Knights of Columbus Council 3152 v. KFS BD, Inc.

K nights of C olumbus C ounCil 3152 et al ., appellants ,
v. Kfs bD, inC., a nebrasKa Corporation,
et al ., appellees.
791 N.W.2d 317
Filed December 10, 2010. 	No. S-09-225.
1. Motions to Dismiss: Pleadings: Appeal and Error. An appellate court reviews
a district court’s order granting a motion to dismiss de novo. It accepts all the
factual allegations in the complaint as true and draws all reasonable inferences
for the nonmoving party.
2. Motions to Dismiss: Pleadings. To prevail against a motion to dismiss for failure
to state a claim, a plaintiff must allege sufficient facts, accepted as true, to state a
claim for relief that is plausible on its face.
3. ____: ____. When a plaintiff does not or cannot allege specific facts showing a
necessary element, the factual allegations, taken as true, are nonetheless plausible
if they suggest the existence of the element and raise a reasonable expectation
that discovery will reveal evidence of the element or claim.
4. Securities Regulation: Federal Acts: Courts: Jurisdiction. Federal courts have
exclusive jurisdiction over private suits brought for violations under the Securities
Exchange Act of 1934. And they also have exclusive jurisdiction over suits in
equity or in law to enforce any liability or duty created by the act or the rules and
regulations thereunder. But except for specified actions, the rights and remedies
provided under the act are in addition to any and all other rights and remedies
that may exist at law or in equity.
5. Actions: Securities Regulation: Federal Acts: Pleadings. Investors cannot
plead around the lack of a private cause of action for violations of federal securi-
ties law by captioning their claim as a common-law claim.
6. Securities Regulation: Federal Acts: Damages. The broker-dealer record-
keeping requirements under the Securities Exchange Act of 1934 do not provide
a private damage remedy for violations.
7. Negligence: Fraud: Proof. For both negligent and fraudulent misrepresentation,
the plaintiff must be a recipient of the misrepresentation to show reliance.
8. Contracts: Fraud. A person has a duty to disclose information to another in a
transaction when necessary to prevent his or her partial or ambiguous statement
from being misleading. But a plaintiff must have received the representation
before the plaintiff can show that a defendant had a duty to disclose addi-
tional facts.
9. Fraud. Mere silence cannot constitute a misrepresentation absent a duty to dis-
close information.
10. ____. When a party makes a partial or fragmentary statement that is materially
misleading because of the party’s failure to state additional or qualifying facts,
the statement is fraudulent.
11. ____. Fraudulent misrepresentations may consist of half-truths calculated to
deceive, and a representation literally true is fraudulent if used to create an
impression substantially false.
904 	280 NEBrASkA rEporTS
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:46 AM CST

12. ____. To reveal some information on a subject triggers the duty to reveal all
known material facts.
13. Fraud: Intent. An ambiguous statement is fraudulent if made with the intent
that it be understood in its false sense or with reckless disregard as to how it will
be understood.
14. Fraud: Proof. To prove fraudulent concealment, a plaintiff must prove these ele-
ments: (1) The defendant had a duty to disclose a material fact; (2) the defendant,
with knowledge of the material fact, concealed the fact; (3) the material fact was
not within the plaintiff’s reasonably diligent attention, observation, and judgment;
(4) the defendant concealed the fact with the intention that the plaintiff act or
refrain from acting in response to the concealment or suppression; (5) the plain-
tiff, reasonably relying on the fact or facts as the plaintiff believed them to be as
the result of the concealment, acted or withheld action; and (6) the plaintiff was
damaged by the plaintiff’s action or inaction in response to the concealment.
Appeal from the District Court for otoe County: paul W.
KorslunD, Judge. Affirmed in part, and in part reversed and
remanded for further proceedings.
J.L. Spray and randall V. petersen, of Mattson, ricketts,
Davies, Stewart & Calkins, for appellants.
James M. Bausch and Andre r. Barry, of Cline, Williams,
Wright, Johnson & oldfather, L.L.p., for appellee kFS BD,
Inc.
Joseph E. Jones and Timothy J. Thalken, of Fraser Stryker,
p.C., 	L.L.o., 	for 	appellee 	Mutual 	of 	omaha 	Insurance
Company.
Daniel E. klaus, of rembolt Ludtke, L.L.p., for appellees
reid D. Houser and Jeffrey N. Sime.
Gail S. perry and Derek C. Zimmerman, of Baylor, Evnen,
Curtiss, Grimit & Witt, L.L.p., for appellees richard A. Witt
and kenneth r. Cook.
heaviCan, 	C.J., 	C onnolly, 	gerrarD, 	mCC ormaCK, 	and
miller-lerman, JJ.
C onnolly, J.
The appellants are former customers of rebecca Engle,
a stockbroker formerly employed by kirkpatrick pettis, the
predecessor of kFS BD, Inc. The appellants sued kFS BD, a
kNIGHTS oF CoLuMBuS CouNCIL 3152 v. kFS BD, INC. 	905
Cite as 280 Neb. 904

Nebraska corporation and Mutual of omaha company; Mutual
of omaha Insurance Company; and officers of these two firms
(collectively the defendants). The appellants alleged claims
of vicarious liability, breach of contract, fraudulent misrep-
resentation, negligent misrepresentation, and fraudulent con-
cealment. Their theories of recovery hinged on the following
allegations: (1) kirkpatrick pettis misrepresented to them and
to federal regulators why kirkpatrick pettis terminated Engle’s
employment; and (2) the defendants concealed that Engle
was discharged because she violated state and federal securi-
ties laws.
The district court sustained the defendants’ motions to dis-
miss all of the claims for failure to state a claim upon which
relief could be granted. We affirm in part, and in part reverse.
I. BACkGrouND
1. C omplaint’s allegations
(a) General Allegations
Because kirkpatrick pettis filed a securities industry form
on December 22, 2000, we assume that all of the appellants’
allegations are directed at actions taken by kirkpatrick pettis.
To avoid confusion, we will refer to kirkpatrick pettis’ con-
duct. And in analyzing the court’s order sustaining the motion
to dismiss, we must accept as true the factual statements
and reasonable inferences from the appellants’ complaint and
attached exhibits.1
We glean the following from the appellants’ complaint. From
January 1998 to November 29, 2000, Engle was employed by
kirkpatrick pettis, a Mutual of omaha company and kFS BD’s
predecessor. kFS BD is a wholly owned subsidiary of Mutual
of omaha.
Engle worked in kirkpatrick pettis’ Nebraska City and
Syracuse, Nebraska, offices with Brian Schuster. kirkpatrick
pettis received numerous customer complaints against her. In the
spring of 2000, kirkpatrick pettis experienced a catastrophic
1 See, Doe v. Board of Regents, ante p. 492, 788 N.W.2d 264 (2010); Neb.
Ct. r. pldg. § 6-1110(c).
906 	280 NEBrASkA rEporTS

