IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 87,452
DANIEL BRENNER and ROGER KLEIN,
Appellants,
v.
OPPENHEIMER & CO. INC.,
Appellees.
SYLLABUS BY THE COURT
1. Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. K.S.A. 2001 Supp. 60-256(c). On appeal, an appellate court applies the same rules, and where it finds reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied.
2. Regardless of the construction given a written contract by a trial court, an appellate court may construe a written contract and determine its legal effect. The interpretation and legal effect of written documents are matters of law upon which the court's standard of review is unlimited.
3. In deciding constitutional choice-of-law questions, whether under the Due Process Clause or the Full Faith and Credit Clause, the contacts of the State whose law was applied is examined along with the parties and with the occurrence or transaction giving rise to the litigation. In order to ensure that the choice of law is neither arbitrary nor fundamentally unfair, the choice of law of a State is not appropriate when that State has had no significant contact or significant aggregation of contacts, creating State interests, with the parties and the occurrence or transaction.
4. As long as Kansas has significant contact or significant aggregation of contacts to ensure that the choice of Kansas law is not arbitrary or unfair, constitutional limits are not violated.
5. Parties can bind themselves to the provisions of an otherwise inapplicable act by incorporating choice of law provisions in an enforceable contract. As long as application of a statute or act is not contrary to public policy, a court will uphold application of an otherwise inapplicable statute or act.
6. Ordinarily a contract which is valid where made is valid everywhere, but there is a well-known exception to that rule. Briefly stated, the exception is that where the contract contravenes the settled public policy of the state whose tribunal is invoked to enforce the contract, an action on that contract will not be entertained.
7. Before courts are justified in declaring the existence of public policy, it should be so thoroughly established as a state of public mind so united and so definite and fixed that its existence is not subject to any substantial doubt.
8. The purpose of the Kansas Securities Act, K.S.A. 17-1252 et seq., is to place the traffic of promoting and dealing in speculative securities under rigid governmental regulation and control to protect investors, thereby preventing, so far as possible, the sale of fraudulent and worthless speculative securities.
Appeal from Johnson district court; JANICE D. RUSSELL, judge. Opinion filed April 19, 2002. Reversed and remanded.
Joseph C. Long, of Norman, Oklahoma, argued the cause, and Diane A. Nygaard, Robert R. Barton, and Robin R. LaFollette, of The Nygaard Law Firm, of Kansas City, Missouri, were with him on the briefs for appellants.
Tracy J. Cowan, of Thompson Coburn LLP, of St. Louis, Missouri, argued the cause, and David Wells, of the same firm, and James J. Cramer, of Payne & Jones Chartered, of Overland Park, were with him on the brief for appellees.
The opinion of the court was delivered by
ABBOTT, J.: Appellants Roger Klein and Daniel Brenner opened brokerage accounts with L.T. Lawrence, a company based in New York now in bankruptcy. Klein managed both accounts. Oppenheimer & Co., Inc. (Oppenheimer), a clearing brokerage, cleared trades for L.T. Lawrence, which had no authority to clear trades itself. L.T. Lawrence sold unregistered securities through Oppenheimer to Klein and Brenner, and Klein and Brenner brought suit against individual agents of L.T. Lawrence and against Oppenheimer for violation of the Kansas Securities Act.
When they opened their accounts, Klein and Brenner had signed client agreements with Oppenheimer containing a choice of law provision stating that the laws of the State of New York would govern. Ruling on a motion for summary judgment, the district court stated that if Kansas law applied, Oppenheimer would be liable. The district court held, however, that the contractual choice of law provision was enforceable and that, under New York law, Oppenheimer was not liable. Therefore, the district court entered judgment for Oppenheimer. Klein and Brenner timely appealed the district court's entry of judgment against them. This matter comes before us pursuant to a K.S.A. 20-3018 transfer.
The underlying facts of this case are uncontroverted. Brenner is a resident of Kansas City, Missouri, and Klein is a resident of Johnson County, Kansas. Brenner is a retired attorney who is in poor health, and his nephew, Klein, manages Brenner's financial affairs. Both L.T. Lawrence and Oppenheimer were located in New York and were licensed as registered broker-dealers in Kansas.
In June 1996, Klein opened an individual account with L.T. Lawrence brokerage from his home in Kansas. In July 1996, Klein opened an account from his home in Lawrence on behalf of Brenner with L.T. Lawrence.
