Judge James C. Chalfant, Case 22STCV11383 2022-08-23 Tentative Ruling

Defendant and Cross-Complainant Khalil Brian Zaghian (“Zaghian”) moves for (1) appointment of a provisional director for Plaintiff/Cross-Defendant Glamlite, Inc, (“Glamlite”); (2) removal of Plaintiff/Cross-Defendant Awilda Giselle Hernandez (“Hernandez”) as Glamlite’s director and officer; and (3) appointment of Zaghian as a Glamlite director.

The court has read and considered the moving papers, opposition, and reply, and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiffs Glamlite and Hernandez filed the Complaint against Zaghian on April 4, 2022, alleging causes of action for (1) civil theft; (2) conversion; (3) tortious interference with contractual relations; (4) tortious interference with prospective economic advantage; (5) breach of fiduciary duty; (6) unfair competition; (7) accounting; (8) constructive trust; (9) identity theft; (10) invasion of privacy; (11) declaratory relief; and (12) a temporary restraining order (“TRO”), preliminary injunction, and permanent injunction. The Complaint alleges in pertinent part as follows.

In 2015, Hernandez developed a product known as “Glamlite,” a lighted mirror for “selfie” photos. After filing a trademark for the name and creating the brand logos, social media accounts, Shopify store, and website, she incorporated her business as Glamlite, which later included a cosmetic line.

Her then-boyfriend Zaghian recommended using his accountant Azad Yavari (“Yavari”) to incorporate the company, and Hernandez agreed. Hernandez instructed Yavari to give Zaghian a 40% share of Glamlite and the role of Chief Financial Officer (“CFO”), while Hernandez retain 60% share and the title of Chief Executive Officer (“CEO”). Hernandez later learned that Yavari instead distributed shares in a 50-50 split and forged her signature in the process.

On January 28, 2022, when looking at Zaghian’s email account, Hernandez discovered credit statements passing personal expenses as business ones for reimbursement. A private investigator discovered (1) two electronic funds transfers from Glamlite’s checking account in March 2020, the latter for $5,000 which Zaghian did not return upon demand; (2) a $320,000 loan Zaghian took out in Glamlite’s name in December 2020 before transferring it to his account; (3) a second loan for $315,000 in December 2021; (4) $682,287 transferred to pay for his personal expenses from January 2020 to January 2022; (5) $27,100 in cash withdrawals from January to November 2020; (6) $42,870 in cash withdrawals from November 2020 to December 2021; (7) a $16,485.42 payment to Zaghian in January 2021; (8) $13,578.78 in payments to his account from February 2020 to August 2021; (9) $316,093 in payments to his bank account between February 2020 and December 2021, less $125,000 in repayment for a previous loan to Glamlite; (10) $500 to his bank account on November 30, 2020; (11) $8,000 to Zaghian’s e-trade account on January 8, 2020; (12) $347.42 paid as property tax for his personal property on January 22, 2020; (13) $2,423.56 paid as property tax for his personal property on December 30, 2020; (14) $9,512.84 paid to a vendor for stereo equipment for his personal residence on December 10, 2021; (15) $902 to Booker International from Hernandez’s personal credit card; and (16) $287,737.50 through a loan he received in Glamlite’s name by claiming he was the sole shareholder.

Hernandez also discovered that Zaghian had been delinquent in many of his duties. He (1) did not ship an order with an estimated shipment date of February 18, 2022 for over a month after; (2) left a $2,000,000 order unfulfilled for over nine months without a response; (3) left a request from a company in the United Kingdom without response, which led to termination of the business relation and deprived Glamlite of $500,000 in sales; (4) ceased communication with a client with potential sales of $1,000,000 in April 2021; and (5) failed to acknowledge seven recent orders totaling $250,000.

Zaghian has interfered with Glamlite’s business by changing the passwords and transferring the ownership of all Glamlite’s social and financial accounts. This includes the physical mailbox Hernandez uses to receive Glamlite checks.

