DMK Biodiesel v. McCoy ( 2015 )

Nebraska Advance Sheets
286 290 NEBRASKA REPORTS
DMK Biodiesel, LLC, a Nebraska limited liability
company, and Lanoha RVBF, LLC, a Nebraska
limited liability company, appellants, v.
John McCoy et al., appellees.
___ N.W.2d ___
Filed March 6, 2015. No. S-14-150.
1. Summary Judgment: Appeal and Error. An appellate court will affirm a lower
court’s grant of summary judgment if the pleadings and admitted evidence show
that there is no genuine issue as to any material facts or as to the ultimate infer-
ences that may be drawn from those facts and that the moving party is entitled to
judgment as a matter of law.
2. ____: ____. In reviewing a summary judgment, the court views the evidence in
the light most favorable to the party against whom the judgment was granted
and gives such party the benefit of all reasonable inferences deducible from
the evidence.
3. Statutes: Appeal and Error. Statutory interpretation presents a question of law.
When reviewing questions of law, an appellate court resolves the questions inde-
pendently of the conclusions reached by the trial court.
4. Securities Regulation. The Securities Act of Nebraska should be liberally con-
strued to afford the greatest possible protection to the public.
5. Statutes: Appeal and Error. Absent a statutory indication to the contrary, an
appellate court gives words in a statute their ordinary meaning.
6. ____: ____. An appellate court will not read into a statute a meaning that is
not there.
7. Securities Regulation. Reliance is not an element of an investor’s claim against
the seller of a security under Neb. Rev. Stat. § 8-1118(1) (Reissue 2012).
8. ____. A buyer’s sophistication is irrelevant to a claim under Neb. Rev. Stat.
§ 8-1118(1) (Reissue 2012).
Appeal from the District Court for Buffalo County: John
P. Icenogle, Judge. Reversed and remanded for further
proceedings.
David A. Domina and Megan N. Mikolajczyk, of Domina
Law Group, P.C., L.L.O., for appellants.
Daniel L. Lindstrom and Nicholas R. Norton, of Jacobsen,
Orr, Lindstrom & Holbrook, P.C., L.L.O., for appellees John
McCoy et al.
L. Steven Grasz, Mark D. Hill, and Michael Schmidt,
of Husch Blackwell, L.L.P., for appellee Renewable Fuels
Technology, LLC.
Nebraska Advance Sheets
DMK BIODIESEL v. McCOY 287
Cite as 290 Neb. 286
Heavican, C.J., Connolly, Stephan, McCormack, Miller-
Lerman, and Cassel, JJ.
Stephan, J.
DMK Biodiesel, LLC (DMK), and Lanoha RVBF, LLC
(Lanoha), filed suit against John McCoy; John Hanson; Phil
High; Jason Anderson (collectively the individual defendants);
and Renewable Fuels Technology, LLC (Renewable), alleg-
ing the fraudulent sale of securities, in violation of Neb. Rev.
Stat. § 8-1118(1) (Reissue 2012). This is the second appeal. In
the first appeal, we reversed the district court’s order grant-
ing a motion to dismiss because the court considered mat-
ters outside the pleadings without conducting an evidentiary
hearing.1 On remand, Renewable and the individual defend­
ants filed motions for summary judgment, which the district
court sustained after conducting an evidentiary hearing. DMK
and Lanoha now appeal. We reverse, and remand for fur-
ther proceedings.
I. BACKGROUND
Republican Valley Biofuels, LLC (RVBF), issued a confiden-
tial private placement memorandum (PPM) with an effective
date of May 7, 2007, seeking investors in a biodiesel produc-
tion facility. RVBF was promoted by the individual defendants,
and Renewable was the manager of RVBF. The PPM provided
that the securities being offered were “speculative and involve
a high degree of risk.” It included a summary of the offering
describing RVBF and the biodiesel facility RVBF proposed to
build, as well as a description of “[r]isk factors” involved in
the investment. The PPM provided that “[n]o person has been
authorized to make any representation or warranty, or give any
information, with respect to RVBF or the units offered hereby
except for the information contained herein.” The PPM also
stated that
[a]lthough we believe that our plans and objectives
reflected in or suggested by such forward-looking state-
ments are reasonable, we may not achieve such plans
1
DMK Biodiesel v. McCoy, 285 Neb. 974, 830 N.W.2d 490 (2013).
