[00:00:13] Speaker 04:
Please be seated. Next up is 25-1373, Catalyst Strategy Advisors versus BD Consulting.

[00:00:36] Speaker 04:
I'm not calling anyone by name today because the first name I tried today I screwed up, so I'll just let you introduce yourselves.

[00:00:45] Speaker 01:
Very good, Your Honor. May it please the Court, Michael Mulvaney, the last day of silent, in case you were wondering, for Appellants Daniel VanderWaal and DV Consulting, Inc., This appeal concerns how to characterize an admitted economic arrangement that governed a decade-long business relationship. Mr. Condrup swore that in March 2013, he proposed, quote, a modified fee arrangement, end quote, and that Mr. Vanderall, quote, agreed to this arrangement.

[00:01:20] Speaker 01:
Mr. Condrup later testified that this agreement that he spoke about in his written discovery responses was reflected in the March 2013 framework emails between the two men.

[00:01:36] Speaker 01:
Now, this was not some stray conversation where somebody has a conversation and then a month later they're saying, hey, we're partners, we own the business. To the contrary, for a decade, the parties here performed under their agreed economic arrangement while building the advisory business together, tracking its revenue and expenses, and dividing the resulting profits.

[00:02:02] Speaker 01:
That admitted March 2013 agreement is the center of this case because its economic substance was profit sharing. For 10 years, fees came in, costs came out, and the economic remainder was divided one-third, two-thirds between the two MET.

[00:02:18] Speaker 04:
Let me ask you about the evidence there, because there seems to be a dispute between the parties on whether they, I think there's an admission that on specific, Business, specific clients, they split the profits two parts to one part.

[00:02:41] Speaker 04:
But opposing counsel's briefs argue that there were business arrangements with other clients where your client did not share in the profits.

[00:02:56] Speaker 04:
And I think you've been alleging that they shared in all the profits.

[00:03:00] Speaker 01:
What's the evidence on that? Very good, Your Honor, and you anticipated the very next thing I was going to say. The clearest example of a decade of conduct, including sharing profits for all clients on an annual total basis is, and this is, I think, will be the only time I cite a particular record citation. It's Conventional Appendix Volume 1 at 91-14. Now, that's a mouthful. That is an Excel spreadsheet.

[00:03:30] Speaker 01:
And it's a multi tab excel spreadsheet the tab that is most interesting and most important is the tab called CSA P&L for profit and loss This was heavily cited in both our opening brief and in our response brief That document is explicitly a 2021 profit and loss statement between the two men where if you scroll down to the bottom of the profit and loss statement the two men are dividing the annual total profits and loss for the entire business without reference to deducting particular clients, et cetera.

[00:04:09] Speaker 01:
So in a... You say deducting particular clients.

[00:04:12] Speaker 04:
You mean without eliminating any clients who perhaps your client did not work with?

[00:04:19] Speaker 01:
Correct, Your Honor. Now, there is some discussion in the response brief that, well, it does make reference to particular clients. It is true that there is reference to particular clients, But the context, and this is apparent from the declaration by Mr. Vanderaal, the cover emails, et cetera, all of which are on the record, the context is they have an almost end of the year, I think it's a December 27th, 2021 P&L. They know that they're going to close a deal on, at least they hope they're going to close a deal on or about December 30th, three days after.

[00:04:52] Speaker 01:
So the reference to particular clients is not taking clients out, it's we know that we're going to have an additional deal closed. We need to make sure we adjust to the profit and loss to add in that deal.

[00:05:06] Speaker 01:
So from my perspective, Your Honor, and it's not the only evidence, but The clearest, most obvious evidence that the men had an agreement to share profits with respect to all deals, all revenue, all expenses is that 2021 profit and loss spreadsheet. That is not a one-off. That's the easiest to understand example because it's literally from a profit and loss.

[00:05:31] Speaker 04:
You know they're arguing otherwise. So anticipate their argument and tell us why what they say should not be.

[00:05:40] Speaker 04:
Yes, Your Honor. I'm realizing, though, that if there's a question of evidence at this stage in the proceedings, that helps you, as long as there's a bona fide dispute.

[00:05:55] Speaker 01:
Sure. And you're anticipating, I think, Your Honor, what I was going to say as well.

[00:06:00] Speaker 01:
We don't need to show... You should just shut up, in other words.

[00:06:03] Speaker 01:
I would never say that, Your Honor.

[00:06:08] Speaker 01:
We're talking about dozens and dozens of deals over a 10-year period. And after scraping through the entire record, the Appleese were able to identify, by my count, a total of...

