Williams v. Petrosian CA2/7 ( 2021 )

Filed 5/14/21 Williams v. Petrosian CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
WILBUR WILLIAMS, JR., et al., B307439
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. 20STCV14137)
v.
SEVANA PETROSIAN et al.,
Defendants and
Respondents.
APPEAL from an order of the Superior Court of
Los Angeles County, Barbara M. Scheper, Judge. Affirmed.
Nick A. Alden for Plaintiffs and Appellants.
Buchalter, Robert Collings Little and Michael B. Fisher for
Defendants and Respondents.
__________________________
Wilbur Williams, Jr., M.D., and his professional corporation
Wilbur Williams, M.D., Inc. (the Group; collectively, the Williams
plaintiffs) appeal from an order denying their motion for a
preliminary injunction. Williams practiced laser hair removal at
10 medical spas operated by Petrosian Esthetic Enterprises, LLC
(Petrosian Esthetic) and its managing member Sevana Petrosian.
After the parties terminated their relationship, the Williams
plaintiffs filed this action for embezzlement, breach of contract,
and related claims against Petrosian, Petrosian Esthetic, and
Petrosian’s business partner Salina Ranjbar (collectively, the
Petrosian defendants). The Williams plaintiffs then filed a
motion for a preliminary injunction, seeking to enjoin Petrosian
from denying Williams access to the medical spas; to compel
Petrosian to transfer the spas’ leases, telephone lines, and
website to the Group; and to require Petrosian to return
$2.2 million allegedly embezzled from the Group’s bank accounts.
On appeal, the Williams plaintiffs contend the trial court erred in
denying a preliminary injunction, arguing the trial court abused
its discretion in finding neither irreparable harm nor a likelihood
of success on the merits. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Management Agreements and Operation of the
Sev Laser Medical Spas1
Williams is a vascular surgeon and sole shareholder of the
Group. Williams was 83 years old when this action was filed.
1 The background facts are taken from the declarations and
exhibits submitted by the parties in connection with the Williams
2
Petrosian has been in the business of laser hair removal and
aesthetic skincare since 2010, and in 2013 she formed Petrosian
Esthetic and became its managing member. Prior to her dealings
with Williams, Petrosian operated two laser hair removal medical
spas (med-spas) in West Hollywood and Glendale under the
business name “SEV Laser,” which Petrosian registered as a
trademark in 2012. Petrosian registered the website
www.sevlaser.com in September 2013, and she obtained phone
numbers for the Glendale and West Hollywood med-spas before
April 2014. Because laser hair removal is a medical procedure
subject to California regulations that require a medical practice
to be directed by a licensed physician, Petrosian initially
affiliated with Kenneth Thomas, M.D. to provide medical services
at the med-spas.
On April 12, 2014 Petrosian Esthetic and the Group
executed a management services agreement (management
agreement) for the Group to control “the practice of medicine and
all decisions related to the practice of medicine” (the “Practice”)
at the Glendale and West Hollywood med-spas, and for Petrosian
Esthetic to provide facilities and non-medical management
services to the Group.
Petrosian Esthetic would be the “sole and exclusive
provider of all non-medical business management, information
management, clinical support and personnel, equipment and
supplies as are reasonably necessary for the day-to-day
administration, operation and non-medical management of the
[p]ractice.” The management agreement provided, “[Petrosian
plaintiffs’ motion for preliminary injunction. We note where the
facts are in dispute.
3
Esthetic] shall provide and maintain all furnishings, fixtures and
equipment used in the Practice, including but not limited to the
lasers used in the Practice.” Further, “[Petrosian Esthetic] has
the legal right to occupy the space occupied by the Practice . . .
and grants to [the Group] the right to use the Premises for the
Practice for as long as this Agreement remains in effect (the
‘Sublease’).”
Petrosian Esthetic was also responsible for all collections,
banking, bookkeeping, and accounting. Under the management
agreement, Petrosian Esthetic would collect “all payments for
services rendered by the Practice” and deposit them into a “Group
Operating Account” belonging to the Group. Petrosian Esthetic
was authorized “[t]o sign checks, drafts, bank notes or other
instruments on behalf of the Group, and to make withdrawals
from the Group Operating Account for payment specified in [the]
Agreement”; however, Petrosian was required “[t]o transfer, no
less frequently than monthly, amounts remaining in the Group
Operating Account after payment of all items required to be paid
hereunder . . . to a separate account . . . over which [Petrosian
Esthetic] has no authority.”
