Phil Goldstein's First Amendment case heads to Massachusetts' highest court

Thu Oct 22, 2009

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The firm's case has now skipped over the intermediate appellate court to appear before Massachusetts' highest judicial body.

The highest court in Massachusetts is set to decide whether restrictions on hedge fund advertising are a violation of the First Amendment.

Phil Goldstein, founder of Saddle Brook, N.J. activist hedge fund Bulldog Investors, who famously overturned the Securities and Exchange Commission's attempt to force registration on hedge funds, is now fighting William Galvin, the Secretary of State of Massachusetts, over his right to operate a Web site for Bulldog that he made available to the public in theoretical violation of the private placement restrictions against advertising.

Goldstein has argued that these restrictions violate his First Amendment right to free speech and countersued the state on those grounds. Many of his charges were dismissed by a lower court, but the case is now set to be heard by the state's highest court at a date that has yet to be decided.

Galvin filed an administrative enforcement action against Goldstein in January 2007 for having an open Web site and for responding to an E-mail request for information from a non-accredited investor. Goldstein fought the action and it was appealed to the superior court, which ruled against him. Goldstein then appealed to the Massachusetts appellate court. Yesterday the Supreme Judicial Court, the state's highest court, stepped in to decide the case.

In a parallel action, Goldstein is suing Galvin in civil court in Massachusetts for violating his right to free speech and challenging his authority to bring the action in Massachusetts. “I did not do anything in Massachusetts. I didn't know anything about this until after he sued us,” says Goldstein. If Goldstein wins, he could seek damages, which he would use to cove his legal fees related to the suit and to his defense of Galvin's administrative action. On September 30, Goldstein lost his civil rights case in the Massachusetts superior court. He plans to appeal the decision. On October 18, he issued a letter to friends and investors responding to the decision, the full text of which is available here.

"Nobody made Galvin the sheriff of the Internet," says Goldstein. "It's not his job to run around and police the Internet. If every dinky state official did that, the Internet couldn't function. What gives him the authority?"

Secretary Galvin’s office declined to comment on the cases.

-- Josh Friedlander

Related stories on Phil Goldstein:

No Don Quixote, He

Round Two! Goldstein to sue SEC over advertising restrictions

The tables have turned on Phillip Goldstein

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