Swenberg v. Dmarcian, Inc.

• Decision Date: 30 July 2021
• Docket Number: A159148
• Citation: 68 Cal.App.5th 280,283 Cal.Rptr.3d 465
• Parties: Charles E. SWENBERG, Plaintiff and Appellant, v. DMARCIAN, INC., et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

68 Cal.App.5th 280

283 Cal.Rptr.3d 465

Charles E. SWENBERG, Plaintiff and Appellant,

v.DMARCIAN, INC., et al., Defendants and Respondents.

A159148

Court of Appeal, First District, Division 2, California.

Filed July 30, 2021

Attorneys for Appellant: Peretz & Associates, Yosef Peretz, Ruth Israely, San Francisco

Attorneys for Respondents: Hoge, Fenton, Jones & Appel, Alison P. Buchanan, San Jose, Laura C. Riparbelli

KLINE, P.J.

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 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 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 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 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 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 misrepresentation, 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 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...