SVES lost the first phase of the trial. Read closely, the decision is far narrower than the result suggests.
On July 27, 2026, Judge Stephen M. Murphy entered judgment against SVES. Any honest account of this case begins there.
THE ONE QUESTION ON TRIAL
Here is what he decided. Gap asked the court to split the trial in two, and in March 2026 the court agreed. The first phase would take up a single question: whether SVES could rescind the settlement agreement it signed on October 3, 2023, on grounds of fraud or duress. The trial ran seven days across April and May.
At the close of SVES’s case, Gap moved for judgment without putting on any evidence of its own, a step California procedure permits when the party carrying the burden of proof has finished and, in the judge’s assessment, has not carried it. The judge granted the motion.
WHY RELIANCE DEFEATED SVES
His reasoning turned on reliance. By the time SVES signed, its own warehouse had inspected over 7.3 million of the roughly 10 million units, and its own reports already showed millions more plus size goods than Gap had claimed. Both Fullum and Murciano, he found, had concluded before signing that Gap’s estimate was inaccurate. He did not find their testimony that they relied on it credible.
A company that already knows a statement is wrong cannot claim it reasonably relied on it. That is what defeated SVES.
The duress claim failed alongside it, no imminent financial ruin, months of negotiation, lawyers on both sides, and little evidence about the failed public offering.
A company that already knows a statement is wrong cannot claim it reasonably relied on it.
Q: WHAT DID THE JUDGE NOT DECIDE?
A: A great deal.
He made no finding that Gap’s 25 to 30 percent representation was false. He wrote that in those words, and assumed falsity only for the purpose of ruling on the motion.
He made no finding that Gap committed fraud.
He made no finding about how the merchandise was loaded, what was in the cartons when they left Gap’s control, or why the size mix differed so sharply from the purchase orders.
And he wrote that no other defenses or affirmative claims were adjudicated, and that SVES’s unfair competition claim was not before the court in this phase at all.
WHAT IS STILL UNTRIED
So the cross complaint stands untried in its entirety. Fraud and deceit. Negligent misrepresentation. Breach of contract. Breach of the implied covenant of good faith. Two counts of tortious interference. Unfair competition. A demand for no less than $378 million, with a jury demand attached.
A PROCEDURAL WIN, NOT A FACTUAL ONE
There is one more feature of this outcome worth naming. Gap won the first phase without calling a single witness of its own, and without ever explaining where its central number came from, because the procedural rule it invoked let it move for judgment before it had to put on a case. That is an entirely legitimate tactic. It is also precisely why the largest questions in this dispute are still open.
Gap’s own negotiator testified the ceiling was 500,000 plus size units. The purchase orders itemized under a million. SVES says more than nine million arrived.
No court has yet decided how.