On August 1, 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. 32708(U), holding that joint venture allegations failed for lack of an agreement to share losses, explaining:
As with the original complaint, FCM’ s fiduciary duty claim hinges on its assertion that the parties’ agreement constitutes a joint venture. Despite its attempt to bolster that claim to address the defects that led to dismissal of the original claim, FCM’ s claim still fails not because of inartful pleading but because the contract itself simply does not support a viable claim.
A party asserting a joint venture relationship must allege an arrangement involving 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. 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.
FCM’s citation to older decisions suggesting that the absence of loss-sharing may not in all cases be fatal to a joint venture claim, is unavailing. The First Department has made clear that the loss sharing requirement may be disregarded only where the record in a particular case establishes that there was no reasonable expectation of losses. In reaching that conclusion, the First Department relied upon the Court of Appeals’ earlier direction that an indispensable essential of a contract of partnership or 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.
As was the case with the original Complaint, this narrow exception does not apply here. B&N and FCM put up capital to begin their business. There was undoubtedly the possibility that the business would fail, and that the initial investments would never be recouped. FCM admits as much in their Amended Complaint, stating that while B&N agreed to advance to FCM certain monies for initial production costs, these advances were credited against purchase orders and only covered a portion of the expenses incurred by FCM thus, while B&N bore the risk that it might not recover these advance payments, FCM bore substantial risk that it would not recover significant development and production expenses.
(Internal quotations and citations omitted).