United States District Court, D. Hawaii
ORDER DENYING DEFENDANT'S MOTION TO
A. OTAKE UNITED STATES DISTRICT JUDGE.
their First Amended Complaint, Plaintiffs Greys Avenue
Partners, LLC and Castle Resorts & Hotels, Inc.
(collectively, “Plaintiffs”) bring claims against
Defendant Colin Theyers (“Defendant Theyers” or
“Defendant”) for misrepresentation, fraud,
conversion, violations of state and federal securities laws,
and violation of the civil provisions of the Racketeer
Influenced and Corrupt Organizations Act
(“RICO”). See ECF No. 9
(“FAC”). Defendant Theyers moves to dismiss the
FAC under Federal Rule of Civil Procedure
(“FRCP”) 12 on the grounds that personal
jurisdiction is lacking, venue is improper, and Plaintiffs
failed to state certain claims. See ECF No. 13. For
the reasons stated below, Defendant Theyers' motion is
action arises from a series of agreements among various
parties related to a joint venture to convert an office
building in New Zealand into a hotel. See generally
FAC. Greys Avenue Investments Limited (“GAIL”)
owns the relevant property in New Zealand (the
“Property”). FAC ¶ 11. Aaron Coupe is the
sole shareholder of GAIL and Defendant Theyers is its
director and manager. Id. ¶¶ 8-10.
Defendant and Mr. Coupe are citizens of New Zealand.
Id. ¶ 4; ECF No. 13-1 at 16.
solicited Plaintiff Castle Resorts & Hotels, Inc.
(“Castle”) to become involved in the project to
convert the Property into a hotel. ECF No. 17-3
(“Mattson Decl.”) ¶ 3. Castle is a
Hawai'i corporation with its principal place of business
in Honolulu. FAC ¶ 2. Richard Wall, Gary Oda, and Jerry
Ruthruff are all affiliated with Castle and were or are
residents of Hawai'i. ECF No. 17-2 (“Oda Decl.”)
¶ 2; Supp. Theyers Decl. ¶¶ 3-4, 16; FAC
¶ 1. Castle also has a sister company in New Zealand-NZ
Castle Resorts & Hotels, Inc. (“NZ
Castle”)-that was involved in the venture as the
planned operator of the hotel after it opened. Mattson Decl.
¶ 12. Plaintiff Greys Avenue Partners, LLC
(“GAP”) is also affiliated with Castle, as Mr.
Oda is GAP's sole member. FAC ¶ 1; Oda Decl. ¶
2; Supp. Theyers Decl. ¶ 12.
first began negotiating with Castle in conjunction with this
venture in early November of 2017. ECF No. 13-2
(“Theyers Decl.”) ¶ 5. He first met certain
Castle representatives, namely Mr. Wall, Mr. Oda, and Mr.
Ruthruff, in New Zealand in late November 2017. Supp. Theyers
Decl. ¶ 3. During their trip to New Zealand, the Castle
representatives engaged in detailed discussions with
Defendant and Mr. Coupe regarding the conversion of the
Property, including by reviewing an appraisal of the
Property, reviewing income projections, addressing GAIL's
existing debt levels, and conducting a site visit. See
Id. ¶¶ 4-12. During this trip, the parties
also negotiated certain terms regarding transferring the
Property to a joint venture entity, Castle financing the
necessary construction, the division of profits, and the
assumption of GAIL's existing debts. Id.
¶¶ 12-14. Defendant memorialized these terms in a
preliminary Heads of Agreement (“Preliminary HO
A”), which was provided to the Castle representatives
while in New Zealand before they returned to Hawai'i.
Id. ¶ 15. Each side retained a New Zealand firm
to review the Preliminary HOA. Id. ¶ 16.
December 2017, Defendant instructed GAIL's attorneys to
prepare additional documents related to the parties'
deal, including a shareholder's agreement for the joint
venture entity-a New Zealand entity, Ascent Industries 33
Limited (“Ascent”)-that would hold the
parties' interests. Id. ¶ 17; Theyers Decl.
¶ 2. Both sides also conducted due diligence, and
continued to negotiate the HOA and corporate documents for
Ascent. Supp. Theyers Decl. ¶ 19. In January 2018,
Defendant provided Mr. Ruthruff with GAIL's updated
balance sheet and addressed his questions regarding which
assets and liabilities Ascent would assume. Id.
