Robert McCrary v. Stifel, Nicolaus & Company
687 F.3d 1052
8th Cir.2012Background
- Plaintiffs allege violations of Section 10(b), 20(a) and Rule 10b-5 by Stifel, Harrison, and Compton based on churning and misrepresentations.
- Harrison, initially a Stifel broker, was terminated for soliciting client loans; Compton supervised Harrison at Edwardsville branch.
- Thompson and McCrary held accounts at Edwardsville branch from 2006-2009; Thompson alleges >$750,000 in losses and $250,000 in excessive commissions; McCrary alleges $400,000 in losses and $40,000 in commissions.
- Thompson arbitrated, filed and pursued discovery, and his arbitration was dismissed with prejudice for failure to comply with panel orders.
- McCrary filed a Missouri state securities action later removed to federal court, amended to add Thompson and others as defendants, asserting 10(b) and 20(a) claims.
- District court dismissed the entire complaint with prejudice, concluding class claims failed Rule 23(b)(3) and declining PSLRA analysis for individual claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court should have addressed PSLRA on individual claims prior to dismissal | McCrary/Thompson contends PSLRA analysis required for individual claims, not just class claims. | Defendants contend dismissal under Rule 23 suffices and PSLRA analysis unnecessary for individual claims. | Remand of individual claims for district court reconsideration |
| Whether class claims were properly dismissed under Rule 23(b)(3) | Class claims should proceed if common questions predominate; misrepresentations and churning uniform enough. | Claims are highly individualized; do not meet Rule 23(b)(3) requirements. | affirmed dismissal of class claims |
| Whether Thompson's arbitration should be enjoined or arbitration waiver should be resolved | Defendants waived arbitration by active participation in litigation; arbitration should be stayed. | Waiver not decided; district court did not address; arbitration autonomy preserved. | Waiver issue left for district court on remand; injunction denial affirmed |
| Whether FINRA jurisdiction issues regarding class action involvement were properly left undecided | FINRA jurisdiction divested by McCrary's class action filing; stay or divestiture necessary. | District court did not resolve; court should address on remand. | Declined to address on appeal; remand for district court to resolve |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (Supreme Court 2007) (heightened pleading state of mind standard under PSLRA)
- Lustgraaf v. Behrens, 619 F.3d 867 (8th Cir. 2010) (requirement to plead facts giving rise to strong inference of scienter)
- In re NVE Corp. Sec. Litig., 527 F.3d 749 (8th Cir. 2008) (de novo review of Rule 12(b)(6) dismissals in securities cases)
- Elam v. Neidorff, 544 F.3d 921 (8th Cir. 2008) (PSLRA pleading requirements for scienter and misrepresentation claims)
- Rowe v. Morgan Stanley Dean Witter, 191 F.R.D. 398 (D.N.J. 1999) (Rule 23 failure can lead to class-action dismissal without necessarily dismissing individual claims)
- Dataphase Systems, Inc. v. CL Systems, Inc., 640 F.2d 109 (8th Cir. 1981) (Dataphase test for preliminary injunctions)