Hernandez seeks (1) $1,785,316.02 in compensatory damages; (2) treble damages; (3) punitive or exemplary damages; (4) declaratory relief that Hernandez owns 60% of Glamlite, not 50%; (5) a TRO and preliminary and permanent injunction enjoining Zaghian from future unlawful conduct; and (6) attorney’s fees and costs.

2. Cross-Complaint

On May 6, 2022, Zaghian filed a Cross-Complaint against Cross-Defendants Glamlite, Hernandez, Gabrielle Sue Spooner (“Spooner”), Madison Smushkevich (“Smushkevich”), and Tawny Tyndall (“Tyndall”). The Cross-Complaint alleges claims for: (1) declaratory relief; (2) summary judgment pursuant to California Corporations Code section 709; (3) abuse of process; (4) breach of oral contract; (5) breach of the implied covenant of good faith and fair dealing; (6) breach of fiduciary duty; (7) wrongful termination; (8) conversion; (9) common count for claim and delivery; (10) constructive trust and unjust enrichment; (11) common count for money had and received; (12) accounting; (13) violation of computer fraud and abuse act; (14) fraud: concealment; (15) libel per se; (16) slander per se; (17) intentional interference with prospective economic relations; (18) intentional infliction of emotional distress; and (19) a TRO, preliminary injunction and permanent injunction. The Cross-Complaint alleges in pertinent part as follows.

Zaghian and Hernandez previously were in a romantic relationship beginning in 2010, got engaged in 2012, cohabited from 2013, and had a child together in year 2014. Hernandez has claimed under penalty of perjury that Zaghian is not the father of her child and court-ordered DNA tests have proven otherwise.

When Zaghian and Hernandez started Glamlite, each received 50% of the 100,000 shares. Zaghian contributed all its capital – $300,000 – and had experience in business management. For the first four years of the business, Zaghian performed 80% of the work and Hernandez 20%.

Zaghian’s home was Glamlite’s principal place of business until cash flow increased and Glamlite leased office space and a warehouse in 2017. The Statement of Information filed with the Secretary of State on November 28, 2016 lists Hernandez and Zaghian as directors, Zaghian as CEO and CFO, and Hernandez as Secretary. Subsequent Statements of Information said the same.

The parties’ relationship soured in 2021 when Hernandez learned that Zaghian was in a serious relationship with another person and never intended to enter into one with Hernandez. By that point, Glamlite had annual sales of approximately $5,000,000.

On March 1, 2022, while their child resided with Zaghian full time, Hernandez retrieved the child from school unannounced and prevented Zaghian from seeing them. On March 15, Hernandez filed an ex parte request for a TRO, alleging that Zaghian is not the biological father, was abusive to them, and stalks and harasses Hernandez.

The following day, Cross-Defendants changed the locks to Glamlite offices to prevent Zaghian from entering, announced to the staff that Zaghian was no longer allowed there, and alleged that he stole large sums from the business. The day after, Cross-Defendants locked him out of all computer programs and software. They also unlawfully gained access to personal information and data in his personal computer in the offices.

On March 21, 2022, Tyndall interrogated Glamlite employees and accused them of stealing records from Zaghian’s computer. In fact, Cross-Defendants had stolen those records. They further yelled at the employees and claimed that Hernandez was Glamlite’s sole owner.

On March 23, 2022, Hernandez filed a Statement of Information that listed Tyndall as the agent of service of process without Zaghian’s knowledge or consent.

On March 28, 2022, without any notice to Zaghian or shareholder meetings, Hernandez filed a Statement of Information that listed her as the sole director and officer. Hernandez presented this Statement of Information and a police report claiming that Zaghian had stolen corporate funds to ADP, a payroll company used by Glamlite. Zaghian does not believe Hernandez filed this report with the police. Based on these documents, ADP refrained from sharing Glamlite payroll information with Zaghian.

Throughout March 2022, Cross-Defendants also (1) used the Statement of Information to transfer all Glamlite funds to a separate account for Hernandez’s sole use; (2) lied to every Glamlite business partner that Zaghian had stolen from Glamlite and was removed for that reason; and (3) locked Zaghian out of the shared business mailbox.

