Dundes v FuersichAnnotate this Case
Decided on October 16, 2006
Supreme Court, New York County
Seena Dundes, as Executor of the Estate of Lester Dundes, Plaintiff,
Lawrence Fuersich, Henry Burr, Visual Reference Publications, Inc. and Retail Reporting Corp., Defendants.
Eaton & Van Winkle LLP
3 Park Avenue
New York, NY 10016
(Robert S. Churchill, Brendan R. Marx)
Weisman Celler Spett & Modlin, P.C.
445 Park Avenue
New York, NY 10022
(Kenneth A. Hicks, John B. Sherman)
Bernard J. Fried, J.
Defendants move, pursuant to CPLR 3212, to dismiss the complaint on the grounds that plaintiff has failed to adduce any evidence of a joint venture between plaintiff's decedent, Lester Dundes, and any of the defendants, to publish a series of "coffee table" books entitled Corporate Interiors, first published in 1997, and continuing with the publication of Corporate Interiors No. 2 through Corporate Interiors No. 5 in 1998, 1999, 2001 and 2003, respectively. Defendants further contend that even if there was a joint venture, there is no evidence that the two individual defendants, Lawrence Fuersich and Henry Burr, personally participated in the venture. It is defendants' position that Lester Dundes was merely a salaried employee or consultant of the corporate defendants, who was the sole publisher of the books, and that he was adequately compensated with $800,000 for what was essentially part-time work.
Plaintiff Seena Dundes is the widow and legal representative of the late Lester Dundes. [*2]Lester Dundes was a renowned and highly respected figure in the interior design industry, having been the publisher for many years of Interior Design, an important magazine in the field. Lester Dundes was working on Corporate Interiors No. 6 at the time of his death on March 13, 2004.
Defendant Henry Burr is the president of the two corporate defendants, Visual Reference Publications, Inc. (Visual Reference Publications) and Retail Reporting Corp. (Retail Reporting). Visual Reference Publications was formerly known as Milton B. Conhaim, Inc. until 1999. In that year, Retail Reporting ceased actively doing business, and was consolidated into Visual Reference Publications. Defendant Burr owns 20% of the stock of Visual Reference Publications. Retail Reporting is listed as the publisher of Corporate Interiors Nos. 1 and 2, while Visual Reference Publications is listed as the publisher of the other three books. Defendant Lawrence Fuersich is the vice-president of the two corporate defendants, and is not and has never been a shareholder of either corporate defendant.
In support of their motion for summary judgment, defendants submit affidavits from defendants Fuersich and Burr, as well as from Angelita Goulimis, the controller of the corporate defendants.
Fuersich avers that he and Burr, not Lester Dundes, developed the idea for a hard-cover, "paid book" that would highlight the work of interior design firms in the area of corporate office design. In January of 1994, Fuersich and Burr met with Lester Dundes in his apartment in New York City. During this initial meeting, Fuersich and Burr introduced themselves to Lester Dundes, and they all told each other about their respective business histories. They discussed the possibility of Lester Dundes approaching design firms and convincing them to feature some of their work in a hard-cover book that Burr and Fuersich intended to publish through Retail Reporting.
Following that initial meeting, Fuersich sent a letter, on the letterhead of Retail Reporting, to Lester Dundes dated February 15, 1994. The letter describes the concept of the paid book idea that Fuersich and Burr had conceived and invited Lester Dundes to work on the book on the business terms set forth in the letter. The letter states, in pertinent part: Dear Lester,
After giving our meeting last month some thought, we've come up with a book concept that may be of interest to you.
Due to the high cost of color separations and printing on short-run books, some publishers are now producing "paid books." ***
Here's how it works. After developing an overall editorial concept with you, a target group of design firms will be selected and then contacted with a proposal similar to the one I've enclosed.
The key to the concept is knowing the right companies and the right people to sell the idea to.
Would you be interest in working with us on this project? Here is what we think are the key elements in developing the project:
If 27-28 companies each reserved an eight-page section in the book at a cost of $4300-[*3]$4500, the billing would be approximately $120,000. Expenses should be approximately $60,000. We propose that you would receive 30% of the gross profits on this part of the project.