[00:06:23] Speaker 01:
five deals on which there's at least some suggestion that Mr. Vanderawe was not paid his share of those profits. Those are, and I can name them if you'd like, but there's a total of five. We think that there are significant factual disputes as to four of those five. So, for example, Trilake's disposal, called TLD in the briefing, It is true that Mr. Vanderall was not paid as to that deal. What the response brief neglects is the reason that that deal was not paid.

[00:06:57] Speaker 01:
There is evidence in the record. It's not established as a matter of finding, but it was not rebutted by the appellees. Mr. Vanderall testified, the reason I didn't get paid on that TLD tri-lakes disposal deal is because I forwent my share of that profit stream in order to repay Mr. Kondrup the capital contribution that feeds back into the statement from the March 2013 framework emails where they say, hey, we're going to true up Mr. Kondrup on the $400,000 to $500,000 of startup costs.

[00:07:37] Speaker 01:
And I think that's very illustrative of why You need to look at each deal. And at least in my experience, and I think sort of the conventional understanding of capital versus independent contractors, contractors don't contribute capital.

[00:07:53] Speaker 04:
Did your client say that he actually worked on that deal?

[00:07:58] Speaker 01:
I believe there's evidence in the record that he did. And so there's a dispute. Mr. Condrup says the reason he wasn't paid is he didn't work on it. Now, I would note, undermining that assertion by Mr. Condrup, is there are a host of deals, even deals where Mr. Van Der Rohe got paid in excess of several hundred thousand dollars, where Mr. Condrup agreed his work was limited. So there's nothing in the record where anybody's saying, well, you did work, but you didn't do very much work.

[00:08:29] Speaker 01:
You're obviously not going to get one third of the results. Mr. Condrup says on Trail Likes that the reason he didn't pay Mr. Vanderell is because he didn't work. Mr. Vanderell says the reason we didn't is during COVID, as you might imagine in a deal-making industry, deals dry up during COVID in 2020.

[00:08:52] Speaker 01:
And the testimony was we had discussions about which deals, you know, when to do distributions because of COVID. And there's testimony by Mr. Vandara in the record. He says, I said, I'm willing to forego tri-lakes, but we need to call ourselves all square in the capital contributions. But we what? But we need to be all square on the capital contributions, referring back to that statement from the March 2013 framework. Okay.

[00:09:19] Speaker 04:
I'm sorry, but we need to be all square, meaning that he expected it to be credited toward his capital contributions?

[00:09:25] Speaker 01:
Correct. And admittedly, this was a very informal business arrangement, which I think is quite clear from, you know, sort of all the documents. There was an acknowledgement, hey, you need to square up on the capital contributions. And then, you know, roughly seven years later, there were still occasional conversations about squaring up on the capital contributions. They didn't call it capital contributions. They called it initial startup costs. But I think economic substance is the same. And Mr. Vanderawe, recognizing that he still had that ongoing obligation under the 2013 framework, said, I will forego this one-off bit of compensation for this one deal, but we are good on capital.

[00:10:08] Speaker 01:
And Mr. VanderWaal's testimony was, Mr. Condrip said, that's fine.

[00:10:12] Speaker 03:
Council, could we just switch gears for a minute? Let me ask you, if the payments were reported to the IRS on Form 1099 and not on K-1, doesn't that cut against an inference partnership?

[00:10:32] Speaker 01:
I think it cuts against the trier fact at trial, reaching that result. I don't think at this procedural posture, Rule 56, that you can say tax returns, well, that's dispositive. And the reason is the language of Section 2021 of the UPA. In that statute, the Colorado Legislature made a policy choice. The policy choice was we are going to find that there's a partnership, quote, whether or not the persons intend to form a partnership.

[00:11:04] Speaker 01:
That's a policy choice. That's part of the Uniform Partnership Act. Correct, Your Honor. It's sort of the lead statement about how you form a partnership. And just as a practical consequence, if courts were to routinely find, well, you filed a tax return that doesn't recognize the partnership, it would essentially read out of the statute, from my perspective, any practical ability for a partnership to be formed without the parties intending to do so.

[00:11:40] Speaker 01:
I hope that... Sorry, go ahead.

[00:11:44] Speaker 03:
Different question. You, at one point, I think, in your briefing, referred to the breach of contract claim as an alternative.

[00:11:54] Speaker 03:
If we agree with you on the partnership claim, or at least that there was summary judgment on the summary judgment ruling, in other words, that it should go to trial, what do we do with your contract claim?

