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Formation of partnership under District of Columbia law is a factual question

Michael Queen v. Ed Schultz
--- F.3d--- (April 4, 2014) (not yet published)

by Gregory Emrick, Associate
Semmes, Bowen & Semmes (

In 2008, Queen, an employee with NBC, approached Ed Schultz, who was a radio personality in Fargo, North Dakota, for the purpose of developing a television show that would star Schultz. Prior to this conversation, Queen had approached NBC with the idea for a Schultz led program and was developing a strategy to market the show. In January 2008, Schultz visited the NBC building in Washington, D.C., and Queen and Schultz discussed Queen’s proposal. The parties contested the content of the January conversation, but Queen alleged that, when asked if Schultz was working on a television program with anyone else, Schultz responded, “No. Now you’re it.” Id., at 1. Thereafter, Queen began to develop sales material for the program, and enlisted the assistance of Max Schindler, a former NBC employee. The three engaged in numerous email communications in which the terms of the partnership were discussed, including the percentage salaries that would be given to each after the sale of the program. This was reduced to a partnership agreement, but Schultz never agreed to sign it. Schindler left the partnership soon after, believing Schultz would never honor his verbal agreements. To assuage any concerns that Queen had after Schindler’s departure, Schultz affirmed, in writing, that any television deal that Schultz entered into would include Queen. While Queen and Schultz, through his attorney, continued to negotiate the terms of the financial agreement, Queen arranged for a pilot episode to be filmed at NBC’s studios. The pilot was picked up by WUSA, a CBS affiliate, with the condition that Queen and Schultz had to pay a fee for the first six (6) months and if it was successful WUSA would consider purchasing ownership in the program. A few weeks before the WUSA show was scheduled to begin filming Schultz withdrew, having come to an agreement with MSNBC for “The Ed Show.” Queen contacted Schultz seeking his financial compensation under his agreement with Schultz splitting the compensation for any television show. Schultz sent Queen a check for $12,000 for expenses associated with filming the pilot, but refused to pay any additional amounts.

Queen thereafter filed suit in the District Court for the District of Columbia for breach of contract, fraud in the inducement, tortious interference with business relationships and intentional infliction of emotional distress. Schultz, in response, filed a counterclaim for fraud, slander per se, and libel per se. The parties filed cross-motions for summary judgment, and the District Court granted judgment to Schultz for Queen’s claims and to Queen on Schulz’s counterclaim, finding neither party liable to the other. Queen appealed the ruling on the breach of contract claim and his breach of partnership duties theory.

The Court of Appeals initially reviewed Queen’s claim of ordinary breach of contract, noting that Queen had the burden of showing that there was a “valid and enforceable contract [which] requires both (1) agreement as to all material terms; and (2) intention of the parties to be bound.” Id., at 4. The District Court had held that the parties had never agreed to the terms with reasonable certainty, most notably about the financial terms that were material terms of the agreement. The Court of Appeals agreed with the trial court’s finding that the materials terms were not agreed upon, but proceeded to analyze the facts under the District of Columbia’s partnership law.

While Queen’s complaint failed to allege a breach of partnership duties, the District Court had addressed the issue based on Queen’s reference to partnership throughout his arguments. “A partnership arises under District of Columbia law when ‘two or more persons … intend to associate together to carry on as co-owners for profit.’” Id., at 6. There are customary attributes of a partnership, i.e., profit and loss sharing, joint control, that aid in determining the existence of a partnership, but the existence of a partnership is a factual question. While Schultz claimed that Queen was a mere employee, Queen argued that he was more than an employee, and that Schulz had agreed to the co-ownership and co-development of the television program.

The Court of Appeals found the District Court erred in finding no partnership existed as a matter of law, as there were factual disputes. The Court further noted that, if Queen were able to prove a partnership existed, and that “The Ed Show” was an opportunity for the partnership, Queen may be entitled to a portion of Schulz’s compensation. Despite not being able to show the existence of the contract that would have given him (25) percent of the compensation, under the District of Columbia partnership law there was a presumption that Queen would be entitled to (50) percent of the partnership income. The Court of Appeals then affirmed the trial court’s granting of summary judgment as to all issues, except the determination of whether a partnership was formed, which was reversed. The matter was remanded for proceedings consistent with the ruling.