September 26, 2023

Submit by Andrew Verstein

As Paul Miller recently noticed, New Non-public Regulation students have largely hewed to tort, property, contract, or fiduciary regulation. Comparatively little consideration has been dedicated to enterprise entities similar to firms and partnerships. But with out the NPL label, there’s fascinating work underway that’s effectively well worth the consideration of this weblog’s readers. As an exhibit, I commend Harwell Wells’s new paper (forthcoming in the Vanderbilt Law Review)  “The Personification of the Partnership.”

Wells’s focus is the acquainted debate over entity ontology. Do entities “exist” or are they fictions, reducible to the sum of their members? For companies, this debate is normative (overrule Residents United!) or conceptual (does a company ‘intend’ issues, for the needs of specific-intent crimes?), however there is no such thing as a believable doctrinal debate. Firms are authorized individuals. In contrast, the ontological standing of partnerships has been in lively flux for greater than a century. Nineteenth century jurists like Story and Kent rejected the authorized personhood of partnerships, however by the tip of the century, elite opinion had shifted decidedly towards recognizing the partnership as its personal authorized particular person. Dean Ames drafted the Uniform Partnership Act to firmly endorse the entity view. However then Ames died, and his successors redrafted the UPA to be ambivalent about whether or not and to what extent the partnership is an entity distinct from the set of its companions. The UPA stays the regulation of many commercially necessary states similar to New York. Litigation underneath UPA partnership regulation is usually litigation about entitization.  

Wells sheds new gentle on partnership ontology by excavating the forgotten explanation why the UPA drafters refused to endorse the entity view partnership, regardless of its endorsement by Ames and different main advisors. The reply is a peculiar braiding of doctrine, normativity, and conceptualism: authorized practitioners got here to view the partnership because the company’s ethical superior, by way of the moral relationships the shape supported in its individuals. Partnerships linked companions in a approach that made them higher individuals, and firms risked the other.

This critique was rooted in entity ontology. Companions have been impressed to stay as much as a excessive normal as a result of they have been in direct privity with their coadventurers and collectors. Individuals wish to do proper by these they’re linked to. And if there’s a ethical failing, they need to personal it as their very own. In contrast, a company intermediates the connection between all company patrons. Two buyers are nothing to one another, they’re solely one thing to the company. Likewise, the shareholder to the company creditor. It’s simpler to take liberties with individuals to whom you don’t maintain some particular and direct relationship.

Wells describes how American attorneys believed that partnership might spin privity into decency – however not if the partnership was only a company with humorous voting and revenue guidelines. The partnership needed to be nothing, or else it was nothing particular.