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State v. Lundberg

Court of Appeals of Kansas

March 3, 2017

State of Kansas, Appellant,
David G. Lundberg and Michael L. Elzufon, Appellees.


         1. Whether jurisdiction exists is a question of law over which appellate courts have unlimited review.

         2. The purpose of the Kansas Securities Act is to provide rigid governmental regulation and control over the promoting and selling of speculative securities in order to protect both investors and the public.

         3. The Kansas Securities Act is patterned after the Uniform Securities Act that, in turn, is modeled after the Federal Securities Act. Accordingly, Kansas courts may look to decisions of federal courts as well as decisions from other states that have adopted the Uniform Securities Act for guidance in interpreting the Kansas Securities Act in an attempt to make its application uniform with other jurisdictions.

         4. K.S.A. 17-12a501 makes it unlawful for a person, in connection with the offer, sale, or purchase of a security, to make an untrue statement of material fact or to omit a material fact. It is also unlawful to engage in an act, practice, or course of business that operates as a fraud or deceit upon another person.

         5. Under K.S.A. 17-12a610, Kansas courts have territorial jurisdiction over a person that sells or offers to sell a security in this state. Likewise, Kansas courts have jurisdiction where the purchase or offer to purchase a security is made and accepted in this state. An offer to sell or to purchase a security is made in Kansas-whether or not either party is then present in this state-if the offer originates from within Kansas.

         6. An out-of-state offer originates from Kansas if any portion of the selling process has occurred here or if there is some territorial nexus between the offer and this state.

         Appeal from Sedgwick District Court; Benjamin L. Burgess, judge.

          Thomas E. Knutzen, deputy director of policy and senior staff attorney, and Joshua A. Ney, Ryan A. Kriegshauser, and Christopher D. Mann, of the Office of the Kansas Securities Commissioner, and Derek Schmidt, attorney general, for appellant.

          Richard Ney and David L. Miller, of Ney, Adams & Miller, of Wichita, for appellee David G. Lundberg.

          Kurt P. Kerns, of Ariagno, Kerns, Mank & White, LLC, of Wichita, for appellee Michael L. Elzufon.

          Zachary T. Knepper, deputy general counsel, and A. Valerie Mirko, general counsel, of North American Securities Administrators Association, Inc., of Washington, D.C., and Alan V. Johnson, of Sloan, Eisenbarth, Glassman, McEntire & Jarboe, L.L.C., of Topeka, for amicus curiae North American Securities Administrators Association, Inc.

          Before Bruns, P.J., McAnany and Buser, JJ.

          BRUNS, J.

         The State appeals from the district court's decision dismissing 56 counts in each of two 61-count criminal complaints filed against David G. Lundberg and Michael W. Elzufon. The complaints alleged that Lundberg and Elzufon had violated the Kansas Uniform Securities Act, K.S.A. 17-12a101 et seq. Specifically, the complaints asserted that Lundberg and Elzufon unlawfully sold-or offered to sell-unregistered securities and committed securities fraud.

         The district court consolidated the two cases for preliminary hearing. Prior to the hearing, Lundberg filed a motion to dismiss for lack of territorial jurisdiction because the sales, offers to sell, and purchases occurred outside of Kansas. Elzufon subsequently joined the motion to dismiss and, prior to the completion of the preliminary hearing, the district court dismissed the bulk of the charges against both defendants for lack of territorial jurisdiction. Subsequently, the State voluntarily dismissed the remaining charges in order to appeal the district court's decision.

         On appeal, we find that the district court has territorial jurisdiction over these cases pursuant to K.S.A. 17-12a610 because a portion of the securities selling process occurred in this state. Furthermore, we find that there is a sufficient territorial nexus between the actions of Lundberg and Elzufon-as well as that of their limited liability companies-to support jurisdiction in Kansas. Thus, although we take no position on the merits of the criminal charges brought against Lundberg and Elzufon, we reverse the district court's decision to ...

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