Locke Lord QuickStudy: Eighth Circuit Approves Striking Class Action ‎Allegations at the Pleading Stage

Locke Lord LLP
July 12, 2021

On June 3, 2021, the U.S. Court of Appeals for the Eighth Circuit held that a district court should ‎have stricken the plaintiff’s class action allegations at the pleading stage. Donelson v. Ameriprise ‎Financial Services, Inc., 999 F.3d 1080 (8th Cir. 2021). The decision indicates when class action ‎defendants should consider deploying what is typically a disfavored procedural mechanism to ‎neutralize a class action before discovery begins.‎

In Donelson, the plaintiff sued Ameriprise Financial Services for securities fraud and breach of ‎fiduciary duty after his stock broker mishandled his investment account. Although the plaintiff’s ‎claims turned on oral misrepresentations requiring individual proof of reliance (which almost always ‎preclude class treatment), plaintiff brought suit as a class action on behalf of all customers who ‎experienced similar improprieties—ostensibly to avoid the arbitration clause in his account ‎agreement, which required him to arbitrate all disputes with Ameriprise except for class actions.‎

Ameriprise moved to strike the plaintiff’s class allegations under Fed. R. Civ. P. 12(f) —which permits ‎a court to strike “any redundant, immaterial, impertinent, or scandalous matter”— and to compel ‎arbitration. The trial court denied the motions, but the Eighth Circuit reversed. The appellate court ‎held that the trial court abused its discretion by denying Ameriprise’s motion to strike because (1) “it ‎was apparent from the pleadings that [plaintiff] could not certify a class,” and (2) “the class allegations ‎were all that stood in the way of compelling arbitration.”‎

Donelson is an unusual endorsement of what is typically a “disfavored” practice in federal court. It ‎also deepens a split among federal courts about whether a court can strike class allegations at the ‎pleadings stage, before the plaintiff moves for class certification. While some federal courts have ‎stricken class allegations before class discovery, Pilgrim v. Universal Health Card, LLC, 660 F.3d 943, ‎‎949 (6th Cir. 2011), others have held that doing so is premature, Francis v. General Motors, LLC, 504 ‎F. Supp. 3d 659 (E.D. Mich. 2020). 

The critical task for defendants will be discerning when it is “apparent from the pleadings that plaintiff ‎cannot certify a class.” That sort of pleading will be rare. In many cases, the plaintiff’s legal and ‎factual theories will not be sufficiently developed in the pleadings to allow a defendant to ‎demonstrate, based on the allegations alone, that class treatment is clearly impossible. In Donelson, ‎Ameriprise could make the required showing because the plaintiff’s claims relied on individualized ‎oral misrepresentations made to the plaintiff by his broker. In most putative class actions, however, ‎plaintiffs allege some common course of action by the defendant that, on its face, might be ‎susceptible to common proof.‎

Donelson also indicates that moving to strike class allegations would be most prudent only when ‎doing so will dispose of the entire case. In Donelson, for example, the court was obviously ‎influenced by the fact that the plaintiff’s class allegations were the only thing standing in the way of ‎arbitration. It would have been inefficient, the court said, to needlessly force the parties to remain in ‎court when they previously decided to arbitrate. Moving to strike class allegations may also be a ‎viable strategy when the named plaintiff’s damages are so small that the case will not proceed on an ‎individual basis.‎