Klotz v. Ezzes CA2/1 ( 2015 )

Filed 3/12/15 Klotz v. Ezzes CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
ADAM M. KLOTZ et al., B254438
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC497629)
v.
STEVEN EZZES,
Defendant and Respondent.
APPEAL from an order of the Superior Court of Los Angeles County. Joseph R.
Kalin, Judge. Reversed.
Fox Rothschild and Michael Eidel for Plaintiffs and Appellants.
Kendall Brill & Klieger, Bert H. Deixler, Laura W. Brill and Joshua W. Sussman
for Defendant and Respondent Steven Ezzes.
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Plaintiffs Adam M. Klotz, Richard A. Spitz, and SageMill Capital Advisors LLC
appeal the trial court’s order quashing service of the summons and complaint on
defendant Stephen Ezzes. Plaintiffs alleged claims against Ezzes for conspiracy and
intentional interference with contract in connection with a failed business opportunity of
SageMill. Ezzes, who is a resident of Connecticut and traveled to California four times
during the plaintiffs’ negotiations with third parties concerning the business opportunity
ostensibly on unrelated matters, sent over 100 emails to his alleged co-conspirator in
California. Plaintiffs contended this contact was sufficient to establish personal
jurisdiction, but the trial court found insufficient physical presence to justify jurisdiction.
We reverse.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Klotz and Spitz met in May 1991 while both were associates at the law firm of
Paul, Hastings. In the summer of 2009, one of Klotz’s clients introduced Stephen Bruce
to Klotz.
In December 2009, Klotz, Spitz, and Bruce formed a partnership to be known as
“SageMill Capital Advisors LLC” (SageMill). In forming SageMill, the partners sought
to capitalize on their trading, portfolio management, structured finance, and capital
markets experience to benefit SageMill’s clients. SageMill’s primary focus was to be
tailored, short-term investment strategies for investors holding large positions in cash or
near-cash securities. SageMill would generate returns surpassing those of U.S.
Treasuries without exceeding the risk of AAA/AA type corporate debt. The partners
envisioned that SageMill would function as an investment advisor by drawing upon the
partners’ collective expertise and would employ rigorous methodologies to identify,
select and monitor opportunities to deliver carefully and conservatively targeted returns,
as well as to craft optimized blends of such opportunities based upon characteristics such
as volatility and correlation.
Thereafter, the parties developed the business over a 20-month period before the
filing of SageMill’s certificate of formation on August 16, 2011. The parties entered into
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an operating agreement on July 19, 2012; the operating agreement was effective
retroactive to January 1, 2012.
In July 2012, SageMill was poised to complete a transaction with Abu Dhabi
Investment Company (IAD) whereby the two entities would form a joint venture or other
jointly owned entity that would be financed by IAD and provide services to IAD and
other clients sourced by IAD and SageMill (the Venture). The business operating model
(Operating Model) of the Venture envisioned profits after five years of $117 million, and
predicted that the Venture would be worth a multiple of that amount. The partners shared
the first three years of the Operating Model with IAD, who agreed with the partners’
estimates that it represented a reasonable and conservative projection of what the Venture
could achieve.
1. The Failed Negotiations with IAD
In late 2011, Andrew Felner of CitiBank introduced SageMill to IAD. Felner had
a relationship with Stephen Swanson of IAD and believed SageMill was a good fit for
IAD. On February 13, 2012, Bruce, Felner, Spitz, Swanson and Biswajit Dasgupta (also
from IAD) spoke on the phone. Shortly thereafter, Bruce and Spitz flew to New York to
meet with Swanson and Felner to discuss how to best proceed with negotiating a
transaction. For the next several months, the parties continued their negotiations.
On April 24, 2012, IAD invited Bruce, Klotz, and Spitz to Abu Dhabi. The
meetings were a success, with Swanson praising the parties’ talents and experience and
expressing a unique “confluence of broad business interests between potential partners as
great as that which existed between IAD and SageMill.” SageMill had a broad array of
businesses, including its foundational “Structured Product Business,” and a “Manager of
Managers” business, in which SageMill would identify, select, and monitor top money
managers, while entities like IAD would provide clients. However, unbeknownst to
Klotz and Spitz, during this time, Swanson, Bruce and Ezzes were actively working to
undermine the Venture. Bruce intended to negotiate his own separate transaction with
IAD in which he would be partners with Swanson and Ezzes.