Also on March 28, 2022, Hernandez hired an attorney to represent both herself and Glamlite. That counsel then wrote a letter to Zaghian claiming he abandoned his position at Glamlite, was terminated from his employment as a result, and must transfer all his shares to Hernandez.

On April 8, 2022, Hernandez filed for an amended TRO fabricating the same and more egregious falsehoods as her March 15 application. During the hearing on this application, Hernandez demanded that Zaghian “not engage in and/or interfere with any business operations of Glamite, Inc.” if he wanted to see their child again.

Zaghian seeks a determination of his ownership interest in Glamlite and the persons entitled to be a director, or an order for an election or appointment of a new director. Zaghian also seeks (1) at least $5,000,000 in general damages; (2) special damages; (3) interest at the legal rate for losses from conversion, including the value of converted property; (4) punitive or exemplary damages; (5) prejudgment interest at the legal rate; and (6) attorney’s fees and costs.

3. Course of Proceedings

On April 4, 2022, Glamlite gave notice of pendency of an action concerning property at 12015 Falcon Crest Way, Los Angeles, CA 91326, of which Zaghian is the owner.

On April 8, 2022, Hernandez served Zaghian with the Complaint and Summons.

On May 6, 2022, Zaghian filed an Answer to the Complaint.

On June 18, 2022, Glamlite filed an Answer to the Cross-Complaint and two days later

Spooner filed an Answer to the Cross-Complaint. On June 27, 2022, Hernandez and Smushkevich filed Answers to the Cross-Complaint.

On July 8, 2022, Zaghian sought an ex parte order for the appointment of a receiver, preliminary injunction, and a TRO compelling Hernandez to redeposit all Glamlite revenue, income, and funds into the Glamlite operating account, or alternatively for an order shortening time for a hearing on the application. This court denied the application.

On July 5, 2022, Hernandez filed a special motion to strike portions of the Cross-Complaint per CCP section 435.16, the SLAPP statute. Dept. 56 (Hon. Holly Fujie) granted the motion on August 4, 2022, striking the third and eighteenth causes of action.

B. Applicable Law

1. Provisional Director

Corporations Code^{^[1]} section 308(a) provides: [i]f a corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs, so that its business can no longer be conducted to advantage or so that there is a danger that its property and business will be impaired or lost, the superior court of the proper county may, notwithstanding any provisions of the articles or bylaws and whether or not an action is pending for an involuntary winding up or dissolution of the corporation, appoint a provisional director pursuant to this section. Action for such appointment may be brought by any director or by the holders of not less than 33- 1/3% of the voting power.”

Alternatively, if the shareholders of a corporation are deadlocked so that they cannot elect the directors to be elected at an annual meeting of shareholders, the superior court of the proper county may, notwithstanding any provisions of the articles or bylaws, upon petition of a shareholder or shareholders holding 50 percent of the voting power, appoint a provisional director or directors pursuant to this section or order such other equitable relief as the court deems appropriate. §308(b).

The provisional director shall be an impartial person, who is neither a shareholder nor a creditor of the corporation, nor related by consanguinity or affinity within the third degree according to the common law to any of the other directors of the corporation or to any judge of the court by which such provisional director is appointed. §308(c). A provisional director shall have all the rights and powers of a director until the deadlock in the board or among shareholders is broken or until such provisional director is removed by order of the court or by approval of the outstanding shares. Id. Such person shall be entitled to such compensation as shall be fixed by the court unless otherwise agreed with the corporation. Id.

The stated purpose of section 308(a) is to prevent danger or loss to a business due to a deadlocked board of directors. Provisional directors are appointed in situations that have not yet reached point that a receiver should or could be appointed. In re Jamison Steel Corp., (1958) 158 Cal.App.2d 27.

2. Election or Appointment of a Director

In section 709, the Legislature explicitly provided for a summary proceeding in which the court may determine the person entitled to the office of director of a corporation; may order a new election to be held or appointment to be made; may determine the validity, effectiveness and construction of voting agreements and voting trusts as well as the validity of the issuance of shares and the right of persons to vote, in addition to providing such other relief as may be just and proper. §709(c).

