Crypto-Concerns: Initial Coin Offerings and the U.S. Securities Laws in the Wake of Aggressive SEC Enforcement Actions

{PDF}

Kenneth S. Witt[*] & Mark A. Staines[**]

Once upon a time, cryptocurrency trading was thought by many to lie outside the scope of U.S. securities law. But since mid-2017, the SEC has increasingly asserted its regulatory authority over cryptocurrency trading and initial coin offerings (“ICOs”). This article begins with a brief overview of cryptocurrency and the underlying blockchain technology. Next, the article explores recent enforcement actions by the SEC and provides guidance on how an ICO issuer can avoid implicating U.S. securities laws.

Read More

The False or Misleading Nature of the Exclusion for False or Misleading Statements under Rule 14a-8(i)(3)

[PDF]

Connor Hannagan[*]

Rule 14a-8  of the Securities Exchange Act of 1934, as amended, requires public companies to include shareholder proposals in proxy materials. The provision also contains thirteen grounds for exclusion. Subsection (i)(3) permits the omission of proposals and supporting statements that violate the proxy rules, including those containing “materially false or misleading statements.”

Subsection (i)(3) has at least two unique attributes. First, the exclusion applies both to the proposal and to the supporting statement. Despite this, inaccurate information in the supporting statement does not necessarily result in the exclusion of the entire proposal. Second, the provision expressly cross-references, and necessarily relies upon, Rule 14a-9, the antifraud provision set out in the proxy rules. Rule 14a-9 aims to protect investors by forbidding materially false or misleading statements in any proxy communication. Not a strict liability provision, Rule 14a-9 includes a state of mind requirement.

Read More

Lucia v. SEC: Justice Breyer Warns of a Dramatic Expansion of the President's Control Over the Federal Civil Service

[PDF]

Kirk McGill[*] & Ben K. McGill[*]

The “Appointments Clause” mandates that “any appointee exercising significant authority pursuant to the laws of the United States is an ‘Officer of the United States,’ and must, therefore, be appointed in the manner prescribed by” the United States Constitution. Thus, the Constitution requires Officers of the United States to receive a commission from a “higher officer.” Accordingly, the President appoints the heads of the “Great Departments” (e.g. cabinet secretaries) with the advice and consent of the Senate, and either these “principal officers,” or the President as Chief Executive, appoint their respective subordinates. This ensures that each officer is accountable to a single superior, and that single superior is either the President or accountable (directly or indirectly) to the President and ultimately to the American electorate. For the first 150 years of the Republic’s history, the vast majority of the Executive Branch consisted of officers, inferior and superior (principal), appointed pursuant to the Constitution and subject to removal by the President or the appointing principal officer at any time and for any reason. In contrast, upon entering office, President Donald Trump had only 554 appointments to make in the Executive Branch out of 2,087,747 nonmilitary Executive Branch employees in Federal Fiscal Year 2017.

Read More

Chapman v. Bureau of Prisons: Stopping the Venue Merry-Go-Round

[PDF]

Danielle C. Jefferis[*] & Nicole B. Godfrey[*]

The Federal Bureau of Prisons (BOP) is in a unique position to frustrate the federal venue statute. In contrast to most state departments of corrections, the BOP bears the unilateral power to transfer prisoners in its custody to prisons across federal judicial districts. At times, the agency exercises this power over prisoners involved in active litigation against the BOP itself. In many of these instances, once the BOP has moved the prisoner-plaintiff outside the judicial district in which the plaintiff brought his claim, the BOP seeks to transfer the claim to the prisoner’s “new” venue. Increasingly, prisoners’ rights advocates are witnessing efforts by the BOP to secure judicial sanctioning of this conduct.

This practice is problematic and should be resisted so that the BOP is not permitted to situate federal prisoners on a “venue merry-go-round” and virtually evade judicial review of claims challenging the agency’s conduct. In one such case, Chapman v. Bureau of Prisons, the BOP attempted to do just that—evade judicial review of its conduct—by moving the plaintiff from a prison in Colorado to one in Indiana. The agency then sought transfer, pursuant to 28 U.S.C. § 1404(a), of the plaintiff’s Eighth Amendment claim against it from the District of Colorado, the venue in which the plaintiff brought the claim, to the Southern District of Indiana, the venue to which the agency moved the plaintiff. The transferee court declined to sanction the practice, citing the plain language of Section 1404 and the statute’s purpose. Courts facing similar questions should reach the same conclusion.

