On January 2, 2024, Justice Cohen of the New York County Commercial Division issued a decision in Fine Creative Media, Inc. v. Barnes & Noble, Inc., 2024 NY Slip Op. 30050(U), dismissing a claim based on an alleged joint venture for lack of allegations regarding sharing profits and losses, explaining:
Defendant’s motion to dismiss the first and seventh causes of action is granted because Plaintiff has failed to allege facts sufficient to establish that B&N owed a fiduciary duty to FMC. Plaintiffs argument that it was owed a fiduciary duty-which is not usually the case in an arms’ length commercial transaction-is premised on the theory that the Production Agreement evidences a joint venture between the parties.
A joint venture requires acts manifesting the intent of the parties to be associated as joint venturers, mutual contribution to the joint undertaking through a combination of property, financial resources, effort, skill or knowledge, a measure of joint proprietorship and control over the enterprise, and a provision for the sharing of profits and losses. The parties need not use the term joint venture for a joint venture to be implied.
In this case, the Production Agreement contemplates mutual contribution of financial resources, specialized know ledge, and joint decision making on some aspects of production of the B&N Classics titles, including which titles would be published. However, Plaintiff has failed to adequately plead that the Production Agreement contains a provision for the sharing of profits and losses. An indispensable essential of a joint venture, both under common law and statutory law, is a mutual promise or undertaking of the parties to share in the profits of the business and submit to the burden of making good the losses. Although a joint venture does not require an equal sharing of profits or losses, the obligation to share in some respect must be part of the arrangement.
Under the Agreement, Plaintiff receives two forms of payment for the B&N Classics books. First, B&N provided Plaintiff with a substantial advance to assist with the initial production costs, which was repaid by Plaintiff at the time of the books’ delivery to B&N. Critically, there was no obligation for Plaintiff to return any of the advance if the B&N Classics business proved to be unsuccessful. Thus, B&N alone bore the risk that it would not recover its advance payments. Second, B&N pays Plaintiff a purchase price upon the delivery of the books to B&N, and the books are non-returnable (id. §6). Thus, if the books do not sell, only B&N bears the risk of loss.
Plaintiff’s argument that the parties contemplated no losses is contradicted by Plaintiffs allegations that this was a highly competitive market. Furthermore, Plaintiff alleges that if the B&N Classics line turned out to be unsuccessful, PCM assumed the risk that it would lose the value of its services and expenses incurred in developing and producing the B&N Classics. But this would be true of any agreement between a buyer and seller of goods. By contrast, in Dundes, which was found to involve a joint venture, the arrangement contemplated that Dundes and defendants would take the risk that they would receive nothing for services performed by each of them, and the expenses both would incur, if sufficient revenues did not materialize.
The Complaint in this case does not allege anything similar and is instead a straightforward contractual arrangement. In the absence of allegations showing the substance of a true joint venture, or some other basis for imposing fiduciary duties upon otherwise independent commercial entities, FCM’ s claim for breach of fiduciary duty and the related claim for an accounting must be dismissed.
(Internal quotations and citations omitted).