Investors who are misled by false statements need not prove that they actually
"relied" on the falsehoods when they decided to invest money.
This ruling, deciding a new legal principle under Nebraska law, was announced
by the Nebraska Supreme Court on Friday, March 6.
Domina Law Group clients, DMK Biodiesel LLC, and Lanoha RVBF, LLC, won
the important ruling.
Dave Domina and
Megan Mikolajczyk argued and briefed the case.
To previously undecided rules of law were announced in the case. "Both
these new rules provide major levels of protection for private investors
who are handed a raft of papers, asked to sign on the 30th page, and later find that the pages tell them to ignore what they were
just told face-to-face and shown in promotional materials", David
The Supreme Court, ruling unanimously, reversed a lower court order dismissing
the investor's case. The Supreme Court reversed and directed that
a trial be held. It concluded that the element of reliance, generally
required to be proven in fraud cases, "is not an element of an investor's
claim against the seller of a security" under the Nebraska State
Securities Statute, Neb Rev Stat 8-1118(1).
The Court also concluded that the Domina law group clients were not disqualified
from legal protection because they were, admittedly "sophisticated
investors". The court concluded that the level of the buyer's
sophistication "is irrelevant to a claim" under the State securities
law. The ruling extended a line of cases supporting investors, but broke
with a string of decisions tending to hold that sophisticated persons
were on their own, and without the same remedy as a Domina claimed the
“This decision strikes a blow in favor of accountability. It stands
for the proposition that those who promote investments and did not tell
the truth will be held accountable, and will not be allowed to escape
by concealing some disclaimer language in a complex, virtually impossible
to read document that purports to eliminate the right of the signing party
to rely on the false statements he or she hears face-to-face.”
Domina continued, “the Supreme Court held that the Securities Act
is to be construed liberally to assure that investors are protected. It
does not provide a safe haven for unscrupulous investors with overpaid
lawyers who overwrite complex prospectuses with exculpatory clauses."
Supreme Court Opinion in
DMK Biodiesel, LLC v McCoy- 290 Neb 286 (2015).