Gelman v. Buehler, 20 N.Y.3d 534 (2013)

Under New York Partnership Law § 62(1)(b), a partnership formed by oral agreement is dissolvable at will by any partner if the agreement does not specify a ‘definite term’ or a ‘particular undertaking’.

Summary

Gelman and Buehler, business school graduates, formed an oral partnership to create a search fund, solicit investments, acquire a business, increase its value, and eventually sell it for profit. Buehler later withdrew, and Gelman sued for breach of contract. The New York Court of Appeals held that Buehler’s withdrawal did not constitute a breach because the oral agreement lacked a ‘definite term’ or a ‘particular undertaking’ as required by Partnership Law § 62(1)(b), making the partnership dissolvable at will. The Court emphasized that the agreement’s objectives were too uncertain and lacked a specific termination date.

Facts

Geoffrey Gelman and Antonio Buehler, recent business school graduates, orally agreed to form a partnership in 2007. Buehler proposed raising $600,000 to establish a search fund to identify a business with growth potential. The plan involved soliciting further investment, acquiring the target business, and managing it to increase its value until a profitable sale (the “liquidity event”). Gelman agreed, and they anticipated the business plan would take four to seven years. Buehler later demanded majority ownership, which Gelman refused, leading to Buehler’s withdrawal.

Procedural History

Gelman sued Buehler for breach of contract. Supreme Court dismissed the complaint, finding no definite term or specific objective. The Appellate Division modified, reinstating the breach of contract claim, reasoning that the “liquidity event” constituted a definite term and the business acquisition and expansion was a specific undertaking. Two justices dissented. The Court of Appeals reversed the Appellate Division’s decision and dismissed the breach of contract claim.

Issue(s)

1. Whether the oral partnership agreement between Gelman and Buehler contained a “definite term” within the meaning of Partnership Law § 62(1)(b).
2. Whether the oral partnership agreement between Gelman and Buehler specified a “particular undertaking” within the meaning of Partnership Law § 62(1)(b).

Holding

1. No, because the alleged temporal framework of the agreement was too flexible and lacked a specific or reasonably certain termination date.
2. No, because the objectives of raising money, identifying a business, and increasing its value were too amorphous and uncertain to constitute a “particular undertaking.”

Court’s Reasoning

The Court of Appeals stated that Partnership Law § 62(1)(b) allows a partner to dissolve a partnership if the agreement lacks a “definite term or particular undertaking.” The Court found that a “definite term” requires an identifiable termination date, while a “particular undertaking” necessitates a specific objective achievable at a future time. Applying these standards, the Court determined that Gelman’s complaint lacked a fixed period for the partnership’s operation. The alleged sequence of events—raising money, identifying a business, raising more money, operating the business to increase its value, and selling it for profit—was deemed too uncertain to satisfy the statutory requirement. The Court distinguished the case from *St. Lawrence Factory Stores v Ogdensburg Bridge & Port Auth.*, where the agreement identified the specific purpose of developing a retail factory outlet center on a defined property. The Court quoted examples of objectives found to be inadequate, such as the “ ‘development, packaging, production and distribution of theatrical feature films . . . while also involved … in television development and production’ ” and partnerships to acquire, manage, and resell real estate. Because the agreement lacked a definite term or particular undertaking, the partnership was dissolvable at will, and Buehler’s withdrawal did not breach the contract. The Court emphasized that the “error in the Appellate Division’s rationale was that it equated “definite term” with the liquidity event—a possible future occurrence from which an identifiable termination date was not ascertainable at the outset of the partnership.”