In addition, on selling the hardcover book we plan on sales of approximately $100,000 and expenses of $40,000. We also propose that you would receive 20% of the gross profit of all book sales which would include sales to our distributors, local book stores, direct mail through our catalog and any special sales we might arrange.
If the project is successful, we believe we could produce subsequent books on an annual basis. There is also the possibility of developing other similar projects that would cover more specific design areas.
I've enclosed some samples of a similar "paid book" for your review.
I'll give you a call in just a few days to get your thoughts on this matter and to discuss any other ideas to might have.
Fuersich Aff., Exh. C. Underneath Fuersich's signature, he identifies himself as "Publisher."
Fuersich avers that Lester Dundes did not accept the financial proposal outlined in the February 15th letter. A second written proposal was made in a three-page letter addressed to "Lester Dundes, Publishing Consultant," from Burr dated December 15, 1995, again on Retail Reporting letterhead, and signed by Burr as President. Fuersich Aff., Exh. D. The cover letter states that he is enclosing "a preliminary projection of income and expenses for our Commercial Interior Book project." Id. The second page is a typed, undated letter addressed to "Lester" from "Hank" which states, in pertinent part, that "the plan is to split the gross profits over the life of the book after all expenses 50-50 between you and Retail." Id.
Defendants allege that, in early 1996, Lester Dundes accepted the proposal made by Burr to split the profits of the Corporate Interiors book project. Lester Dundes was given a private office at the offices of the corporate defendants, and such secretarial help as he required. It is undisputed that Lester Dundes' essential role was to contact interior designers and architects to solicit their participation and obtain photographs of their work, and to solicit advertisers. Lester Dundes' was paid over $800,000 for his work on the Corporate Interiors books. Ms. Goulimis avers that the work was essentially part-time work, and that there were many months when there was nothing for him to do at all.
In May of 1996, when work was beginning on the first book, Retail Reporting set up a separate bank account at Citibank in which to put the participation fees received from the design firms. The purpose of the Citibank account was to keep the design firm participation fees separate from the remainder of the corporate funds so that, if the book could not be published because there was not enough design firms willing to participate, Retail Reporting would be able to return the fees. The account title for this bank account was "Retail Reporting Corp. DBA Corporate Interiors Design Book Series," and the signatories to the account were Burr, Fuersich, and two other corporate officers of Retail Reporting. Fuersich Aff., Exh. H thereto. Fuersich avers that Lester Dundes was never a signatory on the account and was not consulted in its creation.
In July 1996, Retail Reporting filed a Certificate of Assumed Name whereby the corporation stated that it would be conducting business in New York County under the assumed name of "Corporate Interiors Design Book Series." Fuersich Aff., Exh. G thereto. The certificate is signed by Burr, as president of Retail Reporting.
Fuersich and Burr contend that, during the discussions that preceded Lester Dundes [*4]coming to work at the offices of the corporate defendants, there was never any discussion of Lester Dundes being a partner of either Burr, Fuersich or the two corporate defendants, and that Lester Dundes never agreed to be responsible for either the losses or for any liabilities of the book project. They further contend that Lester Dundes was reimbursed for his expenses as they were incurred and submitted, from the first day that he arrived at the offices of the corporate defendants. He did not have to wait to be reimbursed until the book project was profitable and his reimbursement did not depend on profitability.
Fuersich contends that, at a point in time before Corporate Interiors No. 1 was actually published, it became clear to him and Burr and enough design firms had agreed to participate in the book and paid their participation fees so that the book would be profitable. It was at that point in time, that Fuersich and Burr decided, unilaterally and without consultation with Lester Dundes, to cause Retail Reporting to make a partial payment to Lester Dundes of his share of the projected gross profits. Defendants further contend that the timing of all subsequent payments to Lester Dundes and the amount of all interim payments were always unilaterally determined by Fuersich and Burr. In July of 1997, Lester Dundes was given a statement showing the sales, expenses and net profits from Corporate Interiors, and the same procedure was followed with regard to each of the subsequent volumes. From time to time, Lester Dundes had questions concerning certain items on the statements, and his questions were always answered to his satisfaction. Defendants contend that there was no dispute concerning the past payments to Lester Dundes for any of five books at the time of his death.
