Tuesday, March 02, 2021

Holistic Supplements v. Stark (Cal. Ct. App. - March 2, 2021)

On one side of this litigation you've got Brad Barnes.  Mr. Barnes opens a marijuana shop in 2005.  The business is run by an LLC, but for "legal reasons" Barnes doesn't want his name on the business.  In part because he "also owned a strip club, a bar, and an adult entertainment store in the same shopping center" as the marijuana business and didn't want anything illegal about the pot shop potentially tainting his other (more wholesome) enterprises.

So he gets David Gold to be the only one on the LLC, with Gold getting 10% of the profits in return for use of his name (and Barnes running the place and getting the remainder).

But then Gold gets tired of working with Barnes, plus the shop was raided by police in 2011 and Gold becomes worried about maybe getting arrested.  As a result, in 2014, Gold transfers the "name" on the LLC (the one shielding Barnes) to Christopher Stark, the other side of the present litigation.  Stark is a friend of Barnes and works at the strip club.  The arrangement is the same:  Stark's name is the only one on the business, and in return, he gets 10%, but Barnes runs the show and gets the 90%.

But in 2015, Stark gets tired of working with Barnes too.  So, allegedly, Stark tells Barnes' ex-wife, Jamie Kersey, that he too wants out.  So in 2015, there's a meeting between Barnes and Stark (on that, everyone agrees), and present at the meeting is the pot shop's corporate attorney, Robert Manuwal.  According to Barnes, Kersey and the attorney, at the meeting, the "name" transferred yet again:  Stark signs papers that transfers the LLC to Kersey.  There's a document with his signature on it.

But Stark testifies he was just signing checks and whatnot; that he didn't actually transfer the business, and that his signature was forged.

Which is against the weight of the testimony, it seems to me.  Plus conflicts with the fairly compelling facts that "[a]fter that night, Stark had no further involvement in the dispensary operations at the Canoga Park location. He never returned to pick up any assets, cash, marijuana product, or equipment. The day after the alleged transfer, Kersey met with dispensary employees to tell them about the change in ownership. Dispensary operations continued as normal."

But Stark had other plans. "Unbeknownst to Kersey and Barnes, Stark did not relinquish his ownership of the LLC. On September 2, 2015, he filed “Articles of Incorporation With Statement of Conversion” with the Secretary of State. The form listed Stark as the managing member of the LLC and purported to convert the LLC to Holistic Supplements, Inc., a corporation with Stark as the sole shareholder. The document listed Stark’s home address as the business address for the corporation."

Hence the resulting fight between Barnes (via his ex-wife, Kersey) and Stark about who really owns the business.

Stark wins below.  The Court of Appeal reverses.  In a battle between the strip club owner with various people fronting for him versus the strip club employee frontman for ownership of a marijuana shop that no one particularly wanted until after marijuana became legal.

We'll see who wins on remand for control of the Canoga Park marijuana business.