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or objectives. Actual results may differ from projected
results. We will not update forward-looking statements
even though we may undergo changes in the future.
In August 2007, DMK and Lanoha entered into separate
subscription agreements and became minority investors in
RVBF. In the agreements, each acknowledged the investments
involved a high degree of risk. They further acknowledged
they had sufficient knowledge and experience in financial
and business matters to be able to evaluate “the merits and
risks involved” in the investments. Each agreement states:
“Subscriber has relied solely upon the information furnished in
the [PPM] and Subscriber has not relied on any oral or written
representation or statement, except as contained in the [PPM],
in making this investment.”
In 2009, DMK and Lanoha brought an action against
Renewable and the individual defendants in the district court
for Buffalo County. In their operative complaint, they alleged
that Renewable and the individual defendants, acting in con-
cert as members and the manager of RVBF, made false oral
representations and omissions in connection with RVBF and
the proposed biodiesel facility which induced their invest-
ment. DMK and Lanoha asserted these actions violated the
Securities Act of Nebraska (the Act)2 and violated fiduciary
duties owed by the members and manager of RVBF. DMK and
Lanoha further sought an accounting at law.
Renewable and the individual defendants filed motions to
dismiss, which the district court sustained. DMK and Lanoha
appealed, and we reversed.3
After the district court entered a judgment on the appeal
mandate, Renewable and the individual defendants filed
motions for summary judgment asserting they were not liable
to DMK and Lanoha as a matter of law. The district court held
an evidentiary hearing, after which it sustained the motions
and dismissed the action. The court assumed for purposes of
2
See Neb. Rev. Stat. § 8-1101 et seq. (Reissue 2012 & Cum. Supp. 2014).
3
See DMK Biodiesel, supra note 1.
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its ruling that Renewable and the individual defendants “made
the oral representations alleged by [DMK and Lanoha] during
the period of time that [DMK and Lanoha] were contemplat-
ing their investment.” The court framed the issue as whether
the “cause of action for security fraud [based on] misrepre-
sentations made to investors is viable given the contents of
the [PPM] and subscription agreements in which [DMK and
Lanoha] acknowledge[d] that their investments were made
without consideration of any representation not contained in
the [PPM] or Subscription Agreements.” The court reasoned
that DMK and Lanoha were sophisticated investors and that
given the contents of the PPM and subscription agreements,
they could not have relied upon any oral representations as a
matter of law. The court concluded:
[W]hen the sophisticated investor executes a subscrip-
tion document stating that the “Subscriber has relied
solely upon the information furnished in the [PPM] and
Subscriber has not relied on any oral or written represen-
tation or statement, except as contained in the [PPM], in
making this investment” the investor should be held to
that statement.
DMK and Lanoha filed a timely appeal.
II. ASSIGNMENTS OF ERROR
DMK and Lanoha assign, restated and consolidated, that the
district court erred when it (1) concluded that there were no
genuine issues of material fact; (2) concluded that Renewable
and the individual defendants were entitled to summary judg-
ment as a matter of law; (3) failed to find that § 8-1118(5)
invalidates provisions of the subscription agreements; and (4)
failed to recognize that § 8-1118 is applicable to all situations
in which a false or misleading statement is made, regardless of
the level of sophistication of the investors.
