Joseph v. Mieka Corp.
2012 COA 84
Colo. Ct. App.2012Background
- This is a judicial review of a final cease and desist order issued by Colorado Securities Commissioner against Micka Corporation, Daro Blankenship, and Stephen Romo for alleged sale of unregistered securities.
- The Division alleged the Joint Venture to develop an oil and gas lease in Pennsylvania violated the Colorado Securities Act (CSA) by offering interests in the Joint Venture for sale.
- The Joint Venture Agreement characterized the venture as a Texas general partnership; CIM stated total offering price was $3,960,000 for 25 units.
- The Panel found the Joint Venture interests to be securities under the CSA via an investment-contract (Howey) analysis; the Commissioner adopted this with two legal exceptions.
- The Commissioner concluded the Williamson presumption does not apply and held Romo acted as an unlicensed broker-dealer or sales representative; the Panel favored an illusory general partnership.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the Joint Venture interests securities under the CSA? | Joseph: Yes; economic realities show an investment contract. | Micka/Blankenship: Williamson presumption should control; questionable under Colorado law. | Yes; securities status affirmed; Williamson presumption not dispositive. |
| Should Williamson presumption apply to Colorado general partnerships? | Panel would reach same conclusion without presumption; presumption unnecessary. | Williamson presumption should apply to determine investment contract status. | Not dispositive; court need not resolve applicability here. |
| Is the decision supported by substantial evidence? | Economic realities and documents show illusory partnership and reliance on promoters. | Record lacks sufficient evidence of the venture's illusory nature. | Yes; substantial evidence supports the securities finding. |
| Did the Commissioner's rejection of Williamson amount to improper rulemaking under the APA? | Rejection is improper rulemaking if binding. | Rejection is interpretative rulemaking exempt from notice requirements. | No APA violation; Williamson is interpretative guidance, not binding rule. |
| Were Micka/Blankenship broker-dealers under 11-51-401(2)? | Panel found they engaged Romo as an unlicensed sales representative. | Whether Micka/Blankenship are issuers/broker-dealers should be necessary for the finding. | Substantial evidence supports treating them as broker-dealers via Romo’s activity. |
Key Cases Cited
- Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981) (economic realities test for general partnerships as securities)
- Feigin v. Digital Interactive Associates, Inc., 987 P.2d 876 (Colo. App. 1999) (substance over form in determining security status)
- S.E.C. v. Howey Co., 328 U.S. 293 (1946) (test for investment contracts (Howey))
- Toothman v. Freeborn & Peters, 80 P.3d 804 (Colo. App. 2002) (presumption re: limited liability partnerships; context for Williamson)
- Black Diamond Fund, LLLP v. Joseph, 211 P.3d 727 (Colo. App. 2009) (affirmative sanctions in cease and desist context; deference to agency)
- Westmark Asset Mgmt. Corp. v. Joseph, 37 P.3d 516 (Colo. App. 2001) (substantial evidence standard and deference to agency findings)