Swenberg v. Dmarcian ( 2021 )

Filed 7/30/21; Certified for Publication 8/30/21 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
CHARLES E. SWENBERG,
Plaintiff and Appellant,
A159148
v.
DMARCIAN, INC., et al., (San Mateo County
Super. Ct. No. 19-CIV-02896)
Defendants and Respondents.
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.
BACKGROUND
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.
According to the allegations of the complaint, dmarcian is an “email security
provider” and sells “a portfolio of products including software-as-a-service
1
products, compliance products, and technical support.” 1 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.” 2 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.
Swenberg’s complaint alleged that his employment as CRO and COO of
dmarcian was governed by a series of oral agreements. The first agreement,
entered by Swenberg and Draegen on or about January 1, 2017, provided
1 Draegen described dmarcian as marketing and selling “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.”
2Groeneweg’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.”
Groeneweg’s brief refers to the European and American companies as
“dmarcian Europe BV” and “dmarcian, Inc.” Swenberg refers to them as
“dmarcian EU” and “dmarcian.” For simplicity, except when a quotation uses
the full company names, this opinion will use “dmarcian EU” and “dmarcian.”
2
that both were the founders of dmarcian and reclassified Swenberg as an
employee, with a base salary of $140,000 annually.
The second alleged agreement, entered on February 17, 2017, provided
that Draegen and his wife would own five-eighths of dmarcian’s stock and
Swenberg would own three-eighths, which would vest over a three-year
period beginning June 13, 2016 (the start of Swenberg’s work as a
consultant), while “the remaining stock would be reserved as an option pool
for future employees and/or investors in the company.” Swenberg alleged
this February 2017 agreement also provided that “the ownership interest in
dmarcian EU was to be ‘folded into’ dmarcian (either to a merger,
consolidation or other means), and in exchange Groeneweg would receive a
small ownership stake in dmarcian.” The complaint alleged that defendants
“failed to fully execute on the February 2017 Agreement in that dmarcian did
not own or hold dmarcian EU’s interest at least until the time Swenberg was
terminated from dmarcian. Instead, upon information and belief, Draegen
and Groeneweg directly own and/or beneficially own the entire ownership
interest in dmarcian EU to date, and to the detriment of dmarcian and
Swenberg.”
A third agreement, entered in the summer of 2017, provided Draegen
and Swenberg would each be entitled to a guaranteed bonus equal to 50
percent of an ongoing “bonus pool,” to be calculated as 10 percent of
dmarcian’s gross bookings, and an agreement entered in February 2018,
provided Swenberg would be entitled to “severance pay equal to one year of
his total compensation (including base salary, bonus, vesting of stock options
and all benefits) in the event of his separation from dmarcian that was not for
a good cause.” Swenberg alleged that he was paid “an annual base salary
3
and the first installment of his share of the bonus,” but “any additional bonus
payments” and his severance payment remain unpaid.
In addition to the oral agreements, Swenberg alleged that he executed
a written stock purchase agreement in March 2017, pursuant to which he
“duly purchased 3,000,000 shares of dmarcian’s Common Stock with the
intent that vesting be over a three-year period.”
In December 2017, suspicious that Draegen “would not allow the
acquisition of the ownership interest in dmarcian EU by dmarcian,”
Swenberg confronted Draegen and requested that dmarcian complete the
acquisition, but Draegen “failed to follow through with this promise at that
time.” Swenberg raised the issue several times during the first months of
2018, but “instead of being awarded with that benefit and in retaliation for
making this demand, in May 2018, Draegen terminated Swenberg’s
employment.”
Swenberg alleged that Draegen had periodically referred to “a
European Union (‘EU’) affiliate reseller entity of dmarcian that was then
operated by Groeneweg, calling it ‘dmarcian Europe.’ ” The complaint
alleged, on information and belief, that Draegen “concealed from Swenberg
that he had an agreement with Groeneweg regarding dmarcian EU that
conflicted with Draegen’s loyalty to dmarcian and their agreement that
dmarcian EU will fold into dmarcian” and “Draegen may already have had an
ownership stake in dmarcian EU or an agreement regarding dmarcian EU
that jeopardized or interfered with his fiduciary responsibilities to dmarcian.”