[00:12:11] Speaker 01:
This is, Your Honor, I think you let that persist as well. And this is not an election of remedies type situation where you have to make the decision in advance. We have a somewhat unique situation. I mean, I think both parties have tried really hard to find relevant partnership cases that have these facts. And this is a bit of a sui generis sort of one-off type situation. But under these facts, we have essentially almost agreement that there was an agreement in March 2013.

[00:12:41] Speaker 01:
Mr. VanderWaal has said that from the beginning. Mr. Kondrup conceded that in his written discovery response. So the question is, how does the trier of fact deal with the fact that there's an agreement? Is this an agreement attended with some of the other partnership-type stuff, such as sharing in control, sharing in the risk of loss, et cetera? Well, if yes, then there's a partnership. If no, then I think the trier of fact would then consider, well, Everybody agrees, you know, if it's not a partnership, there's not really a third option other than contract.

[00:13:14] Speaker 01:
So I think if the court were inclined to reverse on partnership, the appropriate remedy would be to reverse on contract as well, because you still need to have the trier of fact decide what this all means in the context of the party's conduct.

[00:13:29] Speaker 00:
I've got some follow-up on that.

[00:13:33] Speaker 00:
So as I understand it, you're basically saying, well, first of all, let me address that point. Your client testified that this was not, there was no contract. This was not an independent contractor relationship. Isn't that right? Or that there was no contract.

[00:13:52] Speaker 01:
I.

[00:13:54] Speaker 01:
Yes, but I think there's important context that is missing there if you look at the actual definitions.

[00:13:58] Speaker 00:
Well, didn't he have to basically say that in order to preserve his partnership claim? It was either or. I think that's right. This is an alternative argument. You can't have both.

[00:14:07] Speaker 01:
To get at what I think the court is alluding to, if he were to say, yep, there's a contract, we would have been having the opposite argument, where they just said, you said there was a contract, therefore they can't be a partnership.

[00:14:17] Speaker 00:
Of course, right. But now he wants to say, if there wasn't a partnership, there was a contract. And that's entirely inconsistent with his testimony. But I've got a separate question beyond that.

[00:14:28] Speaker 00:
If I'm understanding correctly, we're all talking about the same payments here. These are the payments that...

[00:14:33] Speaker 00:
What he now claims are partnership distributions, or were partnership distributions all these years, are the same payments that were being made not to him, but from...

[00:14:46] Speaker 00:
catalyst to DV Consulting. And they were made for years and years and years.

[00:14:54] Speaker 00:
They were made to his subchapter S corporation, DV Consulting. DV Consulting then paid him a salary as subchapter S corporations do. They were paid as an independent contractor without a contract, it appears. And that happens. But How is it that, and they're all, everybody agrees. Catalyst, everybody agrees they were, you know, they reported to the IRS as independent contractor payments. So I don't know how you recharacterize that, these same funds that everybody, including Mr. Vanderaar, treated as independent contractor payments.

[00:15:34] Speaker 00:
How do you recharacterize those same funds now as a partnership distribution?

[00:15:38] Speaker 01:
Okay. Appreciate the question, Your Honor. I would say I would answer it in sort of two parts very briefly.

[00:15:43] Speaker 00:
Especially considering that the statute accepts payments to independent contractors, even though there's a sharing of gross profits as a partnership.

[00:15:55] Speaker 01:
Well, the two part is obviously, and I recognize we're in federal court, but it's a question of state law that we're dealing with. So I don't think there's any preclusive effect, and certainly nothing has been cited that Well, tax returns were this way, therefore that's binding.

[00:16:08] Speaker 00:
Oh, but it's a big, big factor when everybody, including your client, treated them that way.

[00:16:14] Speaker 01:
I agree it's a factor, Your Honor.

[00:16:15] Speaker 00:
The payments weren't made to him.

[00:16:18] Speaker 00:
And I don't think there was ever, there was not only no partnership agreement, but certainly no partnership filings. Nobody told the IRS there was a partnership. There were no books and records for the partnership.

[00:16:30] Speaker 00:
There was nothing, no assets, no nothing.

[00:16:32] Speaker 01:
And I think it turns on the procedural posture. So I don't dispute, in fact, we said in our briefing that it is certainly relevant in resolving the genuine factual dispute, the tax returns. I have no doubt that my colleagues will at trial would heavily feature that just as they have in the appellate briefing. But the question is one of state law.

[00:16:51] Speaker 00:
The payment to his subchapter S corporation that then turned around and paid him a salary, which it's required to do. I don't think that the – I think that – He didn't declare any of this as partnership income.

[00:17:02] Speaker 01:
The payment of salary, Your Honor, actually – and there's nothing in the record saying that because of the way that Mr. Vandergaal treated this for his tax purposes, that he somehow benefited. The payment of subchapter S salary actually has the effect of increasing and not decreasing his tax burden.

