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Shore Parkway Assoc. v. United Artists Theater Circuit

September 14, 1993

SHORE PARKWAY ASSOCIATES,
PLAINTIFF,
v.
UNITED ARTISTS THEATER CIRCUIT, INC.,
DEFENDANT.



The opinion of the court was delivered by: Keenan, District Judge

OPINIION AND ORDER

Defendant United Artists Theater Circuit, Inc. has moved to dismiss the complaint for failure to state a claim, Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, the motion is denied.*fn1

BACKGROUND

Shore Parkway Associates ("Shore"), a New York partnership, entered into an agreement with United Artists Theater Circuit, Inc. ("UA") in 1985, whereby a parcel of land owned by Shore would become the site of a new multiplex movie theater. Plaintiff asserts that the unwritten agreement included provisions for the demolition of an existing structure on the parcel, the costs of building the 2,600-seat, 35,000-square-foot theater, a minimal rent, the sharing of profits after the allocation of various expenses, and UA's preparation of quarterly financial reports for Shore.

In May 1985, the parties entered into a 20-year lease, with five five-year options. The theater became operational approximately two years later, and plaintiff claims that it began generating considerable profits.

The complaint alleges that two and one-half years after the theater opened, and immediately following a change in its management and ownership, UA unilaterally and without justification altered its method of allocating revenues against withholdings for these past construction costs. Shore alleges that, among other things, UA's unilateral recalculation of the formula by which it shared profits breached the parties' antecedent, unwritten joint venture agreement. The complaint further alleges that UA applied this reformulation retroactively, has refused to furnish further financial reports, and has improperly charged Shore for excessive and unrelated construction costs.

In moving to dismiss, UA argues that the existence of a joint venture has not been adequately alleged in the complaint. The failure of the complaint to assert adequately all the elements prerequisite to a joint venture agreement, UA insists, requires that the complaint be dismissed. UA further argues that Shore Parkway's correct claim is in fact for breach of contract, or reformation, and should be pleaded as such.*fn2

DISCUSSION

It is well-established that "a complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The scope of the court's task is a limited one in that the likelihood of recovery on the face of the complaint cannot be considered in granting or denying the motion. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). In addition, the complaint must be viewed in the light most favorable to the non-moving party. Scheuer, 416 U.S. at 237; Yoder v. Orthomolecular Nutrition Institute, Inc., 751 F.2d 555, 562 (2d Cir.1985). The burden on the moving party is heavy because "the sanction of dismissal is harsh," Duncan v. AT & T Communications, Inc., 668 F.Supp. 232, 234 (S.D.N.Y.1987), and because "the purpose of pleading is to facilitate a proper decision on the merits." Conley, 355 U.S. at 48.

A. Joint-Venture Claim

Defendant argues that plaintiff has not properly pleaded the existence of the joint venture. In general, a joint venture represents more than "a simple contractual relation." Precision Testing Laboratories v. Kenyon Corp., 644 F.Supp. 1327, 1349 (S.D.N.Y.1946). Thus, joint ownership, a mere community of interest, or a joint interest in profitability alone are not deemed joint ventures. See United States v. Standard Oil Co., 155 F.Supp. 121 (S.D.N.Y.1957), aff'd, 270 F.2d 50 (2d Cir.1959); Stratford Group, Ltd. v. Interstate Bakeries Corp., 590 F.Supp. 859, 863 (S.D.N.Y.1984). To constitute a joint venture, an agreement must satisfy the following five elements: (1) the agreement must be between two or more parties to create an enterprise for profit, (2) the agreement must evidence the parties' mutual intent to be joint venturers, (3) each party must make a contribution of property, financing, skill, knowledge or effort, (4) each party must have some degree of joint management control over the venture, and (5) there must be a provision in the agreement for the sharing of both losses and profits. See ITEL Containers v. Atlanttrafik Exp. Services Ltd., 909 F.2d 698, 701 (2d Cir.1990); Flammia v. Mite Corp., 401 F.Supp. 1121, 1127 (E.D.N.Y.1975); Yanofsky v. Wernick, 362 F.Supp. 1005, 1031 (S.D.N.Y.1973); Precision, 644 F.Supp. at 1348.

Plaintiff's complaint, read in the most favorable light, adequately asserts all five elements. First, the focal point of the enterprise was the construction and operation of a nine-screen movie theater complex in Brooklyn. Plaintiff alleges that the parties agreed that: they would be 50-50 partners in the enterprise; they would share equally the costs of demolishing an existing structure on the proposed site; UA would advance the cost of constructing the theater; the parties would share profits from the enterprise equally, after UA first received a separate allocation for recouping its construction expenses; and UA would pay Shore a minimal rental. The substance of the alleged agreement, which anticipates an ongoing relationship based on mutual effort and shared goals, exceeds the type of simple "arms length purchase and sale" or landlord-tenant relationship that falls outside the definition of a joint venture. Stratford, 590 F.Supp. at 864.

As to the element of intent, the absence of the use of the term "joint venture" to describe an agreement may indicate a lack of intent to enter a joint venture. Id. at 864. The absence of the term is not fatal, however, as the intent of the parties can be express or implied. See McGhan v. Ebersol, 608 F.Supp. 277, 282 (S.D.N.Y.1985); Sherrier v. Richard, 564 F.Supp. 448, 457 (S.D.N.Y.1983).

Intent is crucial because a joint venture 'is a voluntary relationship, the origin of which is wholly ex contractu, i.e., it is not a status created by law.' This manifestation of intent need not be explicit, but the parties must be clear that they intend to form a joint ...


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