David L. Miller, Richard Ney, and Kurt P. Kerns won in State v. Lundberg and Elzufon, No. 114,897/114,898 (Kan. July 19, 2019) affirming Judge Burgess' dismissal of several counts in a Sedgwick County securities fraud prosecution. The primary issue at the district court an on appeal was whether any acts subject to the Kansas Uniform Securities Act occurred in Kansas. The KSC plurality concluded that they did not:
Here, an offer to sell was not made from Kansas—in other words, it did not originate from Kansas—under any of these formulations of the definition. Instead, Lundberg and Elzufon retained agents in another state and those agents made an offer on behalf of the company. The offers originated with the California intermediaries. Documentation or other communication sent on behalf of Real Development or the LLCs that supported the offers, which as discussed above could be interpreted to constitute an offer, was sent from Minnesota, not Kansas. No act comprising the sales offer process that underlies these charges against Lundberg and Elzufon occurred in Kansas. While we recognize the offers were extended on behalf of the Kansas LLCs, we find no support for an interpretation of the KUSA that would allow a Kansas court to exercise criminal jurisdiction only because the entity purportedly benefiting from the security issuance was organized under Kansas law and has a place of business in Kansas when no act in connection with the sale or offer occurred in Kansas.
Even so, the State, Court of Appeals panel, and amicus all rely on Lintz and Newsome to conclude that Kansas has a sufficient "nexus" to the alleged crimes to invoke Kansas jurisdiction. We are not persuaded by these cases because jurisdiction arises under the KUSA only if an offer or sale occurred in the state—not just because the transaction has some sort of "nexus" to the state.
We also conclude the panel of the Court of Appeals erred in its analysis because it confused concepts of constitutional long-arm jurisdiction with the statutory jurisdiction granted by the KUSA. The panel emphasized Lundberg's and Elzufon's contacts with Kansas, noting Lundberg and Elzufon formed the Kansas LLCs to raise funds from investors to develop property in Wichita; the LLCs have places of business in Kansas; the LLCs conducted substantial operations in Minnesota and Kansas; some securities issued by the LLCs include choice-of-law and forum-selection provisions designating Kansas law and Kansas courts for resolving disputes; Lundberg signed a promissory note (one that did not relate to the charges at issue on appeal) while in Kansas; a Wichita investor purchased a promissory note issued by a Kansas LLC, even though the criminal charges based on this transaction had been dismissed before the case reached the Court of Appeals; Lundberg and Elzufon were in Kansas "on multiple occasions"; one intermediary traveled to Wichita to meet Lundberg and Elzufon; and, one time, information about investments was faxed from a hotel in Wichita. The panel then found these contacts substantial enough that Lundberg and Elzufon should have anticipated being brought into court in Kansas.
This type of minimum contacts analysis might satisfy constitutional due process requirements, but it fails to address the statutory language limiting Kansas' jurisdiction over criminal acts arising under the KUSA.
As a result, the KSC affirmed Judge Burgess' dismissal of these counts for lack of jurisdiction.
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