The purchase or sale of securities requires a series of complicated steps. In its opinion, the district court described the transactions involved in the exchange of securities as follows:
"A buyer first opens a brokerage account with a broker, who is the agent of the buyer. The broker has registered representatives who work with the buyer. An actual purchase of stock can occur in two ways: either the buyer calls his registered representative and tells him that he wants to buy a particular stock (an 'unsolicited transaction') or the registered representative calls the buyer and recommends a particular stock (a 'solicited transaction'). Larger brokerage houses have a seat on the stock exchange and they buy directly for clients. Smaller brokerage houses do not have a seat on the exchange, so they contract with one of the larger houses which does have a seat, and the larger broker executes the purchase. The larger broker is known as the 'clearing broker.' . . . A brokerage house like L.T. Lawrence is known as an 'introducing broker.'"
Here, Oppenheimer acted as the clearing broker for L.T. Lawrence in accordance with a clearing agreement. Oppenheimer afforded L.T. Lawrence the operational capacity to clear trades at various stock exchanges and also provided administrative support for processing transactions and generating customer account records. Oppenheimer did not, however, solicit, recommend, or offer the sale or purchase of any of the securities purchased or sold by Klein and Brenner.
In their petition, Klein and Brenner alleged that they believed the accounts "were under the control of Oppenheimer and relied on its reputation in opening and maintaining the accounts." The clearing agreement between Oppenheimer and L.T. Lawrence, however, mandated that L.T. Lawrence provide a disclosure statement to its customers entitled LTL Account Disclosure Statement. In pertinent part, that disclosure statement stated:
"I. Opco is the New York Stock Exchange member correspondent for LTL with whom you opened your securities account. LTL is independent of Opco and has retained Opco to provide certain record keeping and operational services, which may include execution and settlement of securities transactions, custody of securities and cash balances and extension of credit on margin transactions. These services are provided under a written Clearing Agreement between Opco and LTL . . . .
"II. Responsibilities of LTL
'A. LTL has a general responsibility for servicing your securities account through its own registered representatives in accordance with its own policies and applicable securities laws and regulations.
. . . .
'C. LTL is responsible for any investment advice or recommendations for investment management services that may be provided to you and for determining whether particular types of transactions which may be recommended to you (e.g. margin, options, short sales) are appropriate for you.
'D. LTL is responsible for knowing the facts about any orders for the purchase or sale of securities which you may authorize.
. . . .
'G. LTL is responsible for supervision of the activities of the individual registered representative who services your account and for the resolution of any complaints regarding the handling of your account.
'H. In all of the above matters relating to the servicing of your account, Opco has no involvement and assumes no responsibility.
"III. Responsibilities of Opco
'A. In general, Opco is responsible only for those services provided at the request or direction of LTL as contemplated by the Clearing Agreement.
'B. Opco will create computer based account records on your behalf in such name(s) and with such address(es) as LTL directs.
'C. Opco will process orders for the purchase, sale or transfer of securities for your account as LTL directs. Opco is not obligated to accept orders for securities transactions for your account directly from you and will do so only in exceptional circumstances.
. . . .
'I. Opco will provide to LTL written reports of all transactions processed for your account to assist LTL to supervise the handling of your account in accordance with regulatory standards to which LTL is subject.
. . . .
"IV. OPCO DOES NOT CONTROL, AUDIT OR OTHERWISE SUPERVISE THE ACTIVITIES OF LTL OR ITS REGISTERED REPRESENTATIVES OR EMPLOYEES. OPCO DOES NOT VERIFY INFORMATION PROVIDED BY LTL REGARDING YOUR ACCOUNT OR TRANSACTIONS PROCESSED FOR YOUR ACCOUNT NOR UNDERTAKE RESPONSIBILITY FOR REVIEWING THE APPROPRIATENESS OF TRANSACTIONS ENTERED BY LTL ON YOUR BEHALF."
Oppenheimer mailed all of the correspondence, statements, and confirmations concerning the two accounts to Klein's home in Kansas. This lawsuit arose after L.T. Lawrence, through Oppenheimer, sold Klein and Brenner unregistered securities. Klein and Brenner allegedly purchased 20,000 shares of International Nursing Services, Inc.; 109,400 shares of Ecotyre Technologies, Inc.; 15,000 shares of Idenet, Inc.; 20,000 shares of Nouveau International, Inc.; 10,000 Aegis Consumer Funding; 50,000 shares of Eastwind Group; 20,000 shares of MetroGolf, Inc.; 10,000 shares of A Wts Ecotyre Technologies, Inc.; and 9,000 shares of QPQ Corp.
