United States District Court, D. Hawaii
IAN BELL, Derivatively on, Behalf of ECO SCIENCE SOLUTIONS, INC., Plaintiffs,
JEFFREY TAYLOR, DON LEE TAYLOR, L. JOHN LEWIS, S. RANDALL OVESON, and GANNON GIGUIERE, Defendants.
ORDER DENYING DEFENDANT'S MOTION TO STAY CIVIL
E. Kobayashi United States District Judge.
the Court is Defendants Jeffrey Taylor (“J.
Taylor”), Don Lee Taylor (“D. Taylor”), L.
John Lewis (“Lewis”), S. Randall Oveson
(“Oveson”), Gannon Giguiere
(“Giguiere”), and Nominal Defendant Eco Science
Solutions, Inc.'s (“ESSI” and collectively
“Defendants”) Motion to Stay Civil Case
(“Motion”), filed on January 29, 2019. [Dkt. no.
84.] Plaintiffs Ian Bell (“Bell”) and Marc
D'Annunzio (“D'Annunzio, ” collectively
“Plaintiffs”) filed their memorandum in
opposition on February 22, 2019, and Defendants filed their
reply on March 1, 2019. [Dkt. nos. 89, 91.] The Court finds
this matter suitable for disposition without a hearing
pursuant to Rule LR7.2(d) of the Local Rules of Practice for
the United States District Court for the District of Hawaii
(“Local Rules”). Defendants' Motion is hereby
denied because, after weighing the particular circumstances
and interests in this case, the Court concludes not
substantial prejudice will result from proceeding with the
parallel criminal and civil cases.
case arises out of the business transactions surrounding ESSI
from December 2015 to January 2018. Plaintiffs allege that
Giguiere was the mastermind of an elaborate
“pump-and-dump” scheme where Defendants
artificially inflated ESSI's stock price through false
representations and manipulative trading practices, then sold
large quantities of the inflated stock to other investors.
[Verified Amended Consolidated Stockholder Derivative
Complaint (“Amended Complaint”), filed 12/10/18
(dkt. no. 78), at ¶¶ 2-4.]
December 2015, Defendants J. Taylor and D. Taylor obtained
the controlling shares of ESSI. J. Taylor was named as
ESSI's Chief Executive Officer (“CEO”) and D.
Taylor as ESSI's Chief Financial Officer
(“CFO”). They were also named ESSI's sole
directors. [Id. at ¶¶ 61-62.] In addition,
J. Taylor is ESSI's President and Secretary, and D.
Taylor is ESSI's Treasurer. [Id. at ¶¶
36-37.] Throughout 2016 and 2017, ESSI entered into numerous
business deals, mainly with companies owned or controlled by
Giguiere or other Defendants. [Id. at ¶¶
9, 16, 18, 38-39.]
first such business deal was an agreement to purchase
“technology licensing and marketing support” from
Separation Degrees - One, Inc. (“SDOI”), a
company of which Giguiere was “the founder, Chairman,
CEO, Secretary, and President.” [Id. at ¶
66.] As payment for the services by SDOI, ESSI transferred
large quantities of its own stock to SDOI, which
“translated into millions of dollars for defendant
Giguiere.” [Id. at ¶¶ 83-84.] The
“marketing support” of SDOI took the form of two
articles posted to TheMoneyStreet.com, a stock promotion
website also controlled by Giguiere. The articles encouraged
readers to purchase ESSI stock, driving prices up.
[Id. at ¶¶ 76-82.] The “technology
licensing” was a software platform that ESSI used to
build two mobile applications, Herbo, a digital marketplace,
and Fitrix, a fitness tracker. [Id. at ¶¶
also entered into a financing agreement with Phenix, another
company controlled by Giguiere. ESSI agreed to sell ten
million shares of its stock to Phenix at a discounted price
based on a formula contained in the agreement. [Id.
at ¶¶ 100-01.]
last relevant transaction occurred in 2017, where ESSI signed
a letter of intent to acquire Ga-Du Bank, Inc. (“Ga-
Du”), an entity controlled by Lewis and Oveson.