III. STANDARD OF REVIEW
[1] An appellate court will affirm a lower court’s grant of
summary judgment if the pleadings and admitted evidence
show that there is no genuine issue as to any material facts
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or as to the ultimate inferences that may be drawn from those
facts and that the moving party is entitled to judgment as a
matter of law.4
[2] In reviewing a summary judgment, the court views the
evidence in the light most favorable to the party against whom
the judgment was granted and gives such party the benefit of
all reasonable inferences deducible from the evidence.5
[3] Statutory interpretation presents a question of law.6
When reviewing questions of law, an appellate court resolves
the questions independently of the conclusions reached by the
trial court.7
IV. ANALYSIS
1. § 8-1118(1) Claim
[4] DMK and Lanoha claim Renewable and the indi-
vidual defendants violated § 8-1118(1) by selling a security
by means of any untrue statement of material fact. Section
8-1118(1) is part of the Act which is modeled after the 1956
Uniform Securities Act.8 The Act should be liberally con-
strued to afford the greatest possible protection to the public.9
The purpose of the Act is to protect the public from fraud
and to benefit purchasers as opposed to sellers.10 According
to § 8-1118:
4
Young v. Govier & Milone, 286 Neb. 224, 835 N.W.2d 684 (2013); Selma
Development v. Great Western Bank, 285 Neb. 37, 825 N.W.2d 215
(2013).
5
Dresser v. Union Pacific RR. Co., 282 Neb. 537, 809 N.W.2d 713 (2011);
Radiology Servs. v. Hall, 279 Neb. 553, 780 N.W.2d 17 (2010).
6
Spady v. Spady, 284 Neb. 885, 824 N.W.2d 366 (2012); Village of Hallam
v. L.G. Barcus & Sons, 281 Neb. 516, 798 N.W.2d 109 (2011).
7
Village of Hallam, supra note 6; Shepherd v. Chambers, 281 Neb. 57, 794
N.W.2d 678 (2011).
8
See Hooper v. Freedom Fin. Group, 280 Neb. 111, 784 N.W.2d 437
(2010). See, also, Knoell v. Huff, 224 Neb. 90, 395 N.W.2d 749 (1986)
(Grant, J., dissenting; Boslaugh and Hastings, JJ., join).
9
Hooper, supra note 8; Labenz v. Labenz, 198 Neb. 548, 253 N.W.2d 855
(1977).
10
Loewenstein v. Midwestern Inv. Co., 181 Neb. 547, 149 N.W.2d 512
(1967).
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Cite as 290 Neb. 286
(1) Any person who offers or sells a security in vio-
lation of section 8-1104 or offers or sells a security by
means of any untrue statement of a material fact or any
omission to state a material fact necessary in order to
make the statements made in the light of the circum-
stances under which they are made not misleading, the
buyer not knowing of the untruth or omission, and who
does not sustain the burden of proof that he or she did
not know and in the exercise of reasonable care could not
have known of the untruth or omission, shall be liable to
the person buying the security from him or her, who may
sue either at law or in equity . . . .
We have few cases construing or applying this statute. In
the most recent of these, Hooper v. Freedom Fin. Group,11 we
affirmed a judgment determining that directors and a holding
company of a broker-dealer which sold securities by means of
untrue statements of material fact were liable to investors. In
our opinion, we noted that the evidence established the stock
in question was sold by means of untrue statements and that
the purchasers “were unsophisticated investors who relied
upon” the seller’s assurances that the stock was as described in
a sales pamphlet, notwithstanding the pamphlet’s inconsisten-
cies with the offering memorandum.12 However, we were not
called upon in that case to determine whether reliance upon
the alleged misrepresentation was an element of an investor’s
claim under § 8-1118(1) or whether the investor’s degree of
sophistication was relevant to the claim. Nor have we con-
sidered whether exculpatory statements contained in a PPM
or a subscription agreement operate as a bar to a claim under
§ 8-1118(1). Those issues are before us here.
(a) Reliance
[5,6] To determine whether reliance is an element of a
claim under § 8-1118(1), we begin by examining the lan-
guage of the statute, utilizing familiar principles of statutory
construction. Absent a statutory indication to the contrary, an
11
Hooper, supra note 8.
