The Civil Litigator
| Publication year | 1980 |
| Pages | 1869 |
1980, September, Pg. 1869. The Civil Litigator
1869
As security fraud cases increase in number, their treatment under the Colorado Securities Act(fn1) will begin to play a major factor in the nature of the claims as well as the forum selected to try these claims. Large plaintiffs' verdicts in both federal and state courts appear to have encouraged securities customers to take a closer look at unsuccessful investment programs. Hindsight has often created an argument over whether such programs were suitable to the customer's investment purposes and needs.(fn2) In addition, it can be anticipated that securities fraud claims based on misinterpretation, churning and fraud in the handling of a customer's account will continue to be made.
Generally, securities fraud claims are brought in federal court for violations of provisions of the Securities Act of 1933(fn3) and the Securities Exchange Act of 1934.(fn4) The plaintiff's attorney will normally include in the federal action pendent claims for violation of the state securities laws as well as common law fraud. If successful in having the federal court take jurisdiction of the state statutory and common law causes of action, the plaintiff's attorney may have a more favorable forum within which to try his case from a legal and practical standpoint.
However, federal courts in general, and specifically the Federal Court for the District of Colorado, are leaning more toward declining pendent claims based on state causes of action, thus resulting in more claims appearing in the state courts.(fn5) Additionally, sizeable verdicts in state court actions will encourage more plaintiffs' attorneys to file claims in the state courts for violations of state securities laws.(fn6)
Traditionally, and for sound economic reasons, plaintiffs in securities fraud claims have opted for judicial determination of their claims, as opposed to arbitration. Conversely, the defendants generally prefer to arbitrate all disputes. However, until very recently, Colorado case law has been unclear on the enforceability of arbitration clauses in customers' agreements, options agreements and agreements entered into by the customer and the brokerage firm which, in almost...
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