Joint Venture Dispute Over Profits

A recent Georgia Court of Appeals case demonstrates the risk of joint ventures failing to carefully define accounting rules in their joint venture agreement.  Two trade contractors teamed up to accomplish certain tasks on a job at a wastewater lift station at Fort Gordon.  A joint venture agreement provided for an equal split of the profits and losses. Unfortunately, the parties did not define “profit,” and particularly did not define what cost would be deducted in calculating profit.  They disputed in particular whether certain large payments to individuals and 15% overhead charges should be deducted in calculating profits.

One party presented the expert testimony of an accountant while the other did not.  The party presenting expert testimony asked the court to dismiss the other party’s claim because it was not supported by expert testimony of an accountant.  The trial court granted the motion and dismissed the claim.

On appeal, the Court of Appeals ruled that the trial court erred in dismissing the claim.  It recognized that expert testimony is required in certain circumstances to rebut another expert’s opinion.  However, this rule only applies in professional malpractice action.  In addition, the court could find no authority requiring the testimony of an expert, such as an accountant, in calculating profit. 

Even if the calculation was consistent with accounting practice, only a jury is entitled to determine the matter presented by the expert, including whether to give any weight to the testimony.  “It is well settled that the weight of credibility of opinion testimony, even expert testimony is a matter for determination by the finder a fact.”  

Thus, the trial court erred in dismissing the claim solely due to the absence of a rebuttal expert.  The court should have considered the parties’ testimony concerning their agreement concerning the cost to be deducted in calculating profit, with or without expert testimony.