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During the period July 20 to July 25, 2012, Swanson, Dasgupta, Bruce, Klotz, and
Spitz met in Los Angeles to work out the terms of the Venture. Early on during the
negotiations, Swanson told Klotz and Spitz that IAD was prepared to provide all of the
Venture’s working capital in exchange for 50% of the Venture. Spitz and Klotz believed
that IAD was serious about closing a deal while in Los Angeles.
On the evening of July 23, 2012, the negotiations began to falter for no reason
apparent to Klotz and Spitz at the time. In an abrupt about-face, Swanson said that,
although he believed terms could be worked out, Dasgupta was uncomfortable with the
terms, and in particular the compensation levels. Swanson said that SageMill might be
undervaluing IAD’s contributions to the venture and that IAD could establish a structured
product business on its own “by hiring someone like Bruce.” Despite the setback,
Swanson said he did not believe the parties really were too far apart and suggested they
call it a day and resume the following morning. Plaintiffs allege that Bruce, however,
was already having surreptitious communications with Swanson and Dasgupta, and was
working throughout the IAD visit to steal SageMill’s opportunity (and indeed SageMill
itself) for his own benefit.
On Tuesday, July 24 Klotz and Spitz met with Swanson in the morning to
continue their discussions. Swanson began the session by acknowledging that the prior
day was not productive, and again offered the same terms, but without guaranteed
bonuses. He also indicated that IAD would be willing to make a two-year commitment
and that if it decided to walk away after the second year, SageMill could have the
Venture for itself and would not owe IAD anything, including any return of working
capital.
Feeling generally encouraged, Klotz and Spitz told Swanson that they had to
discuss the deal with their partner, Bruce. Klotz and Spitz accepted Swanson’s terms and
remembering the prior day’s experience, emphatically indicated that neither a time
commitment or salaries was a deal point. The parties agreed to meet later that evening,
with Bruce noting to Klotz and Spitz that it was “time to close.” Meanwhile, Bruce was
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busy meeting with Swanson and Dasgupta without Klotz and Spitz’s knowledge. Bruce
had already discussed with Swanson and Dasgupta the terms Swanson would he
proposing to Bruce’s own partners.
At the evening meeting, Swanson began what turned out to be his final negotiation
session with Klotz and Spitz by once again retracting the offer made earlier in the day
and stated that IAD wanted only Bruce and Dasgupta to participate directly at the
Venture level and that Klotz and Spitz should remain in SageMill and would receive
roughly half the compensation of Bruce. Klotz cautioned Swanson that such an
arrangement would run afoul of the parties’ operating agreement and the spirit of the
parties’ long-standing partnership.
Negotiations were scheduled to continue on the morning of July 25, but Swanson
and Dasgupta never arrived. Bruce, throughout that morning, corresponded with
Swanson and Dasgupta to secure his own deal with IAD. At no time did Bruce disclose
to plaintiffs that he had been communicating and secretly meeting with Swanson and
Dasgupta throughout the IAD’s visit.
On Monday July 30, 2012, IAD sent an email to the partners indicating that IAD
was unwilling to consummate a transaction with SageMill due to SageMill’s “partnership
dynamics.” After hearing about the email, Bruce expressed his frustration to Klotz,
telling him that he “can’t believe he [Bruce] signed that Operating Agreement.” Bruce
questioned Klotz’s/Spitz’s integrity and blamed them for the failed negotiations.
2. Ezzes’s Involvement
In the months leading up to IAD’s visit to Los Angeles, Bruce communicated with
Ezzes and disclosed the existence and specifics of SageMill’s business, particularly its
negotiations with IAD, without consulting or informing his partners Klotz and Spitz.
Bruce, Ezzes and Swanson met on June 21, 2012 in New York, without plaintiffs’
knowledge, to discuss the SageMill business. Bruce told Swanson, he had been
discussing SageMill with Ezzes “from day one.” Ezzes had already begun email
conversations with Bruce to join the SageMill–IAD venture.
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Ezzes, who has an extensive track record in the finance industry, was a manager of
Mariner Investment Group, and a close confidant of Bruce. Yet, at no time was Ezzes a
part of the SageMill team, and Bruce did not inform Klotz. and Spitz that he was sharing
confidential SageMill information with Ezzes. Bruce never mentioned or introduced
Ezzes to Klotz and Spitz.
