Holmes v. Lerner
California Court of Appeals
88 Cal. Rptr. 2d 130 (1999)
Patricia Holmes (plaintiff) and Sandra Kruger Lerner (defendant) orally agreed to start a cosmetics business called Urban Decay. David Soward (defendant) was the general partner of “& Capital,” a venture capital partnership comprised of Soward, Lerner, and Lerner’s husband. Soward agreed that & Capital would provide $500,000. Lerner and Holmes did not contribute. Holmes regularly attended informal board meetings, participated in the creation of products, and worked in the warehouse. In interviews and press releases, Lerner said the business was Holmes’ idea. Holmes asked for “something in writing,” but no allocation of share had been agreed upon. When Holmes requested a copy of the articles of incorporation, she received only the first two pages. Holmes was left off an organizational chart but told she was a “director.” Soward offered Holmes a one percent share of the limited liability company that had been formed. The situation worsened until Holmes was barred from Urban Decay. Holmes sued Lerner for breach of the oral partnership agreement and Soward for interference with the contract. At trial, experts valued the company between $2 million and more than $6 million, and one expert projected sales of $52 million by 2003. Lerner then denied that Holmes created or had any official role with the company. The jury awarded Holmes compensatory and punitive damages above $1 million. After a motion for judgment notwithstanding the verdict was denied, Lerner and Soward appealed to the California Court of Appeals.
Rule of Law
Holding and Reasoning (Marchiano, J.)