The Suffolk Superior Court of Massachusetts has denied hedge fund manager Philip Goldstein’s request for preliminary injunction barring enforcement of a final administrative order issued in October 2007 by the Massachusetts Securities Division against Bulldog Investors General Partners and several other private investment partnerships managed by Mr. Goldstein (Bulldog). The initial administrative complaint filed against Bulldog in January 2007 alleged that Bulldog offered securities for sale in Massachusetts that were not properly registered or exempt under the Massachusetts Uniform Securities Act by posting material on its website and sending e-mails to a Massachusetts resident seeking further information on Bulldog and its funds after visiting the website. The interactive website provided information about investment products offered by Bulldog and made certain information available to any visitor, including press articles, a printable brochure describing three of Bulldog’s investment vehicles and a link that provided performance-related information. A visitor could also receive more specific information by agreeing to certain disclaimers and filling out interactive forms requesting identifying information.
Mr. Goldstein requested a preliminary injunction on the theory that the conduct that formed the basis of the administrative complaint was “protected by the free speech and free press guarantees in the First Amendment to the Constitution of the United States and Article XVI of the Massachusetts Declaration of Rights” and that Massachusetts’s regulation of the website violated the Commerce Clause of the U.S. Constitution. The court denied Mr. Goldstein’s request for preliminary injunction as it found that he was unlikely to prevail on its civil rights and Commerce Clause claims. The judge cited the direct e-mail communication between Bulldog personnel and a Massachusetts resident in response to an inquiry through the website as a key factor in his conclusion that Bulldog was unlikely to be successful on the merits of the case. The Division ordered Bulldog to pay a $25,000 fine and cease and desist from further violations of Massachusetts securities laws.
The ruling is available here.