United States Court of Appeals

For the Eighth Circuit 

___________________________

No. 19-3691

___________________________ 

Mark Donelson, individually and on behalf of all others similarly situated

 Plaintiff - Appellee

v.

Ameriprise Financial Services, Inc.

 Defendant - Appellant

Mark J. Sachse

 Defendant

James Cracchiolo; Kelli Hunter Petruzillo; Neal Maglaque; Patrick Hugh 

O’Connell

 Defendants - Appellants

___________________________

No. 19-3693

___________________________ 

Mark Donelson, individually and on behalf of all others similarly situated

 Plaintiff - Appellee

v.

Ameriprise Financial Services, Inc.

 Defendant
-2- 

Mark J. Sachse

 Defendant - Appellant

James Cracchiolo; Kelli Hunter Petruzillo; Neal Maglaque; Patrick Hugh 

O’Connell

 Defendants 

____________

Appeal from United States District Court 

for the Western District of Missouri - Kansas City

____________ 

Submitted: January 13, 2021

Filed: June 3, 2021 

____________

Before GRUENDER, BENTON, and STRAS, Circuit Judges. 

____________

GRUENDER, Circuit Judge. 

Plaintiff Mark Donelson filed suit against Defendants Mark Sachse, 

Ameriprise Financial Services, Inc., and individual Ameriprise officers (collectively 

“Defendants”), alleging violations of federal securities law. He also sought to 

represent other Sachse and Ameriprise clients in a class action. Defendants moved 

to strike Donelson’s class-action allegations and to compel arbitration. The district 

court denied these motions. Defendants appeal. We reverse and remand for entry 

of an order striking Donelson’s class-action allegations and compelling arbitration. 
-3- 

I.

According to his first amended complaint,1 Donelson is a high school graduate 

with no training in trading securities. Donelson had an investment account with 

Robert W. Baird & Co. in 2008. In 2008, Sachse, who worked for Baird, contacted 

Donelson and told him that Sachse had heard that Donelson was adept at trading 

options. Sachse told Donelson that he was a former attorney who had stopped 

practicing law because he no longer enjoyed it. Unbeknownst to Donelson, Sachse 

had been disbarred by the Kansas Supreme Court in 2007 after multiple former 

clients filed ethics complaints.

In 2010, Sachse stopped working at Baird and became a broker and 

investment advisor at Ameriprise. At Sachse’s invitation, Donelson then moved his 

investment account from Baird to Ameriprise. In the process of doing so, Donelson 

and Sachse met at a restaurant so that Donelson could sign the papers needed to open 

his new Ameriprise account. At the restaurant, Sachse had a copy of the Account 

Application, which he filled out himself, checking each box that, according to him, 

required checking. Donelson instructed Sachse that under no circumstances was he 

to trade on margin any securities in or for the account. Nevertheless, Sachse checked 

a box in the Account Application that authorized margin borrowing. Sachse told 

Donelson he checked the box as a formality and assured Donelson that he would not 

trade any securities on margin. Donelson signed the Account Application as Sachse 

instructed, without reading it. 

The Account Application included a recitation that stated:

You acknowledge that you have received and read the Agreement and 

agree to abide by the terms and conditions as currently in effect or as 

they may be amended from time to time. You hereby consent to all 

these terms and conditions with full knowledge and understanding of 

the information contained in the Agreement. This account is governed 

by a predispute arbitration clause which is found in Section 26, Page 3 

1

For the purposes of this opinion, we accept Donelson’s allegations as true.
-4- 

of the Agreement. You acknowledge receipt of the predispute 

arbitration clause. 

The Account Application defined “Agreement” as “the Ameriprise Brokerage Client 

Agreement for Non-Qualified Accounts” (“Client Agreement”), which included an 

arbitration clause. That arbitration clause provided for arbitration of “ALL 

CONTROVERSIES THAT MAY ARISE BETWEEN US . . . , WHETHER 

ARISING BEFORE, ON OR AFTER THE DATE THIS ACCOUNT IS OPENED,” 

except for “PUTATIVE OR CERTIFIED CLASS ACTION[S].” 