Bruce had been giving Ezzes proprietary SageMill information from the earliest
stages of the partnership. On October 3, 2011, Bruce sent Ezzes by email Sage Mill’s
“Proprietary Advisory Introduction,” a PowerPoint presentation detailing SageMill’s
investment strategy and the benefits of utilizing SageMill’s services. Ezzes also had
access to the “‘highly confidential’ Three-Year Operating Model and Budget that Klotz
had sent to IAD in June 2012, which Bruce sent Ezzes” by email. The document
contained extremely sensitive financial projections and fee information related to the
SageMill-IAD partnership. On July 13, 2012, Ezzes emailed Bruce and referred to the
fact they would be working together.
During the SageMill–IAD negotiations in July 2012, Bruce and Ezzes
communicated daily by email. After the SageMill-IAD opportunity fell apart at the end
of July 2012, Bruce immediately began communicating with Ezzes and went to work
with Ezzes to resurrect the IAD deal (in a form that excluded Klotz and Spitz as
partners), and lay the groundwork for ultimately going into business with Swanson. On
August 1, 2012, Bruce inquired of Ezzes about software packages to be used for a “‘fund
of funds’” business, noting that he was putting together a budget and had “‘plenty of
working capital.’” Ezzes indicated he wanted to introduce Bruce to Nino Carpenito, a
hedge fund manager from New Mexico. Ezzes told Bruce it was time to begin formally
planning their new business. In August 2012, Ezzes emailed Swanson about Ezzes’s trip
to California, where he had met with Bruce, and stated, “[Bruce] is nearing the end of
dealing with his former partners. Seems like an odd odyssey since [Bruce] is the only
one with experience to conduct the contemplated businesses. I can tell you [Bruce] is
very excited to get all of this behind him and move forward with the opportunity. We
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spent much of the day talking about how best to capitalize on what is a unique
environment.”
Ezzes, Swanson and Bruce worked together on a project in which Bruce was the
architect of a new proposed joint venture with IAD to focus on the same type of
investments that SageMill had contemplated doing with IAD or other investors. Ezzes,
Swanson and Bruce embarked on a new investment project called Treowe, a “Debt Fund
Management’’ business that was intended to engage in the same business that SageMill
contemplated. Bruce, Ezzes and Swanson prepared and distributed marketing materials
for Treowe.
Treowe’s marketing materials make clear that it is an asset management business
pursuing the same business opportunities that SageMill was to pursue. The Treowe
Management team includes Bruce as the CEO (Chief Executive Officer) and CIO (Chief
Investment Officer), Ezzes as the COO (Chief Operating Officer) and Swanson as a
strategic and business advisor. For Treowe, Bruce used the proprietary financial model
built for the SageMill business (i.e., the Operating Model and Budget).
Plaintiffs’ First Amended Complaint stated claims for against Bruce and Swanson
for declaratory judgment, breach of fiduciary duty, breach of contract, unfair competition,
breach of implied covenant of good faith and fair dealing, conspiracy (against Bruce,
Ezzes and Swanson), intentional interference with contract (against Bruce, Ezzes and
Swanson), and sought damages in excess of $50 million, injunctive relief, and punitive
damages.
3. Motion to Quash
Ezzes, a Connecticut resident, moved to quash service of the summons and
complaint on him for lack of personal jurisdiction. Currently, Ezzes works at Mariner
Investment Group, an asset management firm based in Harrison, New York. Ezzes had
not lived in California for over 30 years. During the 1960’s through the early 1980’s,
Ezzes lived in Los Angeles, attended college and business school at UCLA in the 1970’s,
and lived in San Francisco in 1980 and 1981 to work at Morgan Stanley. Ezzes did not
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own property in California, had not been an officer of a California corporation, had not
been professionally licensed in California, does not hold or own bank accounts or stock
in California, and does not hold a current California driver’s license. He does not, and
has never, conducted any personal business in California. He is only in California on rare
occasions to do work for Mariner for no more than two to three days a year, if at all.