In order to commence an action pursuant to section 709, one must be either a shareholder or one who claims to have been denied the right to vote. §709(a). Section 709 is not limited to technical and procedural questions. Braude v. Havenner, (1974) 38 Cal.App.3d 526, 530. section 709 permits the examination of the entire transaction. Columbia Engineering Co., (1965) 231 Cal.App.2d 837, 844. If the facts show that equitable claims or defenses affect the validity of a corporate election or appointment, the appropriate relief will be granted by the court sitting as a court of equity. Braude, supra, 38 Cal.App.3d at 530. As such, persons who are not record shareholders on the corporate books and have been deprived of that right by fraud occupy the position of shareholders. Lawrence v. I.N. Parlier Estate Co., (1940) 15 Cal.2d 220, 227; Brown v. North Ventura Raod Development Corp., (1963) 216 Cal.App.2d 227, 233.

The court shall try the matter in a summary fashion, within five days, before any other proceedings are had. §709(b).

In November 2016, Hernandez and Zaghian asked Yavari to help file the necessary forms to incorporate Glamlite. Yavari Decl., ¶4; Zaghian Decl., ¶7. Yavari agreed and filed Articles of Incorporation that authorize Glamlite to issues 100,000 shares of common stock. Yavari Decl., ¶4, Ex. 1. He also agreed to serve as its agent for service of process. Yavari Decl., ¶4, Ex. 1.

On November 20, 2016, after Glamlite received an Employer Identification Number, Hernandez and Zaghian met with Yavari to discuss tax-related issues for both themselves and Glamlite. Yavari Decl., ¶5. After Yavari suggested that Glamlite elect to be an S Corporation, they agreed. Yavari Decl., ¶5. Yavari then prepared an IRS Form 2553 to show that, per Zaghian and Hernandez’s instructions, they each owned 50,000 shares, or 50%, of Glamlite. They executed the form in his office on that day, and any claim that Hernandez’s signature is a forgery is false. Yavari Decl., ¶6, Ex. 2; Zaghian Decl., ¶¶ 2, 5.

Also on November 20, 2016, Yavari prepared Glamlite’s first Statement of Information. Yavari Decl., ¶7, Ex. 3. The Statement of Information filed with the Secretary of State on November 28, 2016 lists Hernandez and Zaghian as directors, Zaghian as CEO and CFO, and Hernandez as Secretary. Yavari Decl., ¶7, Ex. 3; Zaghian Decl., ¶7. Zaghian executed the Statement of Information on November 20, 2016, without Hernandez’s signature but in her presence. Yavari Decl., ¶7, Ex. 3.

Yavari remained Glamlite’s accountant for a number of years, holding possession of its corporate book, filing its taxes, and answering inquiries from Zaghian and Hernandez about them. Yavari Decl., ¶8; Zaghian Decl., ¶8, Ex. 4. Yavari also prepared Zaghian’s personal tax returns through 2020, but Hernandez rejected his offer to do the same for her. Yavari Decl., ¶13.

Glamlite’s tax returns show that Zaghian and Hernandez were both 50% shareholders in 2020. Yavari Decl., ¶9; Zaghian Decl., ¶8, Ex. 4. Zaghian was the sole capital contributor, but he agreed to split the business with Hernandez because of their relationship. Zaghian Decl., ¶8.

Corporate books and records show that Zaghian and Hernandez each took a salary from Glamlite until March 2022. Yavari Decl., ¶12. Whenever Zaghian withdrew or took salary from the Glamlite account, Hernandez took as much or more. Zaghian Decl., ¶27.

On October 12, 2021, Zaghian and Hernandez argued via text over their tax liability. Zaghian Decl., ¶10, Ex. 5. Hernandez insisted that she pay taxes on “my 200K” while Zaghian pay taxes on “your 320K.” Zaghian Decl., ¶10, Ex. 5. Zaghian explained that aside from individual income, they were each 50% responsible for taxes on the $296,000 made by Glamlite that year. Zaghian Decl., ¶10, Ex. 5.