After Donelson signed the Account Application, Sachse badly mishandled 

Donelson’s investment account by, among other things, misrepresenting the account 

value, trading on margin when expressly instructed not to, and misrepresenting 

reparations Ameriprise would make for problems with Donelson’s account. In 

response, Donelson filed suit against Defendants, bringing three counts against 

them. In Count I, Donelson asserted violations of § 10(b) of the Securities Exchange 

Act of 1934, 15 U.S.C. § 78j(b), and related Securities and Exchange Commission 

Rules 10b-5(a) and (c), see 17 C.F.R. § 240.10b-5. In Count II, he asserted 

violations of § 20(a) of the Securities Exchange Act. See 15 U.S.C. § 78t(a). And 

in Count III, he asserted breach of fiduciary duty under § 206 of the Investment 

Advisors Act. See 15 U.S.C. § 80b-6. Alleging that other Sachse clients 

experienced similar improprieties, Donelson sought to represent them in a class 

action. 

Defendants moved to strike Donelson’s class-action allegations and to compel 

arbitration. The district court denied these motions. Defendants appeal, challenging 

the district court’s denials. In Section II, we consider whether we have jurisdiction. 

In Section III, we determine whether Defendants waived their right to arbitrate. In 

Section IV, we address whether the district court or the arbitrator should have 

decided arbitrability. And in Section V, we address whether a valid arbitration 

clause exists and whether it encompasses the dispute between the parties. 

Ultimately, we reverse the district court’s denial of Defendants’ motions to strike 
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the class-action allegations and to compel arbitration, and we remand for entry of an 

order striking the class-action allegations and compelling arbitration.

II. 

First, we address Donelson’s arguments that either we do not have jurisdiction 

to hear this appeal or, alternatively, at a minimum, we lack jurisdiction over the 

denial of the motions to strike the class-action allegations. See, e.g., Anderson ex 

rel. Anderson v. City of Minneapolis, 934 F.3d 876, 880 (8th Cir. 2019) (“Before 

reaching the merits of the dispute, we begin with jurisdiction, which is always our 

first and fundamental question.” (brackets and internal quotation marks omitted)). 

Neither argument has merit. 

First, the Federal Arbitration Act (“FAA”) gives us jurisdiction to review the 

denial of the motions to compel arbitration. Section 16 of the FAA 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.” 9 U.S.C. § 16(a)(1)(B). Here, 

Defendants invoked § 4 of the FAA in their motions to strike the class-action 

allegations and to compel arbitration. See id. § 4 (permitting a “party aggrieved by 

the alleged failure . . . of another to arbitrate under a written agreement for 

arbitration” to “petition any United States district court . . . for an order directing 

that such arbitration proceed in the manner provided for in such agreement”). The 

district court denied these petitions in its order denying Defendants’ motions to strike 

and to compel arbitration. Therefore, we have jurisdiction to hear an appeal of this 

denial.

Donelson claims that the district court’s order denying Defendants’ motions 

to strike class-action allegations and to compel arbitration was not an order denying 

a petition under § 4 because the district court did not hold the trial required by that 

section. Section 4 states: “If the making of the arbitration agreement . . . be in issue, 

the court shall proceed summarily to the trial thereof.” However, the fact that the 
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district court did not hold a trial does not mean that the district court did not deny a 

petition under § 4 and does not preclude appellate jurisdiction. 

Donelson also argues that even if we have jurisdiction to review the district 

court’s denial of the motions to compel arbitration, we do not have jurisdiction to 

review the district court’s denial of the motions to strike the class-action allegations. 

We disagree. Under § 4, which permits an appeal to be taken from an “order,” we 

have jurisdiction to review the entire order. See Yamaha Motor Corp., U.S.A. v. 