failure” of its compliance and supervisory obligations. It led
to the eventual collapse of the business. Mutual of omaha’s
chairman, chief executive officer, and board of directors took
heightened” control of kirkpatrick pettis and the supervision
of Engle.
Because 	Engle 	was 	difficult 	to 	manage 	and 	they 	no
longer wished to support the type of business she was doing,
kirkpatrick pettis discharged her. Engle then affiliated with
First union Securities, and Schuster elected to follow her.
kirkpatrick pettis decided to close the Nebraska City and
Syracuse offices because of Engle’s discharge and Schuster’s
decision to follow her. November 29, 2000, was Engle’s last
day of employment and the day that kirkpatrick pettis closed
its offices in Nebraska City and Syracuse.
Engle—while still employed with kirkpatrick pettis and
with its knowledge—falsely represented to customers that the
offices were being closed because of a reduction in the sales
force. on November 28, 2000, the day before Engle’s dis-
charge, kirkpatrick pettis sent a letter to its customers. It
stated that it would be closing its Nebraska City and Syracuse
offices on November 29. It informed its customers that they
would soon be receiving information from Engle and Schuster
announcing their affiliation with First union Securities. The
letter did not state a reason for its closing the offices or the
reason for Engle’s new affiliation. It included a number to
call if the customers wished to maintain their business with
kirkpatrick pettis.
on November 29, 2000, Engle and Schuster sent a letter
to customers announcing their affiliation with First union
Securities. The letter stated that although kirkpatrick pettis
had chosen to close the Nebraska City and Syracuse offices,
Engle and Schuster would be keeping them open as their own
business: Engle & Schuster Financial Advisory Group of First
union Securities. The letter had the new business name in
the letterhead and stated that kirkpatrick pettis had been very
helpful in making Engle and Schuster’s transfer as smooth
as possible.
on December 22, 2000, kirkpatrick pettis filed a Form u-5”
with the National Association of Securities Dealers (NASD),
kNIGHTS oF CoLuMBuS CouNCIL 3152 v. kFS BD, INC. 	907
Cite as 280 Neb. 904

now known as the Financial Industry regulatory Authority,
Inc. (FINrA).2 The Form u-5 is the u niform Termination
Notice for Securities Industry registration.” The Form u-5
stated that kirkpatrick pettis had discharged Engle and stated
the reason as a 	reduction in sales force.” When kirkpatrick
pettis filed the Form u-5, the defendants knew that Engle had
violated securities law and had pending customer complaints.
They also knew that these violations were reportable events
that kirkpatrick pettis should have disclosed on the form.
(b) Allegations Supporting Separate Claims
(i) Fraudulent Misrepresentation
The appellants alleged that in November 2000 and thereafter,
kirkpatrick pettis knowingly made false statements in its filing
with NASD and in letters it sent to the appellants. The false
statements were that Engle had left its employment because
of a reduction in its workforce and that Engle left its employ-
ment because kirkpatrick pettis was closing the Nebraska City
office. The real reasons were that she was discharged because
of customer complaints and her failure to adhere to company,
industry, and state standards of conduct. The appellants alleged
the defendants intended that the appellants rely on letters sent
to them that falsely stated they were closing the Nebraska City
office because of a reduction in its sales force. The defendants
also intended that the securities regulators rely on these mis-
representations and not commence an investigation. Finally, the
defendants intended that the appellants rely on the representa-
tions and information made public by regulators.
(ii) Negligent Misrepresentation
This claim rested solely upon the appellants’ allegations that
kirkpatrick pettis supplied false information to NASD on the
Form u-5. They alleged that the defendants provided this false
information with knowledge that it was intended for the guid-
ance of others and that the following groups would rely on it:
current and future investors, securities regulators, and future
2 See Siegel v. S.E.C., 592 F.3d 147 (D.C. Cir. 2010).
908 	280 NEBrASkA rEporTS

broker-dealers. The defendants had a public duty to give accu-
rate information and failed to exercise due care or competence
to do so. And the appellants were within the class of persons
intended to benefit from their duty and had reasonably relied
on the information.
(iii) Breach of Contract
The appellants alleged that the defendants breached the new
account agreements that each appellant signed when starting an
account. Each new account agreement required the defendants
to comply with all federal and state securities laws and all
NASD bylaws and rules. The defendants breached the agree-
ments when they failed to follow rules requiring them to file
a truthful Form u-5 and to supplement information regarding
Engle’s discharge. Furthermore, the defendants breached their
covenant of good faith and fair dealing with the appellants.
(iv) Fraudulent Concealment
The appellants alleged that the defendants owed a duty
to their customers to report the true reason for Engle’s dis-
charge—her misconduct. Instead, kFS BD 	fraudulently con-
cealed the true reason Engle was discharged.” Specifically,
the appellants alleged that members of kirkpatrick pettis’
executive committee sent 	false and misleading letters” to its
customers regarding Engle’s discharge and filed the false Form
u-5. And they allowed their agents to conceal and misrepresent
the true facts. The defendants made these representations with
knowledge of the true facts. Because of their concealment, the
appellants continued to do business with her.
The appellants alleged that the defendants knew or should
have known that because of their conduct, the appellants
would be deceived to their detriment through two means. First,
as a consequence of their sending letters with false statements
to their customers and permitting their agents to conceal and
misrepresent facts, the appellants would be unable to ascertain
the truth about Engle’s conduct. Second, as a consequence
of their filing the false Form u-5, NASD and Nebraska’s
Department of Banking and Finance would not investigate
Engle and the appellants would not ascertain the truth about
her conduct.
kNIGHTS oF CoLuMBuS CouNCIL 3152 v. kFS BD, INC. 	909
Cite as 280 Neb. 904