(Italics in complaint.) In December 2017 or January 2018, Groeneweg told
Swenberg he and Draegen had been “negotiating the deal between dmarcian
and dmarcian EU for a long time,” and Draegen then admitted he and
4
Groeneweg “were discussing future plans for Draegen, and not dmarcian, to
own an ownership stake in dmarcian EU.” (Italics in complaint.)
The complaint alleged that Draegen and dmarcian breached the oral
agreements with Swenberg by refusing to allow him to vest on the stock
options under the January 2017 agreement; failing to give him a share in
dmarcian EU pursuant to the February 2017 agreement; failing to fully pay
his guaranteed bonuses pursuant to the summer 2017 agreement; and failing
to pay his severance pay pursuant to the February 2018 agreement.
Additionally, Swenberg alleged that he has not been reimbursed for
approximately $100,000 in expenses he had advanced on behalf of the
company.
Swenberg brought this suit individually and derivatively on behalf of
dmarcian, alleging a total of 20 causes of action. Two of these were
specifically alleged against Groeneweg (together with Draegen): The first
cause of action, for breach of fiduciary duty, alleged Draegen and Groeneweg
had a fiduciary relationship with Swenberg because all three were “partners,
co-founders, and/or co-joint venturers when forming dmarcian together” and
because Draegen and Groeneweg controlled the majority of the shares in the
company, and breached their fiduciary duties by putting their self-interests
over dmarcian’s, breaching dmarcian’s employment terms with Swenberg and
retaliating against Swenberg for his complaints; the third cause of action, for
breach of fiduciary duty of undivided loyalty, alleged Groeneweg had a duty
of loyalty to dmarcian as “a reseller of dmarcian’s products, and therefore a
corporate partner” and as “a potential, actual or beneficial investor in
dmarcian,” and breached this duty by concealing Draegen’s acquisition of an
ownership stake in dmarcian EU. A number of causes of action were alleged
against all defendants: Fraud/concealment, alleging “Draegen and dmarcian
5
knowingly concealed from Swenberg his ownership interest in dmarcian EU
even though they knew about Draegen’s conflict of interest and had a duty to
disclose it to Swenberg”; negligent misrespresentation, alleging “defendants
concealed and/or misrepresented” Draegen’s ownership interest in dmarcian
EU; declaratory relief, seeking a declaration that the oral agreements are
enforceable contracts, the stock purchase agreement is enforceable “as it
pertains to the vesting schedule,” Swenberg “was entitled to vest in his
options at a monthly rate over a period of 3 years under either the
Agreements and/or the Stock Purchase Agreement,” and “dmarcian and/or
Swenberg has an ownership interest in dmarcian EU”; specific performance;
unjust enrichment/restitution; and unlawful and/or unfair business practices.
The remaining causes of action were alleged against only Draegen and/or
dmarcian.
Both Draegen and Groeneweg filed motions to quash service for lack of
personal jurisdiction.
In support of his opposition, Swenberg offered his own declaration and
those of his attorney and of former dmarcian employee Sean Venkersammy.
Counsel’s declaration attached copies of material from the Internet in which,
he stated, Groeneweg presented himself as a founder and manager of
dmarcian without suggesting his association was with a separate entity.
First, counsel stated that “[c]onsistent with Groeneweg being a part-owner of
dmarcian, dmarcian’s website lists Groeneweg as the General Manager of
dmarcian in Europe, not as being affiliated with any separate entity called
‘dmarcian EU’ or ‘dmarcian Europe.’ ” A copy of the “Meet Our Team” page of
dmarcian’s Web site shows a photograph of Groeneweg followed by his name
6
but—as it appears in our record—no indication of his specific role. 3 Next,
counsel declared that Groeneweg’s LinkedIn profile lists him as “founder of
dmarcian.” The attached pages from LinkedIn.com show Groeneweg with the
description “General Manager Europe at dmarcian” and, under “Experience,”
“Co-Founder and General Manager Europe”; the text describes “dmarcian”
and its business without reference to dmarcian EU or any other entity.