Defendants contend that the following other aspects of the books were under the sole control of Fuersich and Burr as officers of the corporate defendants: all agreements and dealings with the distributors of the books; all releases from the design firms; all agreements and dealings with the printer of the books; all agreements and dealings with the designer of the books, Harish Patel; and all dealings with the U.S. copyright office. When Corporate Interiors was first published in March 1997, the copyright notice was in the name of Retail Reporting. Retail Reporting registered the copyright for Corporate Interiors No. 2 and Visual Reference registered the copyright for Corporate Interiors Nos. 3, 4 and 5. In addition, defendant Fuersich contends that he unilaterally made the decision to hire Roger Yee as editor for Corporate Interiors No. 4 in place of the original editor, Stanley Abercrombie. Each of the design firms were required to sign a release in favor of Retail Reporting d/b/a Corporate Interiors for any possible liabilities arising from the publication of the design firm's photography and work that was included in the books.
Ms. Goulimis avers that all of the tax documents both the corporate defendants and Lester Dundes filed support defendants' claim that Lester Dundes was merely a paid consultant of the corporate defendants, and not a joint venturer of Fuersich and Burr. Both Retail Reporting and Visual Reference Publications issued Lester Dundes a Form 1099-MISC., reporting all payments to him in connection with the design books, other than expense reimbursements, in each year for which he was paid by those corporations. Lester Dundes was never given a Schedule K-1 ("Partner's Share of Income, Deductions, Credits, etc."), which is the form that joint ventures and partnerships are generally required to issue to each joint venturer or partner for federal income tax purposes. In addition, Lester Dundes never reported the income for any of the design books as income from a joint venture. For the years 1997 to 2003, the Dundes' joint tax returns show that all of his income from the five design books was reported on Form [*5]1040's Schedule C ("Profit or Loss from Business"), as income received from his personal business as a consultant.
Finally, defendants Fuersich and Burr each contend that they did not receive any personal benefit from the publication of the books, and that 50% of the gross profits were retained by either Retail Reporting or Visual Reference Publications. This allegation is confirmed in the Goulimis affidavit. During the time period between 1996 and 2004, Fuersich received a salary from Visual Reference Publications, for which he was issued a W-2 form as an employee. He was never issued a 1099 form or a K-1 for any other compensation or bonus from either of the corporate defendants during this time period.
Plaintiff Seena Dundes, the widow and executrix of Lester Dundes Estate, submits an affidavit in which she claims that her husband was the publisher of the Corporate Interiors books and a partner of defendants Fuersich and Burr. She bases her knowledge on personal conversations with her husband, her interactions with defendants Fuersich and Burr, and certain documentary evidence. Plaintiff also relies on affidavits from Stanley Abercrombie, the editor of the first three editions of Corporate Interiors, Edward H. Fitzelle, a purported expert witness, and David B. Spivak, a member of Eaton & Van Winkle LLP, attorneys for plaintiff and also a purported tax expert, as well as documentary evidence and deposition testimony of defendants Fuersich and Burr.
In support of her claim that Lester Dundes was the books' publisher, she relies on pre-printed letterhead on which the words "Lester Dundes, Publisher" are printed under the heading "CORPORATE INTERIORS Design Book Series." The design firms were also required to sign a "Letter of Agreement," printed on this letterhead, which states that Corporate Interiors was being "published by Lester Dundes and Retail Reporting Corp." Churchill Aff., Exh. L. She also relies on the Introduction to Corporate Interiors Nos. 2, 3, 4 and 5, each of which identifies Lester Dundes as the book's "Publisher," although at the same time also states that the books are "Published by" either Retail Reporting or Visual Reference Publications.
Seena Dundes avers that her husband was "very proud of having developed the idea for Corporate Interiors and having brought it to fruition, with the assistance of defendants, based on what Lester described as their partnership together." Seena Dundes Aff., ¶ 3. She relies on a press release for Corporate Interiors which refers to the book as "the brainchild of Lester Dundes." Churchill Aff., Exh. F thereto. She further relies on the Introduction to Corporate Interiors which states that the book was "put together" by Lester Dundes (id., Exh. G thereto); on the Introduction to Corporate Interiors No. 2, which states that "[i]n 1996, Corporate Interiors was nothing more than a gleam in the eye of Lester Dundes, ... but Lester has a way of translating gleams into action." (id., Exh. H thereto); and on the Introduction to Corporate Interiors No. 4, which was written by Lester Dundes and states that three years earlier he decided to publish Corporate Interiors (id., Exh. I thereto). Finally, she relies on the press release issued by Visual Reference Publications on March 18, 2004 mourning the death of her husband, who is identified as "the driving force of Corporate Interiors, and our admired colleague." Id., Exh. M thereto.