2. D istriCt C ourt’s orDer sustaining
D efenDants’ motions to D ismiss
Each defendant moved to dismiss all the appellants’ claims
for failure to state a cause of action or because the claim was
barred by the applicable statute of limitations. The district
court sustained the motions against each claim for failure to
state a cause of action.
regarding the fraudulent misrepresentation claim, the court
found that neither the letter kirkpatrick pettis sent to custom-
ers nor the letter Engle and Schuster sent to customers included
a false assertion. The court stated that neither letter gave a
reason for kirkpatrick pettis’ closing of the offices. The court
also dismissed the appellants’ fraudulent concealment claims.
It found that the appellants could not show that the defendants
concealed a material fact with the intent that the appellants act
in response to the concealment. It reasoned that kirkpatrick
pettis’ letter invited the appellants to maintain their relationship
with it, instead of pushing them to follow Engle. The court also
concluded that the appellants’ fraudulent concealment claim
failed because they had not alleged having access to or seeing
the Form u-5.
regarding the negligent misrepresentation claim, the court
concluded that the appellants failed to identify any justifiable
reliance. It concluded that the appellants had to show that they
acted or refrained from acting because of a false representation.
And it determined that the claim failed because they failed to
allege that they took any action based on the information in the
Form u-5.
Finally, the court concluded that the appellants’ breach of
contract claim failed for two reasons. First, federal courts
have held NASD rules and securities exchange rules do not
confer a private cause of action for violations. And the appel-
lants had attempted to circumvent these holdings by couching
the violation of NASD rules as a breach of contract claim.
Second, the appellants had failed to recite or attach the rele-
vant portion of the agreements. Thus, it was impossible to
determine whether the new account agreements had merely
incorporated securities rules or conferred additional rights
and obligations.
910 	280 NEBrASkA rEporTS

II. ASSIGNMENTS oF Error
The appellants assign that the district court erred in dis-
missing, with prejudice, their claims of breach of contract,
negligent misrepresentation, fraudulent misrepresentation, and
fraudulent concealment.
III. STANDArD oF rEVIEW
[1-3] An appellate court reviews a district court’s order
granting a motion to dismiss de novo. It accepts all the fac-
tual allegations in the complaint as true and draws all reason-
able inferences for the nonmoving party.3 To prevail against a
motion to dismiss for failure to state a claim, a plaintiff must
allege sufficient facts, accepted as true, to state a claim for
relief that is plausible on its face.4 When a plaintiff does not or
cannot allege specific facts showing a necessary element, the
factual allegations, taken as true, are nonetheless plausible if
they suggest the existence of the element and raise a reasonable
expectation that discovery will reveal evidence of the element
or claim.5
IV. ANALYSIS
1. breaCh of C ontraCt
The district court dismissed the appellants’ breach of con-
tract claim. It relied on cases that held NASD rules and securi-
ties exchange rules do not confer a private cause of action for
violations. It concluded that the appellants had attempted to
circumvent these holdings by couching a violation of NASD
rules as a breach of contract claim. The court also concluded
that it was impossible for it to determine whether the new
account agreements had merely incorporated securities rules
or expressly conferred rights and obligations. It stated that the
appellants had failed to recite or attach the relevant portion of
the agreements.
The appellants contend that it was sufficient to allege that
the defendants (1) agreed in the new customer agreements to
3 See Doe, supra note 1.
4 See id.
5 See id.
kNIGHTS oF CoLuMBuS CouNCIL 3152 v. kFS BD, INC. 	911
Cite as 280 Neb. 904

comply with all federal and state laws and NASD bylaws and
rules and (2) breached these contracts when they failed to com-
ply with these laws.
NASD is a non-profit, self-regulatory organization reg-
istered with the Securities and Exchange Commission as a
national securities association.”6 NASD, now FINrA, 	is the
primary regulatory body for the broker-dealer industry,”7 sub-
ject to control of the Securities and Exchange Commission
(SEC).8 Congress has delegated to it authority 	to promulgate
and enforce rules governing the conduct of its members,” also
subject to SEC’s approval and changes.9
[4] Federal courts have exclusive jurisdiction over private
suits brought for violations under the Securities Exchange Act
of 1934 (Securities Exchange Act).10 And they also have exclu-
sive jurisdiction over suits in equity or in law to enforce any
liability or duty created by the act or 	the rules and regulations
thereunder.”11 But except for specified actions not involved
here,12 the rights and remedies provided under the Securities
Exchange Act are in addition to 	any and all other rights and
remedies that may exist at law or in equity.”13
In its order, the court cited federal cases in which the court
held that plaintiffs cannot seek redress for a defendant’s vio-
lation of NASD rules or securities exchange rules.14 In those
6 MM&S Financial v. National Ass’n of Securities, 364 F.3d 908, 909 (8th
Cir. 2004).
7 Sparta Surgical v. Nat. Ass’n of Sec. Dealers, 159 F.3d 1209, 1210 (9th
Cir. 1998).
8 See, id.; Barbara v. New York Stock Exchange, Inc., 99 F.3d 49 (2d Cir.
1996).
9 Barbara, supra note 8, 99 F.3d at 51. See, also, Sparta Surgical, supra
note 7.
10 15 u.S.C. § 78a et seq. (2006).
11 See 15 u.S.C. § 78aa.
12 See 15 u.S.C. § 78bb(f).
13 15 u.S.C. § 78bb(a).
14 See, Jablon v. Dean Witter & Co., 614 F.2d 677 (9th Cir. 1980); Baden v.
Craig-Hallum, Inc., 646 F. Supp. 483 (D. Minn. 1986).
912 	280 NEBrASkA rEporTS

cases, however, the investors sought recovery for the broker-
dealers’ violations of such rules. Common-law securities suits
can be independent of duties or liabilities created by federal
statutes or rules.15
For example, in Zannini v. Ameritrade Holding Corp.,16 we
held that a subscriber’s class action negligence claim against an
online brokerage service was not preempted by a federal stat-
ute. That statute authorized the SEC to establish the standards
for a broker-dealer’s operational capacity. relying on federal
cases, we concluded that absent preemptive federal regulations,
courts generally permitted investors’ state law claims if they
involved the relationship between investors and their brokers;
the bargains struck between investors and their brokers; and
efficacy of the broker’s trading system, especially as compared
to its representations about the system.17
[5] But investors cannot plead around the lack of a private
cause of action for violations of federal securities law by
captioning their claim as a common-law claim. For example,
federal courts do not permit a common-law breach of contract
claim against NASD or a securities exchange for violating or
failing to enforce its own rules. These courts have precluded
these claims because the statute requiring compliance with
securities statutes and rules does not grant a private right of
action.18 Similarly, the Seventh Circuit rejected a common-law
claim for breach of fiduciary duty based on the violation of
an exchange rule when the governing statute did not provide a
private cause of action.19
[6] The u.S. Supreme Court has held that the broker-dealer
recordkeeping requirements under the Securities Exchange Act
15 See Barbara, supra note 8.
16 Zannini v. Ameritrade Holding Corp., 266 Neb. 492, 667 N.W.2d 222
(2003).
17 Id.
18 See, e.g., MM&S Financial, supra note 6; Sparta Surgical, supra note 7.
19 See Indemnified Capital Inv. v. R.J. O’Brien & Assoc., 12 F.3d 1406 (7th
Cir. 1993). See, also, In re Series 7 Broker Qualification Exam Scoring,
548 F.3d 110 (D.C. Cir. 2008).
kNIGHTS oF CoLuMBuS CouNCIL 3152 v. kFS BD, INC. 	913
Cite as 280 Neb. 904

