Two men share securities regulation news

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

February 5, 2013

Texas Forum Selection Clause Did Not Violate Colorado Public Policy

By John M. Jascob, J.D.

The Colorado Supreme Court has held that the anti-waiver provision of the Colorado Securities Act (Act) did not void the Texas forum selection clauses contained in an issuer's sales agreements for oil and gas interests. In reversing the decision below, the state high court concluded that clauses requiring the parties to litigate any disputes in Texas were not voided by Colorado public policy or by the Act's anti-waiver provision, which bars agreements that waive compliance with the substantive provisions of the Act. Accordingly, the state high court remanded the case to the Court of Appeals with instructions to return it to the trial court for reinstatement of the trial court's grant of the motion to dismiss. (Cagle v. Mathers Family Trust, February 4, 2013, Bender, C.J.).

The defendants, through cold calls, had sold the plaintiffs shares in oil and gas joint ventures in Texas, Alabama and Mississippi. The sales agreements signed by the plaintiffs, who were residents of California, Illinois and Vermont, all contained clauses stating that the courts in Dallas County, Texas had exclusive jurisdiction over any claims or disputes arising out of the contracts. After the ventures lost money, the plaintiffs sued in Colorado state court, raising claims under the Act as well as under the blue sky laws of their resident states. Although the plaintiffs argued that the clauses were unenforceable on public policy grounds, the trial court granted the defendants' motion to dismiss, concluding that only the Texas courts had jurisdiction to hear the case because the clauses were enforceable. The Court of Appeals then reversed the trial court's ruling, reasoning that the forum selection clauses conflicted with the public policy behind the Act, which is remedial in nature and is to be broadly construed for the protection of investors.

Upon analysis, however, the Colorado Supreme Court concluded that the Act does not express a strong public policy voiding forum selection clauses. As the Act requires coordination with the federal securities laws, the state high court found persuasive federal case law that concludes that the anti-waiver provisions in the federal securities statutes do not void a forum selection clause. Although the plaintiffs and the amici argued that both the language of the Act and Colorado appellate precedent show an intent to depart from federal law, the state high court noted that the Act is replete with references to the federal securities acts which show a consistent statutory scheme coordinating the Colorado Securities Act with the federal statutes. In addition, the wording of the Act's anti-waiver provision is nearly identical to that of the federal anti-waiver clause. Finally, the purposes of the federal securities acts are nearly the same as those of the Colorado securities laws, namely, to protect investors.

The state high court also reasoned that the Act's anti-waiver provision differs from the anti-waiver provisions in other Colorado statutes which the court has determined to bar suit in other jurisdictions. The state high court observed that the Colorado Securities Act, unlike the Colorado Wage Claim Act or the Colorado Wrongful Withholding of Security Deposits Act, is not designed for the protection of state resident alone. Rather, the Act's purpose is to protect investors and maintain confidence in the public securities markets. Investors do not have to live in Colorado to avail themselves of the Act's protections because the Act's provisions apply to any securities transaction taking place in Colorado. Although Colorado has a strong interest in making sure a Colorado employee or renter can seek relief in a Colorado court, the state does not have the same interest in protecting out-of-state investors who invest in out-of-state investments in a national market, the court held.

Attorneys: Paul H. Schwartz, Andrew R. Shoemaker and Alice Warren-Gregory (Shoemaker Ghiselli & Schwartz, LLC) for Charles Reed Cagle, Heartland Energy of Colorado, LLC, HEI Resources, Inc., Reed Petroleum and R & J Associates, Inc. Thomas P. Johnson and Sara P. Bellamy (Davis Graham & Stubbs, LLP) for Joel Held. Jeffrey S. George (Hogan Lovells, US LLP) for Steve Ziemke. A. Thomas Tenenbaum and George Kreye (The Tenenbaum Law Firm) for Brandon Davis and Heartland Energy Development Corp. Otto K. Hilbert, II (Robinson Waters & O'Dorisio, P.C.) for John Schiffner and D. Deerman, Ltd. Mark E. Haynes (Ireland Stapleton Pryor & Pascoe, PC) for Martin Harper.

Companies: Heartland Energy Development Corp; HEI Resources, Inc.; Reed Petroleum; R & J Associates, Inc.

LitigationEnforcement: ColoradoNews

Securities Regulation Daily

Introducing Wolters Kluwer Securities Regulation Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.


A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.