Neb Supreme Court Rules for Investors. New Rules to Protect Private Investors Put Burdens on Promoters

Neb Supreme Court Rules for Investors. New Rules to Protect Private Investors Put Burdens on Promoters

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 Domina said.

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 law provides.

“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."

View the Supreme Court Opinion in DMK Biodiesel, LLC v McCoy- 290 Neb 286 (2015).