do not provide a private damage remedy for violations.20 And
many federal courts have accordingly held no private right of
action exists for violations of rules promulgated by a securities
exchange or self-regulatory organization.21 on point here, the
Second Circuit has specifically held that a contract’s implied
incorporation of rules and regulations that govern a broker-
dealer’s dealings with an investor will not support a private
cause of action when the rules and regulations themselves pro-
vide no private cause of action.22
We agree with these authorities. permitting the appellants
to proceed with a breach of contract claim for the defendants’
alleged violation of federal recordkeeping duties would be
inconsistent with Congress’ intent to (1) give federal courts
exclusive jurisdiction over such violations and (2) preclude
private remedies for violations of recordkeeping requirements.
We conclude that the district court did not err in dismissing the
appellants’ breach of contract claim.
2. the appellants must shoW that they reCeiveD a
representation unDer any of their D eCeit C laims
The appellants argue that for their misrepresentation and
concealment claims, we should recognize their theory of reli-
ance on the integrity of the financial industry’s regulatory
system. They argue that the defendants had a public duty to
provide this information and that they wrongfully manipulated
the system by supplying inaccurate or false information or by
concealing the truth about Engle’s discharge in the Form u-5.
They do not claim that they received or learned of the state-
ments in the Form u-5. But they contend that the court erred
in requiring them to show direct reliance on the Form u-5
statements, because they relied on the consequences of the
20 See Touche Ross v. Redington, 442 u.S. 560, 99 S. Ct. 2479, 61 L. Ed. 2d
82 (1979).
21 See 5 Thomas Lee Hazen, The Law of Securities regulation § 14.26[2]
(6th ed. 2009).
22 Gurfein v. Ameritrade, Inc., 312 Fed. Appx. 410 (2d Cir. 2009). See, also,
Appert v. Morgan Stanley Dean Witter, Inc., No. 08-CV-7130, 2009 WL
3764120 (N.D. Ill. Nov. 6, 2009).
914 	280 NEBrASkA rEporTS

false filing: the lack of regulatory action against Engle and
her employment by a reputable firm after she left kirkpatrick
pettis. Thus, it was reasonable for them to conclude that she
was a reputable broker in whom they could trust.
The appellants argue that Bank of Valley v. Mattson23 sup-
ports their theory of reliance because it illustrates that a
plaintiff can rely on an indirect misrepresentation even if the
defendant did not intend this result. Instead, they argue that the
defendants had reason to expect that the appellants would rely
on their misrepresentation. We disagree with the appellants that
Bank of Valley applies here.
In Bank of Valley, we recognized an exception to the require-
ment that a plaintiff show the maker of a misrepresentation
intended the plaintiff to rely on his or her misrepresenta-
tion. We held that a claim of fraudulent misrepresentation did
not fail because the person relying on the misrepresentation
learned of it through a third party. In that case, the appellant
was told the false facts by a third party who repeated what the
maker of the misrepresentation had stated to the third party.
The appellant then made a loan to the maker in reliance on the
false facts. In concluding that the appellant could rely on the
information relayed to him by the third party, we quoted appli-
cable provisions of the restatement (Second) of Torts. First,
we stated that § 531 provides:
o ne who makes a fraudulent misrepresentation is subject
to liability to the persons or class of persons whom he
intends or has reason to expect to act or to refrain from
action in reliance upon the misrepresentation, for pecuni-
ary loss suffered by them through their justifiable reliance
in the type of transaction in which he intends or has rea-
son to expect their conduct to be influenced.”24
We agree that this section extends liability to plaintiffs that
the defendant had 	reason to expect” would rely on the false
representation. We note, however, that this class of plaintiffs
does not include every plaintiff that a reasonable person should
23 Bank of Valley v. Mattson, 215 Neb. 596, 339 N.W.2d 923 (1983).
24 Id. at 601, 339 N.W.2d at 927, quoting restatement (Second) of Torts
§ 531 (1977).
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Cite as 280 Neb. 904

have recognized as being a possible recipient of a false repre-
sentation.25 In Bank of Valley, we also relied on § 533 of the
restatement, which imposes liability for indirect misrepresen-
tations through a third party. The comments to § 533 clarify
that the maker of a misrepresentation must intend that it be
repeated to others to influence them or must have information
that gives the maker 	special reason to expect that [the misrep-
resentation] will be communicated to others, and will influence
their conduct.”26
In sum, a plaintiff can rely on the third-party communi-
cation of a defendant’s fraudulent misrepresentation if the
plaintiff shows that the defendant intended the plaintiff to
learn of and rely on it in the transaction or type of transaction
involved, or had a particular reason to believe that the plaintiff
would do so.27 But in Bank of Valley, we specifically analyzed
whether the hearer had justifiably relied on the misrepresenta-
tion. So while the third-party communication exception pro-
vides a limited exception to the intent element, Bank of Valley
did not hold that a plaintiff need not show actual reliance on
a misrepresentation.
Moreover, we have required plaintiffs to show that they
received a misrepresentation. In Brummels v. Tomasek,28 we
held that the plaintiff’s fraudulent misrepresentation claim
failed because the plaintiff did not allege that the misrepresen-
tation was made to him or her. But the plaintiff never received
the misrepresentation. So in the context of the facts in that
case, we clearly meant that the plaintiff failed to allege that he
received the representation.
The principle that a plaintiff must have received the infor-
mation before the plaintiff can show reliance is reflected in the
restatement’s § 533. That section limits liability for misrepre-
sentations made through a third party to those that 	the maker
25 See restatement, supra note 24, comment d.
26 See id., § 533, comment d. at 73.
27 See, Bank of Valley, supra note 23; restatement, supra note 24, § 531.
28 Brummels v. Tomasek, 273 Neb. 573, 731 N.W.2d 585 (2007), citing Foiles
v. Midwest Street Rod Assn. of Omaha, 254 Neb. 552, 578 N.W.2d 418
(1998).
916 	280 NEBrASkA rEporTS