12
Id. at 122, 784 N.W.2d at 446.
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appellate court gives words in a statute their ordinary mean-
ing.13 An appellate court will not read into a statute a meaning
that is not there.14 The Legislature has provided an additional
tool to determine the meaning of the Act by directing that
it “shall be construed as to effectuate its general purpose to
make uniform the law of those states which enact it and to
coordinate the interpretation and administration of the [A]ct
with the related federal regulation.”15
As noted, the Act is modeled after the 1956 Uniform
Securities Act.16 Section 8-1118(1) is patterned after § 410(a)
of the 1956 Uniform Securities Act,17 which in turn “is almost
identical with § 12(2) of the Securities Act of 1933, 15 U.S.C.
§ 77l[(a)](2).”18
The Act imposes liability upon one who (1) “offers or sells
a security,” (2) “by means of any untrue statement of a mate-
rial fact or any omission to state a material fact necessary in
order to make the statements made in the light of the circum-
stances under which they are made not misleading,” and where
the buyer is (3) “not knowing of the untruth or omission.”19 It
permits the seller to avoid liability by sustaining “the burden of
proof that he or she did not know and in the exercise of reason-
able care could not have known of the untruth or omission.”20
13
Fisher v. PayFlex Systems USA, 285 Neb. 808, 829 N.W.2d 703 (2013);
Mutual of Omaha Bank v. Murante, 285 Neb. 747, 829 N.W.2d 676
(2013).
14
Kerford Limestone Co. v. Nebraska Dept. of Rev., 287 Neb. 653, 844
N.W.2d 276 (2014); SourceGas Distrib. v. City of Hastings, 287 Neb. 595,
844 N.W.2d 256 (2014).
15
§ 8-1122.
16
See Hooper, supra note 8. See, also, Seth E. Lipner et al., Securities
Arbitration Desk Reference, 2014-2015 ed. § 16.1 (Securities Law
Handbook Series 2014).
17
Unif. Securities Act § 410(a) (1956), 7C U.L.A. app. I (2006).
18
Id., comment, cl. (2), 7C U.L.A. at 889. See, also, 12A Joseph C. Long &
Philip B. Feigin, Blue Sky Law § 9:2 (2014).
19
§ 8-1118(1).
20
Id.
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Thus, the statute contains no explicit requirement that an
investor must prove reliance upon an alleged misrepresentation
or omission by the seller in order to recover. The question is
whether the phrase “by means of” implicitly requires a show-
ing that the investor relied upon the seller’s misrepresentation
or omission of material fact.
Various courts have held that similar language in § 12(2)
of the Securities Act of 1933 does not implicitly require an
element of reliance. In Sanders v. John Nuveen & Co., Inc.,21
the Seventh Circuit stated that “[a]lthough the ‘by means of’
language . . . requires some causal connection between the
misleading representation or omission and plaintiff’s purchase
. . . [i]t is well settled that § 12(2) imposes liability without
regard to whether the buyer relied on the misrepresentation or
omission.” Other federal courts have likewise held that reli-
ance upon misrepresentations or omissions is not an element
of a claim under § 12(2) of the Securities Act of 1933.22 In
this regard, a claim under this section of the Securities Act of
1933 differs from a claim under rule 10b-5 of the Securities
and Exchange Commission’s regulations,23 derived from § 78j
of the Securities Exchange Act of 1934,24 which rule also
addresses securities fraud but has been held to include an
element of reliance by the investor upon the alleged fraudu-
lent statement.25
Most courts construing state laws derived from § 410(a) of
the 1956 Uniform Securities Act have similarly concluded that
an investor does not need to prove reliance upon an untrue
21
Sanders v. John Nuveen & Co., Inc., 619 F.2d 1222, 1225 (7th Cir. 1980).
