Partnership Formation: Urban Decay
Length: 1-3 Hours
Discipline: Business Administration
Level: Introductory (non-majors)
Author: Ninassi, Susanne
This problem is based upon the California court case: Holmes v. Lerner, 74 Cal.App.4th 442, 88 Cal.Rptr.2d 130 (1 Dist.1999). In that case, Sandra Lerner and Patricia Holmes met and became friends in 1993. Approximately two years later, they started a company “Urban Decay,” which initially produced nail polishes. Over time, Ms. Lerner started to edge Ms. Holmes out of the business. Ms. Holmes filed a lawsuit against Ms. Lerner claiming that Ms. Lerner breached the partnership agreement and that Ms. Holmes was entitled to a share of the profits. The problem of whether a partnership existed is presented in two stages. The first stage, which takes place on the very first day of class for the semester, presents a case based upon Holmes, outlines the problem, and asks informational questions. No additional information is provided to the student. The second stage presents the elements needed to create a partnership and then the students participate in role-play to determine if a partnership was created, based upon the student research. Assessment of student learning requires the students to submit a paper based upon their research to support their conclusions and through peer evaluations.