[00:17:20] Speaker 00:
Because... I'm not talking about his tax burden. I'm talking about the way he treated it consistently for all these years. As a payment from one company to another company that then paid him a salary.

[00:17:34] Speaker 00:
And that company was an independent contractor.

[00:17:36] Speaker 01:
I would say, Your Honor, in order, the statute must guide the analysis here, and in order for that language, whether or not the person's intended to form a partnership, must control at this procedural posture. In other words, he may have done the stuff that forms a partnership, but not realized the legal impact of what he was doing.

[00:17:58] Speaker 00:
It only controls if you haven't established that there is an independent contractor relationship. If there's some question of fact about that, and I guess that's what I'm really asking you, is how is there possibly a question of fact about that under these circumstances?

[00:18:12] Speaker 01:
Because the statute doesn't say to look at the tax filings. The statute says, were they sharing profits? Were they sharing in control? And were they sharing in the risk of loss? And I think there's voluminous evidence in the record from which the court could conclude, yeah, there's a genuine factual dispute on these issues.

[00:18:34] Speaker 04:
Let me ask, what relief are you seeking and how does it differ under the independent contractor theory and the partnership theory? For example, are you disputing that your client was working together with his client, that all the money was paid properly, but the partnership continued and you didn't get your share of the, when I say you, I'm referring to your client, you didn't get your share of the profits after he terminated you, and if it's an independent contractor relationship, why wouldn't that end as soon as he fires you?

[00:19:28] Speaker 01:
I see I'm quite a bit over. I will try to very succinctly answer.

[00:19:33] Speaker 01:
The legal remedies differ. And so if it's a partnership, there were some related claims for breach of fiduciary duties that would result in damages. But if there's a finding of partnership... In terms of the termination, was the violation of fiduciary duties? Essentially, well, there's been no assertion that there's a termination. There was only an assertion that there never existed a partnership in the first place.

[00:19:57] Speaker 04:
But there was a point when the relationship was terminated, whatever you call it.

[00:20:03] Speaker 01:
I would very respectfully disagree, Your Honor. Nobody has said that there's been no suggestion anywhere below or here that Even if there is a partnership, it's dissolved. And I think that goes to the difference in remedies. If the court is to remand on partnership, the primary finding is one of declaratory relief, which means today, in May of 2026, Mr. VanderWaal remains a partner present tense. And, you know, this business is one that largely runs... You get half or a third of the profits.

[00:20:35] Speaker 01:
Correct. What if it's an independent contractor relief? And here I would refer the court again to the expert testimony by Mr. Wester that we noted in both our opening brief and our response brief. If it's a contract, obviously goodwill and present tense ownership doesn't persist. However, even under Mr. Condrup's view of the contract, which is there is a contract where he does work on a case, he gets 33% of the net fee.

[00:21:03] Speaker 01:
There are deals that Mr. Van der Rohe worked on that remain unpaid. And, for example, in both... Sorry, we don't need examples. I was just curious about... It does vary depending on the relief. Thank you, Your Honor.

[00:21:17] Speaker 04:
Thank you, Counselor.

[00:21:32] Speaker 02:
May it please the court. My name is Brent Owen, and I represent the appellees.

[00:21:37] Speaker 02:
On the partnership claims, there are several independent reasons why this court should affirm summary judgment in my client's favor on all claims. First, CRS 764-202-3C, there is no partnership if payment was for services as an independent contractor. DV Consulting received payment as an independent contractor on 1099 independent contractor forms. Second is CRS-764-202. There is no partnership if the business was formed under another statute.

[00:22:09] Speaker 02:
Catalyst Strategic Advisors LLC, a Colorado LLC, carried on the only business at issue. It rented the office space in Colorado Springs. It employed the people who worked in the business. It signed the engagement letters for all the business activities. It carried the risk of nonpayment. Mr. Vanderaal undisputedly did not own any portion of Catalyst Strategic Advisors LLC, and DV Consulting, not Mr. Vanderaal, received all payments. Third, there's the undisputed requirement that partners share liability for losses.

[00:22:43] Speaker 02:
That is absent here.

[00:22:45] Speaker 02:
Mr. Vanderaal never agreed to go in the red. He bore no risk of loss for two reasons. Once, because DV Consulting received payments as a 1099 independent contractor with no ownership in Catalyst, And again, because DV Consulting, as Judge Moore at questions referred to earlier, is a distinct Connecticut corporation.

