Category Archives: civil contempt

What Is Sufficient Evidence To Prove the Existence of A Partnership or LLC?

In order for a court to determine that a defendant is in civil contempt, it must first determine that the defendant actually exists. In a recent decision, the United States District Court for the Southern District of New York considered what evidence would be sufficient for a plaintiff to prove the existence of a competitor. BeautyBank, Inc. v. Harvey Prince LLP, No. 10 Civ. 955 (S.D.N.Y. 2011).

In October 2010, plaintiff BeautyBank, Inc. (“BeautyBank”) filed a motion to hold defendant Kumar Ramani (“Ramani”) in contempt. The original complaint was filed against the entity Harvey Prince and included, among other allegations, claims for trademark infringement and false advertising. It alleged that Harvey Prince was selling perfume and other cosmetic products that violated a BeautyBank trademark. BeautyBank later added Ramani – whose name was listed as a partner in the Harvey Prince entity – as a defendant.

When BeautyBank later pursued its default judgment against Harvey Prince, Ramani maintained that Harvey Prince did not exist as an entity. In his answer to the complaint filed against him, Ramani said that Harvey Prince LLP was never formed as a Nevada limited liability partnership and instead claimed that his attorney filed trademark applications that incorrectly listed Ramani as a controlling partner in that LLP. Despite this, BeautyBank ultimately persuaded the court to enter a default judgment that included a permanent injunctive relief against Harvey Prince. The injunction enjoined the entity and its officers from imitating, manufacturing and similar practices relating to its trademarked perfume. BeautyBank later made a motion to find Ramani in contempt because, it argued, Ramani was a principal of Harvey Prince and the website www.harveyprince.com continued to sell BeautyBank’s trademarked perfume.

In order to prove Ramani’s noncompliance with the injunction, BeautyBank had to establish that Ramani served Harvey Prince in one of the capacities listed in the injunction. This included showing, at a minimum, that the entity Harvey Prince existed.

The Court found that the evidence presented by BeautyBank did not “demonstrate to a reasonable certainty” that Harvey Prince, LLP existed. Id. at 5. Admittedly, BeautyBank introduced as evidence filings made to the United States Patent and Trademark Office that attested to the existence of Harvey Prince. However, the Court held that “the mere fact that a party states on a document, sworn under penalty of perjury, that an entity is an LLP in the state of Nevada does not result in the creation of an LLP within that state.” Id. at 6.

The Court noted that a limited liability partnership (LLP) is created by statute. It is an entity that allows two or more persons to create a partnership with the added protection that their potential liability will be limited. Therefore, the Court emphasized that whether or not an entity was created is something that is determined by the behavior of parties, not merely the words in a document. Nevada law states that a partnership is formed when

a)      two or more persons associate

b)      to carry on as co-owners of a business

c)       for profit

Nev. Rev. Stat. §§ 87.060, 87.4322.

The Court found that BeautyBank presented no evidence that indicated Ramani associated with another person to form a partnership or that he organized and formed an LLP. Because BeautyBank failed to establish the existence of Harvey Prince, the Court found that the injunction could not be enforced against Ramani. Thus, BeautyBank’s motion for contempt failed.

The Court’s decision is interesting because it suggests that merely referring to an entity as an LLP does not necessarily indicate that a legal LLP has been formed. It is important for businesses seeking to form such an entity to check the relevant state statute and ensure it is complying with the requirements established for such a business entity. Court decisions such as BeautyBank serve as reminders that simply calling a business a “limited liability partnership” on paper may not suffice. 

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