Seena Dundes contends that Lester Dundes repeatedly referred to Fuersich and Burr as his partners, and the latter never said anything which was inconsistent with a partnership or joint venture. She relies on deposition testimony by Fuersich in which he testified that Lester Dundes approached Fuersich in 2003 about selling Corporate Interiors, and indicating that he expected [*6]to receive a 50% commission on the sale.
Mrs. Dundes claims that during the last eight years of Lester Dundes' life, he was deeply involved in the operations of Corporate Interiors, including telephoning, corresponding and meeting with designers, architects, advertisers, vendors and other contacts in the interior design field. Finally, Mrs. Dundes avers that the reasons why their tax returns showed her husband as a consultant is because he worked for a period of years as a consultant to Interior Design magazine following his retirement as its publisher, and the term was merely carried over from one year's tax return to the next.
Stanley Abercrombie, the editor of the first three editions of Corporate Interiors, submits an affidavit at plaintiff's behest in which he avers that he was contacted in 1996 by Lester Dundes, who asked him to be the editor of a periodic book that he had conceived and intended to publish, which would contain the work of the best corporate interior designers. At no time before he was hired did Abercrombie meet or interview with Fuersich or Burr; Abercrombie claims he was hired by Lester Dundes alone. He avers that Lester Dundes was the publisher of each volume, and Abercrombie interacted primarily with him. To a lesser extent, Abercrombie interacted with Fuersich, whose role was limited to the physical production and distribution of the books, and who appeared to know little or nothing about the field of interior corporate design or the editorial aspects of Corporate Interiors, and had few or no contacts with designers. In observing the interaction between Lester Dundes and Fuersich, Abercrombie "observed that Lester Dundes was deeply involved in decision making on all material issues involving the books and that Fuersich would often defer to him on various issues that arose." Abercrombie Aff., ¶ 8. As for Burr, Abercrombie states that he had no involvement with the production of the books. Abercrombie attributes the success of the books solely to the efforts of Lester Dundes. He disputes defendants' claim that Lester Dundes was merely a commissioned salesman and claims that this "disparages the role that Lester Dundes played in starting and continuing the Corporate Interiors business." Id., ¶ 9. He admits that he was not privy to the legal arrangements among the parties, but believed Lester Dundes to be not only the owner, but the principal owner of Corporate Interiors.
Plaintiff also submits an affidavit from Edward H. Fitzelle, a consultant and advisor to clients in the book and magazine publishing business and purported expert in "the variety of ways in which salesmen and consultants are compensated" and the "economics of the publishing business, including the economics of paid books.'" Fitzelle Aff., ¶ 1. Fitzelle contends that he has never encountered a situation in which a salesman or consultant is compensated on the basis of a percentage of the profits from the business, and that in his opinion and experience, the payment to Lester Dundes of 50% of the profits from the Corporate Interiors business signifies that he was a partner or joint venturer, not a salesman or consultant.
Fitzelle further contends that the economics of the venture virtually guaranteed its profitability, and that the publisher was assured of the success of each book before most of the editing, printing, binding and other publishing costs were incurred. This does not mean to say that the venture was without risk, however, the principal risk that Lester Dundes incurred was spending time and money in an attempt to secure commitments on the part of the various design firms, architects and advertisers for their participation, and then not securing sufficient commitments to justify the production of the book.
Finally, plaintiff offers an affidavit from David B. Spivak, a member of the firm of Eaton [*7]& Van Winkle LLP, attorneys for plaintiff in this action, and a purported specialist in personal, partnership and corporate taxation matters. Spivak avers that because the defendants did not file a Form 1065 ("U.S. Return of Partnership Income") and issued 1099-MISC forms rather than K-1 schedules to Lester Dundes, he correctly reported his share of the net income on his Form 1040, Schedule C as profit from a business. Spivak also states that, for income tax purposes, the income allocated to Lester Dundes as his share of the joint venture's profit would constitute ordinary income, just as income received as a consultant or salesman from a business in which he is not a partner would constitute ordinary income.