Counsel further states that the LinkedIn profiles of several employees who
work at dmarcian EU “list in their ‘Experience’ section that they are actually
employed at dmarcian, and two employees on the dmarcian “Meet Our Team”
page list business clients headquartered and doing business in California,
such as AirBnb. As with Groeneweg, these employees’ profiles refer to their
employer simply as “dmarcian.” Finally, counsel’s declaration states that the
Web address “dmarcian-eu.com” automatically redirects to the Web site
“dmarcian.com.”
Swenberg’s declaration stated, “I conducted conference calls along with
dmarcian’s United States employees to Groeneweg and/or members of his
sales team. These calls were about the business of dmarcian, including the
sales process and other day-to-day business matters. These telephone calls
3 As it appears in the record on appeal, Groeneweg’s photograph and
name appear at the bottom of a page and the place where the description of
his role and location would appear—if consistent with the presentation of
other team members—is obscured by what appears to be a pop-up message
on the computer screen (“We use cookies to give you the best experience on
our website” followed by “I accept” and “Learn More” buttons.) Two other
general managers are depicted following Groeneweg: “Con Lokos,” followed
by “General Manager APAC [¶] Melbourne, Australia” and then “Edward
Carroll,” followed by “General Manager Americas [¶] Asheville, USA.”
Assuming the Web site uses same pattern for each of the individuals
portrayed, the pop-up message beneath Groeneweg’s name would obscure
“General Manager Europe” and Groeneweg’s location in the Netherlands.
7
originated in or were made to Marotta’s Burlingame, California, office.”
Swenberg declared, “dmarcian EU acted as a reseller of dmarcian’s products,
and leads from dmarcian were assigned to Groeneweg and/or dmarcian EU
by means of dmarcian’s Customer Relations Management (‘CRM’) system
which was operated and administered in California.” Swenberg stated that
“[t]he process of passing business from dmarcian to the EU sales team
through the CRM software of dmarcian took place in California” and was the
responsibility of an employee in California (Venkersammy), and the software
was “always paid for by dmarcian itself, regardless of whether the clients
were ultimately handled by Groeneweg’s team in Europe.” Another
California employee (Reynolds) “provided employee login information to
dmarcian and dmarcian EU team members through which they could view
assignments that had been given to them by Venkersammy.”
According to Swenberg, “[t]he sales referral process explained above
was reviewed and discussed periodically over the phone with me in California
and others, and Groeneweg himself had input on the operating process
during those calls. Groeneweg also periodically directed his employees to
attend to business in San Francisco on his behalf and/or on behalf of
dmarcian EU, including Vincent Schonau.” Draegen hired an individual, who
was paid by dmarcian, to recruit engineers in Bulgaria who then operated
under the auspices of dmarcian, and Groeneweg paid the same Bulgarian
engineers to develop software that is used by dmarcian, from which all
dmarcian clients, including those in California, benefit. “Groeneweg himself
once threatened me saying that if dmarcian and/or Draegen did not give him
his preferred terms in a negotiation for a stake in the company, Groeneweg
would have a claim for intellectual property against Draegen and/or
dmarcian for the appropriation of this software by dmarcian.”
8
Swenberg stated that the dmarcian-eu.com Web site redirects to
dmarcian.com, “which suggests that the two domains are owned by the same
entity, and I believe Draegen personally registered both domains based on
statements that he has made to me.” Also, according to Swenberg, “[a]ll the
service infrastructure for dmarcian and dmarcian EU is managed from the
United States by dmarcian, and though customer data is held in a cloud
computing system, data from clients located in the EU may be held in the
same data center as the data belonging to clients within the US, including
clients located in California.”
