Put up 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 corresponding to companies and partnerships. But with out the NPL label, there’s fascinating work underway that’s properly definitely 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 firms, this debate is normative (overrule Residents United!) or conceptual (does a company ‘intend’ issues, for the needs of specific-intent crimes?), however there isn’t any 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 individual. 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 essential states corresponding to New York. Litigation beneath UPA partnership regulation is commonly 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 contributors. Partnerships linked companions in a approach that made them higher folks, and companies risked the alternative.
This critique was rooted in entity ontology. Companions had been impressed to stay as much as a excessive commonplace as a result of they had been in direct privity with their coadventurers and collectors. Individuals need to do proper by these they’re related to. And if there’s a ethical failing, they have to personal it as their very own. In contrast, an organization intermediates the connection between all company patrons. Two traders 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 folks to whom you don’t maintain some particular and direct relationship.
Wells describes how American legal professionals believed that partnership may 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.