Holmes v. Lerner

In Holmes v. Lerner (1999) 74 Cal.App.4th 442, the court found that the parties had formed a partnership, even though there was no formal agreement to share profits. The parties in Holmes devised a concept and product for a business, they agreed to form a company and hire employees, a limited liability company was formed and start-up money raised. Unbeknownst to plaintiff, defendant and the CEO of the venture capital company had structured the new company so that plaintiff had no ownership interest or profit sharing rights. Knowing that plaintiff had no financial interest in the company, defendant nonetheless permitted plaintiff to participate in numerous board meetings and to spend a substantial amount of time at the warehouse overseeing the product's manufacture. Holmes did not hold that these facts created a partnership as a matter of law, but only that the evidence was sufficient to support such a finding. ( Id. at p. 459.)