CHIEF JUSTICE BENDER delivered the Opinion of the Court.
¶ 1 In this appeal, we review a court of appeals decision reversing the trial court's grant of a motion to dismiss based on a forum selection clause in a sales contract. Mathers Family Trust v. Cagle, ___ P.3d ___, 2011 WL 1797222 (Colo.App.2011).
¶ 2 The defendants, through cold calls, sold the plaintiffs shares in oil and gas joint ventures in Texas, Alabama, and Mississippi. The plaintiffs all signed agreements with clauses stating that the courts in Dallas County, Texas, "shall have exclusive jurisdiction" to hear any claims or disputes "arising from or relating to" the agreements. When the ventures lost money, the plaintiffs sued in Colorado, raising violations of the Colorado Securities Act (CSA)
¶ 3 The trial court granted the defendants' motion to dismiss, ruling that the forum selection clauses did not violate Colorado public policy and were enforceable. In support of this ruling, the trial court concluded that the anti-waiver provision in the CSA, section 11-51-604(11), C.R.S. (2012), which prohibits waiving compliance with any other provision of the CSA, did not embody a public policy that prohibited a forum selection clause. The plaintiffs appealed, and, on appeal, the court of appeals reversed the trial court. The court of appeals held that the CSA anti-waiver provision voided the forum selection clauses because the anti-waiver provision mandates that a plaintiff seeking relief under the CSA be able to sue in Colorado.
¶ 4 Upon analysis, we construe the CSA and conclude that it does not express a strong public policy voiding forum selection clauses. Because the CSA requires coordination with the federal securities statutes, we find persuasive federal caselaw that analyzes the federal securities laws and that concludes that their anti-waiver provisions do not void a forum selection clause. We reason that the CSA anti-waiver provision differs from other anti-waiver provisions in Colorado statutes where we have determined the anti-waiver provision to bar suit in other jurisdictions. We hold that neither Colorado public policy nor the anti-waiver provision in the CSA voids a forum selection clause in this contract. Hence, we reverse and remand this case to the court of appeals with instructions to return it to the trial court for reinstatement of the trial court's grant of the defendants' motion to dismiss.
¶ 5 The plaintiffs, residents of Vermont, California, and Illinois, all bought shares in joint ventures from defendant HEI Resources, Inc. HEI was incorporated in Texas and based in Colorado. The individual defendants, except Joel Held, the lead securities law attorney for the joint ventures, all controlled some portion of HEI or of one of the other defendant companies, all of which had some connection to HEI. Employees of HEI cold-called the plaintiffs offering them
¶ 6 Each plaintiff invested in the joint ventures, and each plaintiff signed an Application Agreement and a Joint Venture Agreement. Both agreements contained a forum selection clause designating Dallas County, Texas, as the only forum for any lawsuit resulting from the agreement, and a choice of law clause stating that Texas law applied to any claims. The Application Agreement read:
The Joint Venture Agreement contains similar wording. Contrary to the defendants' sales pitches, the plaintiffs lost substantial amounts of money on the joint ventures. The plaintiffs' losses ranged from $445,097 to $1.1 million.
¶ 7 The plaintiffs then sued the defendants in Colorado, bringing claims under the CSA and the Vermont, Illinois, and California securities acts as well as claims for commonlaw fraud, concealment, breach of fiduciary duty, negligence, and misrepresentation,
¶ 8 The trial court granted the defendants' motion to dismiss pursuant to the forum selection clauses. It concluded that it did not have jurisdiction to hear the case because the forum selection clauses were enforceable and the parties had agreed that Texas courts had exclusive jurisdiction to hear any disputes arising from the contract. In support of this conclusion, the trial court found that the forum selection clauses were not unreasonable, the clauses were not fraudulently obtained, and the plaintiffs had failed to show that the forum selection clauses violated public policy. The trial court also construed the choice of law clauses in the two agreements and found the clauses enforceable.
¶ 9 On appeal, the court of appeals held that the forum selection clauses conflicted with the public policy expressed in the CSA and its anti-waiver provision and were therefore void. The court of appeals reversed the trial court's grant of the defendants' motion to dismiss. It did not address the enforceability of the choice of law clauses because its decision on the forum selection clauses resolved the case.
¶ 10 The defendants then petitioned this court to review the court of appeals' decision. We granted certiorari on the issue of whether Colorado public policy or the anti-waiver provision in the CSA voids the forum selection clauses.
¶ 11 Before analyzing the issue presented, we first give some background on forum selection clauses as well as the effect of a trial court's dismissal based on a forum selection clause. We then discuss the standard under which we review such a dismissal.