Read More

The Remote Seller Issue in Colorado: Reexamining Quill and Bellas Hess

[PDF]

Dianne Criswell & Grant Sullivan

In Direct Marketing Association v. Brohl (Brohl II), Justice Kennedy charged the legal system to find an “appropriate case for this Court to reexamine Quill and Bellas Hess.” He noted that changes in technology and consumer sophistication warrant a reconsideration of the physical presence nexus standard that currently serves to shield remote sellers from the obligation to collect and remit owed sales tax.

Whether a retailer must have a physical presence in the jurisdiction in which a sale occurs before it can be compelled to collect and remit owed sales tax was last addressed by the U.S. Supreme Court in 1992 in Quill Corporation v. North Dakota. At that time, out-of-state catalog retailers dominated the remote seller issue. In Quill, the Supreme Court affirmed the bright-line rule from National Bellas Hess v. Department of Revenue and held that companies without a “substantial nexus” in the state where customers lived did not have to charge sales tax. As retail activity has changed over the last 25 years, from primarily brick-and-mortar businesses to internet sellers, state and local governments have struggled to address both lost sales and use tax revenues and the impacts to resident business communities.

Read More

Two Bills Demonstrate the Difficulty in Legislating Teen Sexting

[PDF]

Jennifer Eyl

In November 2016, Cañon City High School, in Cañon City, Colorado, was rocked by a scandal involving 300 sexually explicit images of students being shared among more than 100 teenagers. This case, and others around the country, have caused considerable consternation among prosecutors, school officials, parents, and those who want to ensure juveniles do not suffer criminal consequences for acting like teenagers in the age of easily created, shared and exploited digital images.

Read More

Will the Colorado Supreme Court Prevent a Potential Statewide Auto Insurance Crisis? The Impact of the Court of Appeals’ Decision in Fisher v. State Farm

[PDF]

Evan Stephenson & Shari L. Wall

On May 7, 2015, the Colorado Court of Appeals dramatically changed how auto insurers must pay benefits under uninsured and underinsured motorist (UIM) policies. In Fisher v. State Farm Mutual Automobile Insurance Co., the court interpreted two general insurance-penalty statutes enacted in 2008 to require every UIM insurer statewide to operate effectively as a first-party health insurance operation.

Read More

Department of Labor Fiduciary Rule – Expansion of Fiduciary Duties

[PDF]

Paul L. Vorndran

The U.S. Department of Labor (DOL) has expanded the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974. On April 6, 2016, the DOL issued its final rule (Fiduciary Rule) imposing fiduciary duties upon those who provide investment advice for compensation—direct or indirect—as to the purchase or sale of securities or other investments within a plan or individual retirement account qualified under the Employee Retirement Income Security Act of 1974. According to the Executive Summary, the Fiduciary Rule “aims to require advisers and their firms to give advice that is in the best interest of their customers, without prohibiting common compensation arrangements under conditions designed to ensure the adviser is acting in accordance with fiduciary norms and basic standards of fair dealing.” Further, according to the Executive Summary, the DOL concluded (after a multi-year study that began in 2009) that IRA holders receiving conflicted investment advice may see their investments underperform by an average of 0.5 to 1% per year. This could result in a cost to IRA investors between $95 billion and $189 billion over the next 10 years in the mutual fund segment alone.

Read More

(Digital) Trespass: What’s Old is New Again

[PDF]

Hannah L. Cook

A digital trespass theory of Fourth Amendment searches is necessary to maintain the relevance of the Supreme Court's decision in United States v. Jones. At the time the Fourth Amendment was written, if a government official wanted to track a suspect, he needed to physically follow the suspect around to learn his whereabouts. If he wanted to read a suspect's correspondence, he needed to enter the suspect's home or office and take the physical letter. If he wanted to listen to a suspect's conversation, he needed to hide under an open window or find an informant. In 2017, these tactics are no longer necessary—we use electronics to travel, write, and speak with one another. Unfortunately, these devices can betray us without any physical interaction with law enforcement, potentially confounding a Fourth Amendment whose authors never imagined law enforcement conducting a remote search and eviscerating the progress made in Jones.