Calhoun, 516 U.S. 199, 205 (1996) (holding that 28 U.S.C. § 1292(b)’s grant of 

appellate jurisdiction over certain interlocutory orders permitted the appellate court 

to review “any issue fairly included within the certified order because it is the order

that is appealable” (internal quotation marks omitted)). Here, § 16 of the FAA 

provides for the appeal of “order[s].” 9 U.S.C. § 16(a)(1). Thus, we have appellate 

jurisdiction to review the district court’s denial of Defendants’ motions to strike 

class-action allegations because this denial was contained in an order reviewable 

under 9 U.S.C. § 16(a)(1)(B). 

III. 

Next, we consider Donelson’s claim that Defendants waived their right to 

arbitrate by moving to strike his class-action allegations at the same time they moved 

to compel arbitration. “The issue of waiver of arbitration is one of law and subject 

to de novo review.” Dumont v. Saskatchewan Gov’t Ins., 258 F.3d 880, 886 (8th 

Cir. 2001). “A party may be found to have waived its right to arbitration if it: 

(1) knew of an existing right to arbitration; (2) acted inconsistently with that right; 

and (3) prejudiced the other party by these inconsistent acts.” Lewallen v. Green 

Tree Servicing, L.L.C., 487 F.3d 1085, 1090 (8th Cir. 2007) (internal quotation 

marks omitted). But “[i]n light of the strong federal policy in favor of arbitration, 

any doubts concerning waiver of arbitrability should be resolved in favor of 

arbitration.” Id. Here, there is no dispute that Defendants knew of an existing right 

to arbitration. Therefore, we consider whether Defendants acted inconsistently with 

their right to arbitrate and prejudiced Donelson by their inconsistent acts.
-7- 

Donelson fails to show that Defendants acted inconsistently with their right to 

arbitrate. “A party acts inconsistently with its right to arbitrate if the party 

substantially invokes the litigation machinery before asserting its arbitration right.” 

Id. (brackets and internal quotation marks omitted). “A party substantially invokes 

the litigation machinery when, for example, it files a lawsuit on arbitrable claims, 

engages in extensive discovery, or fails to move to compel arbitration and stay 

litigation in a timely manner.” Id. “[R]equest[ing] [that a court] dispose of a case 

on the merits before reaching arbitration is inconsistent with resolving the case 

through arbitration” and also counts as substantially invoking the litigation 

machinery. Hooper v. Advance Am., Cash Advance Ctrs. of Mo., Inc., 589 F.3d 917, 

921 (8th Cir. 2009) (holding that moving to dismiss for failure to state a claim three 

months prior to moving to arbitrate “substantially invoked the litigation 

machinery”).

Donelson argues that Defendants substantially invoked the litigation 

machinery by filing motions to strike his class-action allegations in his first amended 

complaint at the same time they moved to compel arbitration, which Donelson 

contends counts as requesting disposition on the merits. Donelson is mistaken. The 

motions to strike Donelson’s class-action allegations did not request a decision on 

the merits. They only requested that the district court rule that Donelson’s claims 

were individual and could not be class claims under Federal Rule of Civil Procedure 

23 so that the court could compel arbitration under the terms of the Client 

Agreement. A motion to strike class-action allegations (without an accompanying 

motion to dismiss the underlying individual allegations) is not a request for the court 

to dispose of the case “on the merits.” See Black’s Law Dictionary (11th ed. 2019) 

(defining “judgment on the merits” as “[a] judgment based on the evidence rather 

than on technical or procedural grounds”); see also Dumont, 258 F.3d at 886-87 

(holding that a party’s motion to dismiss based on jurisdictional or quasijurisdictional grounds, which included a statement that it would seek to compel 

arbitration, was not inconsistent with a known right to compel arbitration). This is 

especially the case here, where the purpose of moving to strike was so that the district 
-8- 

court could compel arbitration under the terms of the Client Agreement. See Morgan 

v. Sundance, 992 F.3d 711, 714 (8th Cir. 2021) (holding that, when a party makes

efforts to avoid invoking the litigation machinery, this weighs in favor of finding 

that the party did not act inconsistently with its right to arbitrate). 