intends or has reason to expect its terms will be repeated or its
substance communicated to the other, and that it will influence
his conduct in the transaction or type of transaction involved.”29
Similarly, the restatement permits the 	recipient” of a fraudu-
lent misrepresentation to recover against its maker if the recipi-
ent justifiably relied on it.30 These provisions illustrate that
plaintiffs cannot show reliance on a misrepresentation that
never reached them and of which they had no knowledge.31
[7] Similarly, for negligent misrepresentation claims, we
have stated that 	[b]y its terms, § 552 contemplates liability
to third parties only if the supplier intends for the misinforma-
tion to ultimately reach the third party or if the supplier knows
that the recipient will pass the misinformation on to the third
party.”32 We specifically declined to extend the defendant’s
liability to third parties who were not recipients of the defend-
ant’s negligent misrepresentation. So for both negligent and
fraudulent misrepresentation, the plaintiff must be a recipient
of the misrepresentation to show reliance.
[8] Also, whether the appellants received the alleged mis-
representations is relevant to their concealment claim. A per-
son has a duty to disclose information to another in a transac-
tion when necessary to prevent his or her partial or ambiguous
statement from being misleading.33 But a plaintiff must have
received the representation before the plaintiff can show that
a defendant had a duty to disclose additional facts.34 So
this type of concealment claim also depends upon whether
the appellants received the defendants’ partial or ambiguous
representations.
But the appellants counter that reliance can be shown by their
reliance on the integrity of the financial industry’s regulatory
29 restatement, supra note 24, § 533 at 73 (emphasis supplied).
30 See id., § 537 at 80.
31 Slakey Brothers Sacramento, Inc. v. Parker, 265 Cal. App. 2d 204, 71 Cal.
rptr. 269 (1968).
32 Brummels, supra note 28, 273 Neb. at 580, 731 N.W.2d at 592.
33 See Streeks v. Diamond Hill Farms, 258 Neb. 581, 605 N.W.2d 110
(2000), citing restatement, supra note 24, § 551(2).
34 restatement, supra note 24, § 551(2)(b), comment g.
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Cite as 280 Neb. 904

system. They analogize to the fraud-on-the-market doctrine,
which the u.S. Supreme Court recognized in a decision under
rule 10b-535 of the SEC’s regulations.36
When involving the purchase or sale of a security, rule
10b-5 prohibits making any untrue statement of a material
fact or omitting any material fact necessary to prevent a state-
ment from being misleading.37 The rule is authorized by a
provision of the Securities Exchange Act. That statute prohibits
manipulative or deceptive practices in buying or selling securi-
ties registered on a national securities exchange.38 The u.S.
Supreme Court has held there is a narrow exception to the
reliance requirement for actions brought under rule 10b-5. For
these claims, the Court recognized a rebuttable presumption of
reliance on a material misrepresentation reflected in the market
price of a traded security that has been fraudulently distorted.39
But the presumption is limited to situations in which investors
trade securities relying on the integrity of a well-established
securities market. The appellants ask us to apply this presump-
tion here. We decline to do so.
Here, the rationale does not exist for applying the fraud-
on-the-market doctrine. The reliance presumption is based on
efficient market theory. That is, in an open securities market,
‘the price of a company’s stock is determined by the available
material information,’”40 and affected by misrepresentations or
the withholding of material information.41 Moreover, the pre-
sumption depends upon the existence of a public statement that
reflects the alleged misrepresentations.42 Here, the appellants
35 See 17 C.F.r. § 240.10b-5 (2010).
36 See Basic Inc. v. Levinson, 485 u.S. 224, 108 S. Ct. 978, 99 L. Ed. 2d 194
(1988).
37 See 17 C.F.r. § 240.10b-5(b).
38 See 15 u.S.C. § 78j(b).
39 See Basic Inc., supra note 36.
40 Id., 485 u.S. at 241.
41 See Basic Inc., supra note 36.
42 See Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552
u.S. 148, 128 S. Ct. 761, 169 L. Ed. 2d 627 (2008).
918 	280 NEBrASkA rEporTS

did not allege, or show through exhibits, that any information
in the Form u-5 was publicly disclosed by NASD. Even if we
assumed that the report were publicly available, it would not
be a public statement of collective information that was influ-
enced by market forces. Instead, the appellants are relying on
the absence of regulatory action taken because of the filing;
failure to regulate is not an appropriate application for the reli-
ance presumption.
The fraud-on-the-market doctrine has generally been lim-
ited to securities fraud claims brought under rule 10b-5. rule
10b-5 limits claims to those involving the buying and selling
of securities, for which an efficient market theory makes sense.
Further, Congress designed the Securities Exchange Act to pro-
tect investors against the manipulation of stock prices, where
investors must rely on market integrity in securities markets
because millions of shares are traded daily.43
As noted, in contrast to transactions involving the buying or
selling of securities, the u.S. Supreme Court has held that the
broker-dealer recordkeeping requirements under the Securities
Exchange Act do not provide a private damage remedy for
violations.44 Neither the Form u-5 filing nor the letters to cus-
tomers were transactions involving the trading of securities.
We conclude that the reliance presumption is not appropriate
in this context. Thus, we reject the appellants’ argument that
they can premise their misrepresentation or concealment claims
through their alleged reliance on the absence of regulatory
action against Engle or her subsequent employment by another
broker-dealer.
3. negligent misrepresentation
As noted, the appellants’ negligent misrepresentation claim
rested solely upon their allegations that kirkpatrick pettis
supplied false information to NASD on the Form u-5. The
appellants contend that the court erred in dismissing this claim
because they could not show that they had relied on statements
in the Form u-5.
43 See Basic Inc., supra note 36.
44 See, Touche Ross, supra note 20; 5 Hazen, supra note 21.
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Cite as 280 Neb. 904

As explained, the appellants must show they were recipi-
ents of the defendant’s negligent misrepresentation.45 But the
appellants counter that under the restatement (Second) of
Torts § 552(3), the defendants had a public duty to provide
information to NASD disclosing the circumstances of Engle’s
discharge. They contend that as investors, they were within the
class of persons for whom this duty existed. We do not reach
the public duty issue, because we have already determined that
they cannot show reliance on the Form u-5 when they did not
receive statements made in the filing.
We have adopted the restatement’s § 552 for claims of neg-
ligent misrepresentation.46 That section provides:
(1) one who, in the course of his business, profession
or employment, or in any other transaction in which he
has a pecuniary interest, supplies false information for
the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by
their justifiable reliance upon the information, if he fails
to exercise reasonable care or competence in obtaining or
communicating the information.
(2) Except as stated in Subsection (3), the liability
stated in Subsection (1) is limited to loss suffered
(a) by the person or one of a limited group of persons
for whose benefit and guidance he intends to supply the
information or knows that the recipient intends to supply
it; and
(b) through reliance upon it in a transaction that he
intends the information to influence or knows that the recip-
ient so intends or in a substantially similar transaction.
(3) The liability of one who is under a public duty to
give the information extends to loss suffered by any of
the class of persons for whose benefit the duty is created,
in any of the transactions in which it is intended to pro-
tect them.47
45 See Brummels, supra note 28.
46 See Gibb v. Citicorp Mortgage, Inc., 246 Neb. 355, 518 N.W.2d 910
(1994).
47 restatement, supra note 24, § 552 at 126-27.
920 	280 NEBrASkA rEporTS