In consideration of its services under the management
agreement, Petrosian Esthetic was entitled to receive “its actual
out-of-pocket costs in providing its services, plus an amount equal
to 15% of such amount . . . .” The agreement included an
acknowledgment that Petrosian Esthetic “may operate an
aesthetic skincare business at the premises also occupied by
Group hereunder,” but “any costs attributable to [Petrosian
Esthetic’s] own business shall not be included in the costs used to
determine the Management Fee, which costs shall be limited to
4
the costs of providing administrative services for the Group’s
Practice.”
In 2017 and 2018 Petrosian opened eight additional med-
spas in California. For each new location, a separate limited
liability company was formed as the owner and management
company for that location, and each company then contracted
with the Group to provide medical services and subcontracted
with Petrosian Esthetic to provide management services to the
Group. Each of the management agreements for the new
locations contained the same material terms as the parties’ initial
management agreement. Williams was not a member of and did
not invest in the new location management companies.
B. Termination of the Management Agreements
In January 2019 Williams received a 2018 Internal
Revenue Service form 1099-K (form 1099-K) from Vantiv
ECommerce, LLC (Vantiv), a merchant services company that
processed credit card payments for the Group. The form
indicated the Group received credit card income of $1.3 million in
2018,2 but, according to Williams, he only received $145,000 that
year, which Petrosian represented was the Group’s net profit
after payment of expenses and management fees. Williams
testified he began to have difficulties with Petrosian when she
refused to give his accountant Leila Aquino the financial records
that Aquino needed to prepare the Group’s 2018 profit and loss
statement and Internal Revenue Service W-2 forms for its
employees. Williams’s relationship with Petrosian reached a
2 For simplicity, we have rounded the million-dollar
amounts.
5
“boiling point” in January 2020 when he received Vantiv’s 2019
form 1099-K showing credit card income of $7.5 million in 2019,
although he received only $155,000 as the Group’s purported net
profit.
On February 17, 2020 Williams, accompanied by his wife,
son, Aquino, and attorney Nick Alden, met with Petrosian,
Ranjbar, and Petrosian Esthetic’s attorney to discuss Williams’s
contention he had not received all the profits to which he was
entitled under the management agreements. Ranjbar asserted
Williams had been paid everything he was owed. On March 13,
2020 the parties met again and mutually agreed to terminate the
management agreements after the close of business on April 30,
2020.
C. The Complaint and Motion for Preliminary Injunction
The Williams plaintiffs filed this action on April 13, 2020.
In the operative first amended complaint, they asserted 10 causes
of action against the Petrosian defendants and the management
companies for the eight additional med-spa locations:
(1) declaratory relief; (2) request for accounting; (3) breach of
contract; (4) breach of the covenant of good faith and fair dealing;
(5) breach of fiduciary duties; (6) fraud; (7) embezzlement;
(8) conversion; (9) violation of Business and Professions Code
section 17200 et seq.; and (10) elder abuse. The Williams
plaintiffs alleged the Petrosian defendants withdrew millions of
dollars of the Group’s income from the Group operating accounts
from 2017 until the first quarter of 2020 and transferred the
funds into the Petrosian defendants’ personal accounts and used
the Group’s funds for their own benefit. The Williams plaintiffs
also alleged the Petrosian defendants breached the management
6
agreements by failing, prior to 2018, to deposit income from the
med-spas into the Group’s operating accounts.
On April 23, 2020 the Williams plaintiffs filed an ex parte
application for a temporary restraining order and order to show
cause for a preliminary injunction, which the superior court3
heard and denied the next day. On April 30 they filed another
ex parte application seeking the same relief, which the superior
court denied on May 1 without prejudice due to their filing a
motion for a preliminary injunction in the assigned trial court.4
On June 11, 2020 the Williams plaintiffs filed a motion for
a preliminary injunction. They argued that from 2017 through
March 30, 2020, the Petrosian defendants embezzled more than
$10 million from the Group. They also asserted the Petrosian
defendants breached the management agreements by depositing
the Group’s income into the Petrosian Esthetic bank account in
2017; charging the Group for all furnishings, fixtures, equipment,
and lasers used in the practice; and claiming ownership of the
clinics’ leases, telephone lines, and website after termination of
the management agreements. The Williams plaintiffs sought an
injunction prohibiting the Petrosian defendants from denying
Williams and his employees and patients access to the 10 med-
3 Judge Mitchell Beckloff heard and ruled on the Williams
plaintiffs’ two ex parte applications for a temporary restraining
order.
