United States District Court, D. Hawaii
BRUCE PAIGE; MALANA PAIGE; AND PULSE BEVERAGE HAWAII, INC., Plaintiffs,
THE PULSE BEVERAGE CORPORATION; DONALD BRUCE HORTON; AND ROBERT E. YATES aka ROBERT EDWARD YATES; AND JOHN DOE 1, JOHN DOE 2, AND JANE DOE, Defendants.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS AND
MOTION TO STRIKE WITHOUT PREJUDICE AND WITH LEAVE TO
C. Kay Sr. United States District Judge.
reasons set forth below, the Court GRANTS Defendants'
Motion to Strike and Defendants' Motion to Dismiss
WITHOUT PREJUDICE and WITH LEAVE TO AMEND.
February 29, 2016, Plaintiffs Bruce Paige and Malana Paige
(“Plaintiffs”) filed a Complaint against
Defendants The Pulse Beverage Corporation
(“Pulse”), Donald Bruce Horton, and Robert E.
Yates, and three unknown individuals
(“Defendants”). Compl. ECF No. 1. On May 20,
2016, before Defendants filed any responsive pleading,
Plaintiffs filed an ex parte application seeking leave to add
Pulse Beverage Hawaii, Inc. as a plaintiff and to extend the
time for serving process by 90 days. ECF No. 8. The Court
granted leave to file an amended complaint as a matter of
course under Federal Rule of Civil Procedure 15(a) because
the original complaint had not been served and found good
cause to grant Plaintiffs' request to extend the time for
service under Rule 4(m) until August 22, 2016. ECF No. 13.
filed their First Amended Complaint on August 20, 2016, and
on the same day filed another ex parte application to further
amend their complaint and extend the time for serving process
by 90 days. ECF Nos. 14, 17. The Court granted leave to
further amend their complaint under Rule 15(a)(2) and again
found good cause to extend the time for service until
November 21, 2016. ECF No. 18.
filed their Second Amended Complaint, which spans
approximately 80 pages and consists of three separate parts,
along with three separate sets of attachments supporting the
complaint, on October 9, 2016. ECF Nos. 19-24.
November 29, 2016, Defendants filed a Motion to Dismiss the
Second Amended Complaint. ECF No. 20. Plaintiffs did not file
an opposition. However, on December 22, 2016, Plaintiffs
filed a Third Amended Complaint, which spans approximately
125 pages and incorporates by reference the three attachments
filed with the Second Amended Complaint. ECF No. 36 &
¶ 6. Defendants filed their Reply in support of their
Motion to Dismiss on January 3, 2017. ECF No. 37. Defendants
have stated that Plaintiffs did not request consent for
filing the Third Amended Complaint. ECF No. 38-2, ¶ 5
(Schmitt Declaration). Additionally, Defendants filed a
Motion to Strike the Third Amended Complaint on January 4,
2017. ECF No. 38.
filed a response to these motions on January 13,
2017. ECF No. 43. The motion is styled as a
Motion to Dismiss Defendants' Motion to Dismiss, but
Plaintiffs purport to (1) oppose the Motion to Dismiss and
seek an order declaring that the Defendants were properly
served with the Second Amended Complaint; and (2) oppose the
Motion to Strike, seek leave to extend the time for filing
the Third Amended Complaint, and seek an order declaring that
the Defendants were properly served with the Third Amended
Court held a hearing regarding the Motion to Dismiss and the
Motion to Strike on Tuesday, January 17, 2017 at which
Plaintiffs and counsel for Defendants appeared.
Overview of the Case
allege violations of the Securities Act of 1933, the
Securities Exchange Act of 1934, Hawaii's Uniform
Securities Act, and various other state law claims, in
connection with losses suffered on a stock deal and master
distributorship agreement. Plaintiffs invested a significant
amount of their savings in Pulse on the basis of
representations made by defendant Bruce Horton, the Chairman
of the Pulse Advisory Board during the relevant time period
and a family friend of plaintiff Bruce Paige, about how much
money Plaintiffs would make. Second Am. Compl., Section IV,
¶¶ 3, 8; Section II, ¶¶ 9-14, 19, 44.
