Case Number: BC561488 Hearing Date: January 26, 2015 Dept: 58
JUDGE ROLF M. TREU
DEPARTMENT 58
________________________________________
Hearing Date: Monday, January 26, 2015
Calendar No: 5
Case Name: Yeganian v. Aghanian, et al.
Case No.: BC561488
Motion: Motion for Bond
Moving Party: Defendants Edvin Aghanian, Vahe Haroutounian, Steve Krikorian, Edgar Babayan, and Maeis Keshish (joinder by nominal Defendants VAS Media Group, Inc.; Sale Slassh LLC; and ZCOR, Inc.)
Responding Party: Plaintiff Allen Yeganian
Notice: OK

Tentative Ruling: Motion for bond is denied.

On 10/21/14, Plaintiff Allen Yeganian, individually and derivatively on behalf of VAS Media Group, Inc., Sale Slash LLC, and ZCOR, Inc. (“Corporate Parties”), filed this action against Defendants Edvin Aghanian, Vahe Haroutounian, Steke Krikorian, Edgar Babayan, and Maeis Keshish (“Individual Defendants”) as well as the Corporate Parties arising out of the attempted removal of Yeganian as a shareholder of VAS. Plaintiff asserts derivate causes of action for breach of fiduciary duty on behalf of (1) VAS, (2) Sale Slash, (3) ZCOR and (4) aiding and abetting breach of fiduciary duty on behalf of Corporate Parties; and individual causes of action for (5) breach of fiduciary duty, (6) aiding and abetting breach of fiduciary duty, (7) involuntary dissolution, (8) constructive trust, (9) breach of contract, (10) declaratory relief, (11) conversion, (12) unjust enrichment, (13) conspiracy, (14) violation of Corp. Code § 1601(a), (15) defamation and libel, and (16) accounting.

Motion for Bond –
Individual Defendants, joined by Corporate Parties, request the Court to order Plaintiff to furnish a bond on the ground that there is no reasonable possibility that prosecution of the alleged derivative causes of action will benefit the corporation nor its shareholders (Corp. Code § 800(c)(1)). “In assessing whether there is no reasonable possibility the action will 1304 benefit the corporation, the court ‘must evaluate the possible defenses which the plaintiffs would have to overcome before they could prevail at trial.’” Donner Management Co. v. Schaffer (2006) 142 Cal.App.4th 1296, 1303-4 (citation omitted). “The burden of establishing the statutory condition is on the party moving for security.” Burt v. Irvine Co. (1965) 237 Cal.App.3d 828, 868.

1. Shareholder Standing for Sale Slash and ZCOR
Defendants argue that Plaintiff cannot bring derivative claims on behalf of Sale Slash and ZCOR because he is not a shareholder of either entity (Corp. Code §800(b)(1)), submitting that ZCOR is solely owned by Keshish (Keshish Decl. ¶ 2) and Sale Slash is solely owned by Babayan (Babayan Decl. ¶ 1). However, Plaintiff explains that he and Aghanian, Haroutounian, and Krikorian are equal shareholders in VAS; that other companies were set up with nominal interest holders to protect against creditor claims and lawsuits; but that all of the companies are beneficially owned by VAS. Yeganian Decl. ¶¶ 2-8; see also Verified Complaint ¶¶ 13-14. Although the other shareholders of VAS disclaim any interest in Sale Slash and ZCOR (Aghanian Decl. ¶ 3; Haroutounian Decl. ¶ 3; Krikorian Decl. ¶ 3), this only raises triable issues of material fact as to whether Plaintiff is a beneficial shareholder of Sale Slash and ZCOR through VAS (see Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1011-12 (addressing beneficial ownership through a community property interest)). Notably, Defendants fail to submit any explanation as to VAS’ business or operations. Therefore, Defendants fail to carry their burden to establish that Plaintiff cannot bring derivative claims on behalf of Sale Slash and ZCOR.