[00:23:07] Speaker 02:
On the alternative breach of contract claim, the court also properly granted summary judgment. And the briefing, I think it's important to clarify here, the reply brief suggests that we have recasted the claim in our argument. So I wanted to point the court to the appellate record page 57. It's paragraph 117.

[00:23:27] Speaker 02:
of the fifth claim for relief. Because the question isn't can we dream of a contract in our appellate brief? The claim that they pursued was how to contract with contract with contract and or with cattle strategic advisors LLC pursuant to which Vander Isle performs certain services in exchange for one third of the profits of the business of cattle strategic advisors. They didn't make a claim that they were entitled to payment for some work for some project. The claim that was prosecuted below And the claim that the district court granted summary judgment on was whether or not they were entitled to one-third of the profits of Catalyst strategic advisors.

[00:24:03] Speaker 02:
The briefing sort of sidesteps this to try and create, suggest there's some fact issue on the breach of contract claim. But that's what the summary judgment record was dealing with. That's what Judge Moore was grappling with when he had this.

[00:24:16] Speaker 02:
Just to address a few points that came up in the questioning.

[00:24:20] Speaker 02:
At the start of the argument, my friend on the other side referred to Clients and the payments to the clients the clients that are being referred to Undisputedly our clients of catalyst strategic advisors LLC not a separate and distinct joint advisory services business Not something that's separate apart from catalyst catalyst sign the engagement letter Catalyst was to did the work catalyst was the person was the entity that needed to sue if there was non-payment and in fact there's record evidence that did happen and

[00:24:55] Speaker 04:
We started asking some questions then.

[00:24:58] Speaker 04:
What was the alleged partnership? Who were the partners alleged in the complaint?

[00:25:04] Speaker 02:
The complaint alleged that it was actually a counterclaim. So Catalyst Strategic Advisors LLC sued. And there was a counterclaim, and the only allegation of the only partnership that existed was the individuals. Mr. Vander Al personally, Mr. Condra personally.

[00:25:19] Speaker 04:
So what difference does it make how each one characterized its own business or his own business? If the partnership, if the alleged partnership is between two people, where one person decides, you know, I'll take my money through a subchapter S, or I'll take my money this way. Why is that... Why is the partnership claim prohibited by this Colorado statute that says if the arrangement between these two people is...

[00:26:00] Speaker 04:
defined under some other entity, such as an LLC, corporation, whatever.

[00:26:09] Speaker 04:
Why does it matter? I'm sorry, how does that apply in this circumstance, when the alleged partnership is between two individuals?

[00:26:19] Speaker 02:
And, Your Honor, I think the starting point for that analysis, there is some Tenth Circuit case law that I'd like to get to, but really where you start that analysis is in CRS-764-202. So that's a statute. Could you say that a little more slowly? Sure, Your Honor. CRS-764-202. That's a partnership statute. And subsection 1 says that the association of two or more persons to carry on as co-owners of a business for profit forms a partnership. So respectfully, Judge Hartz, your hypothetical ignored, and the other side's argument essentially ignores the actual legal structures here.

[00:26:58] Speaker 02:
Catalyst Strategic Advisors LLC registered with the Colorado Secretary of State as an LLC.

[00:27:03] Speaker 04:
Did the plaintiff or the counter plaintiff have any interest?

[00:27:11] Speaker 04:
any ownership interest in Catalyst? No, it is undisputed. So Catalyst was not the arrangement between the two individuals. Well, but there's no arrangement that exists between the two individuals because... You agree that there's sufficient evidence of sharing of profits? I disagree. Well, you disagree that there's not even sufficient to overcome summary judgments?

[00:27:35] Speaker 02:
There's not evidence of sharing profits because there's no evidence at all that Mr. Van der Rohe and Mr. Condrup shared profits.

[00:27:40] Speaker 04:
The statute doesn't anticipate... What about this spreadsheet that shows when all these business relationships with clients, that they split the profits with respect to that work?

[00:27:59] Speaker 02:
But there's not a dollar... That was split. The partnership statute asks the two persons who share. Here, the money was paid to Cattle Strategic Advisors LLC, a distinct Colorado corporation that Mr. Vanderhaan nor DV Consulting.

[00:28:14] Speaker 04:
And your client decides, I'm in this partnership, but I want my side of the partnership to be structured as a LLC. And he says, I'd like my share of the partnership to be constructed as a whatever. That's...

[00:28:33] Speaker 04:
In that hypothetical, you're on. They can do it any way they want. I could be your partner, and we say, we're going to have a business together and share profits, and we'll conduct it.

[00:28:46] Speaker 04:
Your side of the business will be an incorporated entity, and you will be the one who the clients pay, but I'll get my one-third. You can have a partnership like that.

