Rome v. HEI Resources, Inc., The Continuing Saga of Joint Venture Interests Subject to Colorado Securities Act Regulation by Herrick Lidstone, Jr. and Amy Fliam

Rome v. HEI Resources, Inc.,
The Continuing Saga of Joint Venture Interests Subject to
Colorado Securities Act Regulation

By Herrick K. Lidstone, Jr. Amy Fliam Colorado federal and state courts have considered whether joint venture interests offered to participants for oil and gas development are securities subject to regulation under federal and state securities laws seven times in the last several years. The most prominent, heavily battled, and longlasting of these cases is Rome v. HEI Resources, Inc., 2009 CV7181 (Denver District Court, order of judgment issued January 12, 2018). This case is the continuation of three Denver district court decisions in 2011 and 2013 (under the name Joseph v. HEI Resources, Inc. (discussed in the October 2013 CBA Business Law Section newsletter) and then Rome v. HEI Resources, Inc., Case No. 2009CV7181 (April 8, 2016) (discussed in the April 2016 newsletter). These cases first narrowed the issues for trial (2011) and then dismissed (2013) the Securities Commissioner’s claims against the defendants since the trial court found that a “security” as defined in the Colorado Securities Act was not involved. These decisions were followed by a Court of Appeals decision (Rome v. HEI Resources, Inc., 2014 COA 160, cert. denied 2015 WL 5102845 (2015), discussed in the December 2014 newsletter) which advised the trial court it had applied an incorrect analysis. After remand, in a 33-page April 2016 decision, the Denver District Court concluded that the joint venture interests in question were securities under Colorado law and that the defendants offered and sold securities.

The District Court then ordered trial on the Colorado Securities Commissioner’s remaining claims from the 2009 litigation: the alleged violations by HEI Resources’ and the other defendants of the registration, licensing, and anti-fraud provisions of the Colorado Securities Act and the damages, fines, and other penalties appropriate for such violations. That trial was held in the fall of 2017, and Judge Michael A. Martinez issued his decision in January 2018. This article focuses on that decision and a subsequent related order by Judge Martinez.

Read more HERE.