Venkersammy’s declaration stated that he was an “Account Services
Manager” and “Community Advocate” for dmarcian until October 2019, and
managed “a global pipeline of over 900 new account signups per month”
through dmarcian’s website.” Prospective clients would fill out a form on the
Web site and some would ultimately be “serviced by employees operating
under the umbrella of dmarcian EU.” Through the Web site, Venkersammy
“directed a portion of those sales leads, which were generated through
dmarcian’s Customer Relationship Management system, to dmarcian EU,
which was originally a reseller of dmarcian’s product, and dmarcian received
a percentage of the payment from those referrals.” Venkersammy stated that
“[s]ometime after 2017, dmarcian and dmarcian EU merged and became a
single entity,” “Groeneweg became a part owner or other stakeholder in
dmarcian around that time,” “[u]pon information and belief, around that
time, Groeneweg merged dmarcian EU with dmarcian under an agreement
that was to be construed under the laws of the State of California,” and
“Groeneweg and/or dmarcian EU have merged with dmarcian for all
purposes, and therefore there is no distinction between the two, and
9
Groeneweg, as the General Manager of dmarcian, has systematic business
contacts with California where dmarcian’s corporate headquarters are.”
Groeneweg’s declaration in support of his reply to Swenberg’s
opposition stated he is a Dutch citizen and has lived in the Netherlands all
his life, he has never been an American citizen, does not own or operate a
business in California, does not conduct business or personally direct any
business activities within California, and does not own real property, pay
taxes, or vote in California. Groeneweg declared it would be “a significant
burden” to be forced to defend this lawsuit in the United States, as he lives in
the Netherlands and has “no significant contacts with the United States.”
Groeneweg further declared he is “an indirect 25% shareholder of
dmarcian Europe BV, a company registered under the laws of the
Netherlands.” According to his declaration, “Mailmerk BV, currently known
as dmarcian Europe B.V., was founded March 20, 2013, by The Digital
Xpedition (TDX) Holding B.V. and BM&C B.V.”; “dmarcian Europe BV is an
entirely separate entity from dmarcian, Inc.” and “does not conduct business
in California”; the two companies have not merged; Groeneweg has never had
an ownership interest in dmarcian; and dmarcian EU “runs its full business
processes (such as the CRM program, administration, and project
management) in Exact Online, a system operated and administered in the
Netherlands” that is “a completely separate system not used by dmarcian,
Inc.” Groeneweg declared, “I never paid for the services of engineers to
develop new software for dmarcian, Inc. and its clients. Instead, dmarcian
Europe BV paid engineers to develop new software.” Groeneweg further
stated that he uses “ ‘co-founder’ ” on his LinkedIn profile “to signify that I
am the co-founder of dmarcian Europe BV.”
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Draegen also declared that Groeneweg has never held an ownership
interest in dmarcian. He stated that he and Groeneweg “considered and
discussed . . . the possibility of merging dmarcian, Inc. with dmarcian Europe
BV” but “did not finalize any agreement and no merger occurred.” According
to Draegen’s declaration, “[t]oday, dmarcian, Inc. and dmarcian Europe BV
remain separate entities. Groeneweg is not and never has been a
shareholder in dmarcian, Inc., nor does he have any affiliation with
dmarcian, Inc.” Draegen declared, “dmarcian, Inc. and dmarcian Europe BV
are distinct separate entities, owned and operated separately. They share
the dmarcian name and there is one dmarcian.com Web site to keep the
customer experience simple. Once a customer makes an account and selects
its geographic region, the customer is directed to the appropriate entity
depending on its geography. The dmarcian brand website only mentions
‘dmarcian Europe BV’ on the ‘Contact US’ page, which also identifies the
other legal entities involved.” Draegen stated that the assertion dmarcian
paid for the CRM software used by dmarcian EU is false and that ‘[o]nce
customer leads are assigned, dmarcian Europe BV maintains its own CRM
that is entirely distinct from the CRM used by dmarcian, Inc.’ ”
Draegen further stated that Venkersammy was terminated from his
employment with dmarcian “for being unable to perform the functions of his
job duties” and, while an employee, “was not involved in any discussions or
decisions regarding company mergers or acquisitions. Indeed, such
discussions or decisions were well above his pay grade and he would not have
been privy to such discussions or decisions. Any representation to the
11
contrary is false. . . . Venkersammy’s statements are self-serving (having
been recently terminated from the company) and false.” 4
The trial court denied Draegen’s motion to quash service. The court
granted Groeneweg’s motion and ordered the complaint dismissed as to
Groeneweg. Swenberg filed a timely notice of appeal.
