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.
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. Points of Law - for Law School Success
The Supreme Court of South Carolina has interpreted South Carolina's long-arm statute to extend to the outer limits of Fourteenth Amendment due process. View Full Point of Law
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.