¶ 12 A forum selection clause is a contractual provision agreed to by private parties that constitutes the parties' agreement as to the place of the action where the parties will bring any litigation related to the contract. Restatement (Second) of Conflict of Laws § 80 (1971); 14D Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3803.1 (3d ed.1998). The United States Supreme Court held forum selection clauses presumptively enforceable in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 3-5, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). The Court stated that "such clauses are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances." Id. at 10, 92 S.Ct. 1907. This conclusion, the Court stated, followed the prevailing trend in the law to honor the parties' choice of forum unless that choice was unfair or unreasonable. Id.; see Restatement (Second) of Conflict of Laws § 80. The Court held that a forum selection clause should control unless the party seeking to void the clause shows (1) that the clause was unreasonable and unjust; (2) that it was the product of fraud or overreaching; or (3) that enforcement of the clause would contravene a strong public policy of the forum in which suit is brought. Bremen, 407 U.S. at 15, 92 S.Ct. 1907.
¶ 13 No Colorado supreme court decision has explicitly adopted Bremen's holding that forum selection clauses are presumptively valid unless they are unreasonable, fraudulently induced, or against public policy. No Colorado case applies Bremen to the CSA, although the court of appeals has analyzed forum selection clauses under Bremen in other contexts.
¶ 14 The common view is that forum selection clauses should be enforced unless they fall within one of the three exceptions in Bremen. 14D Wright & Miller, Federal Practice & Procedure § 3803.1 (citing the "substantial number" of cases holding that a forum selection clause is presumed valid); Restatement (Second) of Conflict of Laws § 80. The vast majority of cases, including every Colorado court of appeals case decided since Bremen, treats forum selection clauses as presumptively enforceable. See, e.g., ABC Mobile Sys., Inc. v. Harvey, 701 P.2d 137, 139 (Colo.App.1985); Excell, Inc. v. Sterling Boiler & Mech., Inc., 106 F.3d 318, 320 (10th Cir.1997) (stating there are no "material discrepancies" between Bremen's treatment of forum selection clauses and Colorado law's treatment of forum selection clauses).
¶ 15 While a federal court has the option of transferring a case to another federal court in the proper forum under 28 U.S.C. § 1404, a state trial court that finds a forum selection clause enforceable and grants a motion to dismiss can only dismiss the case so that the plaintiff may re-file it in the specified forum. Compare Barton v. Key Gas Corp., No. 05-CV-01856-REB-PAC, 2006 WL 2781592, at *3 (D.Colo. Sept. 26, 2006) (not reported in F.Supp.2d) (finding forum selection clause enforceable in a securities case and transferring the case to the United States District Court for the District of Kansas) with Adams Reload Co. v. Int'l Profit Assocs., Inc., 143 P.3d 1056, 1061 (Colo.App.2005) (affirming the trial court's finding that a forum selection clause was enforceable and upholding the trial court's grant of a motion to dismiss); see also 14D Wright & Miller, Federal Practice & Procedure § 3803.1 (stating that dismissal is the only remedy if a court cannot transfer venue).
¶ 16 Contract law governs the issues relating to the interpretation and enforcement of a forum selection clause. ABC Mobile Sys., 701 P.2d at 140; K & V Scientific Co. v. Bayerische Motoren Werke Aktiengesellschaft (`BMW`), 314 F.3d 494, 497 (10th Cir.2002). The standard of review for the interpretation of contract terms is de
¶ 17 We first examine the language of the CSA, which specifies that the CSA coordinates with federal securities law. We then examine Colorado public policy as expressed in the CSA and in anti-waiver provisions in other Colorado statutes to determine if Colorado public policy requires voiding the forum selection clause in this case.
¶ 18 Because Colorado appellate courts have followed Bremen in forum selection cases
¶ 19 First, we turn to the language of the CSA and its coordination with federal precedent. The CSA states that "[t]he provisions of this article ... shall be coordinated with the federal acts and statutes to which references are made in this article ... to the extent coordination is consistent with both the purposes and the provisions of this article." § 11-51-101(3). "Although we have previously held that federal precedent is persuasive in construing similar language in our securities laws, we should first look to the plain language of the controlling statutes under our law." Rosenthal v. Dean Witter Reynolds, Inc., 908 P.2d 1095, 1100 (Colo. 1995) (internal citation omitted). However, "insofar as the provisions and purposes of our statute parallel those of the federal enactments, such federal authorities are highly persuasive." Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 129-30, 556 P.2d 1201, 1204 (1976). The "hallmark" of both state and federal securities regulation is that courts pay close attention to the facts of each case and the commercial realities of each securities offering. Id. at 130, 556 P.2d at 1205.
