DOWNTOWN After more than 16 years snipping hair, painting nails and scrubbing faces, a local institution of beauty will close its doors.

Fred Segal Beauty — which was founded in 1992 by business partners Michael Baruch and Paul DeArmas — will shut down its hair salon and spa on Saturday, finishing out on a small set of appointments before putting the locks on an enterprise that has long called the Fred Segal shopping center on the corner of Fifth Street and Broadway home.

Amid the closing of Fred Segal Beauty is an ugly dispute between the salon owners and their landlords — Fred and Michael Segal — who are battling in a lawsuit that was filed by Baruch and DeArmas after receiving notice in March that their lease extension would not be renewed.

Their dispute is rooted in a long sought after second salon in the Fred Segal shopping center on Melrose Avenue in Hollywood where both Baruch and DeArmas had invested several million dollars to open another Fred Segal Beauty location. The plaintiffs alleged that after receiving assurances over the years that the landlords supported a second salon, they withdrew their backing after more than $1.2 million had already been invested in rent and design fees.

Their feud also involves the development of a Fred Segal Beauty product line, which in similar fashion to the second salon, received original support from the landlords, only to later withdraw that support, the lawsuit states.

Caught during the discussions about a new beauty product line and second salon was the topic of a lease extension at the Santa Monica location where the plaintiffs had spent about $1.5 million in renovation costs in 2003. The plaintiffs claim in the lawsuit that the landlord assured a lease extension would be granted upon their launch of the Fred Segal Web site, which the Segals were in the process of designing, hoping to hold off on an extension so that use of the site could be included in the deal.

In March, Baruch and DeArmas abruptly received notice that their lease would not be extended, the lawsuit claims. The suit also states that the Fred Segal Beauty owners believe there are other businesses within the Fred Segal shopping center selling beauty, hair, skin and cosmetic products, which is in violation of the exclusive agreement between the plaintiff and defendant.

“I am disheartened by this whole thing,” Baruch said. “I am sad for my entire staff and all of the people who have really put time and effort in building the brand into what it is today.

“I am completely confident and excited about all of my team’s future as well as my own.”

Michael Segal did not return several requests seeking comment.

The plaintiffs seek unspecified compensation for damages as well as an injunction against existing Fred Segal businesses that sell beauty products. The exclusive agreement between Fred Segal Beauty and the landlord states that the company has an irrevocable right to full service salon, spa, wellness center and products to Fred Segal shopping center as long as it remained a tenant.

Baruch said that the ownership of the Fred Segal trademark has yet to be determined but believes that it belongs to him and his business partner.

“We are going to move forward with all the ideas we were promised … that includes launching the product line and expanding to other locations,” Baruch said.

The closing came as a surprise to the staff.

“It’s been a very difficult two weeks,” Teresa Guidi, the director operations for Fred Segal Beauty, said. “A lot of people started their careers here.”

Guidi said that she is going to stick around for a few days to help close the business and will begin seeking management positions at other salons.

The customers have been equally surprised by the news, Guidi said.

“People are just shocked,” she said.

Darrylynn Kaun, who has owned a boutique in Fred Segal for 23 years, said she strongly believes that Fred Segal management will put in a good tenant at the space.

“I loved the employees,” she said. “Everyone who worked there was fantastic.”

Elizabeth Kenigsberg contributed to this report

melodyh@smdp.com