BY THE COURT
provided in K.S.A. 17-12a610(a), Kansas has jurisdiction
under the Kansas Uniform Securities Act (KUSA), K.S.A.
17-12a101 et seq., to prosecute a defendant for acts related
to the sale of a security only if the offer to sell or the
sale was made in Kansas.
Sales of a security can involve a continuing process,
including steps such as paying consideration, notifying the
purchaser the offer has been accepted, and delivering the
security. If any step occurs in Kansas, Kansas has
jurisdiction under the KUSA.
KUSA defines "offer to sell" more broadly than that
concept is understood in contract law or under the Uniform
Commercial Code. An offer to sell a security can occur only
once or multiple times in the sales or negotiation process or
in a way where more than one offer is extended during the
sales process of a single security.
under the expansive reading permitted by the definition of
"offer to sell" in the KUSA, Kansas'
jurisdiction is statutorily limited to situations in which
the offer originates within the territorial boundaries of
Kansas. This is true no matter whether the offer to sell is
an attempt or a solicitation, no matter how early in the
process it occurs, and no matter whether it is just one of
Jurisdiction arises under the KUSA only if an offer or sale
occurred in the state- not only because the transaction has
some sort of nexus to the state.
of the judgment of the Court of Appeals in 53 Kan.App.2d 721,
391 P.3d 49 (2017).
from Sedgwick District Court; Benjamin L. Burgess, judge.
Kristafer R. Ailslieger, deputy solicitor general, argued the
cause, and 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, were with him on the briefs for appellant.
L. Miller, of Ney, Adams & Miller, of Wichita, argued the
cause, and Richard Ney, of the same office, was with him on
the briefs for appellee David G. Lundberg.
P. Kerns, of Ariagno, Kerns, Mank & White, LLC, of
Wichita, argued the cause and was on the briefs for appellee
Zachary T. Knepper, deputy general counsel, and A. Valerie
Mirko, general counsel, North American Securities
Administrators Association, Inc., of Washington, D.C., and
Alan V. Johnson, of Sloan, Eisenbarth, Glassman, McEntire
& Jarboe, LLC, of Topeka, for amicus curiae North
American Securities Administrators Association, Inc.
State filed many criminal charges of selling or offering to
sell unregistered securities and committing fraud in selling
or offering to sell securities against Minnesota residents
David Lundberg and Michael Elzufon. Lundberg and Elzufon, as
principals for Kansas limited liability corporations, sold
what the State alleges to be securities by using
intermediaries who resided in California. These California
intermediaries made sales presentations in California and
sold the securities from California to individuals who did
not reside in Kansas.
appeal, we must determine whether the Kansas Uniform
Securities Act (KUSA), K.S.A. 17-12a101 et seq., allows
Kansas courts to exercise jurisdiction over the criminal
charges against Lundberg and Elzufon. Jurisdiction to
prosecute the criminal charges depends on whether "the
offer to sell or the sale [was] made in this state or the
offer to purchase or the purchase [was] made and accepted in
this state." K.S.A. 17-12a610(a). Considering the facts
as stipulated to by the parties, we hold neither an offer to
sell nor a sale of securities occurred in Kansas.
and Procedural History
and Elzufon formed Real Development Corp., a Minnesota
corporation they registered to do business in Kansas. They
formed the corporation to develop properties in downtown
Wichita. They were the officers, sole shareholders, and
agents during its existence. Real Development maintained
places of business in Minnesota and Kansas.
and Elzufon also formed four Kansas LLCs. Lundberg and
Elzufon were the sole members of each, and they acted as the
managers and agents of the LLCs. These LLCs conducted
substantial operations from Real Development's place of
business in Minnesota, although Lundberg and Elzufon often
acted for these businesses while in Kansas and they
maintained a place of business in Kansas. The Kansas LLCs
issued promissory notes and membership interests. The State
alleges these notes and membership interests-representing the
buyers' investments-are securities under the KUSA.
and Elzufon recruited California intermediaries who were
responsible for finding investors. In return, the
intermediaries received a percentage of the sale price of any
security sold as a result of his or her efforts. These
California intermediaries hosted real estate seminars and
roundtables in California at which they made presentations.
From Minnesota, Lundberg and Elzufon provided some
information and materials included in these presentations,
but the intermediaries prepared the actual presentations. One
intermediary formed his own LLC for the purpose of selling
investor's first contact was through a California
intermediary, but the investors also received binders of
materials from either the Kansas LLCs, Real Development, or
both. None of these materials were sent from Kansas.
