Verbal partnership agreement in cannabis business leads to dispute. $662K. Los Angeles County.
Partners in cannabis retail and growing operation dispute terms of verbal agreement after business improves and a buyer for the business is found.
- Case Name: Matthew Dunn v. Terrence Mumford, Mr. T's Collective, LLC
- Court and Case Number: Los Angeles Superior Court / 19STCP02787
- Date of Verdict or Judgment: Saturday, October 30, 2021
- Date Action was Filed: Monday, July 01, 2019
- Type of Action: Breach of Contract, Breach of Fiduciary Duty
- Judge or Arbitrator(s): Hon. Mel Red Recana
- Plaintiffs: Matthew Dunn
- Defendants: Terrence MumfordMr. T's Collective, LLC
- Type of Result: Jury Verdict
- Gross Verdict or Award: $662,075
- Net Verdict or Award: $662,075
- Award as to each Defendant:
$662,075 against Defendant Mumford.
- Economic Damages:
- Trial or Arbitration Time: 13 days
- Jury Deliberation Time: 4 hours
- Jury Polls: 12-0
- Attorney for the Plaintiff:
Law Offices of Jessica Ponce by Jessica Ponce, Los Angeles.
- Attorney for the Defendant:
Law Office of Barry L. Greenhalgh by Barry L. Greenhalgh, Monterey Park.
Facts and Background
- Facts and Background:
Prior to 2018, defendant Terrence Mumford was a holder of a cannabis micro-business license, permitting retail sale of cannabis products and the cultivation of cannabis at a business location on Crenshaw Blvd. in Los Angeles. By late 2017, Mumford’s retail operation lacked customers and the cultivation operation had ceased.
- Plaintiff's Contentions:
Plaintiff Matthew Dunn contended that in early January 2018, he and Mumford verbally agreed to go into business together to develop the retail sales business. He and Mumford agreed that Dunn would take over the day-to-day management of the retail business, provide capital for the business in a minimum of $50,000, stock the shelves with a variety of cannabis products, and hire the employees for the operation. In return, upon assuming the management, Dunn would become a 30% owner of the business, with Mumford providing the micro-business license and the lease of premises for the operation. The parties further agreed that, when the business became profitable to a degree mutually agreeable, they would sell the business and divide the profits in accordance with their ownership percentages, and that Dunn would receive an additional amount equal to the amount of his capital investment into the business.
Promptly upon said verbal agreement, Dunn undertook the management of the business, invested $83,295, and eventually made the business profitable with sales reaching 100 patients per day. Dunn contacted a broker, who found a buyer, who agreed in January 2019 to buy the business for $1.5 million. Mumford signed a memorandum of understanding, but backed out of the deal. Several weeks later Mumford found another buyer on his own, to whom he sold the business for $1.6 million, payable in installments, $1.2 million upon signing and $400k when the license transfer received governmental approval. Mumford received the $1.2 million but failed to pay Dunn his portion of the proceeds. As of the time of trial of the case, the transfers were yet to be approved by authorities.
Dunn and Mumford also had a second oral agreement, for the cultivation of cannabis, under which Dunn would operate this business as well, and receive a 30% share of the harvest. Dunn contended that Mumford kept the entire harvest, not paying any part to Dunn. Dunn contended that the harvest had a value of $329,266. On the retail agreement, Dunn claimed damages of $563,295 (30% of the $1.6 mil., plus $83,295, the capital investment amount). On the cultivation agreement, Dunn claimed damages of $98,780. Grand total damages claimed: $662,075.
Dunn’s causes of action included both damage and equity claims. Damage claims consisted of breach of contract, breach of fiduciary duty, promissory estoppel, and restitution of unjust enrichment. Equity claims consisted of dissolution of partnership, constructive trust, accounting, and injunctive relief. The court reserved to itself the adjudication of the equity claims. Plaintiff’s counsel asked the jury to “put honor back into a handshake.”
- Defendant's Contentions:
Respecting the retail partnership agreement, defendant contended that no contract had been formed because the terms were too vague and uncertain. He denied ever agreeing to give Dunn a percentage share of the business and contended that he would never enter into a business agreement involving a large sum of money without a written agreement. On the cultivation claim, Mumford claimed that he gave Dunn a 30% share of the harvest.
Injuries and Other Damages
Loss of share of the proceeds of the sale of the business. Loss of share of the cultivation harvest.
- Special Damages Claimed - Past Lost Earnings: $563 295 on retail agreement, $98,780 on cultivation agreement.