The sale of unregistered, nonexempt securities is prohibited under Kansas law by K.S.A. 17-1255, and is also prohibited by federal securities law. The stock purchases all occurred between June 1996 and January 20, 1997.
Before this litigation commenced, Klein and Brenner filed a request for arbitration. The arbitration claim was filed on July 22, 1997. In their statement of claim to the arbitration panel, Klein and Brenner alleged that "Oppenheimer has a history of clearing trades for many firms, like L.T. Lawrence, which have a history of abusive, high-pressure phone solicitations of penny stocks, some of whom have had their licenses revoked or have gone bankrupt. . . . Oppenheimer knew or should have known of the securities fraud perpetrated by L.T. Lawrence and is a knowing participant in the fraud." On January 28, 2000, without deciding the merits of the arbitration, the panel granted Klein's and Brenner's motion to dismiss. The panel referred the parties to their remedies at law without prejudice to any available claims or defenses.
On June 10, 1999, Klein and Brenner filed a petition with the District Court of Johnson County, Kansas, naming Oppenheimer, John Bruni, Lawrence Principato, and Todd Edward Roberti as defendants. Bruni worked as a broker, Principato served as Chief Executive Officer, and Roberti was the President, Secretary and Treasurer of L.T. Lawrence. Klein's and Brenner's petition stated that "[a]s Lawrence is presently in bankruptcy, it is not a named Defendant." Service was effected on February 18, 2000, 3 weeks after the dismissal of the arbitration claim.
In their petition, Klein and Brenner advanced two theories for recovery against Oppenheimer under Kansas law. First, they alleged that Oppenheimer aided and abetted L.T. Lawrence and Bruni in violating K.S.A. 17-1255 and was therefore liable under K.S.A. 17-1268(a). Klein and Brenner alleged alternatively that Oppenheimer was a broker-dealer who materially aided in the sale of unregistered securities in violation of K.S.A. 17-1268(b).
In his deposition, Gary Emmerich, Oppenheimer's Director of Operations, testified that he personally investigated numerous client complaints of illegal sales against L.T. Lawrence. Emmerich stated that around the end of 1996 or early 1997, he began bringing client complaints about L.T. Lawrence to the attention of the legal department and others at Oppenheimer. Later, Oppenheimer made the decision to ask L.T. Lawrence to find another clearing broker. Emmerich testified that he received investor complaint letters against L.T. Lawrence alleging that L.T. Lawrence was a boiler room operation, that it ordered trades unauthorized by the customer, and committed possible acts of "churning," or excessive trading prohibited by rules of the NASD. However, Emmerich never alerted any regulatory authorities about the customer complaints received and stated that he knew of no one at Oppenheimer who made any regulatory filing with the Securities Exchange Commission or alerted authorities.
Discovery also revealed that at the time Klein opened the two accounts with L.T. Lawrence, both he and Brenner signed client agreements with Oppenheimer containing a choice of law provision. The client agreement contains various provisions concerning short and long sales orders, transfer of funds, payment of loans on demand, maintenance of collateral, joint tenancy, interest charges, termination fees, etc.
The pertinent paragraphs of the client agreement state:
"In consideration of Oppenheimer & Co., Inc. ('Oppenheimer') accepting my account and agreeing to act as my broker, I agree to the following with respect to any of my accounts with you for extensions of credit and the purchase and sale of securities, put & call options, and other property. This agreement shall not become effective until accepted by you in your New York office. Acceptance may be evidenced by internal records maintained by [Oppenheimer].
. . . .
"5. ORAL AUTHORIZATIONS. I agree that you shall incur no liability in acting upon oral instructions given to you concerning my accounts, provided such instructions reasonably appear to be genuine.
. . . .
"18. APPLICABLE LAW AND REGULATIONS. This agreement and its enforcement shall be governed by the laws of the State of New York without giving effect to the choice of law or conflicts of law provisions thereof. All transactions for my accounts shall be subject to the regulations of all applicable federal, state and self-regulatory agencies including but not limited to the Securities and Exchange Commission, the various securities and commodity exchanges, the Municipal Securities Rulemaking Board, the NASD, the Board of Governors of the Federal Reserve System and the constitution, rules and customs of the exchange or market (and its clearing house, if any) where executed. . . .
