A.S. Goldmen & Company, Inc. v. New Jersey Bureau Of Securitie

163 F.3d 780 (3rd Cir. 1999)

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Nature of the Case

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Facts

This case raises a constitutional challenge to N.J.S.A. § 49:3-60 (' § 60'), which is New Jersey's codification of the portion of the Uniform Act that makes it 'unlawful for any security to be offered or sold in this State' unless the security is either registered by state authorities, is exempt under N.J.S.A. § 49:3-50, or is a federally covered security. Section 60 grants New Jersey regulatory authorities the power to regulate the offer or sale of all non-exempt, non-covered securities whenever the offer is made within the state of New Jersey. P is a securities broker-dealer with its sole office located in Iselin, New Jersey. D's sole office was located in New Jersey. Since that time, it has opened at least one other office out of state P underwrites the public offerings of low priced, over-the-counter securities, and then selling those securities in the secondary market. P planned the initial public offering of Imatec, Ltd. Imatec is a Delaware corporation, located in New York. P planned for the Imatec securities to be traded as a NASDAQ Small Cap stock because such stocks are exempt from initial federal registration requirements. The primary regulation of the Imatec security during the first 25 calendar days of the offering would occur at the state level. P concurrently filed registration statements with the SEC, and also attempted to register the offering 'by qualification' with state regulatory authorities in over a dozen states, including D. D was concerned that the combination of P's practices and the bleak financial prospects of Imatec made the offering a high-risk investment that was likely to be associated with abusive and manipulative sales practices. D refused to approve the offering. A Consent Order specifically denied P exemptions that would have allowed it to solicit members of the public to purchase Imatec stock in the secondary market. The registration statement that P had filed with the SEC became effective. P had managed to register the Imatec offering in sixteen states but had been forced to withdraw its registration in several others, including New Jersey. On October 29, 1996, P commenced the initial public offering from its office in Iselin, New Jersey. By telephone, P solicited sales to individuals outside of New Jersey but did not solicit any sales to individuals within New Jersey. By 3 p.m. of that day, P had sold the entire public offering. P continued to buy and sell Imatec securities in the interdealer market from its New Jersey office. D notified P that it believed that the sales violated the Securities Act and the Consent Order. D issued a Cease and Desist Order dated November 12, 1996, which ordered P to 'cease and desist from the solicitation of customers, offer and sale of Imatec in or from the State of New Jersey to any members of the public.' P filed this declaratory judgment action against D in federal district court. P claimed that D violated the Commerce Clause of the United States Constitution. The district court issued a preliminary injunction against D. The district court granted P's motion for summary judgment in that D's law violated the dormant commerce clause by authorizing D to block the sale of securities from New Jersey to buyers in other states where the security was registered. D appealed.