2. Fair and Adequate Representative Requirement
Defendants argue that Plaintiff will not be a fair and adequate representative of other shareholders. However, Defendants relies on authorities that really only considered standing to bring a derivative action. In Grosset v. Wenaas (2008) 42 Cal.4th 1100, the Supreme Court only addressed the continuous stock ownership requirement to maintain a derivative action (id. at 1119): this was a distinct requirement from the “fair and adequate representation requirement” that was not addressed by the Supreme Court (id. at 1111 n.7).

The Court notes that FRCP Rule 23.1(a) requires a derivative plaintiff to fairly and adequately represent the interests of shareholders or members who are similarly situated in enforcing the right of the corporation. No similar requirement is stated in Corp. Code § 800. Even if such a requirement applied, the Court notes that it applies only with respect to other similarly situated shareholders. Larson v. Dumke (9th Cir. 1990) 900 F.2d 1363, 1366-67. Plaintiff’s theory that he has been singled out: the fact that all other purported shareholders of the Corporate Parties do not support Plaintiff’s claims does not defeat Plaintiff’s ability to fairly and adequately represent similarly situated shareholders (i.e., himself). Id. at 1368-69.

3. Individual Claims
Defendants argue that Plaintiff’s individual claims disqualifies him from bringing derivative ones, relying on Zarowitz v. BankAmerica Corp. (9th Cir. 1989) 766 F.2d 1164, 1165-66. However, Zarowitz is inapposite because it considered the standing of a plaintiff to object to settlement of a derivative action: the Ninth Circuit Court of Appeals concluded that the plaintiff’s significant individual interests diverged from those of the other shareholders which rendered him unable to object as a representative plaintiff.

Defendants fail to cite to any authorities that holds that a plaintiff cannot assert both derivative claims and individual ones against the corporation on whose behalf the derivative claims are brought. Cf. Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525, 530 (stating that “a stockholder may sue as an individual where he is directly and individually injured although the corporation may also have a cause of action for the same wrong.”). The Court emphasizes that Defendants did not challenge whether Plaintiff’s derivative claims were in fact individual ones which would not have benefited the corporation.

4. Merit-Based Argument
Defendants remaining arguments sought to dispute the sufficiency of Plaintiff’s allegations concerning demand futility (Corp. Code § 800(b)(2); Bader v. Anderson (2009) 179 Cal.App.4th 775, 789-90) and the factual reasons for Plaintiff’s removal from VAS.

However, Plaintiff alleges that the other shareholders of VAS have voted to remove Plaintiff (Complaint ¶ 15) and have subsequently made distributions to themselves to the exclusion of Plaintiff, denied Plaintiff’s rights as a shareholder of VAS, and have sought to artificially deflate the value of VAS by disclaiming interests in other companies such as Sale Slash and ZCOR. Id. ¶ 16. In connection with Plaintiff’s allegations concerning VAS’ business (id. ¶ 13), Plaintiff sufficiently alleges facts to support demand futility. The Court notes that even if Plaintiff did not, Defendants fail to explain why the Court could not grant Plaintiff leave to amend to further allege facts.

Defendants submit that they did owe a fiduciary duty because no individual defendant is alleged to be a majority shareholder and did not breach any fiduciary duty because they concluded Plaintiff should be removed based on performance issues (Aghanian Decl. ¶5-7; Haroutounian Decl. ¶¶ 5-7; Krikorian Decl. ¶¶ 5-7). However, Plaintiff’s verified Complaint and declaration supports that Defendants acted in concert to accomplish a joint purpose (removal of Plaintiff) which is sufficient to support a fiduciary duty. Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108. Defendants argument that each shareholder of VAS came to their individual conclusions to remove Plaintiff only raises triable issues of fact. Additionally, Plaintiff disputes Defendants’ showing as to his performance issues. Yeganian Decl. ¶¶ 9-24.

5. Ruling
The motion for bond is denied.