4 Williams appealed from the order denying his second
application for a temporary restraining order; however, we
dismissed his appeal as moot in light of the trial court’s
subsequent ruling on his motion for a preliminary injunction.
(Williams v. Petrosian Esthetic Enterprise, LLC (Sept. 11, 2020,
B305926).)
7
spa locations in California; ordering the Petrosian defendants to
redeposit into the Group operating account all funds withdrawn
between January 1 and March 31, 2020 (estimated at
$2.2 million); ordering the Petrosian defendants to transfer all
leases, telephone lines, and the website “sevlaser” to the Group;
and ordering the Petrosian defendants to provide Williams all
patient and employee files.
1. The Williams plaintiffs’ evidence
The Williams plaintiffs submitted declarations from
Williams, Aquino, and Alden.5 Aquino declared she received a
copy of the 1099-K forms sent to Williams that showed credit
card income of $1.3 million in 2018 and $7.5 million in 2019, but
Williams received only $155,000 in profits in 2019. Aquino asked
the Petrosian defendants to send her their financial records so
she could prepare the Group’s profit and loss statements and
issue W-2 forms to the Group’s employees, but Petrosian’s
accountant did not provide the information. Consequently, the
Group was unable to file tax returns for 2018 and 2019.
After Williams severed his relationship with the Petrosian
defendants in April 2020, Aquino received Petrosian Esthetic’s
bank account statements for the period from September 2014
through December 31, 2017. The statements revealed that
during those years Petrosian used Petrosian Esthetic’s bank
account, rather than a Group operating account, “to deposit the
income of the Group and pay the bills.” Petrosian Esthetic’s bank
statements also revealed that in 2017, the Glendale med-spa
5 Alden’s testimony is cumulative of Aquino’s and Williams’s
testimony, other than Alden’s assertion of general legal
conclusions.
8
location earned income in excess of $1.2 million, but the Group
received only $24,000 as net profit from that location after
payment of expenses and management fees.
Aquino also averred based on her review of the Group’s
bank statements that the Group received gross income of
$3.1 million in 2018;6 Petrosian withdrew $2.6 million; and
Williams was paid $145,000 in net profits. In 2019 the Group
received gross income of $10 million; $3.7 million went to pay
expenses; the Petrosian defendants withdrew $6 million; and
Williams received $155,000 in profits. In the first three months
of 2020, the Group’s income was $3.1 million; $875,534 went to
pay expenses; the Petrosian defendants withdrew $2.2 million
(including $728,000 in cash); and Williams received $55,000 in
profits. Aquino testified, “Based on my calculations, over the last
six (6) years, [d]efendants . . . withdrew more than $10 million
from the Group’s bank accounts.” Aquino testified, without
elaboration, “I also found that the equipment of the clinics was
leased by the Group and paid for from the Group’s bank accounts,
in contradiction of the terms of the [management agreement].”
In his declaration, Williams explained that for the first four
years of the parties’ business relationship the Petrosian
defendants deposited the Group’s income into Petrosian
Esthetic’s bank account and used the account to pay expenses,
and the Group did not receive any tax forms. Williams accepted
the profits distributed to him and “had no idea about the finances
6 Aquino stated the company used two credit card processing
companies, but one did not transmit a form 1099-K to
Dr. Williams, which explained the discrepancy between Aquino’s
income calculation of $3.3 million and the $1.3 million shown on
the Vantiv form 1099-K.
9
of the Group.” Williams received Petrosian Esthetic’s 2017 bank
statements for the first time on March 30, 2020 after Alden
requested them from Petrosian’s attorney. It was only after the
parties terminated their relationship that Williams asked Aquino
to download the Group bank account statements for 2018 through
2020, at which point he finally understood “the full extent of the
fraud perpetrated by [the Petrosian defendants].”
Williams averred Petrosian had never claimed to own the
med-spas until February 2020, when she pressured him to retire
because of his age. Further, it would have been unlawful for
Petrosian to own the practice due to state regulations requiring a
medical practice to be physician-owned and controlled. Williams
claimed the Group paid the expenses of acquiring the leases,
rent, telephone service, and website, but the Petrosian
defendants claimed ownership of them after termination of the
management agreements.