DISCUSSION
“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)
4 As Draegen’s motion is not at issue on this appeal, we omit discussion
of additional details pertaining solely to the court’s jurisdiction over him.
12
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.)
If the plaintiff meets this burden, the burden shifts to the defendant to
demonstrate that the exercise of jurisdiction would be unreasonable.
(Pavlovich, supra, 29 Cal.4th at p. 273.) “When the jurisdictional facts are
not in dispute, personal jurisdiction is a legal question for de novo review.
(Snowney v. Harrah’s Entertainment, Inc. (2005) 35 Cal.4th 1054, 1062
(Snowney).) If the jurisdictional facts are conflicting, we review the lower
court’s factual determinations for substantial evidence, but still review its
legal conclusions de novo. (Dorel Industries, Inc. v. Superior Court (2005)
134 Cal.App.4th 1267, 1273.)” (BBA Aviation, supra, 190 Cal.App.4th at
p. 429.)
“ ‘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
13
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
14
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.)
A.
The trial court determined that Swenberg “failed to carry his burden of
establishing, by a preponderance of the evidence, that Groeneweg had
sufficient minimum contacts with California to support the exercise of
personal jurisdiction over him. [Swenberg] has not demonstrated that
Groeneweg is an officer or director of dmarcian, or that he has any interest in
dmarcian, as opposed to dmarcian EU. Further, [Swenberg] has not
demonstrated that Groeneweg attended any meetings in California relating
to the alleged agreements between [Swenberg] and dmarcian. Ultimately,
[Swenberg] has provided no evidence indicating that Groeneweg engaged in
any tortious conduct while in California, or that his alleged tortious conduct
outside California was purposefully directed at [Swenberg] in California and
had a tortious effect here.”
As explained in its decision, the trial court found Swenberg’s
allegations refuted by the declarations of Groeneweg and Draegen. The trial
court described Swenberg as maintaining that Groeneweg and/or dmarcian
EU had merged with dmarcian, so there was no distinction between the two
entities, and that Groeneweg, as the general manager of dmarcian, had
systematic business contacts with California. The court then explained that
Groeneweg denied he had any ownership interest in dmarcian, denied
dmarcian and dmarcian EU had merged, and disputed the claims that he
directed his employees to attend to business in San Francisco on behalf of
15
himself or dmarcian EU, and that dmarcian EU used the same CRM system
operated by dmarcian in California. The court quoted portions of
Groeneweg’s declaration supporting these points, as well as Groeneweg’s
declarations that he did not own or operate a business in California, conduct
business or personally direct business activities in California, or own
property, pay taxes, or vote in California. Having noted that Swenberg relied
on Venkersammy’s declaration for the proposition that dmarcian and
dmarcian EU had merged, the trial court also quoted Draegen’s declaration
stating that Venkersammy’s position at dmarcian did not make him privy to
discussions or decisions about company mergers or acquisitions, and that
Venkersammy’s assertion that dmarcian and dmarcian EU had merged was
false.
Arguing that he submitted a preponderance of evidence showing it was
appropriate for the trial court to exercise personal jurisdiction over
Groeneweg, Swenberg first maintains the trial court erred in taking at face
value the “vague, unsupported assertions” of Draegen and Groeneweg when
those assertions could and should have been submitted with documentary
evidence. Swenberg relies upon Ziller Electronics Lab GmbH v. Superior
Court (1988) 206 Cal.App.3d 1222, 1232–1233 (Ziller), which held the
plaintiff failed to meet its burden to demonstrate the necessary jurisdictional
facts with verified declarations consisting “primary of vague assertions of
ultimate facts rather than specific evidentiary facts permitting a court to
form an independent conclusion on the issue.”