22
See, e.g., MidAmerica Federal S & L v. Shearson/American Exp., 886 F.2d
1249 (10th Cir. 1989); Gilbert v. Nixon, 429 F.2d 348 (10th Cir. 1970);
Johns Hopkins University v. Hutton, 422 F.2d 1124 (4th Cir. 1970); In re
Phar-Mor, Inc. Litigation, 848 F. Supp. 46 (W.D. Pa. 1993).
23
17 C.F.R. § 240.10b-5 (2014).
24
See 15 U.S.C. § 78a et seq. (2012).
25
See, Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552
U.S. 148, 128 S. Ct. 761, 169 L. Ed. 2d 627 (2008); Ross v. Bank South,
N.A., 885 F.2d 723 (11th Cir. 1989).
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statement or omission of material fact in order to recover.26
In reaching this conclusion, the Utah Supreme Court noted
that its holding was “in accord with a significant majority of
other courts’ interpretations of statutes which, like [the Utah
Uniform Securities Act], were modeled after section 410(a)(2)
of the Uniform Securities Act or section 605(a) of the Uniform
Revised Securities Act.”27 The draftsmen’s commentary to
§ 410(a) of the 1956 Uniform Securities Act is consistent with
these cases. According to the commentary, “[t]he ‘by means of’
clause . . . is not intended as a requirement that the buyer prove
reliance on the untrue statement or the omission.”28
A few courts have reached contrary conclusions, holding
that reliance is an element of an investor’s claim under state
blue sky laws. For example, a Washington appellate court
has construed Washington’s antifraud statute to require reli-
ance as an element of an investor’s claim.29 But unlike the
Nebraska statute, the Washington statute was patterned after
26
See, Dunn v. Borta, 369 F.3d 421 (4th Cir. 2004) (construing Virginia
Securities Act); Carothers v. Rice, 633 F.2d 7 (6th Cir. 1980) (construing
Kentucky’s Blue Sky Law); Alton Box Bd. Co. v. Goldman, Sachs Co., 560
F.2d 916 (8th Cir. 1977) (construing Missouri Securities Law); Forrestal
Village, Inc. v. Graham, 551 F.2d 411 (D.C. Cir. 1977) (construing
District of Columbia Securities Act), abrogated on other grounds, Lampf
v. Gilbertson, 501 U.S. 350, 111 S. Ct. 2773, 115 L. Ed. 2d 321 (1991);
Adams v. Hyannis Harborview, Inc., 838 F. Supp. 676 (D. Mass. 1993)
(construing Massachusetts Blue Sky Law); Comeau v. Rupp, 810 F. Supp.
1127 (D. Kan. 1992) (construing Kansas Securities Act); Green v. Green,
293 S.W.3d 493 (Tenn. 2009); Marram v. Kobrick Offshore Fund, Ltd.,
442 Mass. 43, 809 N.E.2d 1017 (2004); Connecticut Nat. Bank v. Giacomi
et al., 242 Conn. 17, 699 A.2d 101 (1997); Gohler v. Wood, 919 P.2d 561
(Utah 1996); Esser Distributing Co. v. Steidl, 149 Wis. 2d 64, 437 N.W.2d
884 (1989); Everts v. Holtmann, 64 Or. App. 145, 667 P.2d 1028 (1983);
Arnold v. Dirrim, 398 N.E.2d 426 (Ind. App. 1979); Bradley v. Hullander,
272 S.C. 6, 249 S.E.2d 486 (1978). See, also, David O. Blood, There
Should Be No Reliance in the “Blue Sky,” 1998 BYU L. Rev. 177 (1998);
12A Long & Feigin, supra note 18, § 9:117.13.
27
Gohler, supra note 26, 919 P.2d at 566.
28
Louis Loss, Commentary on the Uniform Securities Act 148 (1976)
(emphasis in original).
29
Guarino v. Interactive Objects, Inc., 122 Wash. App. 95, 86 P.3d 1175
(2004).