On January 21, 2022, Zaghian voiced concerns that Glamlite has struggling to pay its invoices. Zaghian Decl., ¶10, Ex. 5. Hernandez refused to cover more than she already agreed to pay for lack of a stable place to live. Zaghian Decl., ¶10, Ex. 5. She then added that an even split of the business and costs is not fair when she must live in a mediocre apartment while other Glamlite employees spend a lot on a lodging, food, and entertainment. Zaghian Decl., ¶10, Ex. 5. Zaghian retorted that Hernandez had no right to act like a dictator and run the business with no communication or solutions to offer, forgetting that he financed Glamlite and did most of the work in its early years. Zaghian Decl., ¶10, Ex. 5.

On March 16, 2022, Hernandez changes the locks to Glamlite offices to prevent Zaghian from entering, announced to the staff that Zaghian was no longer allowed on the premises, and alleged that he stole large sums from the business. Zaghian Decl., ¶18. The next day, she locked him out of all computer programs and software. Zaghian Decl., ¶19. She also unlawfully gained access to personal information and data in his personal computer located in the office. Zaghian Decl., ¶20.

On March 23, 2022, Hernandez signed and filed a Statement of Information for Glamlite that listed Hernandez as CEO, Zaghian and CFO and Secretary, Hernandez and Zaghian as directors, and Tyndall, not Yavari, as agent for service of process. Zaghian Decl., ¶12, Ex. 6. Zaghian did not know who Tyndall was. Zaghian Decl., ¶21.

On March 28, 2022, Hernandez filed a new Statement of Information that listed herself as every officer and Tyndall as agent for service of process with no mention of Zaghian or any other director. Zaghian Decl., ¶13, Ex. 7. Zaghian never agreed to this, there was never a shareholder meeting on the subject, and Hernandez did not have the authority to do so. Zaghian Decl., ¶14.

Also on March 28, 2022, Hernandez’s counsel demanded via letter that Zaghian transfer his Glamlite interest to Hernandez. Zaghian Decl., ¶15, Ex. 8. The letter accused Zaghian of embezzling corporate assets, interfering with day-to-day operations, business activities, and prospective opportunities, interfering with access to various corporate online accounts; destroying documents to conceal illegal activity, and falsely using Hernandez’s identity for personal gain. Zaghian Decl., ¶15, Ex. 8.

During this time, Hernandez also told various business partners not to contact Zaghian, as he is a liar and a thief that Glamlite fired. Zaghian Decl., ¶23. Hernandez locked Zaghian out of the shared business mailbox. Zaghian Decl., ¶26. Hernandez used the Statement of Information to transfer all Glamlite funds to a separate account for Hernandez’s sole use; Glamlite’s Chase Bank account is now overdrawn by $10,470.42. Zaghian Decl., ¶24, Ex. 9.

Yavari did not know that he was no longer Glamlite’s agent for service of process until Zaghian told him that Hernandez had removed him as agent and ousted Zaghian as director and officer. Yavari Decl., ¶10. Yavari checked Glamlite’s March 23, 2022 Statement of Information and discovered this was true. Yavari Decl., ¶10.

Hernandez’s actions have deprived Zaghian of his salary of $8,000 to $10,000 per month and reimbursement of his capital contribution. Zaghian Decl., ¶32. Hernandez continues to use Zaghian’s credit card and checking account for her personal and Glamlite expenses, an amount totaling $11,661.54 between March and July 1, 2022. Zaghian Decl., ¶33.

On June 2, 2022, during a hearing regarding custody of their child and for a restraining order, counsel for Hernandez said that, although she removed Zaghian as Glamlite officer and director, Zaghian is still a 50% shareholder. Hindin Decl., ¶3, Ex. A; Zaghian Decl., ¶9.

On July 8, 2022, this court held a hearing on Zaghian’s ex parte application for the appointment of a receiver, preliminary injunction, and TRO compelling Hernandez to redeposit all Glamlite revenue into its operating account. Hindin Decl., ¶4. When counsel for Zaghian identified the June 2 admission, Hernandez’s counsel confirmed the statement. Hindin Decl., ¶4. When asked about the propriety of having a single director of a company with two shareholders, counsel for Hernandez replied that he did not know. Hindin Decl., ¶5.