2. The Petrosian defendants’ evidence
The Petrosian defendants relied on a declaration from
Petrosian. She admitted that prior to 2018, Petrosian Esthetic
and the management companies for the other med-spa locations
“incorrectly deposited the revenue of the locations directly into
the management company accounts and paid the expenses of the
business, including the [Group’s] expenses, from those accounts.”
However, because deposits into Petrosian Esthetic’s bank account
included revenues from facilities and businesses unrelated to the
Group, “Dr. Williams, or his accountant, would not be able to
segregate and calculate revenue, expenses and profits for just the
Sev Laser med-spas subject to the Management Service
10
Agreements with him by reviewing only the Petrosian
Esthetic . . . bank account statements.”
Petrosian declared that since 2018, all collections for laser
hair removal services from the med-spas had been deposited into
a Group operating account for each location, as provided in the
management agreements. Williams opened the accounts in the
name of the Group and had unrestricted access to the accounts.
Before the middle of 2019, Williams never requested an
accounting or to review the management companies’ books and
records. The management companies maintained records of all
expenses incurred at each facility and utilized an outside
accounting firm to prepare a profit and loss statement for each
management company.
Neither Petrosian nor anyone at Petrosian Esthetic made
cash withdrawals from the Group operating accounts. Rather,
“[t]he money withdrawn from the [Group] accounts was used to
pay expenses and to reimburse the applicable management
company for expenses that it paid pursuant to its management
obligations” under the management agreements, including
payment for all non-medical personnel, facilities costs, furniture,
fixtures, quality assurance, marketing, bookkeeping, and legal
services, as well as use of the Sev Laser name. With respect to
the $2.2 million allegedly embezzled from the Group operating
accounts in January through March 2020, the funds “were used
to pay the expenses of the business, including compensation of
Williams’s nurses and nurse practitioners (approximately
80 persons), the professional corporation’s malpractice insurance,
the non-professional expenses of the business, as described in the
management agreements, and the management fees.”
11
Petrosian averred that after the parties agreed to
terminate the management agreements, but before the April 30
termination date, all of the California Sev Laser med-spas were
closed in response to government stay-at-home orders related to
the COVID-19 pandemic. Effective May 1, 2020, Petrosian
entered into new management agreements with a professional
corporation owned by another licensed physician, and pursuant
to those agreements, the new professional corporation occupied
the space at the med-spa locations formerly used by Williams. As
of June 1, 2020, all of the California med-spa locations reopened,
and the new professional corporation hired all the employees
formerly employed by the Williams plaintiffs at those locations.
Petrosian added, “If [d]efendants were to turn over to
Dr. Williams the leases and occupancy of the Sev Laser med-spas,
along with their phone numbers, website and domain name,
[d]efendants would be damaged in the amount of $13,078,000
based upon approximate monthly gross income of the Sev Laser
med-spas in California of $900,000 for 12 months, plus the
$2.278 million paid in expenses and fees that [Williams] requests
to be redeposited in his account.”
D. The Trial Court Order Denying the Motion for Preliminary
Injunction
After a hearing on August 18, 2020, the trial court7 denied
the motion for a preliminary injunction, finding the Williams
plaintiffs failed to show an inadequate remedy at law and that
they would suffer irreparable harm absent an injunction. The
court concluded all of the Williams plaintiffs’ claims could be
7 Judge Barbara M. Scheper.
12
compensated by an award of damages, and they did not
demonstrate Petrosian would be unable to pay a judgment should
they prevail. Further, the Williams plaintiffs failed to show a
likelihood of prevailing on the merits because pursuant to the
management agreements, Petrosian Esthetic and the affiliated
management companies owned and operated all the non-medical
aspects of the business, and the Williams plaintiffs had “not met
their burden of showing that the Sev Laser med-spas are owned
by [them], or that [they] have any legal claims to the property in
therein.” Rather, the evidence showed the spas were owned by
the investors in the limited liability companies formed to own and
operate each facility.8
The court also found the Williams plaintiffs did not meet
their “burden to show that [d]efendants misappropriated any
funds or made withdrawals for any purpose other than to pay
legitimate management expenses and fees as provided under the
Agreements.” Aquino’s declaration relied on “vague statements
and almost no foundation to show how she calculated the amount
that [d]efendants purportedly embezzled,” and her declaration
and the bank records did not show the withdrawals were
improper and were not made to pay allowable expenses.