Ezzes met Bruce in the mid-1990’s when both worked at Lehman Brothers in New
York. Subsequently, Bruce moved to California to start a business managing
collateralized loan obligations, and currently, Bruce lives in Calabasas, California. In
June 2012, Bruce invited Ezzes to lunch in New York to discuss a new business venture
Bruce had set up with individuals based in California; subsequently, the two men had
lunch with Swanson. Bruce introduced Swanson as the general counsel of IAD, and
explained that Bruce and two other individuals had approached IAD about investing in
Bruce’s new venture. Bruce requested Ezzes to introduce Bruce to certain of Ezzes’s
contacts at JP Morgan and Bank of America to explore whether such institutions would
be interested in underwriting the securities that Bruce and the other two individuals in the
Venture intended to issue through the Venture.
Later, Ezzes attended a meeting where he introduced Bruce and Swanson to
Ezzes’s contacts at JP Morgan and Bank of America. Ezzes did not expect to be involved
in the Venture, and did not discuss the Venture with Bruce or Swanson, nor did he learn
any details of Bruce’s relationship with the other two individuals involved in the venture
because Bruce described the Venture in very broad terms. Ezzes did not have a financial
interest in the Venture, nor was he invited to serve in the role of investor, partner,
member, officer or employee. All of Ezzes’s communications with Bruce were for the
sole purpose of introducing Bruce to Ezzes’s connections at JP Morgan and Bank of
America.
In July 2012, Bruce told Ezzes that the two individuals involved with IAD had an
unsuccessful meeting with IAD, and that IAD had reservations about the two individuals
and thus IAD wanted to invest with Bruce only. Later, Bruce told Ezzes that IAD did not
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want to be involved with Bruce at all. IAD had determined that the Venture was outside
the scope of IAD’s business. Ezzes was not privy to any of these conversations and only
learned of the status of the Venture and IAD through Bruce.
Ezzes argued this evidence established he did not have sufficient contacts with
California to confer jurisdiction. First, general jurisdiction did not exist because his
limited contact with Bruce did not establish continuous and systematic contact with
California because Ezzes was only in California two to three days a year on business for
his employer Mariner. Second, Ezzes had not engaged in any conduct aimed at or
targeted at California because the only time Ezzes met with Bruce was in New York;
Ezzes did not have any involvement in the Venture; Ezzes did not know of the details of
Bruce’s relationship with the plaintiffs and thus could not know of any alleged harm to
be caused to plaintiffs in California; and Ezzes’s conduct did not arise out of California
related activities as Ezzes had no involvement in the Venture in California.
Plaintiffs’ opposition asserted that Ezzes had traveled to California in August
2012, October 2012, April 2013, and the summer of 2013; during August 2012, met with
Bruce and came to SageMill’s offices in Calabasas; met with a business associate in
California in October 2012 about Ezzes’s involvement in the Venture with IAD and
Bruce; and was in California in April 2013 in connection with a presentation by Bruce
and Swanson and Ezzes’s Treowe Partners to Orchard Capital. Further, plaintiffs
asserted that Ezzes had traveled to California every year for business purposes since
2002.
Plaintiffs relied on Ezzes’s four trips to California with respect to the SageMill
business: (1) Ezzes’s meeting with Bruce in Calabasas in August 2012; (2) Ezzes
traveled to California in October 2012 to meet with a business associate (Carpenito) he
wanted introduce to Bruce in connection with the joint venture business that Bruce was
continuing to negotiate with IAD; this trip included Ezzes’s meeting with an asset
manager in Westwood, California called “ICG Advisors” (with whom the SageMill
partners had previously discussed a strategic business arrangement with SageMill);
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(3) Ezzes traveled to California in April 2013 to meet with Bruce, and although the
meeting was canceled on short notice, Ezzes spoke with Bruce while in California; and
(4) Ezzes traveled again to California in the summer or fall of 2013 to speak at a
conference.
In addition, Ezzes sent 118 emails to Bruce from New York during the period
2011 through 2013, most of which involved the SageMill partnership. Treowe Partners,
of which Ezzes is the Chief Operating Officer (COO), has its business office in Los
Angeles, California, and Ezzes is a member of the management committee of Treowe
Partners as the COO.
Plaintiffs argued specific jurisdiction existed because Ezzes purposefully availed
himself of California by reaching beyond his home state to meet with Bruce, visit
SageMill’s offices, and develop a business relationship with Bruce; Ezzes’s contacts with
the forum were substantially connected with the harm to plaintiffs; and jurisdiction would
be reasonable because Ezzes travels to California periodically, has no financial hardships,
and could be deposed in New York.
