Chapter 11 - § 11.6 • CIVIL LITIGATION UNDER STATE LAW

• Jurisdiction: Colorado

§ 11.6 • CIVIL LITIGATION UNDER STATE LAW

In some cases, civil litigation under blue sky laws — where the plaintiffs are able to obtain jurisdiction in a state court over the defendants — may be better for a plaintiff than litigation under the federal securities laws. For example, in First Interstate Bank of Denver, N.A. v. Central Bank & Trust Co. of Denver,¹⁸ the court held that state law claims arising on the same facts as previously dismissed federal claims are not barred under the Colorado Securities Act by res judicata.

As with all civil litigation, states must assert jurisdiction under their long-arm statutes. In Ex parte Dill, Dill, Carr, Stonbraker & Hutchings, P.C.,¹⁹ a Denver law firm objected to jurisdiction in Alabama when they had represented promoters of a Ponzi scheme that had sold securities to residents of Alabama. On several grounds, the Alabama Supreme Court found that the Alabama courts did not have jurisdiction where the law firm's work had been performed outside of Alabama, in Colorado.

Importantly, NSMIA only affected the ability of states to require the registration of "covered securities." It specifically provided that state securities commissions retained jurisdiction to investigate and bring enforcement actions "with respect to fraud or deceit, or unlawful conduct by a broker or dealer...