Investors purchasing securities issued by the Kansas LLCs
wired funds to bank accounts in Minnesota. All the investors
whose claims are at issue were located outside Kansas when
they accepted the offers at issue. All but one investor was a
California resident; the one exception was a Colorado
resident. Lundberg, Elzufon, or both, while in Minnesota,
signed the documents reflecting the transactions at issue.
State, in separate but identical complaints, charged Lundberg
and Elzufon with 61 counts. In one count, the State alleged
Lundberg and Elzufon violated K.S.A. 17-12a501(3), which
makes it illegal to commit fraud or deceit when offering,
selling, or purchasing of a security. The State alleged
Lundberg and Elzufon committed "a fraud on at least 60
persons, . . . resulting in a loss of at least $1, 000, 000
or more." The State also charged six counts of selling
an unregistered security under K.S.A. 17-12a301. In the
remaining 54 counts, the State charged Lundberg and Elzufon
with violating K.S.A. 17-12a501(2), which makes it illegal to
make a false statement of a material fact or to omit a
material fact when offering, selling, or purchasing a
and Elzufon filed separate motions to dismiss for lack of
jurisdiction, arguing neither the offers to sell, the sales,
the offers to purchase, nor the purchases were made or
accepted in Kansas. Instead, according to Lundberg and
Elzufon, the sales and offers to sell at issue in this appeal
took place in California and the sales and offers to sell
were between the individual investors and one of the
intermediaries, not Lundberg or Elzufon. In contrast, the
State contended that the "offer" came from the
various "issuers"-the Kansas LLCs-rather than from
one of the intermediaries. Because the issuers were Kansas
entities, the offer originated from Kansas, supporting
territorial jurisdiction in Kansas. According to the State,
the Legislature intended this outcome because it wanted to
prevent the state from being used as a base for fraudulent
district court judge granted the motion to dismiss 56 of the
counts-the counts related to the sales involving the
California intermediaries. The district judge found that
jurisdiction over these counts turned on the identity of the
offeror. He relied on the Black's Law Dictionary 1081
(6th ed. 1990) definition of "offer" as "to
present for acceptance or rejection" and concluded the
California intermediaries, acting in California, were the
ones presenting the sale of the investments for acceptance or
rejection. He also emphasized the offers made by one
intermediary that purported to be made by that
intermediary's investment LLC rather than any of the
Kansas LLCs or Real Development. The district judge rejected
the State's argument that any of the offers originated
within Kansas. After this ruling, the State voluntarily
dismissed the remaining charges to appeal the district
judge's decision rejecting territorial jurisdiction over
the 56 remaining counts.
of the Court of Appeals reversed. State v. Lundberg,
53 Kan.App.2d 721, 733, 391 P.3d 49 (2017).
panel analyzed the jurisdictional question applying language
from Lintz v. Carey Manor Ltd., 613 F.Supp. 543, 550
(W.D. Va. 1985), and Newsome v. Diamond Oil Producers,
Inc., CCH Blue Sky L. Rptr. ¶ 71, 869 (Okla. Dist.
Ct. 1983). The panel noted that in Newsome, an
Oklahoma state court held "that a sale or offer to sell
a security originates from a state if 'any portion of
the selling process' has occurred within the
state." Lundberg, 53 Kan.App.2d at 730. The
panel also relied on a statement from Lintz that
"'so long as there is some territorial nexus to
a particular transaction, the [security] laws of two or
more states may simultaneously apply.'"
Lundberg, 53 Kan.App.2d at 730 (quoting
Lintz, 613 F.Supp. at 550).
panel held that the sales originated in Kansas and thus
Kansas had territorial jurisdiction. The panel emphasized
Lundberg and Elzufon formed Kansas LLCs to raise funds to
revitalize properties in downtown Wichita. The panel noted
some promissory notes and membership interests included
Kansas choice-of-law clauses and some LLCs' operating
agreements contained forum-selection clauses designating
federal or state courts in Sedgwick County. The panel also
emphasized Lundberg's and Elzufon's other Kansas
contacts not directly related to the offers of sale or sales
at issue. See 53 Kan.App.2d at 732.
granted Lundberg's and Elzufon's petitions for
review, providing our jurisdiction under K.S.A. 60-2101(b).
and Elzufon argue the Court of Appeals erred because Kansas
courts lack jurisdiction to pursue criminal charges against
them under the KUSA. They cite K.S.A. 17-12a610(a), titled
"Jurisdiction; Sales and offers to sell" and
providing that K.S.A. 17-12a301and 17-12a501, among other
statutes, "do not apply to a person that sells or offers
to sell a security unless the offer to sell or the sale is
made in this state or the offer to purchase or the purchase
is made and accepted in this state."
issue of jurisdiction presents a question of law over which
we exercise unlimited review. State v. Rupnick, 280
Kan. 720, 741, 125 P.3d 541 (2005).
determine whether jurisdiction exists, we must interpret the
KUSA. Statutory interpretation is also a question of law
subject to unlimited review. We begin our analysis with the
touchstone of statutory interpretation: legislative intent.