In reply, Ezzes contended that he had never traveled to California to conduct any
personal business with Bruce or anyone else, and his meeting with Bruce in August 2012
occurred only because he happened to be in California, and meeting with Bruce was not
the purpose of his visit. Second, Ezzes never discussed joining the IAD venture, but
would consider joining any venture that Bruce might set up in new York. Third, his
presence in California in October 2012 (at a football game in San Diego with Carpenito)
was related to his business with Mariner, and Ezzes had suggested Carpenito might meet
Bruce in order to assist Bruce. Fourth, on the same visit, Bruce did not meet with ICG, a
money manager based in Westwood, except on business for Mariner. Fifth, he did not
meet with Bruce in California in April 2013. Sixth, Ezzes has only visited California
once or twice a year since 2008. Seventh, Treowe is not a business but a concept Ezzes
created for discussion to raise capital for a venture that has not materialized, and thus
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Ezzes was not the COO of such an entity. Finally, not all of the 118 emails were sent to
Bruce while Bruce was in California.
4. Trial Court Ruling
At the hearing, the trial court stated plaintiffs had not demonstrated minimum
contacts. “There were emails to one’s best friend in California. There were four visits to
California over two years. This does not approximate physical presence as to justify the
exercise of general jurisdiction.” The court observed that Ezzes had not done business in
California. After taking the matter under submission, the court granted the motion to
quash.
DISCUSSION
Plaintiffs argue that general jurisdiction over Ezzes exists based on Ezzes’s nearly
annual business trips to California every year since 2002, and there is specific jurisdiction
over Ezzes because Ezzes traveled to California for the purpose of meeting with Bruce
about the Venture, which is the subject of the claims in this case, sent more than 100
emails from New York to Bruce in California, and agreed to become the COO of a
business that was to be located in California. Ezzes contends that plaintiffs waived their
substantial evidence challenges on appeal because their opening brief only refers to
evidence in their favor. On the merits, Ezzes contends that no general jurisdiction exists
because he had no continuous and systematic contact with California, and no specific
jurisdiction exists because he did not engage in any tortious conduct expressly directed at
California, and did not cause any effects foreseeable in California.
I. Standard of Review
On a defendant’s motion to quash for lack of personal jurisdiction, the plaintiff bears
the initial burden of establishing a factual basis for jurisdiction by a preponderance of the
evidence. If the plaintiff satisfies this burden, the burden shifts to the defendant to show
that the exercise of jurisdiction would be unreasonable. (Snowney v. Harrah’s
Entertainment, Inc. (2005) 35 Cal.4th 1054, 1062 (Snowney).) “On review, the question of
jurisdiction is, in essence, one of law.” (Dorel Industries, Inc. v. Superior Court (2005)
11
134 Cal.App.4th 1267, 1273.) If there is a conflict in the evidence, we review the trial
court’s factual determinations for substantial evidence; but even where there is a conflict,
“we review independently the trial court’s conclusions as to the legal significance of the
facts.” If there is no conflict in the evidence, our review of the jurisdictional question is de
novo. (Ibid.)
II. Exercise of Jurisdiction
California’s long-arm statute permits the exercise of jurisdiction “on any basis not
inconsistent with the Constitution of this state or of the United States.” (Code Civ. Proc.,
§ 410.10.) Constitutionally, California courts may exercise personal jurisdiction over
nonresidents who have “minimum contacts” with the state. Minimum contacts exist where
the relationship between the resident and the forum state is such that the exercise of
jurisdiction does not offend “‘traditional notions of fair play and substantial justice’” under
the due process clause. (Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316 [66
S.Ct. 154, 90 L.Ed. 95].) “The due process clause is concerned with protecting nonresident
defendants from being brought unfairly into [the forum state], on the basis of random
contacts.” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 452 (Vons
Companies).)
A. General Jurisdiction
Personal jurisdiction is either general or specific. If the defendant’s forum-related
contacts are extensive and wide-ranging, or substantial, continuous and systematic, the
defendant may be subject to the court’s general jurisdiction. (Boaz v. Boyle & Co. (1995)
40 Cal.App.4th 700, 717.) In the case of general jurisdiction, the claims at issue need not
be connected with the defendant’s business relationship to the forum. Instead, the
defendant is subject to the California court’s jurisdiction for all causes of action raised
against it. (Vons Companies, supra, 14 Cal.4th at p. 445.) “Such a defendant’s contacts
with the forum are so wide-ranging that they take the place of physical presence in the
forum as a basis for jurisdiction. [Citation.]” (Id. at p. 446.)