¶ 19. Defendant represented that the amount owed on
GAIL's loan from the Bank of New Zealand secured by a
mortgage on the Property was around $4.8 million, and that
GAIL had other loans from the Bank of New Zealand totaling
around $4 million that Mr. Coupe (who had assets outside
GAIL's ownership secured in the Bank's favor) would
retain. ECF No. 17-1 (Ex. 2).
and Mr. Coupe agreed to travel to Honolulu in February 2018
to execute the final documents. Supp. Theyers Decl.
¶¶ 20-23; see also Oda Decl.
¶ 7 (“Mr. Theyers came to Honolulu to attempt to
close the deal between GAIL and GAP”). Between November
2017 and February 2018, Mr. Oda authorized GAP's
attorneys to negotiate the terms of a proposed deal with
GAIL. Oda Decl. ¶ 5.Prior to the February 2018 meeting in
Honolulu, GAP was under no obligation to invest in the
Property with GAIL. Id. ¶ 6. One day before
Defendant met with Plaintiffs in Honolulu, Mr. Ruthruff sent
Defendant a revised version of the HOA, which stated in
relevant part: “GAIL shall forthwith contribute the
Property to Ascent subject only to the current debt of
approximately $14, 833, 195.73 payable to [Bank of New
Zealand], $899, 642.68 payable to Summer Blue and Loan No. 1
of $47, 000.” ECF No. 18-9 ¶ 8.
meeting at Castle's office in Honolulu in February 2018,
Defendant and Mr. Oda discussed the terms of the deal. Oda
Decl. ¶¶ 10-15. Mr. Oda asked whether the amount of
GAIL's indebtedness that Ascent would assume could be
reduced below $16.2 million, in light of the documentation
Defendant sent Mr. Ruthruff indicating that the amount owed
on a loan from the Bank of New Zealand and secured by the
Property was only around $14.8 million. Id.
¶¶ 10-11. Defendant responded that this reduction
was not possible because of the $14.8 million owed to the
Bank of New Zealand and $900, 000 owed to a tenant of the
Property. Id. ¶ 12. Mr. Oda also asked when
title to the Property could be transferred to Ascent, and
Defendant responded that title would be transferred as soon
as a shareholder's agreement was finalized. Id.
¶¶ 13-14; see also Mattson Decl.
¶¶ 4-9. Satisfied with this information, Mr. Oda
signed the HOA on behalf of GAP and Defendant signed the HOA
on behalf of GAIL. Oda Decl. ¶ 15. The executed HOA
provides in relevant part that “GAIL shall forthwith
contribute the Property to Ascent subject only to the current
debts in an amount not exceeding $16.2 million.” ECF
No. 13-3 ¶ 8. Per the terms of the HOA, GAP was required
to contribute $4 million to Ascent, $500, 000 of which was to
be contributed upon execution of the HOA. Id. ¶
2018, GAIL, GAP, and Ascent executed the Shareholder's
Agreement (“SHA”) that provided, among other
things, that shares in Ascent would be split equally between
GAIL and GAP and that Defendant and Mr. Oda would serve as
Ascent's Directors. ECF No. 15. At another meeting at
Castle's office in Honolulu in June 2018, Defendant
delivered the stock certificate selling GAP its portion of
Ascent's shares-50 shares for $1.00 per share-which Mr.
Oda executed on behalf of GAP in the presence of a witness.
Oda Decl. ¶ 17; ECF No. 17-1 (Ex. 5). That same day,
Defendant held the sole Board of Directors' meeting for
Ascent at Castle's office in Honolulu, the minutes of
which reflect that Defendant called the meeting to order, the
parties executed the share transfer, and Defendant noted for
the record that the previously executed SHA was formally
adopted. Oda Decl. ¶ 18; ECF No. 17-1 (Ex. 6); see
also Supp. Theyers Decl. ¶ 29. At this meeting,
Defendant also provided updates on the financial analysis of
the venture and accounting for the joint venture. ECF No.
17-1 (Ex. 6).
later learned the Property was subject to a mortgage
indebtedness of $18.7 million (not $14.8 million as Defendant
represented) and that GAIL could not transfer title to the
Property without repaying or refinancing this mortgage and
because a current tenant had a right of first refusal.
See FAC ¶ 17. GAP would not have entered into
the HOA if it had known these facts. Oda Decl. ¶¶
16, 19-21; FAC ¶¶ 15-20, 26-27. Castle similarly
alleges it relied on Defendant's representations at the
February 2018 Honolulu meeting when agreeing to incur and in
fact incurring substantial expenses in performing
“pre-opening services” aimed at the conversion of
the Property into a hotel. Mattson Decl. ¶¶ 12-14,
16-17; FAC ¶¶ 15-20, 26-27. Castle would not have
been willing to or have incurred these obligations and
expenses had it known these facts. See Mattson Decl.
