On December 3, 2021, Justice Cohen of the New York County Commercial Division issued a decision in J.G. Jewelry Pte. Ltd. v. TJC Jewelry, Inc., 2021 NY Slip Op. 32549(U), holding that a corporation can be part of a joint venture, explaining:
Defendants have not established as a matter of law that the existence of JGJ as a corporate entity precludes any claim based on an alleged joint venture between the parties, assuming of course that Plaintiffs can prove that such a venture existed. Plaintiffs assert that the joint venture preceded the creation of JGJ and submit evidence indicating that joint venture was announced to customers months before JGJ was incorporated. Further, Plaintiffs argue that while JGJ plays an important role in the alleged joint venture (including by serving as a means for the parties to account to each other for their joint activities), the venture itself is broader than JGJ.
Defendants’ reliance on Weisman v Awnair Corp. of Am. (3 NY2d 444 [1957]), is misplaced. In that case, the Court of Appeals held that the rule is well settled that a joint venture may not be carried on by individuals through a corporate form. The two forms of business are mutually exclusive, each governed by a separate body of law. When parties adopt the corporate form, with the corporate shield extended over them to protect them against personal liability, they cease to be partners and have only the rights, duties and obligations of stockholders. They cannot be partners inter sese and a corporation as to the rest of the world.
In the ensuing decades, courts have made clear that Weisman does not state a rigid, formulaic rule that the concept of joint venture is inherently incompatible with use of a corporate entity as part of the venturers’ business. Specifically, the concerns about the conflicting messages of corporate and non-corporate liability and obligations are minimized if the rights of third parties, like creditors, are not involved and the parties’ rights under the partnership agreement are not in conflict with the corporation’s functioning. Further, where arties to a joint venture create a corporation to conduct some but not all of their
business, the joint venture claims may survive, as the joint venture does not conflict with the corporation’s functioning.Defendants have not shown, as a matter of law, that the alleged joint venture is incompatible with the operation of JGJ, such that after the formation of JGJ, the joint venture ceased to exist (if it ever did). The viability of Plaintiffs’ claims will turn on the facts-aided by discovery-and cannot be adjudicated conclusively at this stage based solely on the ground that JGJ is a corporation.
(Internal quotations and citations omitted).