"21. SEVERABILITY. If any provision of this agreement is or becomes inconsistent with any applicable present or future law, rule or regulation, that provision will be deemed rescinded or modified in order to comply with the relevant law, rule or regulation. All other provisions of this agreement will continue and remain in full force and effect."
Klein filed an affidavit with the Johnson District Court stating that in January 1997, a trade of 9,000 shares of QPQ Corp. stock were identified as "unsolicited" on the trade confirmation statement from Oppenheimer. Klein, however, stated that "[t]here is no question in my mind that this trade was, in fact, solicited."
According to Klein's and Brenner's calculations, the statutory damages for the sale of unregistered securities would total $1,022,998.07. The district court, however, observed in its memorandum opinion that the facts which would definitively fix the amount of damages remain in dispute, largely due to certain affirmative defenses available to Oppenheimer.
After discovery, all parties moved for summary judgment. The district court conducted a hearing on the parties' cross motions for summary judgment on April 12, 2001. The Honorable Janice D. Russell, Judge of the District Court of Johnson County, filed a memorandum opinion. In that opinion, Judge Russell remarked that the issue of the liability of a clearing broker for the sale of unregistered securities appeared to be a case of first impression in Kansas.
The memorandum opinion reached several conclusions of fact and law. First, the district court found that Klein's and Brenner's claims were not barred by the statute of limitations due to the tolling provision of K.S.A. 5-515. This finding has not been appealed. Second, the district court found that K.S.A. 17-1268(d) did not appear to prohibit the choice of law provision in the parties' contract. Therefore, the court determined that the choice of law provision in the client agreement was enforceable and held that New York law applied. Third, the district court found that under New York law, Oppenheimer, acting as a clearing broker, was not liable for the sale of unregistered securities. The court characterized Oppenheimer's involvement as "nothing more than ministerial," and held that since "Oppenheimer was not involved in any of the plaintiffs' decisional process," it was not liable to Klein and Brenner under New York law.
The opinion of the district court did not end at that point, however. Instead, the court provided additional analysis of the liability of Oppenheimer under Kansas law, ruling that under Kansas law, Oppenheimer would be liable for the sale of unregistered securities.
On June 20, 2001, a journal entry of judgment was filed in favor of Oppenheimer and against Klein and Brenner. On July 3, 2001, Klein and Brenner filed their timely appeal from the judgment of the district court.
For their first assertion of error, Klein and Brenner argue that the district court's decision to uphold the choice of law provision in Oppenheimer's standard form agreement ignores Kansas law and is contrary to this state's strong public policy favoring the protection of investors.
"The standard of review for a motion for summary judgment is well established. Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. K.S.A. 60-256(c). On appeal, we apply the same rules, and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied. [Citation omitted.]" Jackson v. U.S.D. 259, 268 Kan. 319, 322, 995 P.2d 844 (2000).
The facts on appeal are uncontroverted. We must decide whether, as a matter of law, the district court correctly entered judgment for Oppenheimer based on the language found in the client agreement.
"Regardless of the construction given a written contract by the trial court, an appellate court may construe a written contract and determine its legal effect. [Citation omitted.] The interpretation and legal effect of written documents are matters of law upon which our standard of review is unlimited. [Citation omitted.]" City of Topeka v. Watertower Place Dev. Group, 265 Kan. 148, 152-53, 959 P.2d 894 (1998).
The State of Kansas passed the first blue sky laws in the nation in 1911. See L. 1911, ch. 133, § 1; L. 1913, ch. 141, § 1.
"The first legislative attempts to regulate securities transactions were effected on the state level, with the first general securities law being said to have been enacted by the State of Kansas in 1911, and with 48 jurisdictions having enacted such statutes by 1933. These statutes were said to be enacted to stop the sale of stock in fly-by-night concerns, visionary oil wells, distant gold mines, and other fraudulent exploitations. A similar description of the early legislative purpose is that such acts were aimed at 'speculative schemes which have no more basis than so many feet of blue sky,' and this description has had a lasting influence in that state securities acts are commonly referred to as 'blue sky laws.'" 69A Am. Jur. 2d, Securities Regulation-State § 1, p. 759 (1993).
