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Baharian-Mehr v. Smith

October 15, 2010


Appeal from an order of the Superior Court of Orange County, Kazuharu Makino, Judge. Affirmed. (Super. Ct. No. 30-2009-00124090).

The opinion of the court was delivered by: Moore, J.



This is a dispute between partners in an adult entertainment business. After finding accounting irregularities, plaintiff Akbar Baharian-Mehr sued the corporation which operated the business and his partners Glenn Smith (Smith), Leroy Smith (Leroy) and Theron Smith (Theron).*fn1 Smith then filed a special motion to strike under Code of Civil Procedure section 425.16, the anti-SLAPP statute.*fn2 (Subsequent statutory references are to the Code of Civil Procedure.) The trial court denied the motion, and Smith appeals. As we discuss below, the motion was properly denied because the complaint did not arise from any protected activity on Smith's part, but from a business dispute between the parties, and the mention of any protected activity was merely incidental. We therefore affirm the trial court's order denying the motion. We also affirm the $1500 attorney fee award against Smith and order Smith to pay Baharian-Mehr's attorney fees and costs on appeal.


According to the complaint, in November 2001, Baharian-Mehr and Leroy signed a general partnership contract to establish an adult entertainment business. Baharian-Mehr's responsibilities under the contract included finding a location and performing the necessary work at the site to open the business, as well as obtaining the necessary permits and licenses, in exchange for 15 percent of ownership and profits. Leroy's responsibility was mostly to provide the funds needed to open the business, in return for 85 percent of the business and its profits. Under the agreement, each party was a fiduciary of the other, and Leroy was responsible for keeping accurate accounting records and making those available to Baharian-Mehr at his request. Profit accounting was to be completed monthly.

Shortly thereafter, an addendum to the partnership contract was executed, under which Smith, Leroy's brother, was permitted to enter the partnership and share in Leroy's ownership and profits in exchange for funding.

A potential location was eventually found in Pico Rivera, and a lawsuit was thereafter filed in federal district court to challenge Pico Rivera's zoning scheme. A preliminary injunction was granted, and the site underwent some renovations. A certificate of occupancy was issued in July 2002.

During the renovations and pursuant to the partnership agreement, a corporation known as SGRL Investments, Inc. (SGRL) was formed to conduct the business. SGRL's shareholders were Smith and Leroy, as well as Theron, another family member. Each were named as corporate officers. SGRL adopted the partnership agreement and addendum.

The federal court litigation over Pico Rivera's zoning scheme continued. According to the complaint, the district court twice ruled that both the original and revised zoning plans were unconstitutional. Eventually, SGRL and Pico Rivera entered into a consent decree, with Pico Rivera agreeing to drop its pending appeal and waive the application of certain standards in its current ordinance, and SGRL agreeing to close its business by September 1, 2009.

According to the complaint, Leroy managed the business from 2002 until September 2007, at which time he quit. During that period, Baharian-Mehr did not inspect the accounting records. After Leroy departed, Baharian-Mehr alleged that he was given access to only a portion of the accounting records, which were "a mess." He claimed to have found errors, including one for $100,000. Thereafter, Baharian-Mehr sent a formal request to inspect the records, which he alleged were ignored.

Eventually, Baharian-Mehr inspected some of the records, and found what he believed to be mismanagement and wrongful expenditures of corporate funds. These included, in part: funds paid to a private investigator to watch former employees, who had sued SGRL for wage and hour violations; continued payment of his manager's salary to Leroy after he quit; thereafter hiring Leroy's son Matthew as manager, who failed to deposit receipts in SGRL's corporate bank account; use of a corporate credit card and cash for non-business expenses; failure to properly pay employees all wages and overtime due, resulting in litigation; hiring political consultants unnecessarily for Smith's personal gain; paying Smith's personal attorney; and directing SGRL's accounting records to incorrectly reflect capital investments as loans.

Between September 2007 and April 2008, Baharian-Mehr met with Smith on numerous occasions to try to resolve some of these issues. In February 2009, Smith was elected as new president of SGRL and thereafter "had a complaint filed naming SGRL as plaintiff against defendant [Leroy], followed by a cross-complaint, all leading to the further depletion of SGRL monies for attorney fees and costs . . . ."

In June 2009, Baharian-Mehr filed suit against SGRL, Leroy, Theron, and Smith. As pertinent here, his claims included causes of action for accounting, preliminary and permanent injunctions, breach of fiduciary duty, ...

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