Case briefs

CASE BRIEF 17.1

Blumberg v. Ambrose

2015 WL 5604474 (E.D. Mich. 2015)

FACTS: During the summer of 2004, Roberta Blumberg (plaintiff) 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 on-line, 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 Blumberg's services in 2010 and

2011 were worth more than what she actually received, and that 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 non-compete/non-disclosure 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 CampDoc. 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.

ISSUE: Had the parties created a partnership?

DECISION: There were enough factual issues that the court could not grant summary judgment.

The parties worked together as a team. They intended to share profits from the company.

Blumberg worked without compensation. They had formed the idea together and worked to

develop it and then sell it.

Questions:

1. If an LLC was created, how is this case about the formation of a partnership? 2. What are the indications that there was a partnership created? 3. What list of lessons could you develop for two people who are starting a business based on

what happened in this case?