¶ 20 The CSA applies to any sale of securities taking place in Colorado irrespective of where the buyers and sellers are located or incorporated. See § 11-51-102.
§ 11-51-604(11). The federal Securities Act of 1933 contains an anti-waiver provision with nearly identical language:
15 U.S.C. § 77n (2012).
¶ 21 The U.S. Supreme Court has extended Bremen's reasoning to securities law. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 518-19, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974) (applying Bremen to an arbitration clause in a securities case). Although the
¶ 22 Federal courts, following the reasoning in Rodriguez, have uniformly held that 15 U.S.C. § 77n does not void forum selection clauses. See, e.g., Haynsworth v. The Corp., 121 F.3d 956, 960 (5th Cir.1997) (referring to the "chorus of authority" from other federal circuit courts holding that the anti-wavier clause in the Securities Act does not render a forum selection clause void); Roby v. Corp. of Lloyd's, 996 F.2d 1353, 1366 (2d Cir.1993) (holding that a forum selection clause requiring that investors file suit in England was not void); Bonny v. Soc'y of Lloyd's, 3 F.3d 156, 162 (7th Cir.1993); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 960 (10th Cir.1992).
¶ 23 Despite this uniform line of federal caselaw, the plaintiffs and amici argue that we do not have to follow federal law in this case because the language of the CSA and Colorado appellate precedent show intent to depart from federal law. To analyze this contention, we first examine the language of the CSA.
¶ 24 Section 11-51-101(3) states that the CSA "shall be coordinated" with the applicable federal acts and statutes to which references are made in the article. The CSA is replete with references to the federal securities acts and coordinates the CSA with similar provisions in the federal acts.
¶ 25 The plaintiffs and amici contend that despite this language, Colorado precedent shows that Colorado courts depart from federal securities law when construing the CSA. The plaintiffs and amici rely on a court of appeals decision in which the court concluded that it was not controlled by a federal circuit court decision in determining whether shares in an investment fund constitute a security. Joseph v. Viatica Mgmt., LLC, 55 P.3d 264, 267 (Colo.App.2002). The federal case concerned shares in a similar investment fund and held that those shares were not securities subject to federal securities regulation. SEC v. Life Partners, Inc., 87 F.3d 536, 549 (D.C.Cir.1996). The court of appeals in Viatica concluded that, even though the CSA
¶ 26 Turning to this argument, we note that Viatica analyzed the investments before it and concluded that those investments were securities, and also concluded that it was not bound by Life Partners, because the Viatica investments differed from the Life Partners investments. Viatica, 55 P.3d at 267. The court's conclusion that the investments before it were similar, but not identical, to investments in Life Partners and therefore were securities does not support a generalization that a Colorado court need not follow federal securities cases. Rather, Viatica exemplifies the premise that courts pay close attention to the facts of each securities case and take into account the "substantive economic realities underlying the transaction." Id. at 266; see also Lowery, 192 Colo. at 130, 556 P.2d 1201 at 1205.
¶ 27 The language of the CSA shows the legislature's intent that Colorado securities law be coordinated with federal securities law, as evidenced by the wording of section 11-51-101(3). Our precedent also shows intent to coordinate Colorado securities law with federal securities law. Viatica is distinguishable and its holding does not contradict this intent. Hence, we conclude that we must construe the CSA to coordinate with the federal securities acts, and we follow the reasoning of federal courts that have analyzed a forum selection clause in conjunction with the anti-waiver provision in the federal securities laws.
¶ 28 We next analyze whether either the language of the CSA or Colorado appellate precedent embodies a public policy requiring that litigants be able to bring CSA claims in a Colorado court. If so, a forum selection clause would violate this public policy and would fall under Bremen's third exception. We first construe language in the CSA creating a cause of action for CSA violations, and then we consider precedent analyzing anti-waiver provisions in other Colorado statutes.
¶ 29 Several provisions in the CSA contain language concerning the private right of action to bring lawsuits for violations of the CSA. For example, section 11-51-604(7)-(10) contains language allowing buyers of securities to bring actions in court against sellers who violate the CSA. Section 11-51-604(7) states that a "cause of action" survives the death of a party, and sections 11-51-604(8), (9), and (10) refer to those who "may sue" and to the basis for a "suit." Section 11-51-706(1) requires those offering securities for sale in Colorado to file with the securities commissioner consent to service of process in Colorado, and section 11-51-706(4) states that any violation of the CSA "shall be deemed to constitute the transaction of business within this state for the purpose of section 13-1-124, C.R.S.," Colorado's longarm statute.