Read More

At the Governor’s Table: The Case for the Nonprofit Cabinet Member

[PDF]

Erik Estrada

What makes America great? Chief among the many reasons is its nonprofit sector. Philanthropic organizations in America, including 501(c)(3)-public charities, educate millions of students every year, help advance important scientific research, address the health care needs of millions of patients, and help America's communities become vibrant social centers through the promotion of arts and culture. Without the nonprofit sector, many of the museums, universities, hospitals, and countless other institutions that Americans revere and rely upon would not exist.

Read More

Endrew F. v. Douglas County School District: A “Meaningful” Opportunity to Alleviate the School-to-Prison Pipeline for Students with Disabilities

[PDF]

Jason Langberg & Sarah Morris

Brandon and Tyler are both sixth grade students with individualized education programs (IEPs) for their serious emotional disabilities. Pursuant to his IEP, Brandon is in a behavioral support class that focuses on social and emotional learning for 60 minutes every day. He also receives psychological services twice a week and his parents receive counseling, twice a month, on how to work with Brandon. A behavioral intervention plan (BIP) that focuses on teaching replacement behaviors and reinforcing positive behaviors is part of Brandon's IEP. Finally, his IEP includes specific, measurable, and attainable behavioral goals. Tyler's IEP, on the other hand, mirrors the boilerplate IEP given to most middle school students with emotional disabilities in the district. It provides for 30 minutes of generic special education twice a month and no related services. Tyler has a BIP, but it focuses on punitive consequences.

Read More

Local Government Regulation of Personal Marijuana Grows

[PDF]

Rachel Allen

Marijuana home grows have sparked growing concern since the passage of medical and retail marijuana in Colorado.[1] A recent report issued by the Denver division of the Drug Enforcement Agency compared residential marijuana grows to "meth houses" of the 1990s. Every community faces the problem of marijuana grows for personal use regardless of whether a municipality allows medical and/or retail marijuana sales. Common issues caused by marijuana home grows include fire hazards from providing electricity to grow lights, mold from watering plants, and the public safety concern of cultivating the drug in a residential area. Grows must be confined to an "enclosed" space consisting of a "permanent or semi-permanent area covered and surrounded on all sides." The area must also be a locked space "secured at all points of ingress and egress with a locking mechanism designed to limit access."

Read More

The New "Bright Line" Rule in Condemnation Commission Trials: Regional Transportation District v. 750 W. 48th Ave., LLC

[PDF]

Jody Harper Alderman

In Colorado, when an entity exercises its eminent domain power, a property owner who owns private property that is being acquired may elect to have a jury or a commission of three freeholders determine the amount of just compensation due to the property owner for the taking of the property. If the property owner elects a commission to determine value, the valuation trial is a hybrid model. A presiding judge supervises the pre-trial process, hears in limine motions, issues commission instructions, and might be involved in evidentiary decisions during the valuation trial. The commission receives the evidence and makes decisions on evidentiary objections during the valuation trial—unless the commission requests the judge to assist in those decisions—and ultimately decides just compensation. The roles and responsibilities of the judge and the commission seem to overlap, but, recently, the Colorado Supreme Court in Regional Transportation District v. 750 West 48th Ave., LLC, promulgated a "bright line rule" defining the authority of the judge vis á vis the commission in condemnation cases. We now know that the trial court judge is the ultimate authority in a valuation trial to a commission.

Read More

The Impact of the Affordable Care Act on the Colorado Collateral Source Rule

[PDF]

Charles R. Mendez

The collateral source rule is a long-standing tenet of tort law, though it has been scrutinized by some for more than half a century. Recently, critics have claimed that with the advent of The Patient Protection and Affordable Care Act (ACA) the policy justifications behind the rule have lastly gone extinct. This short essay responds specifically to that new wave of criticism. The policy justifications remain firmly intact. In fact, the ACA, which is likely to be repealed in any event, does very little to contribute to the collateral source rule debate. The same arguments have been made in the past, yet they have not resulted in abrogation of the collateral source rule in Colorado.

Read More

Dying in the Digital Age: New Colorado Law Concerning Access to Digital Assets

[PDF]

Molly Zwerdlinger

Dealing with death is hard enough without the addition of legal matters. While many of us wish assets would just handle themselves upon the death of a loved one, those in charge of administering the estate need to make sure all assets are accounted for and protected.