Finally, the trial court found the Williams plaintiffs failed
to show the balance of harms weighed in their favor because
Williams voluntarily agreed to terminate the management
agreements as of April 30, 2020, and thus, the status quo was
8 The trial court found the Williams plaintiffs had shown
Williams was entitled to receive patient charts and medical
records under the management agreements. However, the court
found Petrosian offered to deliver the medical records to Williams
but received no response.
13
Petrosian’s operation of the med-spas with another physician,
and Petrosian testified she would be damaged by an injunction in
an amount exceeding $13 million. The court concluded, “To
suddenly be forced to turn over all leases, property, and
trademarks, would clearly cause severe harm to [Petrosian].”
The Williams plaintiffs timely appealed.
DISCUSSION
A. Applicable Law and Standard of Review
“As its name suggests, a preliminary injunction is an order
that is sought by a plaintiff prior to a full adjudication of the
merits of its claim. [Citation.] To obtain a preliminary
injunction, a plaintiff ordinarily is required to present evidence of
the irreparable injury or interim harm that it will suffer if an
injunction is not issued pending an adjudication of the merits.”
(White v. Davis (2003) 30 Cal. 4th 528, 554 (italics omitted);
accord, Amgen Inc. v. California Correctional Health Care
Services (2020) 47 Cal. App. 5th 716, 731.) “Trial courts ‘“evaluate
two interrelated factors when deciding whether or not to issue a
preliminary injunction. The first is the likelihood that the
plaintiff will prevail on the merits at trial. The second is the
interim harm that the plaintiff is likely to sustain if the
injunction were denied as compared to the harm that the
defendant is likely to suffer if the preliminary injunction were
issued.”’” (Amgen, at p. 731; accord, ITV Gurney Holding Inc. v.
Gurney (2017) 18 Cal. App. 5th 22, 28-29.)
“‘“The trial court’s determination must be guided by a ‘mix’
of the potential-merit and interim-harm factors; the greater the
plaintiff’s showing on one, the less must be shown on the other to
14
support an injunction.”’” (Jamison v. Department of
Transportation (2016) 4 Cal. App. 5th 356, 361-362.) Nonetheless,
a plaintiff must generally make a prima facie showing of
irreparable harm to obtain a preliminary injunction. (Costa Mesa
City Employees Assn. v. City of Costa Mesa (2012)
209 Cal. App. 4th 298, 305 [plaintiff must “‘present evidence of the
irreparable injury or interim harm that it will suffer if an
injunction is not issued pending an adjudication of the merits’”];
Choice-in-Education League v. Los Angeles Unified School Dist.
(1993) 17 Cal. App. 4th 415, 422 [for the trial court to exercise its
discretion to issue a preliminary injunction, “‘[t]he applicant
must demonstrate a real threat of immediate and irreparable
injury [citations] due to the inadequacy of legal remedies’”]; see
Intel Corp. v. Hamidi (2003) 30 Cal. 4th 1342, 1352 [“[T]he
plaintiff must ordinarily show that the defendant’s wrongful acts
threaten to cause irreparable injuries, ones that cannot be
adequately compensated in damages.”]; see Code Civ. Proc.,
§ 526, subd. (a) [an injunction may be granted in specified
circumstances, including “(2) When it appears by the complaint
or affidavits that the commission or continuance of some act
during the litigation would produce waste, or great or irreparable
injury, to a party to the action” and “(4) When pecuniary
compensation would not afford adequate relief”].)
We review a trial court’s ruling on a motion for a
preliminary injunction for an abuse of discretion. (Amgen Inc. v.
California Correctional Health Care Services, supra,
47 Cal.App.5th at p. 731; Whyte v. Schlage Lock Co. (2002)
101 Cal. App. 4th 1443, 1449-1450.) “‘A trial court will be found to
have abused its discretion only when it has “‘exceeded the bounds
of reason or contravened the uncontradicted evidence.’”’” (SB
15
Liberty, LLC v. Isla Verde Assn., Inc. (2013) 217 Cal. App. 4th 272,
281.) In reviewing the grant or denial of a preliminary
injunction, we do not “resolve conflicts in the evidence, reweigh
the evidence, or assess the credibility of witnesses.” (Whyte, at
p. 1450.) “The burden rests with the party challenging a trial
court’s decision to grant or deny a preliminary injunction to make
a clear showing of an abuse of discretion.” (SB Liberty, LLC, at
pp. 280-281.)