[Id. at ¶¶ 38-39, 105.] A May 5, 2017 ESSI
press release stated acquisition of Ga-Du would allow it to
“provid[e] payment processing, cash management and
financial services to its customers in the cannabis
industry.” [Id. at ¶ 105.] However,
Plaintiffs allege Ga-Du's charter and formation were
questionable. [Id. at ¶ 106.] As a result of
the acquisition process, Ga-Du became a wholly owned
subsidiary of ESSI, Lewis became the Ga-Du CEO, Oveson became
the Ga-Du Chief Operating Officer (“COO”), each
was given a base salary of $120, 000, and each was appointed
as an ESSI director. [Id. at ¶¶ 115, 119.]
total, the Amended Complaint alleges Defendants caused a loss
of market capitalization of over $137 million, seeing the
stock price of ESSI drop from a high of $4.58, on January 20,
2017, to a low of $0.28, on June 12, 2017. [Id. at
¶ 116.] J. Taylor and D. Taylor each received three
million shares of ESSI stock, worth $8, 190, 000 each at the
time of issuance, as “stock-based compensation recorded
as management fees.” [Id. at ¶ 117.] J.
Taylor and D. Taylor also received $115, 000 and $105, 000
salaries, respectively, for 2016. [Id.] In addition
to their salaries, Lewis and Oveson were given the option to
purchase 2.5 million shares and 1.5 million shares,
respectively, of ESSI stock at $2.00 per share. [Id.
at ¶ 118.] Throughout the process, Giguiere sold over
6.6 million shares of ESSI stock, resulting in proceeds of
over $8.5 million, some of which was funneled, through a
third-party, back into ESSI accounts to pay for salaries.
[Id. at ¶¶ 97-99.]
29, 2018, Giguiere was indicted in a California federal court
on: two counts of conspiracy to commit securities fraud, in
violation of 18 U.S.C. § 371; and two counts of
securities fraud, in violation of 15 U.S.C. §§
78j(b), 78ff and 17 C.F.R. § 240.10b-5. [Amended
Complaint, Exh. B (Indictment in United States v.
Giguiere, et al., No. 18 CR 3071 WQH (S.D. Cal.)
(“California Indictment”)).] The California
Indictment is based, in part, on the same events and facts as
the instant case with regard to ESSI and TheMoneyStreet.com.
[Amended Complaint at ¶¶ 136-39.] A jury trial in
the criminal case is currently scheduled to begin on for
August 20, 2019. [Reply at 3.]
6, 2018, following a parallel investigation, the Securities
and Exchange Commission (“SEC”) filed a civil
action based on Giguiere's involvement with ESSI and
other corporations. [Amended Complaint at ¶ 143 &
Exh. A (Complaint in S.E.C. v. Giguiere, et al., No.
18CV1530 BEN JLB (S.D. Cal.) (“SEC Complaint”)).]
The SEC Complaint alleges Giguiere violated § 78j(b) and
§ 240.10b-5(a) and (c). The SEC action was stayed
pending resolution of Giguiere's criminal charges.
[Amended Complaint at ¶¶ 143-48.]
Motion seeks a stay of the proceedings in the instant case,
pending resolution of the criminal case against Giguiere. The
Motion argues Giguiere's Fifth Amendment rights will
substantially interfere with the discovery process as to all
Defendants in this case.
The Constitution does not ordinarily require a stay of civil
proceedings pending the outcome of criminal proceedings.
Federal Sav. & Loan Ins. Corp. v. Molinaro, 889
F.2d 899, 902 (9th Cir. 1989); Securities & Exchange
Comm'n v. Dresser Indus., 628 F.2d 1368, 1375 (D.C.
Cir.), cert. denied, 449 U.S. 993, 101 S.Ct. 529, 66
L.Ed.2d 289 (1980). “In the absence of substantial
prejudice to the rights of the parties involved,
[simultaneous] parallel [civil and criminal] proceedings are
unobjectionable under our jurisprudence.”
Dresser, 628 F.2d at 1374. “Nevertheless, a
court may decide in its discretion to stay civil proceedings
. . . ‘when the interests of ...