Defendants did not substantially invoke the litigation machinery by moving 

to strike Donelson’s class-action allegations. Therefore, they have not acted 

inconsistently with their right to arbitrate, meaning they have not waived this right. 

Thus, we have jurisdiction to hear this case, and Defendants have not waived 

their right to arbitrate. 

IV. 

Next, we turn to the merits of Defendants’ appeal. We begin by addressing

Defendants’ argument that, under Prima Paint Corp. v. Flood & Conklin

Manufacturing Co., 388 U.S. 395 (1967), the district court erred by determining the 

enforceability of the contract containing the arbitration clause because an arbitrator 

should have made that determination. Ordinarily, we review de novo whether the 

district court or the arbitrator should have determined arbitrability. See Fallo v. 

High-Tech Inst., 559 F.3d 874, 877 (8th Cir. 2009). As Donelson points out, 

however, Defendants forfeited the Prima Paint argument by not raising it in the 

district court. Therefore, we review this issue for plain error at most. See Plummer 

v. McSweeney, 941 F.3d 341, 345 (8th Cir. 2019) (holding that the argument that an 

arbitrator rather than a court should have decided a matter relating to contract 

enforceability was “an entirely new issue” on appeal rather than “merely a new 

argument” and therefore was reviewed, at most, for plain error when it was not made 

in the district court). Defendants cannot satisfy the plain-error standard because “the 

requirement to proceed in a federal court can hardly be considered a miscarriage of 

justice necessitating plain-error relief.” Id. (internal quotation marks omitted). 

Thus, the district court’s determination of arbitrability does not require reversal 

under plain-error review. 
-9- 

V. 

Next, we consider Defendants’ claim that the district court erred in denying 

their motions to compel arbitration. The district court denied the motion to compel 

arbitration because it found that there was no valid arbitration clause between the 

parties due to the absence of mutual agreement and lack of consideration. The 

district court went on to deny the motions to strike the class-action allegations, 

suggesting that Donelson’s allegations met Rule 23(a)(2)’s “single common 

question” requirement and that the Defendants’ arguments to the contrary were 

“more appropriate on a motion for class certification.”

We review de novo a district court’s ruling on a motion to compel arbitration 

under § 4 of the FAA. See M.A. Mortenson Co. v. Saunders Concrete Co., 676 F.3d 

1153, 1156 (8th Cir. 2012). Under the FAA, “[a] motion to compel arbitration must 

be granted if a valid arbitration clause exists which encompasses the dispute between 

the parties.” Id. at 1156-57 (internal quotation marks omitted). We conclude both 

that a valid arbitration clause exists and that it encompasses the dispute between the 

parties.

A.

With respect to the validity issue, the parties disagree about the threshold 

question of which law governs this issue. Donelson argues that Missouri substantive 

law governs whether the arbitration clause is valid. Sachse claims that Minnesota 

substantive law controls in light of a choice-of-law clause in the Client Agreement 

so providing. We need not resolve this dispute because, even assuming that

Donelson is right about Missouri substantive law governing this issue, we agree with 

Defendants that the arbitration clause is valid. See Am. Broad. Cos. v. Aereo, Inc., 

573 U.S. 431, 445 (2014) (assuming for the sake of argument that one part of the 

losing party’s argument was correct but holding that, even so, the losing party would 

not prevail for other reasons). 
-10- 

On the merits of this issue, Defendants argue that the district court erred when 

it refused to enforce the arbitration clause on the basis that it was not supported by 

mutual assent or consideration. Donelson also argues that the arbitration clause was 

invalid because it was unconscionable. We agree with Defendants that the 

arbitration clause was valid because it was supported by mutual assent, was 

supported by consideration, and was not unconscionable. 