“An order denying an application for a preliminary
injunction may be reversed only if the trial court abused its
discretion with respect to both the question of success on the
merits and the question of irreparable harm.” (Marken v. Santa
Monica-Malibu Unified School Dist. (2012) 202 Cal. App. 4th 1250,
1260 (italics added); accord, Cohen v. Board of Supervisors (1985)
40 Cal. 3d 277, 286-287.) Moreover, where “‘“the preliminary
injunction mandates an affirmative act that changes the status
quo, we scrutinize it even more closely for abuse of discretion.
‘The judicial resistance to injunctive relief increases when the
attempt is made to compel the doing of affirmative acts. A
preliminary mandatory injunction is rarely granted, and is
subject to stricter review on appeal.”’” (People ex rel. Herrera v.
Stender (2012) 212 Cal. App. 4th 614, 630; accord, Shoemaker v.
County of Los Angeles (1995) 37 Cal. App. 4th 618, 625.)
B. The Trial Court Did Not Abuse Its Discretion in Denying
the Motion for a Preliminary Injunction
The Williams plaintiffs contend they demonstrated both
irreparable harm and a likelihood of success on the merits and
were therefore entitled to an order compelling the Petrosian
defendants to return $2.2 million withdrawn from the Group
16
operating accounts in 2020 and to transfer the Sev Laser leases,
telephone lines, and Sev Laser website to the Group.9 The trial
court did not abuse its discretion.
1. The Williams plaintiffs did not show irreparable
harm
“[I]f the plaintiff may be fully compensated by the payment
of damages in the event he prevails, then preliminary injunctive
relief should be denied.” (Tahoe Keys Property Owners’ Assn. v.
State Water Resources Control Bd. (1994) 23 Cal. App. 4th 1459,
1471; accord, Pacific Decision Sciences Corp. v. Superior Court
(2004) 121 Cal. App. 4th 1100, 1110 [“before a court may issue a
nonstatutory injunction . . . it must appear that monetary relief
would not afford adequate relief”].) The Williams plaintiffs seek
an order to recover $2.2 million they allege the Petrosian
defendants embezzled from the Group operating accounts. This
is precisely the type of recovery for which they have an adequate
remedy at law—payment of damages. The Williams plaintiffs did
not present any evidence the Petrosian defendants would not be
able to pay a $2.2 million judgment if the Williams plaintiffs were
9 In their reply brief, the Williams plaintiffs contend the
Petrosian defendants fraudulently induced Williams to enter into
the management agreement by, among other things, falsely
telling Williams that Petrosian Esthetic’s attorney also
represented Williams in the transaction; and the management
agreement is void and procedurally and substantively
unconscionable. However, the Williams plaintiffs did not raise
these arguments in their opening brief, and they are forfeited.
(See People v. Duff (2014) 58 Cal. 4th 527, 550, fn. 9 [“the claim is
omitted from the opening brief and thus waived”]; Aptos Council
v. County of Santa Cruz (2017) 10 Cal. App. 5th 266, 296, fn. 7.)
17
to prevail at trial. Instead, the Williams plaintiffs argue
monetary relief is not sufficient because by denying relief, “the
trial court in effect allowed [Petrosian] . . . to take over
Dr. Williams’ Practice, equipment, patients and employees. At
his age, Dr. Williams, an 83-year-old man, cannot do a repeat
performance. . . . Dr. Williams does not want money. He wants
his Practice.” This argument rests on a faulty premise—that the
Petrosian defendants’ alleged embezzlement denied Williams his
right to use the med-spa premises, equipment, website, and
intellectual property. It did not.
Williams admitted in his declaration that he and Petrosian
“reach[ed] a mutual agreement to terminate the [management]
agreements on May 1, 2020.” Aquino similarly declared that
Williams “severed his relationship” with Petrosian. Williams had
no right under the management agreements to practice medicine
at the Sev Laser med-spas after termination of the agreements.
The agreements provided to the contrary, Petrosian Esthetic “has
the legal right to occupy the space occupied by the Practice . . .
and grants to [the] Group the right to use the Premises for the
Practice for as long as this Agreement remains in effect . . . .”
There was also substantial evidence Williams had the right
after termination of the management agreements to use the
equipment, phone lines, website, and intellectual property of Sev
Laser. It was Petrosian that provided the equipment and
intellectual property under the agreements. The agreements
stated Petrosian Esthetic “shall provide and maintain all
furnishings, fixtures and equipment used in the Practice,
including but not limited to the lasers used in the Practice.” And,
Petrosian Esthetic was the “sole and exclusive provider of all . . .
information management, . . . equipment and supplies as are
18
reasonably necessary for the day-to-day administration,
operation and non-medical management” of the med-spas.