As the North Carolina Court of Appeals explained, the ele-
ments of a negligent misrepresentation claim are set out under
subsection (1) of the restatement’s § 552.48 Subsections (2)
and (3) only define the class of plaintiffs who can recover.49
Subsection (3) extends liability to a larger class of persons
than the class defined under subsection (2). But more important
to our analysis, it does not eliminate the requirement that the
extended class of beneficiaries must have received and relied
upon the misinformation.
Further, comment a. of § 552 applies to the entire section
and states that liability extends to the 	users” of commercial
information 	in which the maker was manifestly aware of the
use to which the information was to be put and intended to sup-
ply it for that purpose.”50 And the illustrations in the comments
to subsection (3) also show that a plaintiff must have relied on
the representation.51 So the appellants’ reliance on subsection
(3) of the restatement’s § 552 does not change our holding
that in negligent misrepresentation claims: The plaintiff must
receive and rely on the commercial misinformation supplied by
the defendant.52
The appellants did not allege that they received or were
aware of the statements in the Form u-5. We conclude that the
court did not err in dismissing their negligent misrepresentation
claim for failure to allege reliance.
4. frauDulent misrepresentation C laim
The appellants contend that by filing the Form u-5 and
sending letters to the appellants, the defendants 	attempted
to ‘assuage’ and ‘alleviate’ any concerns [the appellants] may
have had regarding Engle’s competency.”53 We have already
48 See Brinkman v. Barrett Kays & Associates, P.A., 155 N.C. App. 738, 575
S.E.2d 40 (2003).
49 See id.
50 restatement, supra note 24, § 552, comment a. at 128.
51 See id., comment k.
52 See, Hollywood Trucking, Inc. v. Watters, 385 Ill. App. 3d 237, 895
N.E.2d 3, 324 Ill. Dec. 3 (2008); Brinkman, supra note 48; Taylor v.
Stevens County, 47 Wash. App. 134, 732 p.2d 517 (1987).
53 Brief for appellants at 24.
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Cite as 280 Neb. 904

rejected their argument that they could show reliance on the
Form u-5 through the absence of regulatory activity against
Engle and her employment with a different broker-dealer.
Because they did not allege that they received or were aware
of statements in the Form u-5, the court also did not err in dis-
missing their fraudulent misrepresentation claim to the extent
that it was based on the Form u-5 statements. We next address
their argument that the court erred in dismissing their claim to
the extent it was based on letters to customers from kirkpatrick
pettis and from Engle and Schuster.
The court determined that the letters to customers from
kirkpatrick pettis and Engle and Schuster did not contain a
fraudulent misrepresentation, because neither letter specified a
reason for closing the Nebraska City and Syracuse offices. But
the court failed to consider whether the letters were intended to
create a false impression, even if literally true.
To state a claim for fraudulent misrepresentation, a plaintiff
must allege (1) that a representation was made; (2) that the rep-
resentation was false; (3) that when made, the representation
was known to be false or made recklessly without knowledge
of its truth and as a positive assertion; (4) that the representa-
tion was made with the intention that the plaintiff should rely
on it; (5) that the plaintiff did so rely on it; and (6) that the
plaintiff suffered damage as a result.54
[9-13] It is true that mere silence cannot constitute a misrep-
resentation absent a duty to disclose information.55 But we need
not consider whether kirkpatrick pettis owed fiduciary duties
to the appellants. When a party makes a partial or fragmentary
statement that is materially misleading because of the party’s
failure to state additional or qualifying facts, the statement is
fraudulent.56 	Fraudulent misrepresentations may consist of
half-truths calculated to deceive, and a representation literally
54 Brummels, supra note 28.
55 See Moyer v. Richardson Drug Co., 70 Neb. 190, 97 N.W. 244 (1903).
56 See, State ex rel. NSBA v. Douglas, 227 Neb. 1, 416 N.W.2d 515 (1987);
Johnson v. Richards, 155 Neb. 552, 52 N.W.2d 737 (1952); restatement,
supra note 24, § 529. See, also, State v. Douglas, 217 Neb. 199, 349
N.W.2d 870 (1984).
922 	280 NEBrASkA rEporTS

true is fraudulent if used to create an impression substantially
false.”57 	‘To reveal some information on a subject triggers
the duty to reveal all known material facts.’”58 Consistent with
imposing liability for half-truths, the restatement (Second) of
Torts § 527 provides that an ambiguous statement is fraudulent
if made with the intent that it be understood in its false sense or
with reckless disregard as to how it will be understood.
It is true that kirkpatrick pettis’ letter did not give an expla-
nation for its closing of the Nebraska City and Syracuse offices.
But in the next sentence, it stated that its customers would
shortly be receiving information from Engle and Schuster
announcing their new affiliation with First union Securities.
The letter did not disclose to customers, as the appellants’
allegations and exhibits suggest, that kirkpatrick pettis was
closing the offices because (1) it had discharged Engle for mis-
conduct and (2) Schuster had elected to follow her.
We conclude that the court erred in dismissing the appel-
lants’ fraudulent misrepresentation claim without considering
whether statements in the letters from kirkpatrick pettis and
Engle and Schuster, while literally true, were sufficient to cre-
ate a false impression. But in our de novo review, we conclude
that the appellants plausibly claimed that kirkpatrick pettis
sent or authorized letters fraudulently implying that Engle and
Schuster were leaving kirkpatrick pettis’ employment because
kirkpatrick pettis was closing its Nebraska City and Syracuse
offices for reasons unrelated to Engle’s conduct. Whether the
appellants can ultimately prove that the impression was false is
not the issue in considering a motion to dismiss. Accepting all
the factual allegations in the complaint as true and drawing all
reasonable inferences in favor of the appellants, the complaint
is sufficient to survive a motion to dismiss.
5. frauDulent C onCealment
The appellants alleged that kirkpatrick pettis fraudulently
concealed the true reason for Engle’s discharge in its Form u-5
57 See Johnson, supra note 56, 155 Neb. at 563, 52 N.W.2d at 744.
58 State ex rel. NSBA, supra note 56, 227 Neb. at 26, 416 N.W.2d at 531.
kNIGHTS oF CoLuMBuS CouNCIL 3152 v. kFS BD, INC. 	923
Cite as 280 Neb. 904