First, the parties mutually assented to the arbitration clause. Under Missouri 

law, “[a] valid arbitration clause . . . requires mutuality of agreement, which implies 

a mutuality of assent by the parties to the terms of the contract.” State ex rel. Hewitt 

v. Kerr, 461 S.W.3d 798, 810 (Mo. 2015) (internal quotation marks omitted). Parties 

may assent to terms expressly in a contract or “incorporated into the contract by 

reference” so long as “[t]he intent to incorporate [is] clear.” See id. “To incorporate 

terms from another document, the contract must make clear reference to the 

document and describe it in such terms that its identity may be ascertained beyond a 

doubt.” Id. at 810-11 (brackets and internal quotation marks omitted); see also Dunn 

Indus. Grp. v. City of Sugar Creek, 112 S.W.3d 421, 435 (Mo. 2003) (holding that 

an arbitration clause can be incorporated by reference into a contract). 

Defendants argue that the district court erroneously ruled that Donelson had 

not “knowingly accept[ed] the terms of the Client Agreement” based on its findings 

that Donelson never signed or received the Client Agreement (which included the 

arbitration clause) and Donelson was not shown the Account Application. 

Defendants are correct. 

Though Sachse did not provide Donelson with a copy of the Client 

Agreement, which contained the arbitration clause, Donelson still agreed to the 

arbitration clause because he was presented with and signed the Account 

Application, which expressly incorporated the arbitration clause in the Client 

Agreement. It stated: 
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You acknowledge that you have received and read the [Client] 

Agreement and agree to abide by the terms and conditions as currently 

in effect . . . . You hereby consent to all these terms and conditions with 

full knowledge and understanding . . . . This account is governed by a 

predispute arbitration clause which is found in Section 26, Page 3 of the 

[Client] Agreement . . . . 

Thus, the arbitration clause was clearly incorporated by reference in the Account 

Application. See Kerr, 461 S.W.3d at 810-11. And because Donelson signed the 

Account Application, there was mutual assent to the arbitration clause. See 

Chochorowski v. Home Depot U.S.A., 404 S.W.3d 220, 228 (Mo. 2013) (“A signer’s 

failure to read or understand a contract is not, without fraud or the signer’s lack of 

capacity to contract, a defense to the contract.”). 

Second, the arbitration clause was supported by consideration because 

Ameriprise provided a client account to Donelson. In general, “bilateral contracts 

are supported by consideration and enforceable when each party promises to 

undertake some legal duty or liability.” Baker v. Bristol Care, Inc., 450 S.W.3d 770, 

776 (Mo. 2014). But when the promises of one party are illusory rather than binding, 

there is no consideration. Id. “A promise is illusory when one party retains the 

unilateral right to amend the agreement and avoid its obligations.” Id. But, “[i]f two 

considerations are given for a promise, one . . . legally sufficient . . . and the other 

not . . . , the promise is enforceable.” Id. at 774. 

Relying on Baker, Donelson argues that the arbitration agreement lacks 

consideration because Ameriprise retained the unfettered right to amend the Client 

Agreement containing the arbitration clause. In Baker, an employee and her 

employer entered into an agreement in which the parties agreed to arbitrate all legal 

claims against the other. Id. at 773. This arbitration agreement stated that 

consideration consisted of the employee’s continued employment and mutual 

promises to resolve claims through arbitration. Id. But the agreement also clarified 

that the employee was an at-will employee and that the employer could unilaterally 

amend, modify, or revoke the agreement upon thirty days’ prior written notice to the 
-12- 

employee. Id. at 773. The Missouri Supreme Court held that the arbitration 

agreement failed for lack of consideration because the two sources of consideration 

were illusory. Id. at 776-77.