Twenty-two years later, Congress passed important federal laws designed to regulate securities and protect the public. See the Securities Act of 1933, 15 U.S.C. § 77a et seq. (2000). Federal securities laws do not act to preempt state regulation, however. Instead, federal statutes expressly indicate that nonconflicting state regulation of securities is allowed. "Section 18 of the Securities Act of 1933 . . . § 28 of the Exchange Act, and § 18a of the Investment Advisers Act, provide clear and unequivocal congressional expression not to preempt state securities laws, and these savings provisions are not limited to state laws in effect at the time of passage of federal laws." 69A Am. Jur. 2d, Securities RegulationState § 13, p. 772 (1993).
"It was clearly the intention of Congress to leave the States free to exercise such regulatory control over the sale of securities as does not conflict with the provisions of the Federal Act, and, in the absence of such a conflict, it is contemplated that the States and the Federal government shall exercise concurrent jurisdiction in this field." Travelers Health Ass'n v. Com., 188 Va. 877, 897, 51 S.E. 2d 263 (1949), aff'd 339 U.S. 643, 94 L. Ed. 1154, 70 S. Ct. 927 (1950).
Therefore, no federal preemption issue is presented which might preclude the application of Kansas law.
In order for a state to assert jurisdiction, however, it must do so in a constitutionally permissible manner.
"In deciding constitutional choice-of-law questions, whether under the Due Process Clause or the Full Faith and Credit Clause, this Court has traditionally examined the contacts of the State, whose law was applied, with the parties and with the occurrence or transaction giving rise to the litigation. [Citation omitted.] In order to ensure that the choice of law is neither arbitrary nor fundamentally unfair [citation omitted], the Court has invalidated the choice of law of a State which has had no significant contact or significant aggregation of contacts, creating state interests, with the parties and the occurrence or transaction." Allstate Ins. Co. v. Hague, 449 U.S. 302, 308, 66 L. Ed. 2d 521, 101 S. Ct. 633 (1981).
One legal scholar has remarked that "to justify application of forum law the Supreme Court only requires contacts with the forum state sufficient to create a state interest, even if another state has a materially greater interest. The Court will not weigh interests, it will just find them." Friedler, Party Autonomy Revisited: A Statutory Solution to a Choice-of-Law Problem, 37 Kan. L. Rev. 471, 500 (1989).
This court has likewise observed that "[a]s long as Kansas has '"significant contact or significant aggregation of contacts" . . . to ensure that the choice of Kansas law is not arbitrary or unfair,' constitutional limits are not violated. [Citation omitted.]" Systems Design v. Kansas City P.O. Employees Cred. Union, 14 Kan. App. 2d 266, 269, 788 P.2d 878 (1990) (quoting Shutts v. Phillips Petroleum Co., 235 Kan. 195, 679 P.2d 1159 [1984], rev'd in part on other grounds, 472 U.S. 797, 821-22, 86 L. Ed. 2d 628, 105 S. Ct. 2965 [1985]).
Under the facts of this case, there are sufficient minimum contacts with both New York and Kansas to establish jurisdiction in either state. Oppenheimer was located in New York at all times relevant to this lawsuit. The district court found that "all offers and sales of these securities were directed to Mr. Klein in the state of Kansas and received by him in Kansas when he was physically present in the state. All communications, statements and confirmations were received by Mr. Klein in the state of Kansas." Therefore, in the event that the choice of law provision is unenforceable, the application of Kansas law over New York law would not present constitutional concerns.
The next step in our review is to determine whether an actual conflict exists between the laws of New York and the laws of Kansas.
In Shutts v. Phillips Petroleum Co., 240 Kan. 764, 767, 732 P.2d 1286 (1987), cert. denied 487 U.S. 1223 (1988), this court wrote that "if the law of Kansas [is] not in conflict with any of the other jurisdictions connected to the suit, then there [is] no injury in applying the law of Kansas." In other words, if the outcome of this dispute would be the same under the laws of New York as under the laws of Kansas, the case presents a "false conflict." "Where there is no difference between the laws of the forum state and those of the foreign jurisdiction, there is a 'false conflict' and the court need not decide the choice of law issue." Lucker Mfg. v. Home Ins. Co., 23 F.3d 808, 813 (3d Cir. 1994).