Further, Petrosian declared and presented documentary evidence
she created or acquired the Sev Laser telephones, Internet
address, website, and trademarks prior to her affiliation with
Williams, and she opened and operated the Sev Laser med-spas
in West Hollywood and Glendale while affiliated with a different
physician. The Williams plaintiffs cannot point to any evidence
they had a right to the equipment and intellectual property after
termination of the agreement. Williams’s asserted lack of
knowledge that Petrosian owned the leases to all the clinics, the
telephone lines, and the website does not constitute evidence he
had any claim to their use.
By contrast, the Petrosian defendants presented evidence
they would be seriously harmed if the trial court transferred the
Sev Laser med-spas to Williams and the Group. By the time of
the filing of the motion for a preliminary injunction, Petrosian
had entered a management agreement with a new physician
under which the physician subleased space and operated a
medical practice, and an injunction would force the med-spas to
close with an estimated $13 million in foregone revenue per
year.10 Moreover, because the Petrosian defendants and their
10 The Williams plaintiffs contend Petrosian is not licensed to
practice medicine, and without Williams, Sev Laser’s practice
violates California regulations against the practice of medicine by
non-licensed physicians. However, Williams and Alden declared
an affiliation similar to that contemplated under the
management agreements complies with California law.
Petrosian averred the spas closed before the termination of the
Group’s affiliation due to the COVID-19 pandemic, and by the
19
affiliates owned the leases, equipment, and website and
continued to operate the med-spas, the injunction sought by the
Williams plaintiffs “‘“‘mandates an affirmative act that changes
the status quo . . . [which] is rarely granted, and is subject to
stricter review on appeal.’”’” (People ex rel. Herrera v. Stender,
supra, 212 Cal.App.4th at p. 630.) Accordingly, the trial court did
not abuse its discretion in finding Williams failed to establish his
remedy at law was inadequate and he would suffer irreparable
harm absent an injunction. (White v. Davis, supra, 30 Cal.4th at
p. 554.)
2. The Williams plaintiffs did not show a likelihood of
success on the merits
Even if the Williams plaintiffs had made an adequate
showing of irreparable harm, the trial court did not abuse its
discretion in finding they had not met their burden to show a
likelihood of success on the merits. (Marken v. Santa Monica-
Malibu Unified School Dist., supra, 202 Cal. App. 4th 1250 at
p. 1260.)
The Williams plaintiffs contend the Petrosian defendants
embezzled more than $10 million between 2017 and 2020 by
withdrawing from the Group’s account (or Petrosian Esthetic’s
account in 2017) revenue the Group received from its medical
practice without paying Williams the net income to which he was
time the spas reopened in June 2020, she had entered into a new
management agreement with another physician under which the
new medical group had a right to occupy space at the med-spas
for its practice. It was the new medical practice that hired
Williams’s former employees, not Petrosian.
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entitled.11 In their motion for a preliminary injunction (seeking
$2.2 million allegedly converted in 2020), the Williams plaintiffs
relied on Aquino’s testimony setting forth the Petrosian
defendants’ withdrawals from the Group’s operating account and
the lesser amount of net income paid to Williams, the Group’s
2020 bank statements, and nine checks reflecting deposits into
the Petrosian Esthetic account from the Group’s operating
account in 2019. Although Aquino opined that based on her
calculations the Petrosian defendants over a six year period
“withdrew more than $10 million from the Group’s bank
accounts,” none of the evidence submitted with the motion shows
that the withdrawals from the Group’s accounts were used for
anything other than to pay expenses and management fees as
provided under the management agreements.
As discussed, the management agreements gave Petrosian
Esthetic and the related companies the authority to sign checks
on behalf of the Group “and to make withdrawals from the Group
Operating Account, for payment specified in [the]
Agreement[s] . . . .” Petrosian Esthetic had the right to collect its
“actual out-of-pocket costs in providing its services, plus an
amount equal to 15% of such amount . . . .” The services included
“all non-medical business management, information
11 The Williams plaintiffs also claim the Petrosian defendants
breached the management agreements by failing to deposit the
Group’s practice revenue into the Group’s operating account prior
to 2018. Although Petrosian admitted this was true, the
Petrosian defendants produced the Petrosian Esthetic bank
statements for 2017, and as we will discuss, the Williams
plaintiffs did not meet their burden to show the Petrosian
defendants used the Group’s funds for unauthorized purposes.