But Baker is inapposite here because the source of consideration supporting 

the arbitration clause is not illusory and because Ameriprise does not have the 

unilateral right to amend the Client Agreement. The Client Agreement states: 

You agree that we shall have the right to amend this Agreement by 

modifying or rescinding any existing provisions or by adding any new 

provision. You understand and acknowledge that we may modify or 

change the terms and conditions of this Agreement by mailing a written 

notice of the modification or change or a new printed Agreement to 

you . . . . Such written notice or posting of the amendment will include 

the effective date of the modification or change. No such amendment 

shall become effective prior to 30 days from the date of such notice . . . . 

The use of your account after the mailing of any written notice . . . shall 

constitute your acknowledgement and agreement to be bound thereby.

Though this provision permits modification of the Client Agreement, it also specifies 

that “use of your account . . . shall constitute your acknowledgement and agreement 

to be bound thereby.” Thus, the amendment provision presupposes that an account 

will still be provided, which constitutes consideration. See id. at 774 (defining 

consideration in part as “the transfer . . . of something of value to the other party”). 

In addition, unlike in Baker, Ameriprise does not have the right to unilaterally 

change the Client Agreement. See id. at 773. Rather, any change requires 

“acknowledgement and agreement” by Donelson in the form of “use of [his] 

account.” 

Third, the arbitration agreement is not unconscionable. Donelson claims that 

the arbitration provision is unconscionable because it requires him to arbitrate all

claims he may have against Ameriprise, but Ameriprise is not required to arbitrate 

all claims it may have against him. “Unconscionability is defined as an inequality 

so strong, gross, and manifest that it must be impossible to state it to one with 
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common sense without producing an exclamation at the inequality of it.” Eaton v. 

CMH Homes, Inc., 461 S.W.3d 426, 432 (Mo. 2015) (internal quotation marks 

omitted). The unconscionability doctrine “guards against one-sided contracts, 

oppression, and unfair surprise.” Id. But the fact that an arbitration provision applies 

to one party but not the other does not itself render the provision unconscionable. 

Id. at 433-34. Therefore, even assuming that the arbitration provision applied only

to Donelson, it would not be unconscionable. 

Because the arbitration clause was supported by mutual consent, was 

supported by consideration, and was not unconscionable, it is valid and thus 

enforceable. 

B. 

Because the arbitration clause is valid, we must consider whether it 

“encompasses the dispute between the parties.” See M.A. Mortenson, 676 F.3d at 

1156-57. By its own terms, the arbitration clause provides for arbitration of “ALL 

CONTROVERSIES THAT MAY ARISE BETWEEN US[2]

 . . . , WHETHER 

ARISING BEFORE, ON OR AFTER THE DATE THIS ACCOUNT IS OPENED,” 

except for “PUTATIVE OR CERTIFIED CLASS ACTION[S].” Thus, whether the 

arbitration clause encompasses this case turns on whether the class-action allegations

should be stricken, as Defendants argue they should. Accordingly, we consider 

whether the district court abused its discretion when it denied Defendants’ motions 

to strike Donelson’s class-action allegations. See Nationwide Ins. v. Cent. Mo. Elec. 

Co-op., Inc., 278 F.3d 742, 748 (8th Cir. 2001) (reviewing a motion to strike for 

abuse of discretion). 

Under Federal Rule of Civil Procedure 12(f), “the court may strike from a 

pleading any insufficient defense or any redundant, immaterial, impertinent, or 

2

Before the district court, Donelson argued that “US” did not include Sachse 

or the Ameriprise officers, but this issue has not been raised on appeal. 
-14- 

scandalous matter.” “Judges enjoy liberal discretion to strike pleadings under Rule 

12(f).” BJC Health Sys. v. Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir. 2007). 

And because this remedy is “drastic” and “often is sought by the movant simply as 

a dilatory or harassing tactic,” see 5C Charles Alan Wright & Arthur R. Miller, 

Federal Practice and Procedure § 1380 (3d ed.), “[s]triking a party’s pleading . . . 

is an extreme and disfavored measure,” BJC Health, 478 F.3d at 917; see Wright & 

Miller, supra, § 1380. But despite this, it is sometimes appropriate to strike 

pleadings, such as when a portion of the complaint lacks a legal basis. See, e.g., BJC 

Health, 478 F.3d at 916-18 (affirming a district court’s grant of a motion to strike 

the plaintiff’s prayer for punitive damages on the basis that fraud had not been 

pleaded with the particularity required by Rule 9(b)). 