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General jurisdiction is proper only where the defendant’s contacts in the forum are
continuous and systematic. Continuous and systematic contacts include such activities as
maintaining an office and employees in the forum, use of forum bank accounts, and the
marketing or selling of products in the forum state. (Helicopteros Nacionales de Colombia
v. Hall (1984) 466 U.S. 408, 415 [104 S.Ct. 1868, 80 L.Ed.2d 404]; Shisler v. Sanfer Sports
Cars, Inc. (2006) 146 Cal.App.4th 1254, 1258–1259.)
In Cassiar Mining Corp. v. Superior Court (1998) 66 Cal.App.4th 550, the
defendant was incorporated in Canada, mined and milled raw asbestos in British Columbia,
and sold raw asbestos fibers to manufacturers, including several different companies with
California plants. For 38 years, the defendant sold thousands of tons of raw asbestos to
California operations. Despite the fact the defendant had sold thousands of tons of its
product to several California companies over a period of 38 years, there was no general
jurisdiction because the defendant’s contacts with California were limited to sales to
California operations and did not include offices, employees, bank accounts, or real
property within the state, or advertisement in any California trade journals or publications.
(Id. at p. 555.)
Here, Ezzes’s contacts with California do not approximate physical presence within
the state, nor do his recent dealings with SageMill and Treowe Partners approximate
presence in the state. They have been limited to once a year visits to clients, and more
recently, a string of emails regarding the failed Venture with IAD and four visits over a
two-year period regarding IAD and Treowe. Ezzes did not maintain a residence, bank
account, or have a California driver’s license. Such contacts are not sufficiently systematic
and continuous to warrant general jurisdiction.
B. Specific Jurisdiction
Specific personal jurisdiction, on the other hand, may exist if the defendant’s forum-
related activities are not so pervasive as to justify an exercise of general jurisdiction.
Specific jurisdiction results when the defendant’s contacts with the forum state are
sufficient to subject the defendant to suit in the forum on a cause of action related to or
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arising out of those contacts. (Sonora Diamond Corp. v. Superior Court (2000) 83
Cal.App.4th 523, 536.) Whether jurisdiction exists turns on the quality and nature of the
defendant’s activities in the forum related to a particular cause of action. (Cornelison v.
Chaney (1976) 16 Cal.3d 143, 147–148 (Cornelison).) We therefore consider the
relationship between the defendant, the forum, and the litigation. (Snowney, supra, 35
Cal.4th at p. 1062.)
We will find specific jurisdiction where (1) the defendant has purposefully availed
himself or herself of doing business in the state; (2) the controversy at issue arises from or
is related to the defendant’s forum-related contact; and (3) assertion of jurisdiction would
be reasonable. (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 269 (Pavlovich);
Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 477–478 [105 S.Ct. 2174, 85
L.Ed.2d 528] (Burger King Corp).)
1. PURPOSEFUL AVAILMENT
“‘Purposeful availment’” occurs where a nonresident defendant purposefully directs
its activities at the residents of the forum, purposefully derives benefit from its activities in
the forum, creates a substantial connection with the forum, deliberately engages in
substantial activities in the forum, or creates continuing obligations between itself and
residents of the forum. (See Burger King Corp., supra, 471 U.S. at pp. 471–478.) By
limiting the scope of a forum’s jurisdiction in this manner, “[t]he ‘purposeful availment’
requirement ensures that a defendant will not be haled into a jurisdiction as a result of
‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts.” (Id. at p. 475.) The purposeful availment
requirement focuses on the defendant’s intentions. “‘This prong is only satisfied when the
defendant purposefully and voluntarily directs his activities toward the forum so that he
should expect, by virtue of the benefit he receives, to be subject to the court’s jurisdiction
based on’ his contacts with the forum. [Citation.]” (Pavlovich, supra, 29 Cal.4th at p.
269.)
