August 24, 2019

Colorado Court of Appeals: Colorado Securities Act’s Anti-Waiver Provision Ensures Investors Must Be Permitted to Bring Claims in Colorado When Their Rights May Not Be Enforceable in Another Jurisdiction

The Colorado Court of Appeals issued its opinion in Mathers Family Trust v. Cagle on May 12, 2011.

Investments—Colorado Securities Act—Anti-waiver Provision—Forum Selection Clause.

Plaintiffs, purchasers of investments sold by HEI Resources, Inc. (HEI), appealed the dismissal of their claims against defendants, HEI and others involved in the investments, based on the forum selection clauses in the parties’ agreements requiring litigation in Texas. The order was reversed and the case was remanded.

Plaintiffs are out-of-state investors who purchased joint venture interests sold by HEI, a Colorado corporation headquartered in Colorado Springs. Defendant Martin Harper was the accountant and Joel Held was the attorney for each of the joint ventures in which plaintiffs invested; the other defendants are persons or entities closely related to HEI. The “Application Agreement” and “Joint Venture Agreement” both contained a forum selection clause providing that the courts in Texas have exclusive jurisdiction to hear any claims. After losing substantial sums of money on the ventures, plaintiffs filed suit in Colorado. The district court dismissed all of plaintiffs’ claims based on the forum selection clauses.

On appeal, plaintiffs contended that the forum selection clauses were void because they conflict with the public policy behind the Colorado Securities Act (CSA) and its anti-waiver provision. The CSA’s anti-waiver provision protects investors against the possibility that a different forum might not enforce their rights; thus, agreements that would prevent enforcing the CSA in Colorado courts are void. For the anti-waiver provision of the CSA to adequately protect investors’ rights under the act, when those rights may not be enforceable in a different jurisdiction, investors must be permitted to bring their claims in Colorado. Therefore, the district court’s order dismissing plaintiffs’ claims was reversed.

This summary is published here courtesy of The Colorado Lawyer. Other summaries by the Colorado Court of Appeals on May 12, 2011, can be found here.

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