First Department Rejects Martin Act Preemption

Originally published January 18, 2011

Keywords: Martin Act, New York, blue sky law, sellers, securities

The Martin Act—New York's "blue sky" law—prohibits various fraudulent and deceitful practices in the distribution, exchange, sale and purchase of securities. Long dormant, the Martin Act was famously dusted off and put to vigorous use by former New York Attorney General (later governor) Eliot Spitzer in his campaign to "clean up" Wall Street. The Martin Act provides the New York Attorney General with powerful investigative tools and statutory remedies with respect to dishonest or deceptive activities by sellers of securities. 

According to the NY Court of Appeals, one thing the Act does not do is create a private right of action. In CPC Int'l v. McKesson Corp.,¹ New York's highest court concluded that the Martin Act did not permit individual litigants to sue for violation of that Act—only the Attorney General may do so. Enterprising defendants have used that