[00:28:57] Speaker 02:
In the partnership you've just described, There would be an entity that we would need to share losses in.

[00:29:03] Speaker 04:
The ownership interest.

[00:29:05] Speaker 02:
But there's not a legal entity in the record.

[00:29:08] Speaker 04:
The only entity that... I mean, that's the whole point of the Uniform Partnership Act, is you don't need to have an entity. They don't even need to think that they're a partnership. That's why the tax returns are evidence, but they're far from dispositive.

[00:29:25] Speaker 02:
Well, I disagree, Your Honor, that you don't need any entity at all. I don't think the partnership statute is written to be a gotcha. I don't think it's written so that you can structure your arrangement, create a Colorado LLC, Cattle Strategic Advisors LLC, and operate...

[00:29:48] Speaker 04:
If the LLC had two members and it was the two people arguing about this, then that would be their entity. But they didn't. Only one created that entity and that's how he wanted to have structured his side of the partnership.

[00:30:06] Speaker 02:
Except for that, the statute assumes that the profits are going to the entity you're describing. You can't ignore. And I direct your honor to subsection two.

[00:30:17] Speaker 04:
The entity is the partnership. They're saying there's an entity. They, in practice, set up this arrangement where they would have clients. They both work for these clients.

[00:30:31] Speaker 04:
The client would pay money to this particular entity that one of the two partners created, and that partner would share a third of those profits with the other person, and that's a partnership.

[00:30:43] Speaker 03:
Could I just throw one other thing in here?

[00:30:50] Speaker 03:
I'm going back to the framework emails, which are between these two individuals, and there's reference there about distributions one-third, two-thirds, and it's two-thirds to JK.

[00:31:04] Speaker 03:
Let's say two-thirds to Catalyst. It doesn't say two-thirds to whatever the other entity is, Condrip Enterprises. It says two-thirds to JK. I mean, why doesn't that at least raise a factual issue about partnership status here?

[00:31:20] Speaker 02:
For several reasons, Your Honor. First, there's not evidence in the record that there was a two-third distribution to Joseph Condrip, and there's not factual evidence in the record that there was a distribution to Mr. Vanderoen.

[00:31:32] Speaker 02:
The partnership...

[00:31:34] Speaker 02:
If you allow a structure to exist just on allegations, on essentially just, I'm going to say that this partnership exists.

[00:31:41] Speaker 03:
Well, these aren't allegations. There weren't allegations in the emails. They're the emails.

[00:31:46] Speaker 02:
But there's not evidence that profits were shared between those two individuals. The statute anticipates that you have two individuals who are sharing the profits. And yes, to Judge Hart's question, you could have a partnership, and LEF is a case where this happened, where there were entities used and then they agreed to share the profits and losses, and then the evidence in the record was that they had, in fact, shared the profits and losses through those entities. That doesn't exist here. There is not any... It doesn't exist here?

[00:32:14] Speaker 04:
There is no... There's no evidence that the counter... counterplaint of... I don't know how to... got a third of the profits from the work that two of them did.

[00:32:30] Speaker 02:
No, Mr. Vanderov owned... The spreadsheet doesn't show that? It doesn't, because DV Consulting is a distinct Connecticut corporation. You create a separate corporation... But it's a pass-through. I mean...

[00:32:44] Speaker 02:
It received a PPP loan. It paid salaries. It took deductions. It's not – if you flipped the – But it is a pass-through.

[00:32:51] Speaker 03:
Isn't that what an S corporation is? But if you flip this on its head and you – Counsel, do you want to answer the question, is it a pass-through or is it not? If you want to say yes or no, fine, and explain, but is it or isn't it?

[00:33:03] Speaker 02:
No. It had its own employees. It took a PPP loan.

[00:33:05] Speaker 03:
That's not the way an S corporation works.

[00:33:08] Speaker 02:
I'm – I am not an expert in Connecticut S-Corp tax law, but this corporation, DV Consulting, had its own employees. It had other clients that it received revenue from. So I respectfully don't know precisely what you mean by pass-through, but it was its own corporate entity.

[00:33:27] Speaker 03:
Let me ask you this. District Court, in its summary judgment order, said the framework emails are not necessarily inconsistent with the defendant's position.

[00:33:39] Speaker 03:
Now, why doesn't that alone show there's a tribal jury issue? There is no such thing as a not inconsistent summary judgment standard. I mean, wasn't that error by the district court or a misstatement of the summary judgment law?

[00:33:54] Speaker 02:
I don't believe so, Your Honor.