Dismissal of the complaint as against the individual defendants is well-placed. There is an essential distinction in the law between a corporation and those individuals who administer its affairs, and sound public policy restricts the imposition of liability on corporate officers and directors for the acts of the corporation (Petkanas v Kooyman, 303 AD2d 303, 305 [1st Dept 2003]).
While the complaint alleges that Lester Dundes' agreement was with Fuersich and Burr individually, and not with either or both of the corporations through which they chose to perform their obligations, the undisputed documentary evidence is that the alleged joint venture was entered into with, and carried out through, the corporate defendants Retail Reporting on the first two books, and by Visual Reference Publications on the latter three books. The undisputed facts show that all of the actions taken by the individual defendants who were president and vice-president of the corporate defendants were done for the benefit of the corporations and in the course of their normal duties and responsibilities. The original two letters of February 15, 1994 and December 15, 1995, were both written on the stationary of Retail Reporting and signed, respectively, by Fuersich as publisher of Retail Reporting and by Burr as president of the company. It was Retail Reporting that filed for permission to conduct a business using the assumed name of "Corporate Interiors Design Book Series" and all payments received by designers were placed in a special bank account set up by Retail Reporting. The books were copyrighted in the name of the corporate defendants. The payment of net profits and expenses to Lester Dundes was made by the corporate defendants, and reported as such to the Internal Revenue Service. All agreement with the editors, Stanley Abercrombie and Roger Yee; with the books' designer, Harish Patel; with the printer; and with the distributors of the books were made through the corporate defendants. All releases from design firms were in favor of the corporate defendants. Finally, all net profits were divided between the corporate defendants and Lester Dundes, and neither Lawrence Fuersich nor Henry Burr received any part of the gross profits.
Against this unrebutted evidence, plaintiff can only point to three pieces of documentary evidence in an attempt to raise a triable issue of fact on her claim for relief against the individual defendants. First is the purported absence of the corporate letterhead on the undated Burr letter attached to the Churchill Affidavit as Exhibit B. However, this letter to Lester Dundes expressly states that the profits are to be shared "50-50 between you and Retail," and it is unrebutted that this letter was sent together with the December 15th cover letter, which is on the corporate letterhead of Retail Reporting and signed by Burr as president of the company. Second is the fact that a press release announcing the publication of the first book does not mention Retail Reporting. However, this document advises persons to contact "Lester Dundes, Larry Fuersich" for more information and to obtain copies, and gives the telephone and facsimile number of the corporate defendants' business office. Lastly, plaintiff attempts to raise an issue of fact from the [*8]absence of the corporate letterhead on the sales and expense statements for each of the five books, but the unrebutted testimony of Angelina Goulimis is that she prepared these documents in her capacity as controller of the corporate defendants and often printed financial documents on her printer using plain paper. None of these documents is sufficient to raise a triable issue of fact sufficient to defeat partial summary judgment in favor of defendants Lawrence Fuersich and Henry Burr.
Plaintiff argues that large portions of the moving affidavit of defendants Fuersich and Burr cannot be considered because CPLR 4519, known as the "Dead Man's Statute," precludes testimony about transactions or communications with a dead person on the part of a person with an adverse interest in the transaction or communication. The purpose of the statute is "to protect the estate of the deceased from claims of the living who, through their own perjury, could make factual assertions which the decedent could not refute in court" (Matter of Wood's Estate, 52 NY2d 139, 144 (1981); see also Phillips v Kantor & Co., 31 NY2d 307, 313 ). Thus, when death "seals the lips of one of the parties to a transaction, the Dead Man's Statute seeks to achieve adversarial balance in civil trials by sealing the lips of the surviving party" (Alexander, Practice Commentaries, McKinney's Cons laws of NY, Book 7B, CPLR C4519:1). Evidence precluded under the Dead Man's Statute may not be used to support a motion for summary judgment (Beyer v Melgar, 16 AD3d 532 [2d Dept 2005]; Friedman v Sills, 112 AD2d 343,
344-45 [2d Dept 1985]; cf. Phillips v Joseph Kantor & Co., supra).