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management, clinical support and personnel, equipment and
supplies as are reasonably necessary for the day-to-day
administration, operation and non-medical management of the
Practice . . . .”
Absent evidence of how the Group’s funds were used by
Petrosian Esthetic, Aquino’s testimony that the Group’s gross
operating income was significantly greater than the net income
paid to Williams is not evidence that any funds were embezzled.
Aquino stated as to 2019, that the Group’s practice received
$10.3 million but only $4.7 million went to pay expenses, payroll,
and equipment leases. But Aquino’s declaration provides no
foundation or supporting documents to show how Aquino
calculated the expense amounts. Aquino also avers as to 2020
that only $875,534 of the Group’s gross income of $3.1 million
went to pay expenses, payroll, rent, and leases on the equipment.
Although the Williams plaintiffs submitted the Group’s 2020
bank statements, the statements do not show how Aquino
calculated the $875,534 purportedly used to pay expenses.
Contrary to Aquino’s assertion, Petrosian declared that
“[t]he money withdrawn from the [Group] accounts was used to
pay expenses and to reimburse the applicable management
company for expenses that it paid pursuant to its management
obligations,” including payment for non-medical personnel,
facilities costs, furniture, fixtures, quality assurance, marketing,
bookkeeping, and legal services, as well as use of the Sev Laser
name by the affiliated companies. According to Petrosian, the
funds withdrawn in 2020 also were used to pay approximately
80 nurses and nurse practitioners, malpractice insurance,
management fees, and other expenses. The trial court implicitly
credited Petrosian’s averments over Aquino’s. In reviewing the
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trial court’s order, we “do[] not resolve conflicts in the evidence,
reweigh the evidence, or assess the credibility of witnesses.”
(Whyte v. Schlage Lock Co., supra, 101 Cal.App.4th at p. 1450.)
The Williams plaintiffs contend they did not have sufficient
information to calculate the Group’s expenses and assert that
“only [d]efendants can answer the question, which withdrawals
were allowable expenses and costs.” Aquino acknowledged she
lacked information to prepare the Group’s profit and loss
statements, calculate Williams’s taxable income, and prepare the
medical staffs’ W-2 Forms. The fact the Williams plaintiffs did
not have sufficient information about the Group’s expenses does
not absolve them of their burden in the trial court to demonstrate
likelihood of success on the merits to obtain preliminary
injunctive relief,12 and on appeal “to make a clear showing of an
abuse of discretion.” (SB Liberty, LLC v. Isla Verde Assn., Inc.,
supra, 217 Cal.App.4th at pp. 280-281.) The Williams plaintiffs
did not meet their burden.13
12 Aquino declared she asked Petrosian Esthetic in early 2019
and 2020 to provide a check registry and information about the
Group’s employees, and at the termination meeting she asked for
unspecified accounting information, but no additional
information was provided. The Williams plaintiffs did not
produce any evidence they pursued their request for financial
information in discovery before filing the motion for a
preliminary injunction, and they do not contend the Petrosian
defendants failed to comply with any discovery requests for the
information.
13 The Williams plaintiffs request we take judicial notice of
the articles of organization of Petrosian Esthetic and the location
management companies; a declaration filed by Petrosian
Esthetic’s attorney on August 4, 2020 in connection with the
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DISPOSITION
The order denying the Williams plaintiffs’ motion for a
preliminary injunction is affirmed. The Petrosian defendants are
to recover their costs on appeal.
FEUER, J.
We concur:
PERLUSS, P. J.
SEGAL, J.
Petrosian defendants’ motion to compel arbitration; a declaration
filed by the attorney on September 22, 2020 (after denial of the
preliminary injunction) in connection with the Williams
plaintiffs’ attorney disqualification motion; and a cashier’s check
Williams purportedly obtained to post a bond in the event the
trial court granted a preliminary injunction. We deny the
Williams plaintiffs’ request because even if the documents were
judicially noticeable (which is questionable as to the cashier’s
check), they are irrelevant to the appeal. (See Coyne v. City and
County of San Francisco (2017) 9 Cal. App. 5th 1215, 1223, fn. 3
[denying judicial notice as to documents that were not relevant to
court’s analysis]; Arce v. Kaiser Foundation Health Plan, Inc.
(2010) 181 Cal. App. 4th 471, 482 [“We also may decline to take
judicial notice of matters that are not relevant to dispositive
issues on appeal.”].)
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