During the summer of 2004, Roberta Blumberg (plain- tiff) and Michael Ambrose (with LLC referred to as defendants) worked together at the health clinic of Tamarack Camps. Blumberg was a registered nurse and the director of health and safety at Tamarack, while Ambrose was an undergraduate student and a clinical assistant. Blumberg and Ambrose collaborated to create and market a for-profit Web-based electronic medical records program called “CampDoc” that would allow camps to input and access the medical records of their campers. This program was expanded to allow parents the ability to fill out health forms and medical histories online as well as electronically submit information regarding allergies and medications. Blumberg participated in both the design and the development of the CampDoc system, including its prototype, and Ambrose wrote the code for the CampDoc software.
In the summer of 2009, Blumberg and Ambrose were able to pilot the software program at Tamarack. With the success of the pilot program, the two decided to market and sell the CampDoc program to other camps across the county.
In October 2009, Ambrose filed articles of incorporation for CampDoc as a Michigan limited liability company and, unbeknownst to Blumberg, included himself as the sole member. As part of organizing the company, Ambrose told Blumberg that she needed to sign several documents, including an employment agreement, which she did in May 2010. However, Blumberg did not believe that these documents altered her relationship as a partner with Ambrose. Ambrose also had conversations with Blumberg in 2011 about her interest in the profits of CampDoc, and he told her that “she would receive some percentage of the profits from the business.”
From 2010 to March 2012, Blumberg attended conferences for CampDoc. Blumberg “brought several dozen camps on board in 2011,” but she was not paid for that work. In 2012, Blumberg quit her job “as a registered nurse to devote [her] attention to CampDoc.” Blumberg never received compensation for her services in 2009. Blumberg was paid $100 in
2010, $1,000 in 2011, $6,250.02 in 2012, and $18,750.06 in 2013. Ambrose believed that Blumberg’s services in 2010 and 2011 were worth more than what she actually received, and it was his intention to make Blumberg “a millionaire.”
In September 2012, Ambrose provided Blumberg with four more documents to sign—a consulting agreement, a participation plan agreement, a noncompete/ nondisclosure agreement, and a confidentiality agreement. Although Blumberg claims that Ambrose considered her a “co-founder” and called her “the heart and face of the company,” Ambrose’s lawyers advised him that she should not be listed as an owner of Camp- Doc. Rather, Ambrose suggested that Blumberg own a “phantom” interest in the company, which would be “the equivalent of real equity.”
After reviewing the documents, Blumberg informed Ambrose that she intended to seek legal advice. Ambrose then terminated Blumberg’s “employment” with CampDoc the following day.
Blumberg filed suit seeking to have the association between herself and Ambrose declared a partnership under Michigan’s Uniform Partnership Act.
Judicial Opinion
GOLDSMITH, District Judge Michigan’s Uniform Partnership Act defines a “partnership” as being a voluntary “association of 2 or more persons . . . to carry on as co-owners a business for profit.” Whether a partnership exists is typically a question of fact. The parties need not possess the subjective intent to form a partnership in order for one to exist. Rather, the proper focus of the Court’s inquiry “is on whether the parties intended, and in fact did, carry on as co-owners a business for profit.” Byker v. Mannes, 641 N.W.2d 210, 218 (Mich.2002).
Defendants raise several arguments in support of their contention that a partnership did not exist in this case. First, Defendants argue that the only written agreements that existed between the parties were an employment agreement, a confidentiality agreement, and a non-compete/non-solicitation/confidentiality agreement, all of which Blumberg signed in May 2010.
According to Defendants, these agreements defeat Blumberg’s claim that a partnership existed because they suggest that the only relationship between the parties was an employer-employee relationship.
Second, Defendants contend that Blumberg received occasional commissions or bonuses from January 2010 through September 2012, pursuant to those agreements. Defendants further state that Blumberg received a monthly salary as an independent con- tractor from October 2012 through September 2013. Blumberg also received a Form 1099 for the 2011–2013 tax years, which Defendants contend further supports their position that Blumberg was receiving wages as a mere employee or independent contractor, not as a partner. Defendants argue that, even if there was an agreement between the parties with respect to employee profit sharing, the payment of profits as wages of an employee or independent contractor would not constitute indicia of a partnership.