filing and in the letters that they sent to customers. Their claim
regarding the Form u-5 is twofold. First, they alleged that
kirkpatrick pettis’ failure to report the true reason for Engle’s
discharge was 	a material fact to the NASD, SEC, [the appel-
lants,] and the State of Nebraska, in their decision to allow her
to do business with the [appellants].” Second, they alleged that
the concealment was material to the appellants’ decision to
continue to do business with her.
To the extent that the appellants’ concealment claim relied
on the Form u-5 and securities regulators’ response, permit-
ting the claim would be inconsistent with federal securi-
ties law. As discussed, Congress excluded a private remedy
for a violation of filing requirements under the Securities
Exchange Act.59 We do not consider whether the appellants
could base their concealment claim upon an omission within
the Form u-5 under other circumstances. As explained above,
this part of the claim fails because they did not allege that they
received any statements in the filing. But their allegation that
the letters to them from kirkpatrick pettis and Engle consti-
tuted a fraudulent concealment was unrelated to any duty to
file reports with securities regulators. Because it does not rely
upon the violation of duties for which a remedy does not exist,
it is not precluded.
We note that an overlap exists between fraudulent conceal-
ment claims and misrepresentation claims based on half-truths
or ambiguities. That is, if a defendant’s partial or ambiguous
representation is materially misleading, then the defendant has
a duty to disclose known facts that are necessary to prevent the
representation from being misleading.60
As noted, on November 28, 2000, kirkpatrick pettis sent
a letter to its customers stating that it would be closing its
Nebraska City and Syracuse offices on November 29. It did
not give any reason for the closings or for Engle’s new affili-
ation. But it informed its customers that they would soon be
receiving information from Engle and Schuster announcing
59 See, Touche Ross, supra note 20; 5 Hazen, supra note 21.
60 See, Streeks, supra note 33; restatement, supra note 24, § 551(2)(b).
924 	280 NEBrASkA rEporTS

their affiliation with First union Securities. It included a
number to call if the customers wished to maintain their
business with kirkpatrick pettis or had any questions regarding
their account.
The district court found that kirkpatrick pettis’ letter invited
the appellants to maintain their business with it, instead of
pushing them to follow Engle. So the court determined that the
claim failed because the defendants did not conceal any mate-
rial fact with the intent that the appellants act in response to
the concealment. But the court failed to consider whether the
defendants concealed the information with the intent that the
appellants refrain from acting.
In Streeks v. Diamond Hill Farms,61 we quoted and relied on
the restatement’s § 55162 to address the appellant’s argument
that he had no duty to disclose information in a fraudulent con-
cealment case. Subsection (1), which sets out the elements of
the claim, provides:
(1) one who fails to disclose to another a fact that he
knows may justifiably induce the other to act or refrain
from acting in a business transaction is subject to the same
liability to the other as though he had represented the
nonexistence of the matter that he has failed to disclose,
if, but only if, he is under a duty to the other to exercise
reasonable care to disclose the matter in question.63
The restatement rule obviously includes a defendant’s intent
to induce another person to refrain from acting. But in Streeks,
we also quoted an earlier case as properly setting out the ele-
ments of fraudulent concealment. unfortunately, those ele-
ments did not include a defendant’s intent to induce another
person to refrain from taking action:
to prove fraudulent concealment, a plaintiff must show
that (1) the defendant had a duty to disclose a material
fact; (2) the defendant, with knowledge of the material
fact, concealed the fact; (3) the material fact was not
61 Streeks, supra note 33.
62 See restatement, supra note 24, § 551.
63 Id. at 119 (emphasis supplied).
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Cite as 280 Neb. 904

within the plaintiff’s reasonably diligent attention, obser-
vation, and judgment; (4) the defendant concealed the fact
with the intention that the plaintiff act in response to the
concealment or suppression; (5) the plaintiff, reasonably
relying on the fact or facts as the plaintiff believed them
to be as the result of the concealment, acted or withheld
action; and (6) the plaintiff was damaged by the plaintiff’s
action or inaction in response to the concealment.”64
We have been imprecise in setting out the intent element for
fraudulent concealment cases. And the intent element cannot
be read consistently with the reliance and damage elements.
Those elements require a plaintiff to show that he or she acted
or refrained from acting in response to a concealment and
sustained damages as a result. In contrast, a defendant’s intent
to induce the plaintiff to act in response to a concealment can-
not include the plaintiff’s choosing not to act. Instead, when a
plaintiff’s inaction in response to a concealment causes dam-
ages, it is because the concealment of material information
induced the plaintiff’s false belief that action was not needed.65
The concealment deprives the plaintiff of making an intelligent
choice to act or refrain from acting.
By comparison, in fraudulent misrepresentation cases, we
have stated that a plaintiff must show that the defendant
intended the plaintiff to rely on a false representation.66 That
requirement is broad enough to include a plaintiff’s action
or inaction in reliance upon a defendant’s misrepresentation,
which is consistent with restatement principles.67 And many
courts either apply the same elements for all fraud and deceit
claims, i.e., fraudulent misrepresentations or concealments, or
have specifically stated in fraudulent concealment cases that
64 Streeks, supra note 33, 258 Neb. at 589, 605 N.W.2d at 118 (emphasis
supplied).
65 See, e.g., Security Inv. Co. v. State, 231 Neb. 536, 437 N.W.2d 439 (1989).
Compare Mogensen v. Mogensen, 273 Neb. 208, 729 N.W.2d 44 (2007).
66 See Brummels, supra note 28.
67 Compare restatement, supra note 24, § 531.
926 	280 NEBrASkA rEporTS

the defendant must have intended to induce the plaintiff to
either act or refrain from action.68
[14] Because of our inconsistency, the district court failed
to consider whether the defendants intended the appellants to
refrain from acting. To avoid further mistakes, we hold that
to prove fraudulent concealment, a plaintiff must prove these
elements: (1) The defendant had a duty to disclose a material
fact; (2) the defendant, with knowledge of the material fact,
concealed the fact; (3) the material fact was not within the
plaintiff’s reasonably diligent attention, observation, and judg-
ment; (4) the defendant concealed the fact with the intention
that the plaintiff act or refrain from acting in response to the
concealment or suppression; (5) the plaintiff, reasonably rely-
ing on the fact or facts as the plaintiff believed them to be as
the result of the concealment, acted or withheld action; and (6)
the plaintiff was damaged by the plaintiff’s action or inaction
in response to the concealment.
unsurprisingly, the intent element that we first set out in In
re Estate of Stephenson69 has been repeated in other published
opinions besides Streeks. To ensure that the incorrect intent
element does not resurface, we overrule the following opin-
ions only to the extent that they can be read as precluding a
plaintiff from showing that a defendant fraudulently concealed
a material fact with the intent that the plaintiff refrain from
acting in response: Brummels v. Tomasek70; Streeks v. Diamond
Hill Farms71; In re Estate of Stephenson72; Ord v. AmFirst
68 See, e.g., Stephenson v. Capano Development, Inc., 462 A.2d 1069 (Del.
1983); ASC Const. Equip. v. City Commercial Estate, 303 Ga. App. 309,
693 S.E.2d 559 (2010); Gouge v. McNamara, 586 N.W.2d 710 (Iowa App.
1998); Francis v. Stinson, 760 A.2d 209 (Me. 2000); 7979 Airport Garage
v. Dollar Rent A Car, 245 S.W.3d 488 (Tex. App. 2007).
69 In re Estate of Stephenson, 243 Neb. 890, 503 N.W.2d 540 (1993).
70 Brummels, supra note 28.
71 Streeks, supra note 33.
72 In re Estate of Stephenson, supra note 69.
kNIGHTS oF CoLuMBuS CouNCIL 3152 v. kFS BD, INC. 	927
Cite as 280 Neb. 904