¶¶ 12- 14, 16-17; FAC ¶¶ 15-20, 26-27.
to the agreements discussed above, GAP alleges it expended
$2.9 million and Castle alleges it incurred expenses and
expended services totaling over $250, 000. FAC ¶¶
19-20, 26-27. Aside from misrepresentations about the
mortgage on the Property and GAIL's ability to transfer
the Property to Ascent, Plaintiffs allege that Defendant
engaged in other misrepresentations that they relied on in
agreeing to the venture. FAC ¶¶ 15-20, 35, 39.
These misrepresentations include that: GAP's contribution
of $4 million would be sufficient to convert the Property
into a hotel (when it was not); that GAP's contributions
would be deposited into an account that required both
sides' signatures and would only be used to convert the
Property into a hotel (when they were not); and that
Defendant would maintain complete accounting records and
provide GAP with real-time access to accounting records so
that GAP would have detailed knowledge of the project's
finances at all times (when he did not). See FAC
¶¶ 15-20, 35, 39. Because of Defendant's
conduct, Ascent was unable to refinance the Property, the
conversion to a hotel failed, and Plaintiffs' investments
lost significant value. See Id. ¶¶ 21-22,
initially filed a Complaint against Defendant and Mr. Coupe.
ECF No. 1. Plaintiffs voluntarily dismissed all claims
against Mr. Coupe, ECF No. 5, and then filed the FAC against
Defendant and GAIL. ECF No. 9. Plaintiffs indicate they will
dismiss all claims against GAIL, although they have not yet
formally done so. ECF No. 17 at 2-3, 23. Plaintiffs bring
claims against Defendant for misrepresentation, fraud,
conversion, federal and state securities law violations, and
a civil RICO violation. ECF No. 9. After Plaintiffs filed the
FAC but before Defendant moved to dismiss the FAC, Mr. Coupe
filed a Statement of Claim in New Zealand court against
Plaintiffs and the individuals affiliated with Plaintiffs.
ECF No. 13-7.
moved to dismiss the FAC arguing he is not subject to the
jurisdiction of Hawai'i courts, that venue in Hawai'i
is improper, and that Plaintiffs failed to state certain
claims. ECF No. 13. Plaintiffs oppose the motion. ECF No.
The Court held a hearing on Defendant's motion on
December 20, 2019.
Defendant's Motion to Dismiss under Rule
first moves to dismiss the FAC under Rule 12(b)(2) on the
basis that the Court lacks jurisdiction over him as a
Legal Standard under Rule 12(b)(2)
plaintiff bears the burden of establishing personal
jurisdiction over a nonresident defendant. See Love v.
Associated Newspapers, Ltd., 611 F.3d 601, 608 (9th Cir.
2010); Schwarzenegger, 374 F.3d at 800. When no
federal statute governs personal jurisdiction,  the district
court applies the law of the forum state. See Boschetto
v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008).
Hawaii's jurisdiction reaches the limits of due process
set by the United States Constitution. See Cowan v. First
Ins. Co. of Haw., 61 Haw. 644, 649, 608 P.2d 394, 399
(1980) (stating that Hawai's long-arm statute,
Hawai'i Revised Statutes (“HRS”) §
634-35,  was adopted to expand the jurisdiction of
Hawai'i courts to the extent permitted by the due process
clause of the Fourteenth Amendment). Constitutional due
process requires that a defendant “have certain minimum
contacts” with the forum state “such that the
maintenance of the suit does not offend traditional notions
of fair play and substantial justice.” Int'l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)
(internal quotation marks and citation omitted).
are two categories of personal jurisdiction: (1) general
jurisdiction and (2) specific jurisdiction. See
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466
U.S. 408, 413-15 (1984). Plaintiffs do not contend that the
allegations in the FAC support the exercise of general
jurisdiction, so the Court addresses only specific
specific jurisdiction, courts generally conduct a three-part
inquiry- commonly referred to as the minimum contacts test-to
determine whether a defendant has sufficient contacts with
the forum to warrant the court's exercise of
(1) The non-resident defendant must purposefully direct his
activities or consummate some transaction with the forum or
resident thereof; or perform some act by which he
purposefully avails himself of the privilege of conducting
activities in the ...