CONSOLIDATED MANAGEMENT GROUP v. Department of Corporations

Consolidated Management Group, LLC (Consolidated), Consolidated Leasing Hugoton Joint Venture # 2 (Hugoton), and Consolidated Leasing Anadarko Joint Venture (Anadarko; Consolidated, Anadarko, and Hugoton are hereafter referred to collectively as petitioners) appeal from a judgment denying their petition for writ of administrative mandamus. The petition sought to overturn the decision of respondent Department of Corporations (Department) rejecting petitioners’ challenge to a Department desist and refrain order with respect to offers and sales of interests in Hugoton and Anadarko.

The issues on appeal are: (1) whether federal law preempts the Department’s authority to issue the desist order; and (2) whether the interests in Hugoton and Anadarko are securities. Most of the cases that have addressed the first issue, including a recent decision by another California Court of Appeal, have found no preemption, and we agree with that majority view. Substantial evidence supported the Department’s determination that the interests in question are securities. We affirm for the reasons that we explain below.

I. BACKGROUND

Consolidated, a Kansas limited liability company with its…