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the Securities Exchange Act of 1934, and the court applied
reliance principles drawn from that act and the related regula-
tion commonly known as rule 10b-5. A Georgia appellate court
reached the same result in interpreting a state statute patterned
after the Securities Exchange Act of 1934.30
[7] Based upon the plain language of § 8-1118(1), its rela-
tionship to § 410(a)(2) of the 1956 Uniform Securities Act, and
§ 12(2) of the Securities Act of 1933, and the weight of case
law interpreting similar state statutes, we hold that reliance is
not an element of an investor’s claim against the seller of a
security under § 8-1118(1).
(b) Sophistication of Investor
It is undisputed that DMK and Lanoha were sophisticated
investors at the time of their investment in RVBF. DMK and
Lanoha contend that for purposes of establishing liability
under § 8-1118(1), their level of sophistication does not mat-
ter. However, the district court found this fact to be of signifi-
cance, reasoning that while there may be a rationale for allow-
ing redress to an unsophisticated investor who relies upon oral
representations which are contrary to a written prospectus, “in
a situation in which a sophisticated investor has been fully
advised of the risks of the potential investment and then hears
‘contrary’ statements about the issue of the risk one would
[expect] he would fully investigate and require documentation
as to the inconsistencies.” While there is logic to this reason-
ing, the plain language of § 8-1118(1) does not differentiate
between sophisticated and unsophisticated investors or impose
a duty of investigation or inquiry upon any potential investor
confronted with inconsistencies between written and oral rep-
resentations by the seller of the security.
The only phrase in the statute dealing with the investor’s
knowledge at the time of the alleged misrepresentation is “the
buyer not knowing of the untruth or omission.”31 Courts con-
struing similar language in § 12(2) of the Securities Act of
1933 and state statutes derived from § 410(a)(2) of the 1956
30
Keogler v. Krasnoff, 268 Ga. App. 250, 601 S.E.2d 788 (2004).
31
§ 8-1118(1).
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Uniform Securities Act have held that it bars recovery only
when an investor has “actual knowledge that a representation is
false or knows that existing information has been withheld.”32
Courts have held that constructive knowledge is not a bar to a
claim under § 12(2) and similar state laws33 and that the statu-
tory language does not impose a duty on any investor to inves-
tigate or verify statements made by the seller of a security.34
Rejecting an argument that investors had an affirmative duty
to discover the truth of misrepresentations and omissions with
regard to an investment, an Indiana appellate court construing
a statute similar to § 8-1118(1) reasoned:
[I]f the legislature had intended to impose a duty of inves-
tigation upon the buyer, it would have expressly included
such in the working of the statute. The proscriptions of
[the Indiana statute], however, embrace a fundamental
purpose of substituting a policy of full disclosure for that
of caveat emptor. That policy would not be served by
imposing a duty of investigation upon the buyer.35
[8] We agree with this reasoning and with the conclusion
of other courts and commentators that a buyer’s sophistication
is irrelevant to a claim under § 12(2) of the Securities Act of
1933 and similar state statutes.36 As one court put it, “Section
12(2) [of the Securities Act of 1933] does not establish a
graduated scale of duty depending upon the sophistication and
32
Wright v. National Warranty Co., 953 F.2d 256, 262 (6th Cir. 1992). See,
also, MidAmerica Federal S & L, supra note 22; Sanders, supra note 21;
In re Olympia Brewing Co. Securities Litigation, 612 F. Supp. 1367 (N.D.
Ill. 1985); Marram, supra note 26; 12A Long & Feigin, supra note 18,
§ 9:31.
33
Dunn, supra note 26; MidAmerica Federal S & L, supra note 22; Marram,
supra note 26; 12A Long & Feigin, supra note 18, § 9:130.
34
Dunn, supra note 26; MidAmerica Federal S & L, supra note 22; In re
Olympia Brewing Co. Securities Litigation, supra note 32; Marram, supra
note 26. See, also, Bradley, supra note 26; 12A Long & Feigin, supra note
18, § 9:32.