Groeneweg points out that Ziller was discussing deficiencies in the
showing made by the plaintiff, who had the burden of demonstrating the
basis for jurisdiction. But Swenberg’s point in relying on Ziller is simply that
declarations providing “vague assertions of ultimate facts rather than specific
16
evidentiary facts permitting a court to form an independent conclusion on the
issue” are insufficient to establish the matters stated. (Ziller, supra,
206 Cal.App.3d at p. 1233.) This is as true for a defendant’s declaration as
for a plaintiff’s declaration. While it was Swenberg’s burden to establish the
jurisdictional facts by a preponderance of the evidence, deficiencies in
Groeneweg’s declaration would undermine his attempt to dispute facts
properly supported by Swenberg’s showing. Swenberg’s argument is that the
trial court erred in relying upon vague and unsupported facts in Groeneweg’s
and Draegen’s declarations to find disputes over facts that did not exist, as
well as that the court ignored Groeneweg’s failure to address many facts
establishing what Swenberg sees as Groeneweg’s “pervasive” contacts with
California.
B.
Swenberg contends Groeneweg had sufficient contacts with California
to support the exercise of both general and specific jurisdiction. We find it
necessary to discuss only the latter. As we have said, specific jurisdiction
depends on three factors: whether the defendant “ ‘purposefully availed
himself or herself of forum benefits,’ ” whether the controversy ‘ “is related to
or ‘arises out of’ [the] defendant’s contacts with the forum” ’ and whether the
assertion of personal jurisdiction ‘ “would comport with ‘fair play and
substantial justice.’ ” ’ ” (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
17
Cir. 2001) 274 F.3d 610, 623–624.) Thus, purposeful availment occurs where
a nonresident defendant ‘ “purposefully direct[s]” [its] activities at residents
of the forum’ (Burger King [Corp. v. Rudzewicz], supra, 471 U.S. at p. 472),
‘ “purposefully derive[s] benefit” from’ its activities in the forum (id. at
p. 473,), ‘create[s] 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 [s]tate 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.) “ ‘[T]he 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.) “[T]o find specific
jurisdiction, a court must look to the defendant’s ‘own’ suit-related contacts
18
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 maintains that Groeneweg “engaged in many purposeful acts
with California, in that he was “engaged constantly with dmarcian—a
company headquartered in California—by servicing clients derived from
dmarcian’s CRM system, assisting with the operations of dmarcian day to
day, and directing engineers to develop software for the California-based
company” and committed a tort aimed at a California resident (Swenberg) by
making a threat over the phone and “fraudulently concealing his relationship
with dmarcian and/or Draegen from Swenberg.”
The trial court expressly accepted Groeneweg’s and Draegen’s
declarations that Groeneweg was not an officer or director of dmarcian and
did hold an ownership interest in that company, and that the two companies
did not merge and/or operate as a single entity. The only evidence Swenberg
offered to support his allegations to the contrary was Venkersammy’s
declaration. Venkersammy formerly worked as “an Account Services
Manager and Community Advocate” for dmarcian, managing the “global
pipeline” of new account signups on dmarcian’s Web site and directing “a
portion of those sales leads” to dmarcian Europe.” Neither his declaration
nor anything else in the record provides any explanation how his position at
the company gave him access to information concerning a merger with
dmarcian Europe or Groeneweg’s ownership status. His assertions on these
points were flatly contradicted by Groeneweg and Draegen, based on their
personal knowledge and positions as, respectively, general manager of
dmarcian Europe and CEO of dmarcian. We cannot find the trial court erred
19
in crediting their evidence and rejecting Venkersammy’s unsupported
statements.
Although we therefore agree that Swenberg failed to support his
allegations that Groeneweg in fact was the general manager of dmarcian or
that the two companies operated as one, this is only the beginning of the
inquiry.
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, 5 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.
