his claim that he was a ten (10%) percent equity partner in the firm of Joachim & Flanzig at the time of its dissolution is granted;  and it is further,

ORDERED, that the attorneys for the parties are directed to appear for a status conference April 8, 2004 at 9:30 a.m.

This constitutes the decision and Order of the Court.

FOOTNOTES

1.   Frommer submitted an unsigned copy of the March 16, 1996 limited liability partnership agreement with this motion.   A fully executed copy of the agreement was provided to the Court after the submission of the motion.   Despite its late submission and for the sake of judicial economy, the fully executed copy of the March 16, 1996 agreement was considered by the Court.

LEONARD B. AUSTIN, J.