Personal Jurisdiction
Purposeful Availment
Labor Law
California Law
Charles Swenberg brought this action against dmarcian, Inc., Timothy Draegen, and Martijn Groeneweg, alleging various claims related to his ownership interest in and employment with the company. This appeal is from the trial court’s order granting Groeneweg’s motion to quash service for lack of personal jurisdiction. For the reasons explained herein, we reverse and remand.
Dmarcian, Inc. (“dmarcian”) was incorporated in Delaware in 2014, and, in 2017, registered with the California Secretary of State as a foreign corporation with its “principal executive office” in Burlingame, California.
Draegen is a co- founder of the company, its chief executive officer (CEO) and majority shareholder, and resides and works in North Carolina. Groeneweg, who resides in the Netherlands, is alleged to be a chief executive of, and have an ownership interest in, “a company whose true name is unknown to Swenberg, but which was a European affiliate entity of dmarcian” and “was referred to colloquially as dmarcian EU.” The complaint alleges on information and belief that Groeneweg is presently a shareholder or beneficial owner of dmarcian. Swenberg, who resides in California, is a co-founder of dmarcian and worked for the company as a consultant in 2016, then as chief revenue officer (CRO) and finally as chief operating officer (COO) until his termination on May 31, 2018.
Groeneweg’s declaration states he is a 25 percent shareholder in dmarcian Europe BV, which he described as (in the same terms Draegen described dmarcian) as selling and marketing “an email authentication protocol specification (called ‘DMARC’) that assists customers in streamlining email communications by filtering out spam, malware, and phishing emails from email inboxes.” Groeneweg stated that the company provides these services “throughout Europe, Russia, and Africa.”
“California courts may exercise jurisdiction over
nonresidents ‘on any basis not inconsistent with the Constitution of this state
or of the United States.’ (Code Civ. Proc., § 410.10.) The statute ‘manifests
an intent to exercise the broadest possible jurisdiction, limited only by
constitutional considerations. [Citations.]’ (Sibley v. Superior Court [(1976)]
16 Cal.3d [442,] 445.) A state may constitutionally exercise personal
jurisdiction over a nonresident as long as he or she has ‘minimum contacts’
with that forum such that ‘maintenance of the suit does not offend “traditional
notions of fair play and substantial justice.” [Citations.]’ (Internat. Shoe
Co. v. Washington (1945)
326 U.S. 310, 316.)” (Taylor-Rush v. Multitech
Corp. (1990) 217 Cal.App.3d 103, 112 (Taylor-Rush); Pavlovich v.
Superior Court (2002) 29 Cal.4th 262 (Pavlovich.)
“When jurisdiction is challenged by a nonresident defendant, the burden of proof is on the plaintiff to demonstrate that sufficient ‘minimum contacts’ exist between the defendant and the forum state to justify imposition of personal jurisdiction.” (Taylor-Rush, supra, 217 Cal.App.3d at p. 112, quoting Sibley v. Superior Court, supra, 16 Cal.3d at p. 445.) The plaintiff must prove the factual basis justifying exercise of jurisdiction by a preponderance of the evidence. (BBA Aviation PLC v. Superior Court (2010) 190 Cal.App.4th 421, 428 (BBA Aviation).) “The plaintiff must provide specific evidentiary facts, through affidavits and other authenticated documents, sufficient to allow the court to independently conclude whether jurisdiction is appropriate” and “cannot rely on allegations in an unverified complaint or vague and conclusory assertions of ultimate facts.” (Strasner v. Touchstone Wireless Repair & Logistics, LP (2016) 5 Cal.App.5th 215, 222; BBA Aviation, at p. 428; In re Automobile Antitrust Cases I & II (2005) 135 Cal.App.4th 100, 110.)
“ ‘Under the minimum contacts test, “an essential criterion
in all cases is
whether the ‘quality and nature’ of the defendant’s activity is such that it is
‘reasonable’ and ‘fair’ to require him to conduct his defense in that
State.” ’ ” (Epic Communications, Inc. v. Richwave Technology, Inc. (2009)
179 Cal.App.4th 314, 327 (Epic Communications), quoting Pavlovich,
supra, 29 Cal.4th at p. 268.) “ ‘The “substantial connection” [citations]
between the defendant and the forum State necessary for a finding of minimum contacts
must come about by an action of the defendant purposefully directed toward
the forum State. [Citations.]’ (Asahi Metal Industry Co. v. Superior
Court (1987) 480 U.S. 102, 112.) A defendant’s physical presence in the
state is not required, as long as his or her efforts were “ ‘purposely
directed’ ” toward residents of that state. (Burger King Corp. v. Rudzewicz (1985)
471 U.S.
462, 476; St. Joe Paper Co. v. Superior Court (1981) 120 Cal.App.3d 991,
997.) Thus, personal jurisdiction may be exercised over a defendant who has
caused an effect in the forum state by an act or omission occurring elsewhere.
