Bid to Dissolve LA Weekly Passes First Legal Hurdle

LOS ANGELES (CN) – A Los Angeles judge on Thursday denied a bid by alternative newspaper LA Weekly’s new owners to toss a lawsuit from an investor who wants to dissolve the business over ethical violations and other blunders he says are ruining the publication.

Nearly a year ago, a group of investors bought the LA Weekly; no one knew who until plaintiff and co-investor David Welch sued this past August. Welch says the new management brought changes that have hurt the magazine.

After the group fired most of the paper’s editorial staff, former contributors organized a boycott that pulled so many sponsors away from the paper’s food event it was eventually canceled – but not before the investors promised to print good reviews for any vendors who would participate, Welch says.

Welch lays much of the blame on Brian Calle, the investment group’s leader and now LA Weekly’s publisher. Calle formerly headed the editorial board at the Orange County Register and was a contributor to the far-right news site Breitbart. He’s now CEO of LA Weekly parent company, Street Media.

Before the group bought the paper, Welch says he performed four months of legal work to facilitate the purchase and invested $225,000 when the others came up short to complete the purchase. But he says the investment group diverted profits and used the publication to line their own pockets.

Eventually, Welch says he was frozen out of the management team despite his 14 percent ownership in the company.

Street Media asked LA County Superior Court Judge Dalila Lyons to toss Welch’s lawsuit, claiming the court lacks jurisdiction to dissolve the Delaware-based limited liability company and Welch hadn’t presented enough basic facts for the case to continue.

In court Thursday, Street Media attorney Ekwan Rhow of the LA firm Bird Marella told Lyons there was no dissent or “board deadlock” to justify dissolving the company.

“LA Weekly is operational,” Rhow said in court. “You can go to the corner and get a copy of LA Weekly yourself.”

But Welch’s attorney, Rory Miller with the LA firm Glaser Weil, said dissolution can be made under Delaware or California law.

In the end, Lyons said she has jurisdiction to hear a dissolution case for a Delaware-based company and declined Street Media’s bid to toss the suit.

Other listed owners of the paper include Wayne Gross and Alan Greenberg of the law firm Greenberg Gross, for whom Welch once did litigation work; Kevin Xu, CEO of a “regenerative medicine” company, and his mother Lily Li; attorney Steve Mehr; hotel developer Paul Makarechian; Andy Bequer, CEO of an addiction treatment center; property developer Michael Mugel; and professional skateboarder Nyjah Huston, who was featured on an LA Weekly cover without a disclaimer alerting readers to his role within the company.

Miller, Welch’s attorney, acknowledged Calle and several other defendants haven’t been served with the lawsuit yet. Lyons asked for an update on process service in January.

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