As named defendants in this lawsuit, both Fuersich and Burr were "interested" in the outcome of the case within the meaning of the Dead Man's Statute (see Smith v Kuhn, 221 AD2d 620, 621 [2d Dept 1995] ["The test of the interest of a witness is whether the witness will gain or lose by the direct legal operation and effect of the judgment or that the record will be legal evidence for or against the witness in some other action];" Slusarczyk v Slusarczyk, 41 AD2d 593 [4th Dept 1973] [defendant "was certainly a party interested in the event of the action, for, surely, she would gain or lose by the direct legal operation and effect of the judgment").
However, Fuersich and Burr have been dismissed from the lawsuit based on the unrebutted documentary evidence that any joint venture with Lester Dundes was entered into with, and carried out by, the corporate defendants. Burr's testimony, however, is still precluded because he is also an owner of the corporate defendants. Mark Patterson, Inc. v Bowie, 172 Misc 2d 1000 [Sup Ct, NY County 1997]; cf. Herrmann v The Sklover Group, Inc., 2 AD3d 307 [1st Dept 2003]). Defendants argue that the affidavits of Fuersich and Angelita Goulimis, officers of the corporate defendants, and who are not subject to CPLR 4519, contains sufficient evidence to grant summary judgment dismissing the complaint in its entirety. For the following reasons, I disagree. The record contains disputed issues of fact as to the existence of a joint venture between Lester Dundes and the corporate defendants requiring a trial of all six causes of action.
The essential elements of a joint venture are: (1) an agreement, express or implied, manifesting the intent of the parties to be associated as joint venturers to create an enterprise for profit; (2) their mutual contribution to the joint undertaking through a combination of property, financial resources, effort, skill or knowledge; (3) some measure of joint proprietorship and control over the enterprise; and (4) a provision for the sharing of profits and losses (Richbell Information Services v Jupiter Partners, L.P., 309 AD2d 288, 298 [1st Dept 2003]; Tilden of New Jersey, Inc. v Regency Leasing Systems, Inc., 230 AD2d 784, 785-86 [2d Dept 1996]). [*9]"The ultimate inquiry is whether the parties have so joined their property, interests, skills and risks that for the purpose of the particular adventure their respective contributions have become as one and the co-mingled property and interests of the parties have thereby been made subject to each of the associates on the trust and inducement that each would act for their joint benefit" (Steinbeck v Gerosa, 4 NY2d 302, 317, appeal dismissed 358 US 39 ).
The evidence adduced on this motion reveals disputed issues of fact concerning the parties' intent regarding their business arrangement. There is the undisputed fact that Lester Dundes was named as a co-publisher of the books. The 1994 and 1995 letters do not define Lester Dundes' role in the book project either as partner or employee, although the 1995 letter is addressed to Lester Dundes as "Publishing Consultant." There is deposition testimony from Fuersich to the effect that Lester Dundes approached him about selling Corporate Interiors in the Summer of 2003 and indicated that he expected to receive 50% of the selling price, more consistent with the position an equal partner might take. Plaintiff also relies on the press release issued by Visual Reference Publications in March 2004, wherein Lester Dundes is described as an "admired colleague," and not an employee of the company.
The second factor to be considered is the parties' contributions of "property, financial resources, effort, skill or knowledge" to the book project (Yonofsky v Wernick, 362 F Supp 1005, 1031 [SD NY 1973]). There is a key disputed issue of fact as to who was even responsible for coming up with the idea for Corporate Interiors. Fuersich claims that he and Burr developed the idea, and their early correspondence with Lester Dundes supports that claim. Nevertheless, plaintiff has come forth with documentary and testimonial evidence supporting her allegation that the books were the "brainchild" of Lester Dundes. In any event, there is a plethora of undisputed evidence showing that the success of the books was due in large measure to Lester Dundes' efforts, knowledge and contacts in the interior design world.