5The text reads, “We use cookies to give you the best experience on our
Web site,” followed by “I accept” and “Learn More” buttons.
20
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. 6
It is also undisputed that dmarcian EU obtained prospective customers
through a process in which customers who contacted the Web site, if located
in dmarcian EU’s geographical area, were directed to dmarcian EU by a
California-based employee of dmarcian. The trial court accepted
Groeneweg’s declaration that dmarcian EU uses separate business systems
from dmarcian, including the CRM system, as refuting Swenberg’s “claim
that dmarcian EU uses the same customer relations management system
that is operated and administered by dmarcian in California. But
Groeneweg’s declaration did not respond to, much less contradict, Swenberg’s
evidence that the dmarcian CRM was used to direct prospective customers to
dmarcian EU; Venkersammy’s declaration on this point was within the
purview of his employment; and Draegen confirmed that dmarcian EU used a
6The LinkedIn profile of one of these employees describes him as
“Account Director DMARC at dmarcian Europe,” but his “experience” section
reads “Account Director DMARC [¶] dmarcian”; two others are described as
“Account Director DMARC at dmarcian Europe” both in the initial profile and
under “experience.”
21
distinct CRM “once customer leads are assigned.” Neither Groeneweg nor
Draegen denied Venkersammy’s assertion that dmarcian receives a
percentage of the payments from customers referred to dmarcian Europe.
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.
Swenberg stated in his declaration that he participated in conference
phone calls between dmarcian employees in California and Groeneweg and/or
his sales team members “about the business of dmarcian, including the sales
process and other day-to-day business matters.” Groeneweg did not directly
deny this assertion. Groeneweg declared generally that he does not “conduct
business” in California, but this general statement does not suffice to refute
Swenberg’s specific one.
Similarly, Groeneweg did not wholly deny Swenberg’s declaration that
Groeneweg paid engineers who “operated under the auspices of dmarcian” to
develop software used by dmarcian for the benefit of all dmarcian’s clients.
Groeneweg declared that he did not pay engineers “to develop new software
for dmarcian, Inc. and its clients” but “[i]nstead, dmarcian Europe VB paid
engineers to develop new software.” That Groeneweg did not personally pay
the engineers, as opposed to dmarcian EU doing so, does not negate
Swenberg’s point, if in fact the software was provided for dmarcian’s use.
Groeneweg’s declaration does not say who the software was developed for or
used by, and therefore does not negate Swenberg’s assertion that it was used
by dmarcian.
22
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 derive[d] 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
23
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.)
In granting Groeneweg’s motion to quash, the trial court relied upon
Taylor-Rush, supra, 217 Cal.App.3d 103, which it viewed as analogous to the
present case. Taylor-Rush, however, was narrowly focused on jurisdiction
based solely on nonresident defendants’ allegedly tortious conduct committed
within California or directed at a forum resident—that is, the alleged
misconduct itself was the defendants’ only connection to California. In that
case, the California plaintiff sued nonresident corporate officers and directors
of a nonresident corporation for fraud and breach of contract, alleging she
was induced by fraudulent representations to transfer her wholly owned
California corporation in exchange for stock in, and an employment
agreement with the defendant corporation. The Taylor-Rush court held
sufficient contacts were established for personal jurisdiction over two
defendants, one because he made the relevant misrepresentations and
nondisclosures while in California and the other because, although he met
with the plaintiff in New York, his “alleged tortious conduct . . . was
purposely directed at [plaintiff] in California and had a tortious effect here.”
(Id. at p. 114.) Significantly, neither of these defendants denied making the
alleged misrepresentations and nondisclosures; they only disclaimed liability
on the theory that all their dealings with plaintiff were in their capacity as
corporate officer or director—a defense the Taylor-Rush court rejected.
(Ibid.) As to three other defendants, the court held the plaintiff made an
insufficient showing of minimum contacts in that there was no evidence they
participated in or directed any tortious act or omission, as the plaintiff
24
alleged, they conspired with the other defendants, but her declaration did not
mention them, and the defendants’ declarations stated they did not
participate in the negotiations during which the plaintiff claimed she was
defrauded. (Ibid.)