¶ 30 The plaintiffs contend that the provisions in section 11-51-604 create a requirement that suits under the CSA be brought in Colorado courts. They argue that the provisions in section 11-51-706 show a legislative intent to require investors to sue in Colorado courts because the provisions compel violators to accept Colorado's jurisdiction.
¶ 31 The language in section 11-51-604 provides for a "cause of action" and states that buyers "may sue." The word "may" denotes a grant of discretion and is usually permissive. Jefferson Cnty. Bd. of Equalization v. Gerganoff, 241 P.3d 932, 937 (Colo.2010); People v. Dist. Court, 713 P.2d 918, 922 (Colo.1986). The phrase "may sue" is permissive, not mandatory, and allows but does not require that CSA violations be litigated in Colorado. The phrase "cause of action" in section 11-51-604 creates the option to sue in court, but it does not require that the court be located in Colorado.
¶ 32 Section 11-51-706 creates a mechanism requiring out-of-state sellers of
¶ 33 The plaintiffs argue that Colorado appellate precedent analyzing anti-waiver clauses in different statutes creates a public policy against forum selection clauses. Hence, we next consider three previous Colorado appellate decisions construing anti-waiver clauses in two other statutes. The first statute, the Colorado Wage Claim Act (CWCA),
§ 8-4-121. We held that an arbitration provision in an employee's contract was void because a provision in the CWCA stating that "any person ... may file suit in any court" reflected the legislature's intent to allow Colorado employees to recover past due wages in court, and the anti-waiver provision in section 8-4-121 implemented this policy by "protecting employees against contractual waiver or modification" of "substantive and procedural rights." Lambdin v. Dist. Court, 903 P.2d 1126, 1130 (Colo.1995) (discussing § 8-4-110(2)). We concluded that the U.S. Supreme Court's decision in Rodriguez, which held that an arbitration clause in a contract was enforceable despite the anti-waiver provision in the federal Securities Act of 1933, did not require us to hold that the arbitration clause in Lambdin was enforceable. Id. at 1131 (citing Rodriguez, 490 U.S. at 482, 109 S.Ct. 1917). Rodriguez drew a distinction between the substantive rights in the Securities Act, such as the allocation of the burden of proof, and the procedural rights in the Securities Act, such as the grant of concurrent jurisdiction in the state and federal courts and the existence of nationwide service of process. 490 U.S. at 481-82, 109 S.Ct. 1917. The Court concluded that 15 U.S.C. § 77n, prohibiting waivers of "compliance" with the provisions of the Securities Act, did not prevent waivers of procedural provisions. Id. at 482, 109 S.Ct. 1917. In Lambdin, we concluded that the Securities Act, which "precluded waiver of substantive provisions under the act but not procedural provisions," differed from the CWCA because the CWCA prohibited the waiver of both substantive and procedural rights. 903 P.2d at 1131. A division of the court of appeals later held, without much analysis, that the CWCA anti-waiver provision voided a forum selection clause that required an employee to litigate claims against his employer in New York. Morris v. Towers Fin. Corp., 916 P.2d 678, 679 (Colo.App.1996). The court of appeals read the statement in section 8-4-110 that a party "may file suit in any court having jurisdiction over the parties" to bar the forum selection clause because Lambdin implied that parties could file suit in any jurisdiction and thus could not limit actions to one jurisdiction through a forum selection clause. Id. (emphasis added).
¶ 34 We considered a different anti-waiver provision in the Wrongful Withholding of Security Deposits Act (WWSDA).
§ 38-12-103(7). We held that these two sections of the WWSDA created a statutory right of action "in a legal proceeding [that] cannot be limited or waived by an arbitration agreement." Ingold, 159 P.3d at 123 (emphasis in original).
¶ 35 The plaintiffs contend that the CSA, like the CWCA and the WWSDA, creates both substantive and procedural rights. The CSA's anti-waiver provision, they argue, thus voids any out-of-state forum selection clauses based on Lambdin, Morris, and Ingold. To analyze this contention, we examine the purposes and language of the CWCA, the WWSDA, and the CSA.