Under the “effects test” analysis applied to the purposeful availment prong, as set
forth in Calder v. Jones (1984) 465 U.S. 783 [104 S.Ct. 1482, 79 L.Ed.2d 804] (Calder),
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the defendant must allegedly have (1) committed an intentional act, (2) expressly aimed at
the forum state, (3) causing harm that the defendant knows is likely to be suffered in the
forum state. (Jewish Defense Organization, Inc. v. Superior Court (1999) 72 Cal.App.4th
1045, 1057.) Merely asserting that a defendant knew or should have known that his
intentional acts would cause harm in the forum state is not enough to establish jurisdiction
under the effects test. The plaintiff must also point to contacts which demonstrate that the
defendant expressly aimed its tortious conduct at the forum. (Pavlovich, supra, 29 Cal.4th
at p. 269.) The effects test need not be applied under the purposeful availment prong in
every tort case because the “effects test was not meant to restrict a court’s jurisdictional
reach, but rather to serve as an additional tool for a forum to exercise constitutional
jurisdiction.” (Gilmore Bank v. AsiaTrust New Zealand Ltd. (2014) 223 Cal.App.4th
1558, 1571 (Gilmore Bank).)
Here, defendant relies upon Burdick v. Superior Court (2015) 233 Cal.App.4th 8, to
establish that internet conduct alone will not support jurisdiction. Burdick held jurisdiction
was improper over an Illinois defendant who made allegedly defamatory statements about
the plaintiffs, California residents, on the defendant’s Facebook page. (Id. at p. 25.)
Burdick applied the “effects test” of Calder, supra, 465 U.S. 783 and the recent Supreme
Court decision of Walden v. Fiore (2014) 571 U.S. ___ [134 S.Ct. 1115, 188 L.Ed.2d 12].
Walden held that the suit must arise out of the defendant’s contacts with the state that the
defendant created, and must connect the defendant’s conduct to the forum state, not just to
a plaintiff who resides in California. (Walden, at pp. 1122–1123.) Both Calder and
Walden “emphasize the difference between conduct directed at the plaintiff and conduct
directed at the forum state itself.” (Burdick, at p. 25.) Applying this test, Burdick
concluded that there was no evidence the defendant’s Facebook page focused on
California, the posting was directed at California residents, or that the persons or
institutions to whom the posting was directed (defendant’s Facebook friends) resided in
California. (Id. at p. 25.)
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Postings on a Facebook page, which has an amorphous and semi-public audience,
differ from the emails at issue here, which were exchanged between two individuals in
private. In Gilmore Bank, supra, 223 Cal.App.4th 1558, a judgment creditor sought to
recover fraudulently transferred funds from the defendant New Zealand bank, where the
judgment debtor had set up a trust. The bank received compensation for shielding the
judgment debtor’s assets from the judgment creditor. The bank sought to quash service of
the summons on the basis that it did not do business in California and none of its
representatives traveled to California, although the bank received wire transfers from
another defendant’s bank account in California and the parties communicated by email.
(Id. at pp. 1564–1565.)
Gilmore Bank, supra, 223 Cal.App.4th 1558 found specific jurisdiction based upon
the bank’s purposeful availment of the California forum, noting that “‘in this age of
telecommunications, fax machines, and rapid mail services it is possible to [solicit and
negotiate investments] without face-to-face meetings in any jurisdiction.’ [Citation.] It ‘is
an inescapable fact of modern commercial life that a substantial amount of business is
transacted solely by mail and wire communications across state lines, thus obviating the
need for physical presence within a State in which business is conducted.’ [Citation.]
‘While any single telephone call or piece of correspondence might not be enough to satisfy
the “minimum contacts” requirement, there is much more in this case. Here there was a
veritable “latticework” of contacts linking [AsiaTrust] and the State of California: not one
but many calls and other communications to California during the negotiations. The
execution in California of the legal documents which formed the arrangement . . . . A
continuing stream of payments from [AsiaTrust] to California.’” (Id. at pp. 1572–1573.)
Similarly, in Hall v. LaRonde (1997) 56 Cal.App.4th 1342, the plaintiff, a
California resident, initially contacted the defendant, a New York resident, by email
concerning a software module the plaintiff had written. The parties incorporated the
module into defendant’s retail product, and the defendant agreed to compensate the
plaintiff for each license of the program sold. The plaintiff developed the software in
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California; all negotiations over the software were conducted by email and telephone;
and the plaintiff had no other connections to New York. (Id. at pp. 1344–1345.) Further,
the defendant reached out to California and worked with the plaintiff in integrating the
module into defendant’s software, the parties continued to work on the product, making
modifications to it, and the parties contemplated continuing royalty payments to the
plaintiff. (Id. at p. 1347.) In assessing whether special jurisdiction existed, the court
observed that “[t]here is no reason why the requisite minimum contacts cannot be
electronic.” The court found the defendant’s contacts with California were more than
random, fortuitous and attenuated and that specific jurisdiction existed because it was fair
for the defendant to account in California for the consequences of his activities that arose
in California. (Ibid.)