(McGee v. International Life Ins. Co. (1957) 355 U.S. 220,
223–224; Sibley v. Superior Court, supra, 16 Cal.3d at pp. 445–446; Buckeye
Boiler Co. v. Superior Court (1969) 71 Cal.2d 893, 898–899.)” (Taylor-Rush,
supra, 217 Cal.App.3d at p. 112.) But there must be evidence the
nonresident defendant intentionally targeted his or her conduct at the forum
state and not just at a plaintiff who lives in that state. (Burdick v.
Superior Court (2015) 233 Cal.App.4th 8, 13, 25 (Burdick); Walden
v. Fiore (2014) 571 U.S. 277, 288 (Walden).)
Personal jurisdiction may be general or specific. (Epic Communications, supra, 179 Cal.App.4th at p. 327.) “General jurisdiction exists where the defendant has such pervasive contacts with the forum state that it is fair to subject it to jurisdiction for all purposes. (DVI, Inc. v. Superior Court [(2002)] 104 Cal.App.4th [1080,] 1090, 1097.) . . . Specific jurisdiction exists when, though the defendant lacks such pervasive forum contacts that he may be treated as present for all purposes, it is nonetheless proper to subject him to the forum state’s jurisdiction in connection with a particular controversy.” (Epic Communications, supra, 179 Cal.App.4th at p. 327.) “ ‘When determining whether specific jurisdiction exists, courts consider the “ ‘relationship among the defendant, the forum, and the litigation.’ ” [Citations.] A court may exercise specific jurisdiction over a nonresident defendant only if: (1) “the defendant has purposefully availed himself or herself of forum benefits” [citation]; (2) “the ‘controversy is related to or “arises out of” the defendant’s contacts with the forum’ ” [citations]; and (3) “ ‘the assertion of personal jurisdiction would comport with “fair play and substantial justice” ’ ” [citations].’ ” (Snowney, supra, 35 Cal.4th 1054, 1062, quoting Pavlovich, supra, 29 Cal.4th at p. 269.)
“ ‘ “The purposeful availment inquiry . . . focuses on the defendant’s intentionality. [Citation.] This prong is only satisfied when the defendant purposefully and voluntarily directs its activities toward the forum so that it should expect, by virtue of the benefit it receives, to be subject to the court’s jurisdiction based on” its contacts with the forum.’ (Pavlovich, supra, 29 Cal.4th at p. 269, quoting U.S. v. Swiss American Bank, Ltd. (1st Cir. 2001) 274 F.3d 610, 623–624.) Thus, purposeful availment occurs where a nonresident defendant ‘ “purposefully directs” its activities at residents of the forum’ (Burger King [Corp. v. Rudzewicz], supra, 471 U.S. at p. 472), ‘ “purposefully derives benefit” from’ its activities in the forum (id. at p. 473,), ‘creates a “substantial connection” with the forum’ (id. at p. 475), ‘ “deliberately” has engaged in significant activities within’ the forum (id. at pp. 475–476), or ‘has created “continuing obligations” between itself and residents of the forum’ (id. at p. 476). By limiting the scope of a forum’s jurisdiction in this manner, the ‘ “purposeful availment” requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of “random,” “fortuitous,” or “attenuated” contacts. . . .’ (Id. at p. 475.) Instead, the defendant will only be subject to personal jurisdiction if ‘ “it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the state.” ’ (Pavlovich, supra, 29 Cal.4th at p. 269, quoting World-Wide Volkswagen, supra, 444 U.S. at p. 297.)” (Snowney, supra, 35 Cal.4th at pp. 1062–1063.)
The “ ‘minimum contacts’ analysis looks to the defendant’s contacts with the
forum state itself, not the defendant’s contacts with persons who reside
there.’ ” (Zehia v. Superior Court (2020) 45 Cal.App.5th 543, 554–555,
quoting Walden, supra, 571 U.S. at p. 285.) “ ‘The plaintiff cannot be
the only link between the defendant and the forum. Rather, it is the
defendant’s conduct that must form the necessary connection with the forum
State that is the basis for its jurisdiction over him.’ ” (David L. v.
