Businesses often work together to achieve common goals. In these cases, businesses can unwittingly expose themselves to each other’s liabilities through the creation of a joint venture. A “joint venture” is broadly defined as the formation of a relationship between two parties for purposes of generating profit. Haley v. C.I.R., 203 F.2d 815 (5th Cir. 1953) (“A joint venture has been defined as a special combination of two or more persons, where in some specific venture [for] a profit is jointly sought without any actual partnership or corporate designation”). The relationship can form by expressed contractual intent or implicitly through the parties’ actions. Williams v. Obstfeld, 314 F.3d 1270 (11th Cir. 2002) (“A joint venture… may be created by express or implied contract”). Joint ventures can have a significant, far-reaching, and unwanted affect because all participants in the venture are responsible for each other’s actions even if they do not know anything about the liability or are not otherwise responsible for the liability. Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.
Determining whether two or more parties created a joint venture can be difficult because there is no bright line test. Courts consider several factors such as the existence of a common purpose, a joint proprietary interest in the subject matter, the right to share profits and the duty to share losses, and joint control or right of control. Williams, 314 F.3d 1270 (providing the elements for establishing a joint venture). No single element controls the court’s decision as to joint venture status. In other words, the existence of any one element does not automatically create joint venture formation. See Sasportes v. M/V Sol de Copacabana, 581 F.2d 1204 (5th Cir. 1978) (“Of course these elements cannot be applied mechanically. No one aspect of the relationship is decisive… [because m]any business dealings other than joint ventures might involve, for example, joint property holdings.”). For example, courts will not find the existence of a joint venture merely because the parties shared profits. Fulcher’s Point Pride Seafood, Inc. v. M/V Theodora Maria, 935 F.2d 208 (11th Cir. 1991) (“Though profit -sharing is a significant factor, we consider the total circumstances of an agreement to determine its status as a joint venture.”).
Businesses should be mindful of the possibility of inadvertent formation of a joint venture, which would subject the businesses to all liabilities within the scope of the venture. Florida Tomato Packers, Inc. v. Wilson, 296 So.2d 536 (Fla. 3d DCA 1974) (citations omitted) (“Each joint venturer is vicariously liable for the acts of a servant working on behalf of the joint venture, no matter which joint venturer actually employed the servant.”); Progress Rail Services Corp. v. Hillsborough Reg’l Transit Auth., 2005 WL 1051932 (M.D. Fla. Apr. 12, 2005) (“One joint venturer can bind the others in matters within the scope of the joint enterprise.”). The amorphous nature of joint venture formation makes liability exposure even more concerning because it is difficult to determine when the preverbal line is crossed. Therefore, businesses should proactively avoid unwanted joint venture formation by including anti-joint venture provisions in their B2B agreements. See Blow v. Carnival Corp., 2023 WL 3686840 (S.D. Fla. May 26, 2023) (dismissing the plaintiff’s claim because the contract disclaimed joint control, established that the tortfeasor may not bind the defendant, and disclaimed an intent to create a joint venture). These provisions are not, however, a cure-all because the parties’ subsequent conduct can create a joint venture despite their contractual wording disclaiming a “joint venture.” Ash v. Royal Caribbean Cruises Ltd., 2014 WL 6682514 (S.D. Fla. Nov. 25, 2014) (“While the… Agreement specifically states that it does not constitute a joint venture, a subsequent course of conduct may have created such a joint venture agreement.”).
Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.