DMK Biodiesel v. McCoy, 859 N.W.2d 867

DMK Biodiesel, LLC and Lanoha RVBF, LLC invested as minority members in Republican Valley Biofuels, LLC (RVBF) after signing subscription agreements and receiving a private placement memorandum (PPM) that warned of speculative, high-risk investments.
Plaintiffs alleged Renewable Fuels Technology, LLC (RVBF’s manager) and four individual promoters made false oral representations and omissions inducing the investments, violating Neb. Rev. Stat. § 8-1118(1).
District court originally dismissed the complaint; the Nebraska Supreme Court reversed on procedural grounds and remanded for evidentiary proceedings.
On remand, after an evidentiary hearing, the district court granted summary judgment for defendants, reasoning plaintiffs were sophisticated investors who had disclaimed reliance on oral statements in their subscription agreements.
Plaintiffs appealed; the Nebraska Supreme Court reversed, holding genuine factual disputes remain and addressing statutory interpretation issues under § 8-1118.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether reliance is an element of a § 8-1118(1) claim	Reliance required to prove causation	Reliance not required; statute requires only causal connection "by means of"	Reliance is not an element of § 8-1118(1) claims
Relevance of investor sophistication	Sophistication irrelevant under § 8-1118(1)	Sophistication defeats claim; sophisticated investors must investigate	Investor sophistication is irrelevant to liability under § 8-1118(1)
Effect of integration/exculpatory clauses in PPM/subscription agreements	Clauses cannot bar statutory claim; § 8-1118(5) voids waivers	Integration clause bars reliance-based claims; written disclosures trump oral	Integration clauses do not bar § 8-1118(1) claims; such waivers are ineffective to avoid statute’s protections
Whether summary judgment was appropriate	Genuine issues of material fact exist about alleged misrepresentations and plaintiffs’ actual knowledge	No genuine issue; written documents and sophistication defeat claim	Summary judgment was erroneous; remanded for further proceedings

Hooper v. Freedom Fin. Group, 280 Neb. 111 (Neb. 2010) (construing state securities law and finding liability where untrue statements were made to unsophisticated investors)
Sanders v. John Nuveen & Co., Inc., 619 F.2d 1222 (7th Cir. 1980) (holding § 12(2) liability does not require proof of reliance)
MidAmerica Federal S. & L. v. Shearson/American Exp., 886 F.2d 1249 (10th Cir. 1989) (refusing to allow truthful prospectus to negate oral misrepresentations under a § 12(2)-style statute)
Acme Propane, Inc. v. Tenexco, Inc., 844 F.2d 1317 (7th Cir. 1988) (rule 10b-5 context: written disclosure can trump inconsistent oral statements)
Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43 (Mass. 2004) (integration clause does not bar claims under a Massachusetts statute similar to § 8-1118(1))