Superior Court (2018) 29 Cal.App.5th 359, 372, quoting Walden, at p.
285.) “To find specific jurisdiction, a court must look to the defendant’s
‘own’ suit-related contacts with the forum to see if they create a ‘substantial
connection with the forum State,’ not just ‘with persons who reside there.’
” (David L., at p. 372, quoting Walden, at pp. 284–285.)
Swenberg presented compelling evidence that Groeneweg publicly presented himself as one of the leaders of dmarcian, with no hint there was a distinction between dmarcian and any other entity Groeneweg was associated with. It is undisputed that dmarcian and dmarcian EU shared a Web site; accordingly, anyone who attempted to access a Web site for dmarcian EU would be redirected to the dmarcian Web site. On the dmarcian Web site, Groeneweg appears immediately below Draegen, the CEO (identified by name and location in the United States) and above two individuals identified as “General Manager APAC Melbourne, Australia” and “General Manager Americas Asheville, USA.” Although the exhibit in the record on appeal is incomplete, in that the text beneath Groeneweg’s name is obscured by what appears to be a pop-up message on the computer screen, it is obvious from the format of this section of the Web site that the hidden information would read—as Swenberg’s attorney indicated in his declaration—“General Manager Europe.” Other employees are similarly presented with photographs, names, and locations in various parts of the world. The obvious impression imparted by the Web site is a company with operations run by regional managers in different geographic areas.
The same impression is conveyed by Groeneweg’s LinkedIn profile, which describes him as “General Manager Europe at dmarcian” and, under “Experience,” “Co-Founder and General Manager Europe.” The accompanying text describes “dmarcian” and its business without reference to dmarcian EU or any other entity: “Companies use dmarcian to rapidly and accurately deploy DMARC . . .”; “The mission of dmarcian is to fix the email ecosystem”; “dmarcian has 19,000 customers . . . .” Other dmarcian EU employees’ LinkedIn pages similarly describe the business of “dmarcian” and provide as examples of dmarcian’s customers a world-wide list including companies headquartered and doing business in California, such as AirBnb and GAP.
That dmarcian EU’s Internet presence was a shared Web site, administered by dmarcian in California, where a dmarcian employee would assign prospective customers to dmarcian EU, indicates at the very least a strong business association between dmarcian EU and dmarcian: dmarcian was dmarcian EU’s source for customers contacting the company through the Web site.
By publicly presenting himself as a leader of dmarcian, a company headquartered in California, having dmarcian EU’s web address automatically route to dmarcian’s Web site, administered in California, and receiving prospective customers directed to dmarcian EU by a dmarcian employee in California, Groeneweg “ ‘ “purposely availed himself . . . of forum benefits” ’ ” and “ ‘ “purposefully derived benefit” from’ his activities in the forum.” (Snowney, supra, 35 Cal.4th at pp. 1062–1063.) A California court’s exercise of jurisdiction over Groeneweg in litigation related to his role in dmarcian can hardly be seen as based on “ ‘ “random,” “fortuitous,” or “attenuated” contacts.’ ” (Ibid.) Having established and made economic use of a relationship with a California company and its employees, Groeneweg could reasonably expect to be subject to the jurisdiction of California courts in litigation connected to this relationship.
Swenberg’s claims clearly relate to Groeneweg’s business relationship with dmarcian: The gist of Swenberg’s complaint is that he had an agreement with Draegen for dmarcian to acquire an ownership share in dmarcian EU that was violated by Draegen and Groeneweg secretly negotiating a deal for Draegen to acquire the interest personally, thereby defeating Swenberg’s expectation of an ownership interest in dmarcian EU. He further alleged that his complaints about this situation resulted in retaliation including termination of his position at dmarcian.
“A state may exercise specific jurisdiction over a nonresident who purposefully avails himself or herself of forum benefits, because the state has ‘a “manifest interest” in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors. [Citations.] Moreover, where individuals “purposefully derive benefit” from their interstate activities [citation] it may well be unfair to allow them to escape having to account in other States for consequences that arise proximately from such activities.’ ” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 447, quoting Burger King Corp. v. Rudzewicz, supra, 471 U.S. at pp. 473–474.)
(California Court of Appeal, July 30, 2021, Swenberg v. Dmarcian, Inc., Docket No. A159148, Certified for Publication)
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