[00:33:55] Speaker 03:
The summary judgment standard was- Where is there a not inconsistent test? Where are we going to find that in any judicial opinion for summary judgment, other than this one?

[00:34:06] Speaker 02:
Well, you may not find that exact language, but the substance of the law is that the person who's asserting that a partnership exists bears the burden of proving it. So when the summary judgment record doesn't have evidence that meet the baseline, what the statute requires, then there's not evidence in the record to have a tribal issue of fact.

[00:34:25] Speaker 03:
Well, again, maybe I'll...

[00:34:29] Speaker 03:
This is a slightly different direction, but in the initial order on the Rule 12C motion, the district court relied on emails to deny the motion.

[00:34:40] Speaker 03:
Why shouldn't the court have relied on the same emails to deny summary judgment?

[00:34:44] Speaker 02:
Because in the context of 12C, you're taking the allegations as true. And the allegations in the complaint were that these two individuals had shared profits. When we got to the summary judgment record, that evidence doesn't exist. And the partnership statute... Is that what the district court said?

[00:35:00] Speaker 03:
I didn't see the district court explain that, how it reconciled its treatment of the framework emails.

[00:35:09] Speaker 02:
Well, the district court, I don't believe that the district court needed to address its 12c ruling when it now had the full factual record. On a motion to dismiss standards, you get essentially every benefit of the doubt. Now he had the factual record.

[00:35:24] Speaker 03:
Well, you get some benefit of the doubt at summary judgment, too, if you're the non-moving party.

[00:35:29] Speaker 02:
You do. You do. And once we met our burden as the moving party, under Reed, under the Colorado case law, he had the duty to prove that there was a disputed material factual issue. And there wasn't a disputed material factual issue. No, if you go back to the partnership statute I mentioned earlier, 764.202, it anticipates that persons are sharing profits. If you jettison, if you just say I'm going to ignore, these two corporate forms, then you inject complete uncertainty. What certainty do I have?

[00:36:00] Speaker 02:
If I go create a Colorado LLC, I structure my business in this certain way. But someone can just say, well, if you look at the numbers, then maybe I could kind of get to where I might indirectly have gotten a share of the profits. It's not that loose.

[00:36:14] Speaker 04:
It's the Uniform Partnership Act that creates the uncertainty because it doesn't care about form. It cares about substance. Let me ask you it this way.

[00:36:23] Speaker 04:
They work for a client.

[00:36:26] Speaker 04:
client pays money there's a profit of x dollars two-thirds of the money ends up in the pocket of one of the alleged partners and one-third of that profit ends up in the pocket of the others it goes through various entities but isn't that what happened here didn't two-thirds of the money that your client Business created, two-thirds of the profit went into his pocket, even though it went through some entities, and didn't one-third of that profit end up in an opposing party's pocket?

[00:37:02] Speaker 04:
Am I wrong about that? Because if that's what happened, I think that's what the Uniform Partnership Act cares about.

[00:37:08] Speaker 02:
And, Your Honor, I'm over my time for the answer. We went over for this. You're entitled to time. Two responses, Your Honor. No, I don't think that that's what the undisputed facts show. There was a discussion at the start.

[00:37:20] Speaker 04:
Not undisputed facts, but there is evidence of that. I don't... They don't need to prove the undisputed facts.

[00:37:27] Speaker 02:
That's fair, Your Honor. I think the evidence was that there was payment on a deal-by-deal basis. But more fundamentally, what you describe, the partnership statute, doesn't... I think the structure that you're describing would eliminate subsection... Two, the partnership statute doesn't say any time there's any reference to profit because that would be too amorphous. It says if you formed under a provision that isn't the partnership statute, you're not a partnership. And if you're paid as an independent contractor.

[00:38:00] Speaker 04:
Am I correct? Maybe I've got the law all wrong. But tell me if I've got the facts wrong.

[00:38:07] Speaker 04:
or at least facts that are supported by the evidence, maybe it would be ultimately a trap.

[00:38:15] Speaker 04:
Of the money made in this work, didn't two-thirds of the money end up in your client's pocket and one-third of the profit end up in their pocket?

[00:38:27] Speaker 02:
No, Your Honor. There was a per-deal calculation. There's an admission.

[00:38:33] Speaker 04:
Where did the money go?

[00:38:35] Speaker 02:
Well, the money was received.

[00:38:37] Speaker 04:
Two-thirds of the profit went where?

[00:38:40] Speaker 02:
Well, Catalyst Strategic Advisors LLC received all the revenue for all the work that was performed.

[00:38:45] Speaker 04:
And after Catalyst Strategic LLC got the money, where did it pass on the money?