Here, Klein and Brenner advanced two theories for recovery under Kansas law: aiding and abetting another in the sale of unregistered securities in violation of K.S.A. 17-1268(a), and materially aiding in the sale of unregistered securities in violation of K.S.A. 17-1268(b). Kansas statutory law plainly imposes civil liability on "[a]ny person who offers or sells" an unregistered, nonexempt security, and holds "every broker- dealer or agent who materially aids in the sale" jointly and severally liable. K.S.A. 17- 1268(a) and (b). In addition, Kansas statutes authorize the person buying the security to "sue either at law or in equity to recover the consideration paid for the security, together with interest at 15% per annum from the date of payment, costs, and reasonable attorney fees, less the amount of income received on the security . . . or for damages." K.S.A. 17-1268(a).
Here, the district court concluded that "under New York law, Oppenheimer, as the clearing broker, has no liability for the sale of unregistered securities to [Klein and Brenner]." The district court justified its conclusion by citing two cases: Katz v. Financial Clearing & Services Corp., 794 F. Supp 88 (S.D.N.Y. 1992), and Connolly v. Havens, 763 F. Supp. 6 (S.D.N.Y. 1991).
The State of New York's blue sky laws are encompassed in the Martin Act, N.Y. Gen. Bus. Law, Art. 23-A, § 352 et seq. (McKinney 1996). "The Martin Act 'prohibits various fraudulent and deceitful practices in the distribution, exchange, sale and purchase of securities,' [Citation omitted.] 'but does not require proof of intent to defraud or scienter.' [Citation omitted.]" Cromer Finance Ltd. v. Berger, 2001 WL 1112548, *3 (S.D.N.Y., Sept. 19, 2001). The Act authorizes the attorney general to regulate and enforce New York's state securities laws, and to redress harm suffered by individual investors. See People v. Landes, 600 N.Y.S.2d 292, 294, 192 App. Div. 2d 1 (1993) aff'd, 84 N.Y.2d 655, 621 N.Y.S.2d 283, 645 N.E.2d 716 (1994).
In CPC International Inc. v. McKesson Corporation, 70 N.Y.2d 268, 276, 519 N.Y.S.2d 804, 514 N.E.2d 116 (1987), the New York Court of Appeals discussed the Martin Act. The McKesson court stated:
"In all the other States, except one, the Legislature has expressly recognized a private civil action for violations of the corresponding provision. Under the Martin Act, however, no private action has been expressly authorized. A majority of this court now holds that there is no cause of action impliedly created under section 352-c." 70 N.Y.2d at 275-76.
In Granite Partners L.P. v. Bear, Stearns & Co., Inc., 17 F. Supp. 2d 275, 291 (S.D.N.Y. 1998), the court confirmed: "It is well established that there exists no private right of action for claims that are within the purview of the Martin Act." (Citing Vannest v. Sage, Rutty & Co., Inc., 960 F. Supp. 651, 657 n. 6 [W.D.N.Y. 1997]).
In addition to limiting an individual's private right of recovery, the Martin Act fails to impose strict liability for the sale of unregistered securities. See N.Y. Gen. Bus. Law, Art. 23-A, § 352 et seq. (McKinney 1996). Indeed, New York state securities laws only call for the registration of those securities that are distributed intrastate.
"All jurisdictions purporting to have adopted the Uniform Securities Act or the Revised Uniform Securities Act, except the District of Columbia, contain provisions calling for the registration of securities under certain conditions, although the complexity, procedure, and terminology vary greatly from one jurisdiction to another. A few of the jurisdictions, of which New York is a notable example, require registration only of intrastate distributions." 69A Am. Jur. 2d, Securities RegulationState § 74, p. 827 (1993).
Because Kansas statutes explicitly authorize a private right of redress for the sale of unregistered securities while New York state law does not, and because New York law only requires the registration of intrastate securities, the district court correctly concluded that this dispute would not result in the same outcome in both jurisdictions. It is obvious to us that this case does not present a false conflict. Therefore, we must determine which jurisdiction's laws should govern.
Klein and Brenner contend that the district court erred when it found the choice of law provision in Oppenheimer's standard form agreement determinative. First, they contend that because Kansas follows traditional choice of law rules as reflected in the Restatement (First) of Conflict of Laws (1934), choice of law provisions in contracts are unenforceable, especially when contrary to the public policy of the state. Here, they maintain that the court failed to heed the long-established public policy of the State of Kansas for the protection of investors. Second, Klein and Brenner contend that the district court's decision is in contravention of the statutory nonwaiver provision found in K.S.A. 17-1268(d). Finally, they assert