On the third question of joint proprietorship and control, while defendants relegate Lester Dundes' contribution to the Corporate Interiors books to that of a part-time salesman, there is a question of fact regarding his role and his decision-making authority. As evidence that Lester Dundes' role was not limited to that of a salesman, plaintiff offers her opinion that the interaction between the three men was not consistent with an employer/employee relationship. Plaintiff also points to documentary evidence identifying Lester Dundes as the books' publisher; the fact that he signed a "Letter of Agreement" on behalf of the "Corporate Interior Design Book Series" (see Churchill Aff., Exh. L thereto), and Abercrombie's testimony that he was hired by Lester Dundes as the first editor of the books and that Lester Dundes was deeply involved in all important decision-making and appeared to be the principal owner of the business.[FN1]
Finally, there is no dispute that the net profits of the books were to be split 50-50 between Lester Dundes and the corporate defendants. While an individual who has no proprietary [*10]interest in a business except to share the profits as compensation for services is not a joint venturer (De Vito v Pokoik, 150 AD2d 331 [2d Dept 1989]), the "receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business" (Partnership Law § 114 [a]). Plaintiff's proffered expert in the book and magazine publishing world avers that he has never encountered a situation where a salesman or consultant is compensated on the basis of a percentage of profits from the business, and opines that Lester Dundes' receipt of 50% of the profits of the Corporate Interiors books signifies his status as a partner or joint venturer.
Defendants argue that summary judgment is still appropriate because Lester Dundes never agreed to share the burden of any losses of the alleged venture. An essential element of a joint venture is "a mutual promise or undertaking of the parties to share in the profits of the business and submit to the burden on making good the losses (emphasis in original)" (Steinbeck v Gerosa, 4 NY2d at 317; see also Richbell, 309 AD2d at 298; Tilden, 230 AD2d at 785-86). A joint venture may still exist although the participants "suffer losses in different proportions" (Richbell, 309 AD2d at 298). As previously recognized, a joint venture may exist even where there is no explicit agreement to share losses if "there was no reasonable expectation that there would be any losses" (Cobblah v Katende, 275 AD2d 637 [1st Dept 2000]); see also P.F.G. Industries, Inc. v Tel-Glass, Inc., 49 AD2d 112, 114 [1st Dept 1975] [failure to allege agreement to share losses was not fatal to joint venture that involved a single transaction that was concluded profitably]).
Defendants rely on Fuersich's testimony that Lester Dundes never agreed to be responsible for either the losses or any liabilities of the book project; Ms. Goulimis' testimony that Lester Dundes submitted his expenses to the corporate defendants for repayment and that he never had to wait to be repaid; and her testimony that, even though the Corporate Interior books were profitable, there was always a risk of loss to the corporate defendants in connection with the Corporate Interiors books, such as a work stoppage at the overseas printer or a fire at the factory or warehouse where the books were printed and stored.
However, the evidence shows a successful venture that netted profits for each of the five editions of Corporate Interiors. According to the Fitzelle affidavit, the economics of the book project virtually guaranteed its profitability, and the publisher was assured of the success of each book before most of the editing, printing, binding and other publishing costs were incurred. A jury could believe that the parties never discussed who might be responsible for losses or liabilities because none were seriously contemplated, but that Lester Dundes, as a named co-publisher with authority to sign agreements on behalf of "Corporate Interiors Design Book Series," was legally responsible for the potential legal liabilities of the enterprise.
A jury could further accept plaintiff's argument that the only party who was at real risk of any loss was Lester Dundes, who, by devoting his time, energy and money to secure the participation of a satisfactory number of appropriate designers and architects in each edition of the book, before each edition generated any profits, took the risk that enough participants could not be obtained and the books would not be published. Fuersich admits in his affidavit that no payment of profits was made to Lester Dundes for his time until it became clear that enough design firms had agreed to participate in the book and paid their participation fees so that Corporate Interiors would be profitable. In Kraemer v World Wide Trading Co. (195 App Div 305 [1st Dept 1921]), the court sustained a complaint alleging a joint venture to act as brokers in [*11]the procurement of steamships for a foreign corporation, rejecting the defendant's argument that plaintiff was merely an employee entitled to one-half of any commissions earned, finding that "since the plaintiff took the risk of receiving nothing for his services" a joint venture was adequately plead (id., at 308). "An individual who offers services for a share of the net profits from several transactions, risks losing the value of those services, and therefore is subject to losses" (Ramirez v Goldberg, 82 AD2d 850, 852 [2d Dept 1981]).
