Aries Sec. v. Mlodzianowski

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ARIES SECURITY, LLC, Plaintiff and Appellant, v. JOSEPH MLODZIANOWSKI, Defendant and Respondent.

No. C093275

California Court of Appeals, Third District

December 27, 2021

NOT TO BE PUBLISHED

(Super. Ct. No. PC20200292)

Duarte, J.

This case arises out of a business dispute between a California resident and a Texas resident, who are the co-owners and sole members of a cyber security company, plaintiff Aries Security, LLC (Aries). Aries appeals from the order granting defendant Joseph Mlodzianowski's motion to quash service of summons for lack of personal jurisdiction. Finding no error, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Factual Background

Aries is a limited liability company formed in 2008 under the laws of Delaware. When Aries was founded, its principal place of business was in Wilmington, Delaware.

Aries provided cyber security products and services to a variety of customers and businesses, including the Department of Defense and government contractors. Aries also assisted businesses in testing and assessing their cyber security safeguards by simulating cyber security attacks.

As part of its event planning expertise, Aries had a reputation of featuring prominent speakers on cutting edge advancements in information security at DEF CON, the "premiere" cyber security convention held in Las Vegas, Nevada. Aries attended this annual event to generate business and to market its products and services. In order to compete in the cyber security industry, Aries developed proprietary event planning and execution processes to promote and market its products and services at DEF CON.

Mlodzianowski and Brian Markus were the co-owners and only members of Aries. Markus was the majority owner (70 percent) and was solely responsible for managing the company. Mlodzianowski was the minority owner (30 percent) and was responsible for providing technical expertise to the company and planning and executing the company's annual marketing event at DEF CON, which included securing volunteers, speakers, and sponsors for the event. Mlodzianowski also developed "hacking" games for the company, which could be used as training tools to test computer skills in troubleshooting, threat detection, and advanced covert channel and stenography detection.

Markus was a resident of California; he had lived in California since Aries was founded. At the time Aries was founded, he lived in the City of Lakewood, which is located in Los Angeles County. At the time this action was filed, he was living in El Dorado Hills.

Mlodzianowski was a resident of Texas. He had never lived in California owned property in California, paid taxes in California, or opened a bank account in California. He performed his work for Aries from his home in Texas, where he had lived for the past 45 years. Mlodzianowski communicated with Markus primarily through e-mail. According to Mlodzianowski, he had traveled to California approximately five or six times over the past decade, either for vacation or work related to his primary employer, and had never met with an Aries customer in California or traveled to California to perform work for Aries or to meet with Markus for work related to Aries.

In or around late December 2018 or early January 2019 Mlodzianowski made several complaints to Markus about his management of Aries, including complaints about his improper use and dissipation of company assets for his personal benefit.

On December 28, 2018, an application was filed with the California Secretary of State to register Aries, a foreign limited liability company, to transact business in California.^[1] The application, which was signed by Markus on behalf of Aries, identified Aries' principal executive office as being located in Wilmington, Delaware and the address of its principal office in California as being located at 655 West Broadway, Suite #800, San Diego California, which is the same address as the law firm that represents Aries in this action.

On January 3, 2019, Aries filed a statement of information with the California Secretary of State, ^[2] which identified Markus and Mlodzianowski as the managers of Aries and indicated that Markus lived in El Dorado Hills.^[3] The statement of information, which was not signed by anyone on behalf of Aries, also indicated that Aries was formed under the laws of Delaware and its principal office was located in Wilmington, Delaware; it did not, however, include an address for a California office.

In late January 2019, Mlodzianowski sent a letter to Markus via e-mail requesting the dissolution of Aries due to Markus's lack of transparency after several years of tax manipulation and other issues. Thereafter, Mlodzianowski unsuccessfully attempted to resolve his dispute with Markus over the course of a year or so, mostly through e-mail and counsel.

Procedural Background Allegations of the Complaint

In June 2020, Aries filed suit against Mlodzianowski in El Dorado County, alleging claims for breach of fiduciary duty, misappropriation of trade secrets, and interference with prospective economic advantage. These claims were predicated on Mlodzianowski's misappropriation of Aries' assets, including proprietary and copyrighted material that he used to create a competing software program called OpenSOC, and his deliberate attempt to "usurp Aries' business opportunities and siphon off Aries' employees, contractors, and volunteers." According to Aries, instead of contributing to the company, Mlodzianowski competed against it, targeting the same customers by using its proprietary list of customers/potential customers, contractors, and business connections. He also competed against Aries by using its proprietary event planning and execution processes at cyber security conventions to market his competing business, including at the DEF CON convention in Las Vegas and the Texas Cyber Summit convention, and solicited Aries' volunteers, contractors, and sponsors to work for his competing business.

Aries further alleged that Mlodzianowski maliciously and intentionally made patently false and misleading statements about the company; specifically, he claimed that Aries' finances were concealed from him and money was stolen from the company, which "caus[ed] a number of issues with [Aries'] long-term volunteers, current customers, potential customers, and sponsors." Aries also alleged that Mlodzianowski intentionally failed to complete tasks for Aries related to the 2019 DEF CON convention, and intentionally and maliciously destroyed Aries' cyber security programming around July 2019 in order to disrupt its business operations.

Aries claimed that its principal place of business was in El Dorado Hills, and that jurisdiction was proper in El Dorado County because "a significant portion of the transactions and wrongs complained of [in this action] occurred in . . . the County of El Dorado."

The Motion to Quash

In October 2020, Mlodzianowski specially appeared in this action to file a motion to quash service of summons for lack of personal jurisdiction under Code of Civil Procedure section 418.10. He maintained that such relief was warranted because his contacts with California were insufficient to establish general or specific personal jurisdiction. In support of his motion, Mlodzianowski argued that the trial court's exercise of general jurisdiction would not be appropriate because he had no meaningful contacts with California, let alone contacts that could be considered so continuous and systematic as to render him essentially at home in California. He further argued that the court's exercise of specific jurisdiction would not be appropriate because Aries' claims did not arise out of or relate to any intentional conduct on his part occurring in California, or any conduct on his part that was purposefully directed or expressly aimed at California or any of its residents. In other words, Mlodzianowski claimed that Aries could not satisfy its burden to establish the requisite minimum contacts to justify the trial court's exercise of specific jurisdiction; namely, the purposeful availment and forum-relatedness requirements of specific jurisdiction. Lastly, Mlodzianowski argued that, even if his California contacts were sufficient to establish personal jurisdiction, his motion to quash should be granted because litigating this matter in California would be unreasonable due to his attenuated contacts with California, his lack of knowledge that Aries had a presence in California, and the substantial burden of having to travel nearly 2, 000 miles to defend himself against this action.

Aries opposed the motion, arguing that the trial court had the authority to exercise specific personal jurisdiction over Mlodzianowski. Aries insisted that the standard for specific jurisdiction had been satisfied because: (1) Mlodzianowski purposefully availed himself of the California forum by intentionally directing conduct at California businesses and residents^[4] (e.g., engaging in regular contacts and communications with Aries and Markus, misappropriating Aries' trade secrets and sabotaging its programming soliciting Aries' California customers, usurping Aries' proprietary methods employed at conventions, making defamatory statements about Aries to Aries' California customers); (2) the claims alleged in the complaint arose out of and/or are related to Mlodzianowski's contacts with California, as each claim is predicated on conduct directed at Aries or other California residents; and (3) exercising jurisdiction over Mlodzianowski would be reasonable.^[5] Lastly, in the event the court was inclined to grant the motion to quash, Aries requested a continuance to allow it to conduct jurisdictional discovery; it sought discovery related...