Swenberg contends Groeneweg is actually more like the defendants in
Taylor-Rush as to whom jurisdiction was found rather than those for whom
minimum contacts were not established, because the complaint alleged
various tortious acts by Groeneweg and the evidence Swenberg presented
“explicitly mentioned” Groeneweg. 7 This argument is not particularly
compelling, as Swenberg cannot establish jurisdictional facts with allegations
of an unverified complaint (Strasner v. Touchstone Wireless Repair &
Logistics, LP, supra, 5 Cal.App.5th at p. 222; BBA Aviation, supra, 190
Cal.App.4th at p. 428; In re Automobile Antitrust Cases I & II, supra, 135
Cal.App.4th at p. 110) and much of the evidence Swenberg cites relates to
Groeneweg’s business contacts discussed above, not to tortious conduct itself
establishing the requisite forum connection. But this is of little import,
because—unlike Taylor-Rush—Swenberg’s evidence showed sufficient
minimum contacts as discussed above.
The remaining requirement for specific jurisdiction is that “ ‘ “ ‘the
assertion of personal jurisdiction would comport with “fair play and
7 Specifically, Swenberg refers to allegations that Groeneweg was
involved in making a “sham, forced buyback of Swenberg’s ownership stake
in dmarcian,” had a fiduciary duty to Swenberg as partner, co-founder and co-
joint venturer in forming dmarcian, “endeavored to control dmarcian’s
corporate activities to deprive Swenberg of the benefits of his ownership
stake in that company,” engaged in conduct intended to reduce dmarcian’s
ability to generate a profit, reducing Swenberg’s return on his investment,
and “allegations of fraudulent concealment, fraudulent negligent
misrepresentation, unjust enrichment, and unfair business practices.”
25
substantial justice” ’ ” [citations].’ ” (Snowney, supra, 35 Cal.4th at p. 1062,
quoting Pavlovich, supra, 29 Cal.4th at p. 269.) More than 30 years ago, the
United States Supreme Court observed—quoting its words from decades
earlier—that “because ‘modern transportation and communications have
made it much less burdensome for a party sued to defend himself in a State
where he engages in economic activity,’ it usually will not be unfair to subject
him to the burdens of litigating in another forum for disputes relating to such
activity.” (Burger King Corp. v. Rudzewicz, supra, 471 U.S. at p. 474, quoting
McGee v. International Life Insurance Co., supra, 355 U.S. at pp. 222–223.)
That point is all the more obvious now. Groeneweg chose to make the
Internet presence of dmarcian EU, and its ability to obtain customers from
on-line contacts, depend upon the services of a California based company. We
see no unfairness in requiring him to subject himself to the jurisdiction of
California courts in litigation involving his relationship with that California
company and its employees.
DISPOSITION
The judgment is reversed, and the matter remanded for further
proceedings consistent with the views expressed in this opinion. Costs to
Swenberg.
26
_________________________
KLINE, P.J.
WE CONCUR:
_________________________
RICHMAN, J.
_________________________
MILLER, J.
Swenberg v. Dmarcian, Inc., et al. (A159148)
27
Filed 8/30/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
CHARLES E. SWENBERG,
Plaintiff and Appellant, A159148
v. (San Mateo County
DMARCIAN, INC., et al., Super. Ct. No. 19-CIV-02896)
Defendants and Respondents.
ORDER CERTIFYING
OPINION FOR PUBLICATION
THE COURT:
The opinion in the above-entitled matter filed on July 30, 2021, was not
certified for publication in the Official Reports. For good cause the request
for publication by appellant is granted.
Date: _______________ ___________________________
Kline, P.J.
1
Trial Court: San Mateo County Superior Court
Trial Judge: Hon. Leland Davis III
Attorneys for Appellant: Peretz & Associates
Yosef Peretz
Ruth Israely
Attorneys for Respondents: Hoge, Fenton, Jones & Appel
Alison P. Buchanan
Laura C. Riparbelli
2