Third, Defendants argue that Blumberg’s deposition testimony illustrates “her complete lack of knowledge and control over the very basic operations of CampDoc,” which, according to Defendants, strongly militates “against any right of co-ownership, mutual agency or right to management.” Defendants contend that Blumberg has not met her burden of establishing a partnership, given her “complete ignorance regarding the development, financing, operations, decision making, management[,] and structure of CampDoc.”
Blumberg argues that there are genuine issues of fact regarding the existence of a partnership. For instance, Blumberg states that she and Ambrose “worked together to create, market and monetize CampDoc,” for which many hours of work went uncompensated. Blumberg also claims that Ambrose told her that she was going to be a millionaire, and that he referred to her as a “co-founder” of CampDoc. Blumberg further states that she and Ambrose had dis- cussed percentages of equity ownership in CampDoc. Although the two were unable to reach an agreement on this issue, Blumberg argues that the default pro- visions of the partnership act provide that she and Ambrose share the partnership’s profits equally.
According to Blumberg, she and Ambrose began working on CampDoc years prior to her signing any agreements, and when she did sign the agreements in May 2010, she did not believe that they modified her relationship as a partner. While acknowledging that she received some financial compensation for her work on CampDoc, Blumberg claims that she was not paid in 2009, she was only paid $100 in 2010, and her services were worth more than the $1,000 she received in 2011.
Regarding her lack of knowledge about Camp- Doc’s daily operations, Blumberg contends that such evidence does not counsel against her claims of a partnership, because she and Ambrose had agreed that he would handle administrative matters. By doing so, Blumberg states that she focused her efforts on the research, development, testing, and marketing of the program.
In this case, there was no express agreement among the parties concerning the formation of a partnership. Thus, the Court must determine whether the par- ties’ conduct demonstrates their intention to carry on CampDoc for profit as co-owners.
Various actions by Ambrose support the conclusion that a partnership existed between himself and Blum- berg. For instance, Ambrose told Blumberg that she was going to “make millions,” which the Court finds would be a rather hefty wage for a mere employee. Ambrose also told Blumberg that he considered her a “cofounder,” as well as the “heart and face” of Camp- Doc. And it was not until late in the relevant timeframe that Ambrose ever protested that Blumberg was not a partner. Moreover, when negotiating a more formal arrangement in the fall of 2012, Ambrose proposed a “phantom” equity ownership that would functionally recognize Blumberg as an equity owner. Lastly, while some of Blumberg’s time was compensated under an employee agreement, much of it wasn’t, and, for significant periods of time, Blumberg was paid little or nothing for her efforts. [T]he Court finds that there is a genuine issue of material fact concerning the existence of a partnership between the parties.
Although Defendants argue that Blumberg lacked awareness of the CampDoc’s daily administrative operations, this does not necessarily weigh against her ability to participate and control the administration of the business, nor does it establish that there was no mutual agency among the parties.
Defendants also point out that, during her deposition, Blumberg testified that she did not know if she ever invested any financial capital in CampDoc. Nor does she allege a common interest in the capital that was employed for either the creation of CampDoc or the prototype software. However, investment of capital is not fatal to Blumberg’s claim for a partnership. The investment of time, labor, and skill is evidence of a partnership.
Blumberg states that she brought several dozen camps on board in early 2011, and she was involved in designing CampDoc’s marketing materials, as well as participating in the design and development the pro- gram. Blumberg further claims that she communicated with CampDoc employees and customers regularly, attended conferences to market CampDoc, and was the person responsible for signing up many of CampDoc’s customers. Blumberg’s contributions of labor, skill, and expertise evidence the existence of a partnership.
It is true that the parties did not file a certificate of
partnership as required under Michigan law. However, the failure to file the certificate is not dispositive; it is only one factor in determining whether a partnership has been formed.
The Court concludes that the above facts, when viewed as a whole and in the light most favorable to Blumberg, sufficiently demonstrate a factual basis for Blumberg’s contention that the parties acted in association to carry on for profit a business as co-owners.
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