[00:38:53] Speaker 02:
Catalyst Strategic Advisors LLC is owned by a Colorado corporation, KEI. Yeah.

[00:38:59] Speaker 02:
And it paid employees, and it paid for the cost of its rent and its overhead and its business out of that money.

[00:39:05] Speaker 04:
And that money went to your client?

[00:39:09] Speaker 02:
Yeah, presumably.

[00:39:10] Speaker 04:
Eventually, yes. Okay. And where did the money that went to the one-third share, didn't that end up in the pocket of the opposing party?

[00:39:21] Speaker 02:
No, Your Honor, because it was undone on a per-deal basis. But on each deal? No.

[00:39:27] Speaker 02:
No, and you discussed at the beginning that there was at least one deal that undisputedly there wasn't payment on, and they've tried to say after the fact that seven years later that's a return of capital, but that isn't a disputed factual issue. That isn't what the partnership statute anticipates.

[00:39:44] Speaker 02:
Thank you, Your Honor. I appreciate your time. Interesting.

[00:39:46] Speaker 04:
Okay, thank you, Counsel. I'm going to give you 30 seconds, so it's got to be something really important.

[00:39:56] Speaker 01:
Your Honor, I'll make it work in 30 seconds.

[00:39:58] Speaker 01:
First, I would refer the court to Appendix Volume 5, 1215.

[00:40:04] Speaker 01:
That's the fact matrix below.

[00:40:08] Speaker 01:
Statement of Material Facts Number 42 describes in detail the same spreadsheet we've been talking about, and you'll see testimony in the record about how that spreadsheet was called Dan Financials. They maintain a whole separate set of books that was adjusted to account for this profit. Second point, particularly Judge Hartz's and I think Judge Matheson's points, the statute expressly recognizes the general concept that substance matters not form. Section 302 says you can hold partnership property in other entities.

[00:40:42] Speaker 01:
Thank you, Your Honor.

[00:40:45] Speaker 04:
Yeah, good. No, no, no.

[00:40:48] Speaker 00:
Judge Moritz has a question. I guess you keep talking about these as profits, and I think that's where it's getting confusing. It's not a problem if you refer to them as profits. That doesn't necessarily mean if there's a sharing of profits, it's a partnership. Because the statute itself says it's not a partnership if profits were received in payment for services as an independent contractor.

[00:41:19] Speaker 00:
So you can call them profits, and you can treat them as profits, and you can show spreadsheets for profits, but the question under the statute, under the law, is whether those payments were received as, whether those profits were received as payments by an independent contractor. And what I was trying to suggest earlier is that's the only evidence we have here, two They both have these separate corporations that are receiving these payments. And yes, they may be profits, but the profits were made in payment for all those years.

[00:41:53] Speaker 00:
And that's the problem that I'm struggling with is call them profits, show them as profits, treat them as profits. but weren't those profits made as payments between two separate corporations?

[00:42:06] Speaker 01:
Your Honor, I apologize for not understanding the import of Your Honor's questions before.

[00:42:11] Speaker 00:
Well, I admit I wasn't stating it like that, but I'm getting confused by all the references to profits, and I don't think that's the deciding factor is whether they shared profits, whether those profits were payments.

[00:42:25] Speaker 01:
Two very brief responses. As a factual matter, I think there is indeed a factual dispute about how this set of conduct, et cetera, could be characterized. Second, and more importantly, it's possible that, I don't think there's a disconnect, but profits actually matter in two different places under Section 202. It matters explicitly under Subsection 3, which Your Honor has referred to several times, where it says, well, there's a presumption of profits if, and then there's not a presumption of profits if something else. It actually matters more critically in one much more important place, and that's under 202.1.

[00:43:02] Speaker 01:
The language carrying on as co-owners, the model, I mean, it's persuasive. It's certainly not binding authority on this court. But the model committee who put it together said, what is carrying on as co-owners? It has two aspects. Aspect number one is, did you share profits? And so I think it does matter in two different places. I think because of that structure, there is a factual dispute that would need to go to trial. And you're referring to the comments by the Uniform Commission or whatever it's called. And I always butcher exactly what it's called, but it's cited in our brief.

[00:43:34] Speaker 01:
And if we look at the Uniform Partnership Code, there will be little footnotes. Yes, Your Honor. And the codification is different, but it is indeed Section 202 under the model UPA. Thank you. Thank you, Your Honor.

[00:43:47] Speaker 04:
Interesting.

[00:43:49] Speaker 04:
Thank you very much, counsel. Case is submitted. Counselor excused. We've got one more to go.