Given the accusations of embezzlement and fraud against him, Zaghian retained Certified Fraud Examiner Anna Leh (“Leh”) to audit his account. Leh Decl., ¶¶ 2, 5-6, Ex. A. She found no signs of fraud. Leh Decl., ¶7, Ex. B.

In 2015, Hernandez developed a product known as “Glamlite,” a lighted mirror for “selfie” photos. Hernandez Decl., ¶2. After filing a trademark for the name and creating the brand logos, social media accounts, Shopify store, and website, she incorporated her business as Glamlite, which later included a cosmetic line. Hernandez Decl., ¶¶ 3-6, 10. Her then-boyfriend Zaghian served as CFO while she served as CEO. Hernandez Decl., ¶¶ 8-9. The Form 2553 showing that they were equal shareholders was filed without Hernandez’s consent; the signature does not match her signature on other documents. Hernandez Decl., ¶27, Exs. F-G.

On January 28, 2022, Hernandez discovered that Zaghian was reimbursing himself from Glamlite for personal expenses and hired an investigator to perform an audit. Hernandez Decl., ¶¶ 11-12. The auditor found loans, personal expenses, cash payments to and for the benefit of Zaghian totaling $1,607,837.52. Hernandez Decl., ¶14.

Hernandez also discovered that Zaghian had been delinquent in many of his duties. Hernandez Decl., ¶15. He (1) did not ship an order with an estimated shipment date of February 18, 2022 for over a month after; (2) left a $2,000,000 order unfulfilled for over nine months without a response; (3) left a request from a company in the United Kingdom without response, which led it to terminate the business relation and deprived Glamlite of $500,000 in sales; (4) ceased communication with a client with potential sales of $1,000,000 in April 2021; and (5) failed to acknowledge seven recent orders totaling $250,000 in orders. Hernandez Decl., ¶15.

Zaghian has interfered with Glamlite’s business by changing the passwords to and transferring the ownership of all social and financial accounts to deny access to other Glamlite employees. Hernandez Decl., ¶17. This includes the physical mailbox Hernandez uses to receive Glamlite checks. Hernandez Decl., ¶17.

After terminating Zaghian, on March 29, 2022, Hernandez wire transferred $25,000 from her personal savings to the Glamlite account to cover payroll and rent. Hernandez Decl., ¶19, Ex. A.

On April 6, 2022, Glamlite’s primary manufacturer, Bause Cosmetics, asked Zaghian if Glamlite would pay the outstanding balance. Hernandez Decl., ¶21, Ex. C. Basue Cosmetics claimed that it would withhold Glamlite’s inventory unless the $200,000 balance was paid. Hernandez Decl., ¶21. Zaghian never paid the amount owed, so Hernandez paid it herself from her personal bank account. Hernandez Decl., ¶¶ 21-22. Between March 29 and May 5, 2022, Hernandez lent Glamlite about $428,000 to cover Bause Cosmetics expenses. Hernandez Decl., ¶23, Ex. A. She also forfeited her salary beginning April 4, 2022. Hernandez Decl., ¶24.

Since Hernandez assumed sole leadership of Glamlite, the company’s sales and online media presence have dramatically increased. Hernandez Decl., ¶¶ 25-26, Exs. D-E.

Zaghian moves for (1) appointment of a provisional director for Glamlite under section 308; (2) removal of Hernandez as Glamlite’s director and officer under section 709; and (3) appointment of Zaghian as a Glamlite director alongside the provisional director under section 709.

The minimum number of a corporation’s directors shall not be less than three, but there may be two directors so long as the corporation has only two shareholders. §212(a).

If a corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs, so that its business can no longer be conducted to advantage or so that there is a danger that its property and business will be impaired or lost, the court may, notwithstanding any provisions of the articles or bylaws, appoint a provisional director. Action for such appointment may be brought by any director or by the holders of not less than 1/3 of the voting power. §308(a).

