Sanjiv Mehra, a co-founder and co-CEO of EOS Products, best known for its multi-colored, spherical lip balms, filed a lawsuit in Delaware Chancery Court, alleging that Mehra’s business partner, Jonathan Teller, is trying to strip him of his economic rights to the business, in breach of Teller’s fiduciary duties and contractual obligations.
EOS is a popular brand of lip balms, shaving cream, and lotions that markets to millennial consumers. The business was a successful startup, now employing about 150 people with offices in New York, London, Berlin, Shanghai, Mexico City, and Stockholm. EOS was endorsed by celebrities including Miley Cyrus, Demi Lovato, and Britney Spears and later got negative publicity from class-action lawsuits claiming that the lip balm caused a rash.
Mehra’s lawsuit alleges that Teller’s actions were motivated by Teller’s deteriorating personal financial situation and that Teller used pretextual, sham corporate actions to try and squeeze Mehra out of EOS. The lawsuit alleges that Teller put his personal desire for cash ahead of the business’s liquidity needs and, unhappy with the necessary financial controls Mehra put in place to keep the business afloat, is now attempting to gain control over Mehra’s share.
“As we allege, Mr. Teller, in violation of his fiduciary duties and contractual obligations, concocted a ‘deadlock’ between himself and Mr. Mehra, purported to dissolve EOS’s parent company, and unlawfully barred Mr. Mehra from EOS’s office, all as part of a scheme to deprive our client of his economic rights in the business he built,” said Mehra’s lawyer, Patrick Smith of Smith Villazor LLP. “Our client founded the business, and with his experience and effort, made it a success. We will aggressively pursue this case against Mr. Teller and those who assisted him in this scheme.”