Invest. Servs.73; Kramer v. Eagle Eye Home Inspections74; and
Precision Enters. v. Duffack Enters.75
Having clarified the elements of a fraudulent concealment
claim, we turn to the sufficiency of the appellants’ complaint
on the intent element. As the trial court realized, kirkpatrick
pettis’ letter failed to explain to its customers the reason for
Engle’s discharge. Additionally, the letter also failed to disclose
to customers that it had discharged Engle and was closing the
offices because of that action, as suggested by the complaint.
Because the letter failed to state any reason, the appellants
could have reasonably believed that the offices were being
closed for an innocuous reason that did not concern them
and that Engle and Schuster were leaving kirkpatrick pettis
because of the closings.
Further, kirkpatrick pettis stated in its letter that customers
would shortly be receiving information from Engle and Schuster
about their new affiliation. And a letter from kirkpatrick pettis’
general counsel to Engle’s attorney suggests that kirkpatrick
pettis knew Engle would likely represent her discharge as a
voluntary termination. In fact, Engle and Schuster—on Engle’s
last day of employment with kirkpatrick pettis—sent a let-
ter to their customers the day after kirkpatrick pettis sent its
letter. In that letter, Engle and Schuster stated that customers
would be receiving paperwork in a couple of days to transfer
their accounts to First union Securities. They also stated that
kirkpatrick pettis was 	being very helpful in making this trans-
fer as smooth as possible.”
The letters in the attached exhibits, coupled with the com-
plaint’s allegations that kirkpatrick pettis approved them, are
sufficient to support a claim that kirkpatrick pettis knew
some of its customers were about to transfer their accounts to
73 Ord v. AmFirst Invest. Servs., 14 Neb. App. 97, 704 N.W.2d 796 (2005).
74 Kramer v. Eagle Eye Home Inspections, 14 Neb. App. 691, 716 N.W.2d
749 (2006), abrogated on other grounds, Tracy Broadcasting Corp. v.
Telemetrix, Inc., 17 Neb. App. 112, 756 N.W.2d 742 (2008).
75 Precision Enters. v. Duffack Enters., 14 Neb. App. 512, 710 N.W.2d 348
(2006).
928 	280 NEBrASkA rEporTS

Engle and Schuster’s new firm absent any disclosure regarding
Engle’s discharge.
Although the court concluded that kirkpatrick pettis’ letters
were intended to persuade customers to keep their accounts
with kirkpatrick pettis after it closed its Nebraska City and
Syracuse offices, that intent did not preclude any other purpose.
The appellants specifically alleged that because of the defend-
ants’ approval of these letters and their agents’ concealments,
they were unable to ascertain the truth about Engle’s conduct.
So another plausible purpose for concealing information about
Engle’s discharge was to ensure that the appellants did not
question investment activity in their accounts or kirkpatrick
pettis’ ability to supervise its agents.
Accepting all the factual allegations in the complaint as true
and drawing all reasonable inferences in favor of the appel-
lants, we conclude that the appellants’ complaint was sufficient
to survive a motion to dismiss. The appellants’ complaint and
exhibits allege that (1) by failing to disclose Engle’s discharge
or the reason for her discharge and (2) by allegedly permitting
Engle and Schuster to solicit customers with kirkpatrick pettis’
apparent cooperation, the defendants intended that the appel-
lants not question Engle’s misconduct. We therefore reverse the
district court’s order dismissing this claim only as it relates to
Engle’s and kirkpatrick pettis’ letters to customers.
The district court dismissed the appellants’ complaint solely
upon their failure to allege sufficient facts regarding the defend-
ants’ intent in these letters. The remaining elements raise fac-
tual issues which are not properly before us. Also, because the
court concluded that the appellants had failed to state a claim,
it did not reach their other theories of liability, and we similarly
do not reach those issues.
V. SuMMArY
In conclusion, we hold the following:
• We affirm the court’s dismissal of the breach of contract
claim, because the rules the defendants allegedly violated do
not provide a private remedy and federal courts have exclu-
sive jurisdiction over private suits brought for the alleged
violations.
kNIGHTS oF CoLuMBuS CouNCIL 3152 v. kFS BD, INC. 	929
Cite as 280 Neb. 904

• We affirm the court’s dismissal of the appellants’ negligent
misrepresentation claim. This claim, which was based solely on
statements in a securities regulations filing, fails because the
appellants did not allege that they received the statements.
• We reverse the court’s dismissal of the appellants’ fraudu-
lent misrepresentation claim to the extent that it is based on
statements made in letters kirkpatrick pettis sent or autho-
rized Engle to send to its customers. The appellants plausibly
claimed that the letters created a false impression about Engle’s
leaving her employment with kirkpatrick pettis.
• We reverse the court’s dismissal of the appellants’ fraudu-
lent concealment claim that was also based on these letters.
The appellants plausibly claimed that they would not have
transferred their business to Engle’s new broker-dealer if mate-
rial facts regarding her discharge had been disclosed.
affirmeD in part, anD in part reverseD anD
remanDeD for further proCeeDings.
W right and stephan, JJ., not participating.
allen roos anD D ean roos , C otrustees of the leslie D.
roos anD ruby s. roos trust, et al ., appellants , v.
Kfs bD, inC., a nebrasKa Corporation, anD
mutual of omaha insuranCe C ompany,
a nebrasKa Corporation, appellees.
799 N.W.2d 43
Filed December 10, 2010. 	No. S-09-477.
1. Motions to Dismiss: Pleadings: Appeal and Error. An appellate court reviews
a district court’s order granting a motion to dismiss de novo. It accepts all the
factual allegations in the complaint as true and draws all reasonable inferences
for the nonmoving party.
2. Motions to Dismiss: Pleadings. To prevail against a motion to dismiss for failure
to state a claim, a plaintiff must allege sufficient facts, accepted as true, to state a
claim for relief that is plausible on its face.
3. ____: ____. When a plaintiff does not or cannot allege specific facts showing a
necessary element, the factual allegations, taken as true, are nonetheless plausible
if they suggest the existence of the element and raise a reasonable expectation
that discovery will reveal evidence of the element or claim.
930 	280 NEBrASkA rEporTS