Alternatively, if the shareholders of a corporation are deadlocked so that they cannot elect the directors to be elected at an annual meeting of shareholders, the court may, notwithstanding any provisions of the articles or bylaws, upon petition of a shareholder or shareholders holding 50% of the voting power, appoint a provisional director or directors pursuant to this section or order such other equitable relief as the court deems appropriate. §308(b).

Zaghian seeks the appointment of a provisional director because he and Hernandez are deadlocked and would be unable to elect directors at a shareholder meeting. Mot. at 8. Zaghian presents evidence that he and Hernandez each are 50% shareholders in Glamlite, and both were directors until March 28, 2022. Yavari Decl., ¶6, Ex. 2; Zaghian Decl., ¶¶ 12-13, Exs. 6-7. Zaghian has not agreed to demands to transfer his shares, and Hernandez has recently acknowledged that he is still 50% owner. Zaghian Decl., ¶15, Ex. 8; Hindin Decl., ¶3, Ex. A.

Thus, Zaghian has presented evidence of his authority to seek a provisional director under section 308(b). Hernandez does not dispute Zaghian’s 50% ownership for purposes of the motion (Opp. at 3) and does not oppose the appointment of a provisional director. Opp. at 2. The motion to appoint a provisional director is granted. Zaghian fails to nominate a provisional director and the court will discuss this issue with the parties.

Hernandez remains a director of Glamlite. As discussed post, this is not the appropriate forum to remove Hernandez as a director or appoint Zaghian in her place. It is possible that Hernandez and the as yet unknown provisional director will conflict and deadlock. If so, one remedy could be to appoint a second provisional director under section 308(b).

Upon the filing of an action therefor by any shareholder or by any person who claims to have been denied the right to vote, the superior court of the proper county shall try and determine the validity of any election or appointment of any director of a corporation. §709(a). Upon finding for the moving party, the court may determine the person entitled to the office of director or may order a new election to be held or appointment to be made. §709(c).

Zaghian “challenges the self-appointed (sic.) or self-election of Hernandez as sole director of Glamlite and as holding all officer positions in Glamlite.” Mot. at 6. He relies on section 709 to seek Hernandez’s removal as director either under the statute or the court’s equitable powers for her breach of fiduciary duty and fraud. The court should then appoint Zaghian as a director. Mot. at 9.

As Hernandez responds (Opp. at 3-4), section 709 has no bearing on her removal as a director. Hernandez has always been a director since Glamlite’s inception. She did not recently appoint or elect herself as a director. Yavari Decl., ¶7, Ex. 3. The proper authority for a court to remove a director for fraudulent or dishonest acts is section 7223(a). That provision requires a claim for removal and Zaghian’s Cross-Complaint does not seek the removal of Hernandez as director.

In reply, Zaghian contends that he may rely on section 709 because Hernandez appointed herself as sole director without a meeting or corporate authority and the appointment is within section 709(a). Reply at 4.

Zaghian misstates the facts. Hernandez and Zaghian were long-time directors and Hernandez removed Zaghian as a director.^{^[3]} She was always a direct and did not appoint herself. Zaghian cannot rely on section 709 to contest her “election or appointment”.

Zaghian also misunderstands the purpose of section 709, which exists for a party to test through a summary court proceeding whether the election or appointment of a director or group of directors is valid. The summary nature of the proceeding is why section 709 proceedings are assigned to writs and receivers departments in LASC 2.8(d). In contrast, the removal of a director for fraud or misconduct under section 7223(a) is a more detailed inquiry assigned to the I/C courts. LASC 2.8(d) (other special proceedings not listed). Zaghian cannot bypass the more detailed inquiry through a summary section 709 proceeding.

The motion to appoint a provisional director is granted. The court will discuss the identity of this director at the hearing. The portions of Zaghian’s motion to remove Hernandez and appoint (or reinstate) himself as director must be made before the trial court and are denied.

^{^[1]} All further statutory references are to the Corporations Code unless otherwise stated.

^{^[2]}The court declines to rule on Zaghian’s written evidentiary objections as they are irrelevant to the issues to which this court is assigned.

^{^[3]} The court need not address whether Hernandez was entitled to do so.