of the investment, Plaintiffs also discussed the possibility
of a Master Distributorship Agreement for the Pulse product
line in Hawaii, which Mr. Horton assured them could be
“more or less” worked into the Subscription
Agreement for purchasing stock and for which they would have
sufficient capital from the stock offering. Id.,
Section IV, ¶¶ 16, 21. However, the stock price
fell drastically, at least in part because Francis Chiew, a
Pulse director, caused substantial downward pressure on the
market by selling a significant number of shares wholesale;
and due to issues related to a hold on the stock, Plaintiffs
were unable to sell. Id. ¶¶ 28-31.
main thrust of Plaintiffs' complaint appears to be that
Defendants improperly obtained an exemption from SEC
registration requirements for the sale of securities by
omitting material information about whether Plaintiffs were
qualified investors for purposes of that exemption.
Id. ¶¶ 25-26, 77. Plaintiffs also appear
to allege that Plaintiffs relied on Defendants'
representations that the investments would yield sufficient
capital to fund the business and that Defendants breached the
distribution agreement in various ways, both of which caused
the distributorship to fail. Id. ¶¶ 33-38.
Service of Process
Second Amended Complaint
attempted to serve Mr. Yates and Pulse with the Second
Amended Complaint on November 8, 2016. See ECF Nos.
27, 28. On December 1, 2016, Plaintiffs filed the process
server's affidavits stating that the summons, complaint,
and related documents were personally given to a person who
identified himself as Robert Yates, Pulse's president, at
its executive offices in Colorado, along with a picture
purporting to show Mr. Yates holding a box containing those
documents. ECF Nos. 27, 28. According to the process
server's search of the Registry of the Secretary of State
for Colorado, Robert Yates was the Registered Agent for
service for Pulse. ECF No. 28.
November 8, 2016 Plaintiffs attempted to serve Mr. Horton
through Mr. Yates at Pulse's Colorado office, under
Colorado law as Mr. Horton's “supervisor,
secretary, administrative assistant, bookkeeper, human
resources representative or managing agent” or as a
person authorized to receive service of process. ECF No. 29.
Plaintiffs filed the process server's affidavit
describing service on Mr. Yates, as detailed above, on
December 1, 2016. Id. Plaintiffs also attempted to
personally serve Mr. Horton at his residence in British
Columbia, Canada on seven separate occasions between November
5, 2016 and November 20, 2016. ECF No. 30. However, personal
service was unsuccessful. Id.
Yates provided a declaration stating that on November 8,
2016, a person purporting to be a process server brought
three boxes to Pulse's offices in an attempt to serve the
Second Amended Complaint. ECF No. 20-2, ¶ 4 (Declaration
of Robert E. Yates). Mr. Yates states that he explained his
name was Robert Yates, but when he inquired what was in the
boxes, the purported process server stated he would have to
open the boxes to find out. Id., ¶¶ 5-6.
Mr. Yates also states the boxes were left in Pulse's
lobby and that no one from Pulse signed for them.
Id., ¶¶ 7-8.
Horton also provided a declaration stating that he has no
authority with respect to the management of Pulse, as a
member of Pulse's Advisory board, and he is neither an
agent nor a principal of Pulse. ECF No. 20-3, ¶¶
3-4 (Declaration of Donald Bruce Horton). He further states
that he resides in British Columbia, Canada, and was not
present at Pulse's offices in Colorado on November 8,
2016. Id., ¶¶ 5-6.
Third Amended Complaint
attempted to serve the Third Amended Complaint by personally
delivering it to Defendants' attorneys, but personal
service was refused. ECF No. 35. Defendants' attorneys
have declared that they lacked authority to accept service of
pleadings on behalf of the Defendants. ECF No. 37-1, ¶ 6
(Declaration of Jessica M. Wan).
also served the Third Amended Complaint on Ty Nohara as the
Securities Commissioner for Hawaii pursuant to Hawaii Rev.
Stat. § 485A-610(b), which service was acknowledged on
behalf of the Commissioner on December 23,
2016. ECF No. 41. Plaintiffs have filed
additional documents related to service on the Commissioner
since that time. See ECF Nos. 40, 41, 42.