On June 3, 2021, the Eighth Circuit joined the Sixth Circuit in holding that class allegations may be dismissed on a motion to strike if it is apparent from the pleadings that the class cannot be certified. Further, the Eighth Circuit noted that striking class allegations is particularly appropriate where those allegations are all that stand in the way of compelling arbitration.

• Plaintiff Mark Donelson filed a putative class action in the Western District of Missouri against Defendants Mark Sachse, Ameriprise Financial Services, Inc., and individual Ameriprise officers (collectively, “Defendants”), alleging violations of federal securities law. These claims were based on Sachse’s alleged mismanagement of Donelson’s Ameriprise investment account and the accounts of other putative class members.
• Defendants moved to strike Donelson’s class allegations and to compel arbitration based on an arbitration provision in the Ameriprise client agreement, which was incorporated by reference in Donelson’s account application. The district court denied Defendants’ motion to compel arbitration on multiple grounds, including absence of mutual agreement and lack of consideration. The court also declined to strike Donelson’s class allegations, noting that such motions are generally disfavored, and that Donelson was “entitled to explore whether class action treatment might be available.”
• On appeal, the Eighth Circuit began by examining its jurisdiction. The court looked to the Federal Arbitration Act (“FAA”), citing 9 U.S.C. § 16(a)(1)(B), which provides that “[a]n appeal may be taken from . . . an order . . . denying a petition under section 4 of [the FAA] to order arbitration to proceed.” Because Defendants invoked FAA § 4 in their motion, the Eighth Circuit held that it had jurisdiction to consider the entire order—including both arbitration and class-allegation issues.
• The court then rejected Donelson’s argument that Defendants waived their right to arbitrate by moving to strike class-action allegations at the same time they moved to compel arbitration. The court found that “Defendants did not substantially invoke the litigation machinery by moving to strike Donelson’s class-action allegations.” In reaching this conclusion, the court distinguished Defendants’ motion to strike from a request to “dispose of a case on the merits before reaching arbitration,” which would be inconsistent with the right to arbitrate and would result in waiver of that right.
• On the substantive issues, the court found that there was a valid arbitration provision, based on mutual agreement and supported by consideration, that encompassed the claims asserted by Donelson. That provision, however, permitted only individual disputes—not putative or certified class actions. Accordingly, the Eighth Circuit took up the question whether the district court abused its discretion by denying Defendants’ motion to strike Donelson’s class allegations.
• The Eighth Circuit noted that “[f]ederal courts are split as to whether class-action allegations may be stricken under Rule 12(f) prior to the filing of a motion for class-action certification when certification is a clear impossibility.” Ultimately, the court joined the Sixth Circuit in concluding that a district court may strike class allegations on the pleadings consistent with Rule 23(c)(1)(A), which “directs district courts to decide whether to certify a class ‘[a]t an early practicable time[.]’”
• Applying this rule, the Eighth Circuit found that the district court should have stricken Donelson’s class allegations “because not only was it apparent from the pleadings that Donelson could not certify a class but also the class allegations were all that stood in the way of compelling arbitration.” In particular, the court noted that Donelson could not maintain his proposed class action under Rule 23(b)(2) because two of his class claims presented individualized issues and would not be “cohesive,” while the third claim would not afford relief to private litigants. Accordingly, upon deciding that the class allegations should have been stricken based on the pleadings and that the remaining individual claims were subject to mandatory arbitration, the Eighth Circuit reversed the district court and remanded for entry of an order striking class allegations and compelling arbitration.
• While many courts have commented that striking class allegations at the Rule 12 stage is a “disfavored” or “drastic” remedy, the Eighth Circuit’s decision demonstrates that courts should take such motions seriously in appropriate cases. Indeed, Donelson shows that district courts can even abuse their discretion by declining to strike class allegations at the pleadings stage. Accordingly, Defendants should consider whether to move to strike when it is apparent from the face of the pleadings that a putative class cannot be certified—particularly when striking class allegations early in the litigation would achieve material benefits that might be forfeited were the case to proceed to the Rule 23 stage. Indeed, as Donelson shows, courts may be less reluctant to strike class allegations at the pleadings stage when it appears as though a plaintiff may have brought the case as a class action for purely strategic purposes (such as avoiding arbitration), notwithstanding the fact that the class could never be certified.
• The Eighth Circuit’s opinion in Donelson v. Ameriprise Financial Services, Inc., No. 19-3691, No. 19-3693, 999 F.3d 1080, is available here.