35
Kelsey v. Nagy, 410 N.E.2d 1333, 1336 (Ind. App. 1980).
36
See, Wright, supra note 32; Marram, supra note 26; 12A Long & Feigin,
supra note 18, § 9:31.
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access to information of the customer.”37 The same is true of
§ 8-1118(1).
(c) Exculpatory Provisions
The district court also concluded that DMK and Lanoha
should be held to the affirmation in their subscription agree-
ments that they had not relied on any oral or written represen-
tation or statement except those contained in the PPM. DMK
and Lanoha argue that this was error, because § 8-1118(5)
provides that “[a]ny condition, stipulation, or provision binding
any person acquiring any security or receiving any investment
advice to waive compliance with any provision of the act or
any rule or order under the act shall be void.” But Renewable
and the individual defendants contend the district court’s rul-
ing was correct, relying on a federal case holding that “in the
law of securities a written disclosure trumps an inconsistent
oral statement.”38
The provision of the PPM upon which Renewable and
the individual defendants, as well as and the district court,
relied is sometimes referred to as an “integration clause.” The
Supreme Judicial Court of Massachusetts considered whether
an integration clause in a subscription agreement barred an
action under a Massachusetts statute similar to § 8-1118(1)
based upon alleged oral misrepresentations and omissions by
the seller of a security. Reasoning that reliance and sophistica-
tion of the buyer are not elements of the statutory claim, the
court concluded that “the existence of contradictory written
statements, in an integration clause or otherwise, does not
provide a defense to the charge of preinvestment materially
misleading oral statements.”39 The court determined that a sec-
tion of the Massachusetts statute which prohibited any party
from waiving compliance with its provisions further supported
its conclusion that the integration clause did not bar the statu-
tory claim.
37
Sanders, supra note 21, 619 F.2d at 1229.
38
Acme Propane, Inc. v. Tenexco, Inc., 844 F.2d 1317, 1322 (7th Cir. 1988).
39
Marram, supra note 26, 442 Mass. at 55, 809 N.E. at 1028.
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In MidAmerica Federal S & L v. Shearson/American Exp.,40
the 10th Circuit Court of Appeals held that a securities dealer
could be held liable to an investor under an Oklahoma statute
similar to § 8-1118(1) for oral misrepresentations by one of
its brokers, even though correct information was furnished in
prospectuses later sent to the investor. The court distinguished
the holding in Acme Propane, Inc. v. Tenexco, Inc.,41 that a
written disclosure trumps an inconsistent oral statement, upon
which Renewable and the individual defendants rely, noting
that the court in that case was dealing with a liability claim
under rule 10b-5, whereas §12(2) of the Securities Act of
1933, upon which the Oklahoma statute was based, “dictates a
different outcome.”42 The court in MidAmerica Federal S & L
reasoned that unlike liability claims under rule 10b-5, § 12(2)
“has no requirement of justifiable reliance on the part of a
purchaser” and that the “purchaser’s investment sophistication
is immaterial.”43 The court cited with approval a commenta-
tor’s observation that “‘it is a firmly entrenched principle of
§ 12(2) that the “[a]vailability elsewhere of truthful infor-
mation cannot excuse untruths or misleading omissions” by
the seller.’”44
Because we have concluded that reliance is not an element
of a claim under § 8-1118(1) and the sophistication of the
investor is irrelevant to such claim, we conclude that the dis-
trict court erred in determining that the integration clauses in
the subscription agreements executed by DMK and Lanoha bar
their claims under § 8-1118(1).
40
MidAmerica Federal S & L, supra note 22.
41
Acme Propane, Inc., supra note 38.
42
MidAmerica Federal S & L, supra note 22, 886 F.2d at 1256.
43
Id.