Thus, we conclude that Ezzes purposefully availed himself of California. Ezzes’s
visits to California admittedly had a dual purpose (on the one hand, Ezzes’s business for
Mariner and on the other, his meetings with Bruce). There is also the establishment of a
new business enterprise in California (Treowe) of which Ezzes held a significant
management role. Finally, there was a constant stream of emails back and forth. These
emails were crucial to the defendants’ alleged enterprise of undermining the SageMill
negotiations with IAD and the creation of their own business endeavor that employed
SageMill’s proprietary information.
Further, Ezzes’s conduct satisfies the effects test of Calder, supra, 465 U.S. 783.
Ezzes committed an intentional act (assisting Bruce in causing the demise of the Venture),
that was expressly aimed at California because the parties and the partnership resided here,
that caused harm Ezzes knew was likely to be suffered in the forum state—namely,
SageMill’s loss of the joint venture.
2. CONTROVERSY ARISING FROM FORUM CONTACT
A controversy is related to or arises out of a defendant’s forum contacts where there
is a substantial connection between the forum contacts and the plaintiffs’ claim. (Vons
Companies, supra, 14 Cal.4th at p. 453.) However, “A claim need not arise directly from
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the defendant’s forum contacts in order to be sufficiently related to the contact to warrant
the exercise of specific jurisdiction. Rather, as long as the claim bears a substantial
connection to the nonresident’s forum contacts, the exercise of specific jurisdiction is
appropriate.” (Id. at p. 452.) “[W]e consider not only the conduct directly affecting the
plaintiff, but also the broader course of conduct of which it is a part.” (Anglo Irish Bank
Corp., PLC v. Superior Court (2008) 165 Cal.App.4th 969, 979.)
Here, the plaintiffs’ claims arise out of Ezzes’s contacts with California: Ezzes’s
alleged efforts to assist Bruce in usurping the SageMill Venture with IAD for their benefit
occurred primarily in California through emails and face-to-face meetings in California
with Bruce. The net result of Ezzes’s contacts with California was Bruce’s and Ezzes’s
alleged wrongful act of causing the Venture negotiations to fail so that Bruce, Ezzes, and
others could step in and form a joint venture with IAD, as well as form Treowe Partners, a
business that offered financial services in a manner that was substantially similar to that
contemplated by SageMill.
3. REASONABLENESS OF JURISDICTION
Factors related to the determination of whether an exercise of specific jurisdiction is
reasonable include the burden on the defendant to defend himself in California, the interest
of the forum state, and the plaintiff’s interest in obtaining relief. (Cornelison, supra, 16
Cal.3d at p. 150–151.) “These considerations sometimes serve to establish the
reasonableness of jurisdiction upon a lesser showing of minimum contacts than would
otherwise be required. [Citations.] On the other hand, where a defendant who purposefully
has directed his activities at forum residents seeks to defeat jurisdiction, he must present a
compelling case that the presence of some other considerations would render jurisdiction
unreasonable.” (Burger King Corp., supra, 471 U.S. at p. 477.) The intensity of the
defendant’s contacts with the state and the reasonableness of the exercise of jurisdiction are
inversely related: the stronger the contacts, the more reasonable an exercise of jurisdiction
becomes; the stronger the showing of reasonableness, the smaller the degree of contacts
that need be shown to establish purposeful availment. (Id. at pp. 477–478.)
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Here, jurisdiction is reasonable. Ezzes admittedly already travels to California on
business several times a year. Although he lives and conducts his business on the East
Coast, he has business interests in California (Treowe). Requiring him to come to
California to participate in this litigation thus does not place any undue burden on him.
Lastly, we point out that we find no waiver here based upon plaintiffs’ supposedly
selective recitation of the facts. The facts advanced by the plaintiffs, as well as the other
facts in the record, support specific jurisdiction.
DISPOSITION
The order is reversed. Appellants are to recover their costs on appeal.
NOT TO BE PUBLISHED.
JOHNSON, J.
We concur:
ROTHSCHILD, P. J.
BENDIX, J.*
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.
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