Citation. Young v. Jones, 816 F. Supp. 1070, 1992)
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Brief Fact Summary.
Plaintiffs, Robert Young et al., relied on an unqualified audit letter from one of the Defendants, Price Waterhouse-Bahamas (“PW-Bahamas”), and placed $550,000 with a South Carolina bank. The investment was not accounted for, and Plaintiffs brought this action against Defendants.
Synopsis of Rule of Law.
Partnership by estoppel creates a liability to third parties who rely upon representations that a partnership exists.
Facts.
Plaintiffs invested $550,000 in a South Carolina bank after they were reassured by Defendants, through an unqualified audit letter, that the investment entity was legitimate. The audit letter was based upon a falsified financial statement. Plaintiffs dealt primarily with one Defendant, PW-Bahamas, to obtain the audit letter, but they included the United States Price Waterhouse (“PW-US”) firm as well as individual members of the PW-US firm. PW-US and its individual members did not directly handle the failed investment, but partners are jointly and severally liable for the actions of one party of a partnership. Therefore, if Plaintiffs could establish a partnership between PW-Bahamas and PW-US then PW-US could be held liable. Plaintiffs argued that a partnership by estoppel was established through pamphlets by Defendants that linked the various offices worldwide.
Issue.
The issue is whether a partnership by estoppel was established between PW-Bahamas and PW-US to hold PW-US liable for the missing investment money.
Held.
There was no partnership by estoppel because there was no proof that Plaintiffs relied upon any acts or statements by Defendants that a partnership existed between PW-Bahamas and PW-US. Plaintiffs never made any assertions that they extended the credit based upon a perceived partnership between Defendants and therefore can not rely upon the doctrine of partnership by estoppel.
Discussion.
Plaintiffs could not prove that an actual partnership existed and alternatively pleaded that a partnership by estoppel existed. Plaintiffs lacked jurisdiction to directly bring an action against PW-Bahamas so it was critical to establish the partnership.