44
Id. at 1256-57, quoting Martin I. Kaminsky, An Analysis of Securities
Litigation Under Section 12(2) and How It Compares With Rule 10b-5, 13
Hous. L. Rev. 231 (1976) (quoting Dale v. Rosenfeld, 229 F.2d 855 (2d
Cir. 1956)).
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(d) Summary
We conclude that the district court erred in entering sum-
mary judgment with respect to the § 8-1118(1) claim of DMK
and Lanoha. There remain genuine issues of material fact
concerning whether the alleged misrepresentations and omis-
sions of material fact were made, the nature of such misrepre-
sentations and omissions, and whether DMK and Lanoha had
actual knowledge of the true facts which they allege to have
been misrepresented or omitted.
2. Other Issues
(a) Exhibits 12 Through 20
Renewable and the individual defendants argue that exhibits
12 through 20 were not received in evidence at the summary
judgment hearing and should not be considered on appeal. The
exhibits in question were offered by DMK and Lanoha over
objections which were not ruled on at the hearing or, as far as
we can tell, subsequent thereto. We have not considered these
exhibits in our analysis of this appeal.
(b) Motion to Strike
Following oral argument of this appeal, Renewable and the
individual defendants filed a motion to strike statements made
by DMK and Lanoha’s counsel during oral argument as not
supported by the record. Because we have not relied upon such
statements, we do not consider whether or not they are sup-
ported by the record and overrule the motion as moot.
(c) Motion for Attorney Fees
At the same time DMK and Lanoha filed their opening
brief on appeal, they also filed a motion for attorney fees
pursuant to that portion of § 8-1118(1) which permits a party
seeking to impose liability on a seller of securities to “sue
either at law or in equity to recover the consideration paid for
the security, together with interest at six per cent per annum
from the date of payment, costs, and reasonable attorney’s
fees.” We read the statute to permit an award of attorney fees
as a part of a judgment on the merits of the liability claim.
Nebraska Advance Sheets
300 290 NEBRASKA REPORTS
That has not occurred in this case. Although DMK and Lanoha
have prevailed on this appeal, they have yet to prove and
obtain a judgment on their liability claim under § 8-1118(1).
Accordingly, we overrule their motion for attorney fees with-
out prejudice.
V. CONCLUSION
For the foregoing reasons, we reverse the judgment of the
district court and remand the cause for further proceedings
consistent with this opinion.
R eversed and remanded for
further proceedings.
Wright, J., not participating.
P rofessional Firefighters Association of Omaha,
Local 385, AFL-CIO CLC, et al., appellants,
v. City of Omaha, Nebraska, a municipal
corporation, appellee.
___ N.W.2d ___
Filed March 6, 2015. Nos. S-14-230, S-14-375, S-14-627.
1. Summary Judgment: Appeal and Error. An appellate court will affirm a lower
court’s grant of summary judgment if the pleadings and admitted evidence show
that there is no genuine issue as to any material facts or as to the ultimate infer-
ences that may be drawn from the facts and that the moving party is entitled to
judgment as a matter of law.
2. Statutes: Judgments: Appeal and Error. The meaning and interpretation of a
statute are questions of law. An appellate court independently reviews questions
of law decided by a lower court.
3. Commission of Industrial Relations: Final Orders: Contracts. When
Nebraska’s Commission of Industrial Relations enters a final order setting
wages, hours, and terms and conditions of employment which are binding on the
employer, the order is, in every sense, a contract between the parties.
4. Municipal Corporations: Public Officers and Employees: Ordinances. City
ordinances related to how city employees should be paid are agreements by the
city to follow the ordinances and pay employees at the relevant rates.
5. Actions: Employer and Employee: Wages: Attorney Fees: Case Disapproved:
Appeal and Error. To the extent Brockley v. Lozier Corp., 241 Neb. 449, 488
N.W.2d 556 (1992), authorizes two attorney fee awards under the Nebraska Wage
Payment and Collection Act to an employee who is unsuccessful at the trial court
level but successful on appeal, it is disapproved.