Federal 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. Some courts permit this. See Pilgrim v. 

Universal Health Card, LLC, 660 F.3d 943, 949 (6th Cir. 2011); cf. John v. Nat’l 

Sec. Fire & Cas. Co., 501 F.3d 443, 444-45 (5th Cir. 2007) (affirming dismissal of

unsupportable class-action allegations on Rule 12(b)(6) motion). Others deny as 

premature motions to strike class-action allegations made before a plaintiff moves

to certify a class. See, e.g., Weske v. Samsung Elecs., Am., Inc., 934 F. Supp. 2d 698, 

706-07 (D.N.J. 2013). 

We agree with the Sixth Circuit that a district court may grant a motion to 

strike class-action allegations prior to the filing of a motion for class-action

certification. It is “sensible . . . to permit class allegations to be stricken at the 

pleading stage” if it is “apparent from the pleadings that the class cannot be certified” 

because “unsupportable class allegations bring ‘impertinent’ material into the 

pleading” and “permitting such allegations to remain would prejudice the defendant 

by requiring the mounting of a defense against claims that ultimately cannot be 

sustained.” Wright & Miller, supra, § 1383. This is consistent with Rule 23(c), 

which governs class-action certification, because Rule 23(c)(1)(A) directs district 

courts to decide whether to certify a class “[a]t an early practicable time,” and 
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nothing in Rule 23(c) indicates that the court must await a motion by the plaintiffs. 

See Pilgrim, 660 F.3d at 949. 

We conclude it was an abuse of discretion for the district court to deny the 

motions to strike the class-action allegations. We reach this conclusion 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. As 

for Counts I and II, Donelson cannot maintain a class action because the class claims 

would not be cohesive. As for Count III, Donelson cannot maintain a class action 

because that cause of action could not provide the injunctive or declaratory relief 

required by Rule 23(b)(2).3

 Under these circumstances, delaying the decision on 

whether Donelson could certify a class would needlessly force the parties to remain 

in court when they previously agreed to arbitrate. It also risks forcing Defendants 

to litigate, until the district court rules on Donelson’s not-yet-filed motion for class 

certification, with one hand tied behind their backs to avoid substantially invoking 

the litigation machinery and waiving their right to arbitrate. 

With respect to Counts I and II, the class-action allegations should have been 

stricken because class claims based on these counts would not be cohesive. Rule

23(b)(2) permits “[a] class action [to] be maintained if Rule 23(a) is satisfied and if 

. . . the party opposing the class has acted or refused to act on grounds that apply 

generally to the class, so that final injunctive relief or corresponding declaratory 

relief is appropriate respecting the class as a whole.” To certify a class under Rule

23(b)(2), the “class claims . . . must be cohesive.” In re St. Jude Med. Inc., 425 F.3d 

1116, 1121 (8th Cir. 2005). “[T]he cohesiveness requirement of Rule 23(b)(2) is 

more stringent than the predominance and superiority requirements for maintaining 

a class action under Rule 23(b)(3).” Ebert v. Gen. Mills, Inc., 823 F.3d 472, 480 

(8th Cir. 2016). The existence of a significant number of individualized factual and 

legal issues defeats cohesiveness and is a proper reason to deny class certification

3

At oral argument, Donelson clarified that he seeks to maintain a class action 

only under Rule 23(b)(2). 
-16- 

under Rule 23(b)(2). St. Jude, 425 F.3d at 1122. A significant number of 

individualized factual and legal issues exist “where members of a proposed class 

will need to present evidence that varies from member to member” such that the 

class claim is not “susceptible to generalized, class-wide proof.” See Ebert, 823 F.3d 

at 478-79 (internal quotation marks omitted). 