The best and safest rule for discerning this intent is the
plain language of the statute. Only when the statutory
language is unclear or ambiguous do we move on to consider
tools of statutory construction. State ex rel. Secretary
of DCF v. Smith, 306 Kan. 40, 48, 392 P.3d 68 (2017).
has historically been an early adopter of laws regulating
securities. It was the first state to adopt a securities act,
passing the first such laws in 1911. 12 Blue Sky Law §
1:1 (2018). The purpose of this early law and its successor
statutes was "'to place the traffic of promoting and
dealing in speculative securities under rigid governmental
regulation and control to protect investors, thereby
preventing, so far as possible, the sale of fraudulent and
worthless speculative securities.' Activator Supply
Co. v. Wurth, 239 Kan. 610, Syl. ¶ 1, 722 P.2d 1081
(1986)." Brenner v. Oppenheimer & Co., 273
Kan. 525, 543, 44 P.3d 364 (2002).
July 1, 2005, Kansas adopted the 2002 Uniform Securities Act
(USA) promulgated by the National Conference of Commissioners
on Uniform State Laws (NCCUSL). See Klein v. Oppenheimer
& Co., 281 Kan. 330, 331, 130 P.3d 569 (2006). The
purpose of the uniform act, and in turn the KUSA, remains the
same as the earlier Kansas statutes. See NCCUSL, Uniform
Securities Act, Prefatory Note ("It is not intended that
adoption of a new Uniform Securities Act will reject earlier
case decisions interpreting identical or substantively
identical sections of [earlier acts] unless specifically so
stated in the Official Comments."). Uniform laws
"are adopted to remove doubts as to controlling rules of
law on the subjects involved and are intended to secure not
only identity of the statute, but also uniformity in
decision." In re Estate of Reed, 233 Kan. 531,
540-41, 664 P.2d 824 (1983).
often look to decisions from other courts as persuasive
authority when interpreting uniform laws. This can be helpful
when, as here, no Kansas case has addressed a statute. On the
issue now presented, however, we find no case precisely on
point with the facts here. As a result, we focus on the plain
language of the KUSA and explore the limited guidance we can
glean from the caselaw of other jurisdictions. We thus begin
by looking more in depth at the elements of each crime
charged, as those crimes are defined in the KUSA.
as applied here
counts, the State charged Lundberg and Elzufon with violating
K.S.A. 17-12a301 by selling an unregistered security. The
KUSA regulates securities by making it unlawful for a person
to offer or sell a security in the state unless at least one
of three conditions is satisfied: (1) the security is a
federally covered security, (2) the security, transaction, or
offer is exempt from registration, or (3) the security is
registered under the KUSA. K.S.A. 17-12a301; see also K.S.A.
2018 Supp. 17-12a302 (notice filing); K.S.A. 2018 Supp.
17-12a303 (registration by coordination); K.S.A. 17-12a304
(registration by qualification). These provisions apply only
if a security is at issue. In their motions to dismiss,
Lundberg and Elzufon challenged whether the interests
underlying the charges here are securities under the KUSA.
See 12A Blue Sky Law § 10:9. The district court did not
reach this question and it is not before us. We therefore
assume, without deciding, that the notes and membership
interests underlying the charges here are securities under
State also charged Lundberg and Elzufon with many counts of
fraud. The antifraud provisions of the KUSA make it unlawful
"in connection with the offer, sale, or purchase of
a security, directly or indirectly" to commit one
of three types of fraudulent acts. (Emphasis added.) See
K.S.A. 17-12a501. The State charged Lundberg and Elzufon with
two of the three possible types of fraudulent acts,
specifically those that make it unlawful:
"(2) to make an untrue statement of a material fact, or
omit to state a material fact necessary in order to make a
statement made, in the light of the circumstances under which
it is made, not misleading; or
"(3) to engage in an act, practice, or course of
business that operates or would operate as a fraud or deceit
upon another person."
Legislature has assigned crime severity levels for
intentional violations of the registration requirements of
K.S.A. 17-12a301 and the antifraud provisions of K.S.A.
17-12a501 based on the amount of loss caused by action. See
K.S.A. 2018 Supp. 17-12a508(a)(2), (3).