Opinion ID: 801342
Heading Depth: 3
Heading Rank: 3

Heading: Existence of IAG Partnership

Text: The Plaintiffs-Appellants contend that the district court erred in ruling that the IAG partnership was never formalized and that it lacked the legal capacity to bring the instant suit. It is undisputed that pursuant to Federal Rule of Civil Procedure 17(b) the capacity of IAG to sue is determined by Texas law. Texas law provides that “an association of 2 or more persons to carry on a business for profit as owners creates a partnership, regardless of whether: (1) the persons intend to create a partnership; or (2) the association is called a 8 Case: 10-20865 Document: 00511872563 Page: 9 Date Filed: 05/31/2012 No. 10-20865 ‘partnership,’ ‘joint venture,’ or other name.” TEX. BUS. ORG. CODE ANN . § 152.051(b). However, persons doing business under an assumed name “may not maintain in a court of [Texas] an action or proceeding arising out of a contract or act in which an assumed name was used until an original, new, or renewed certificate has been filed as required by this chapter.” TEX. BUS. & COM. CODE ANN. § 71.201(a). IAG did not file an assumed name certificate until two weeks prior to the scheduled trial date. The certificate provided that IAG is a partnership owned by Craig and Hugh and the assumed name would be used from September 2010 forward. The district court recognized that it is possible for partnerships to cure the lack of capacity by belatedly filing a certificate, but nonetheless ruled that IAG could not effect such cure “because it does not exist today and did not exist at the time the complaint was filed in this case.” Under Texas law, there are five factors to consider in determining whether a partnership has been created: (1) receipt or right to receive a share of profits of the business; (2) expression of an intent to be partners in the business; (3) participation or right to participate in control of the business; (4) sharing or agreeing to share or sharing: (A) losses of the business; or (B) liability for claims by third parties against the business; and (5) agreement to contribute or contributing money or property to the business. TEX. BUS. ORGS. CODE § 152.052(a).2 With respect to the first of the above-quoted five factors, in his deposition, Hugh Scott testified that Hanafin had a twenty-five percent interest in the IAG partnership, which indicates that Hanafin had a right to receive a share of IAG’s profits. With respect to the second factor, in his deposition testimony, Hanafin 2 See Ingram v. Deere, 288 S.W.3d 886, 894 n.4 (Tex. 2009) (noting that on January 1, 2010, § 152.052 will apply to all partnerships regardless of the formation date). 9 Case: 10-20865 Document: 00511872563 Page: 10 Date Filed: 05/31/2012 No. 10-20865 admitted that Hugh, Craig, and he “formed a partnership, IAG.” Hanafin also admitted that he performed work on behalf of IAG under a nondisclosure agreement. In addition, Hanafin, as IAG’s Director of Technology Development, signed a “Confidentiality and Non-Disclosure Agreement” agreement between IAG and Jotun. As for the third factor regarding participation in the control of the business, Hanafin dealt directly with other companies on behalf of IAG in that Hanafin had the authority to sign agreements on behalf of IAG. With respect to the fourth factor, it does not appear that the partnership agreement required Hanafin to share in IAG’s business losses. Nonetheless, the statute in question expressly provides that an “agreement by the owners of a business to share losses is not necessary to create a partnership.” § 152.052(c). As for the fifth and final factor, Hanafin’s creation of formulas and product would constitute a contribution of property to the business and thus weigh in favor of finding that IAG was a partnership. Accordingly, four of the five factors indicate that IAG was a partnership. The one factor that does not so indicate is that there was no apparent agreement that Hanafin would share business losses or liability claims against IAG. However, as set forth above, the statute provides that such an agreement is not necessary to the creation of a partnership. Under these circumstances, the district court erred in ruling that there was no issue of material fact with respect to whether IAG existed as a partnership.