As the baby boomers and members of Generation X age, we will be faced with a crisis concerning what to do with their digital assets upon death. Although the way we interact with the digital world has changed drastically over the past thirty years, there is good news for lawyers in Colorado. Colorado has recognized this oncoming crisis and has enacted a new law. The Revised Uniform Fiduciary Access to Digital Assets Act (Act) addresses potential issues of dying in the digital age.

Read More

The Case for Revising Colorado’s Venue Rule

[PDF]

Jeffrey Ruebel

Two concepts form the basis governing courts’ authority to act: (1) personal jurisdiction and (2) venue. Personal jurisdiction has been used as a method to constrain the power of the sovereign and to protect litigants against unfair treatment at the hands of a state by asking whether the sovereign has authority over the parties. On the other hand, venue serves to make courts accessible to litigants but also protects against unfair treatment that might result from selecting an inconvenient location for trial.

Read More

How Much Can Dumb Pipes Know? BMG v. Cox and Why a Knowledge Bar to DMCA Safe Harbor for Internet Service Providers is Inappropriate

[PDF]

Erik Estrada, Caitlin Cronin, and Bill Gillespie

In November 2015, in BMG Rights Mgmt. (US) LLC v. Cox Commc'ns, Inc., the United States District Court for the Eastern District of Virginia announced a legal standard that if widely adopted would undo the tiered safe harbor protections afforded online service providers (OSPs) under the Digital Millennium Copyright Act (DMCA). These services have different functions, capabilities, and needs. Recognizing that one size does not fit all for OSPs, Title II of the DMCA (codified at 17 U.S.C. § 512) sets out different safe harbor qualifications for four different types of services: (1) transitory digital network communications (ISPs); (2) system caching (transitory storage); (3) information residing on systems or networks at direction of users (content hosts—websites, etc.); and (4) information location tools (search engines). However § 512 does require that at a minimum all OSPs "adopt[] and reasonably implement[], and inform[] subscribers and account holders of . . . a policy that provides for the termination in appropriate circumstances of subscribers and account holders . . . who are repeat infringers." Despite Congress"s intent to differentiate between the four services, the court in BMG v. Cox used the termination policy requirement to impute a standard from §§ 512(c) and (d)—a lack of actual knowledge—to §§ 512(a) and (b). Other courts should not adopt this standard for ISP termination policies but should apply a stricter standard when the service is just Internet access.

Read More

From Writs to Remedies: A Historical Explanation for Multiple Remedies at Common Law

[PDF]

Aaron Belzer

In previous work, "Enforcing Rights," I examined how courts confine remedies to a single context in constitutional litigation, allowing enforcement of a constitutional right by providing either a criminal or a civil remedy, but not both. In contrast, outside the constitutional context, courts do not similarly limit remedies to a single context. This Essay builds on "Enforcing Rights" and previews a larger work suggesting a historical explanation for the emergence and persistence of multiple remedies in the non-constitutional context.

Read More

The Affordable Care Act and Colorado's Collateral Source Rule

[PDF]

LaMar F. Jost & Marissa S. Ronk

The Patient Protection and Affordable Care Act (ACA or Act) mandates near-universal healthcare coverage for Americans. Tax-paying individuals and entities largely fund the statutory system that permits near-universal healthcare coverage. Taxpayers, therefore, are not collateral to any insurance policy purchased on a federally mandated health exchange. As a result, an unresolved issue in Colorado (and around the country) is whether the ACA disaffirms the collateral source rule. This article examines that issue under Colorado law.

Read More

A BUSINESS OWNER’S DILEMMA: IS HIRING AN ATTORNEY TO HANDLE MY CASE WORTH IT?

[PDF]

Jason C. Astle

Most attorneys turn down small business clients with litigation needs because the amounts involved are too small. One survey of attorneys identified the average threshold for accepting cases as $100,000 in controversy. Compounding the problem, on the other side, clients often will not seek an attorney because the cost of hourly fees appears higher than the benefit of such legal representation. Because of this dichotomy, a substantial population of American small businesses generally goes without legal representation. However, alternative fee agreements may solve this problem, and become more important than changes to rules of civil procedure in providing “just, speedy and inexpensive determination of every action and proceeding.”

Read More