¶ 36 We begin our analysis of these three anti-waiver provisions by examining the purposes of the statutes. The CWCA is "designed to require employers to make timely payment of wages ... and to provide adequate judicial relief when employers fail to pay wages when due." Cusimano v. Metro Auto, Inc., 860 P.2d 532, 533 (Colo.App. 1992); see also Lambdin, 903 P.2d at 1129. "[A] state in which a party is domiciled has an interest in rules it promulgates to protect its residents against the unfair use of superior bargaining power." Dresser Indus., Inc. v. Sandvick, 732 F.2d 783, 786 (10th Cir. 1984) (holding that Colorado law should apply to an employment contract signed by a Colorado employee who worked in Colorado). The WWSDA "was passed to control the practices of landlords who withhold, without justification, their tenants' damage deposits." Houle v. Adams State Coll., 190 Colo. 406, 407, 547 P.2d 926, 927 (1976). The WWSDA is "designed to assist tenants in vindicating their legal rights and to equalize the disparity in power which exists between landlord and tenant in conflicts over such relatively small sums." Martin v. Allen, 193 Colo. 395, 396, 566 P.2d 1075, 1076 (1977). Colorado has an interest in regulating landlord-tenant relations throughout the state so state residents have an expectation of consistency. Town of Telluride v. Lot Thirty-Four Venture, L.L.C., 3 P.3d 30, 38 (Colo.2000).
¶ 37 The CSA, unlike the CWCA and the WWSDA, is not designed for the protection of state residents alone. Its purpose is to protect investors and maintain confidence in the public securities markets. See § 11-51-101(2). Those investors do not have to live in Colorado to avail themselves of the protections of the CSA because it applies to any securities transaction taking place in Colorado irrespective of where the buyer and seller live. See § 11-51-102. Where Colorado has a strong interest in making sure a Colorado employee or a Colorado renter can seek relief in a Colorado court, the state does not have the same strong interest in protecting out-of-state investors, like the plaintiffs here, who invested in out-of-state investments in a national market.
¶ 38 The language of the three anti-waiver provisions also reflects their different purposes. The CWCA voids all agreements "purporting to waive or to modify such employee's rights." § 8-4-121 (emphasis added). The WWSDA voids agreements that waive "any provision of this section for the benefit of a tenant or members of his household." § 38-12-103(7) (emphasis added). The CSA voids agreements that "waive compliance with any provision of this article." § 11-51-604(11) (emphasis added). The CSA's anti-waiver provision is almost identical to 15 U.S.C. § 77n, which the U.S. Supreme Court construed in Rodriguez to void agreements that waived substantive rights but not those that waived procedural rights.
¶ 39 Here, the parties' agreement to file lawsuits related to the agreements in Texas waives only a procedural right. The defendants concede that the CSA applies to the plaintiffs' Colorado securities claims. The plaintiffs could bring their CSA claims in a Texas court because states routinely apply the securities laws of other states. 10 Loss
¶ 40 The CSA has a different purpose than the CWCA and the WWSDA. The CWCA and the WWSDA protect people domiciled in Colorado and concern matters employment and landlord-tenant relationships in which Colorado has a strong interest. The CSA, in contrast, protects both Colorado and out-of-state investors, like the plaintiffs here, and concerns the regulation of investments that include out-of-state investments. Because the language of the CSA anti-waiver provision is nearly identical to that of the federal securities anti-waiver provision and does not contain the language preventing waiver of "rights" and "benefits" that the CWCA and WWSDA contain, it only prohibits the waiver of substantive rights. Here, the plaintiffs did not waive their substantive rights under the CSA because they can pursue their CSA claims in a Texas court. We therefore conclude that Lambdin, Morris, and Ingold do not require that we hold that the forum selection clauses in this case are void.
¶ 41 The plaintiffs and amici argue that we must consider the effect of the choice of law clause in order to determine if the forum selection clause should be enforced. While a forum selection clause determines the place where a suit related to a contract can be brought, a choice of law clause determines the law that will govern the parties' contractual rights and duties. Restatement (Second) of Conflict of Laws § 187 (1971). Requiring a court to consider a choice of law clause at the same time as a forum selection clause forces a court to attempt to determine the potential outcome of the case under the chosen law at the outset of the litigation. Swenson v. T-Mobile USA, Inc., 415 F.Supp.2d 1101, 1105 (S.D.Cal.2006). Because it is impossible to determine the outcome and merits of this case at this procedural stage, we do not reach the plaintiffs' contentions regarding the choice of law clause.
¶ 42 For the reasons stated above, we reverse the court of appeals. We remand this case to the court of appeals with instructions to return the case to the district court to reinstate its order granting the motion to dismiss.