Defendants continue to rely on Weinreich v Sandhaus (1989 WL 130641 [SD NY July 24, 1989]), for the proposition that the failure to receive compensation for services rendered is not loss sharing sufficient to allege a joint venture. But the Weinreich complaint was dismissed on summary judgment, because the plaintiff admitted that in the event there were any losses from an alleged joint venture to design, develop and market laser light shows, he had no obligation, liability or responsibility for such losses. He further testified that he was not obligated to return any of the money advanced to him in the event that there were no profits. In Steinbeck v Gerosa, supra, the Court of Appeals merely recognized that a royalty agreement entitling an author to a percentage of the gross receipts from the sale of books and derivative works did not constitute a joint venture with the publisher, because, in fact, "there was to be no sharing of losses." 4 NY2d at 317. Finally, in De Vito v Pokoik (150 AD2d 331 [2d Dept 1989]), the plaintiff admitted that there was no agreement for the sharing of losses, and conceded that he was not held personally liable for any of the business obligations. There is no such definitive evidence of Lester Dundes' responsibility for losses or liabilities in this case.
Finally, the documentary and testimonial evidence is less than clear regarding the extent and timing of defendants' reimbursement of Lester Dundes' out-of-pocket expenses.
Defendants argue that the fact that the joint venture did not file a Form 1065 (U.S. Return of Partnership Income") or issue Schedule K-1's to Lester Dundes is definitive proof that no joint venture existed. However, in Zito v Fischbein Badillo Wagner Harding (11 Misc 3d 713 [Sup Ct, NY County 2006]) and Prince v O'Brien (256 AD2d 208 [1st Dept 1998]), the courts recognized that tax documents and documentary evidence of compensation as an employee were merely some proof, and not conclusive, on the issue of whether a person is an employee or a partner. Indeed, in the Zito case, in addition to W-2 forms received by a "contract" partner of a law firm partnership seeking to be dismissed from an action against the law firm, he produced a written employment agreement which clearly stated that he did not have an equity interest in the firm. Summary judgment dismissing the case was granted based on the documentary evidence and the fact that the plaintiff was not able to produce any contradictory evidence sufficient to establish the indicia of a partnership. (11 Misc 2d at 717.)
Indeed, one bankruptcy court has even ruled that company and individual tax returns both listing the debtor as a partner of the company, although relevant, were administrative in nature and "not highly probative in regard to proving the intent of the parties" as to whether a partnership existed (In re Ashline, 37 B R 136, 140 [Bank ND NY 1984]). And in Joachim v Flanzig (3 Misc 3d 371, supra), where a written partnership agreement existed documenting the plaintiff's 10% equity interest in a law firm partnership, the court ruled that the defendants failed to raise a triable issue of fact by virtue of tax documents showing that the plaintiff had been issued W-2 forms, and not Schedule K-1's, for some of the years in question.
In this case, the undisputed evidence is that Lester Dundes never objected to receiving a 1099-MISC form or questioned why he was not being issued a Schedule K-1 from the corporate [*12]defendants. However, plaintiff's tax expert opines that the income allocated to Lester Dundes as his share of the joint venture's profit would constitute ordinary income, just as income received as a consultant or salesman from a business in which he is not a partner would constitute ordinary income. Thus, while the tax returns are clearly evidence that supports defendants' position, a jury could conclude that Lester Dundes' had no reason to care how defendants characterized his income from the venture.
There is no basis to dismiss the fifth cause of action based on the December 15, 1995 letter from Burr to Lester Dundes. That document hardly qualifies as an enforceable written contract governing the plaintiff's claims (compare Clark-Fitzpatrick, Inc. v Long Island Railroad Co., 70 NY2d 382, 388 ).
For the foregoing reasons, it is hereby
ORDERED that defendant's motion for summary judgment is granted to the extent of dismissing all causes of action against the individual defendants, Lawrence Fuersich and Henry Burr, and is denied in all other respects.
Dated: October 16, 2006
Footnote 1:Defendants' objection to Abercrombie's testimony as not credible, and even false, is reserved for trial, where the basis of his personal knowledge can be explored on cross-examination. And since Abercrombie does not purport to offer testimony as an expert witness in this case, but offers his personal observations of Lester Dundes' role in and contributions to Corporate Interiors, defendants' reliance on Joachim v Flanzig (3 Misc 3d 371, 378-79 [Sup Ct, Nass County 2004]), is misplaced.