Here, Donelson cannot bring a Rule 23(b)(2) class action with respect to 

Counts I and II because a significant number of individualized determinations must 

be made in deciding whether the class members’ claims have merit. Count I asserts

violations of § 10(b) of the Securities Exchange Act and Rule 10b-5. Count II asserts 

violations of § 20(a) of the Securities Exchange Act. For Count I, the putative class 

would have to show “(1) misrepresentations or omissions of material fact or acts that 

operated as a fraud or deceit in violation of the rule; (2) causation, often analyzed in 

terms of materiality and reliance; (3) scienter on the part of the defendants; and 

(4) economic harm caused by the fraudulent activity occurring in connection with 

the purchase and sale of a security.” In re K-tel Int’l, Inc. Sec. Litig., 300 F.3d 881, 

888 (8th Cir. 2002). At least three of these four elements would require a significant 

number of individualized factual and legal determinations to be made, as the 

allegations in the first amended complaint demonstrate. For instance, whether 

Sachse or any of the other defendants committed misrepresentations, whether those 

misrepresentations were material, whether class members relied on the 

misrepresentations, and whether economic harm resulted from the 

misrepresentations would need to be resolved separately for each class member. See 

Ebert, 823 F.3d at 479-81 (noting that “even if a determination [could] be made 

class-wide on the fact and extent of [the defendant’s] role,” a number of matters 

would “still need to be resolved household by household” and therefore the claims 

lacked cohesiveness); Avritt v. Reliastar Life Ins., 615 F.3d 1023, 1037 (8th Cir. 

2010) (holding that a class was “not cohesive enough to satisfy Rule 23(b)(2)” 

because “resolution of the plaintiffs’ claims would require numerous individual 

determinations regarding [the defendant’s] representations and each purchaser’s 

reliance”); cf. McCrary v. Stifel, Nicolaus & Co., 687 F.3d 1052, 1059 (8th Cir. 

2012) (affirming a district court’s dismissal of a Rule 23(b)(3) class action alleging 
-17- 

churning, unauthorized trading, and misrepresentation by a broker and his firm on 

the basis that such claims are highly individualized).

The same is true for Count II. For a § 20(a) violation, Donelson must prove 

“(1) that a primary violator violated the federal securities laws; (2) that the alleged 

control person actually exercised control over the general operations of the primary 

violator; and (3) that the alleged control person possessed—but did not necessarily 

exercise—the power to determine the specific acts or omissions upon which the 

underlying violation is predicated.” Lustgraaf v. Behrens, 619 F.3d 867, 873 (8th 

Cir. 2010) (internal quotation marks omitted). Here, the violations of the federal 

securities laws needed for element (1) are the alleged violations of § 10(b) and Rule 

10b-5 on which Count I is based. Therefore, Count II requires the same 

individualized determinations as Count I, which defeat cohesiveness. 

As for Count III, breach of fiduciary duty under 15 U.S.C. § 80b-6, the classaction allegations should have been stricken because Donelson cannot obtain the 

relief required by Rule 23(b)(2) for this count. There is no private cause of action

for violations of this section of the statute. See Transamerica Mortg. Advisors, Inc. 

v. Lewis, 444 U.S. 11, 19-20 (1979) (holding that Congress did not provide a private 

right of action for § 80b-6 because the statute expressly provided other means of

enforcing compliance with its terms). Rule 23(b)(2) permits a class action to be 

maintained if “final injunctive relief or corresponding declaratory relief is 

appropriate respecting the class as a whole.” Because § 80b-6 does not afford any 

relief to private litigants, much less injunctive or declaratory relief, Donelson cannot 

certify class claims under Rule 23(b)(2) for violations of § 80b-6.4

4

To the extent Donelson claims that he can establish a class under § 80b-15 of 

the Investment Advisors Act, he has waived this argument. Section 80b-15 permits 

private parties to bring a cause of action solely to declare certain contracts void 

because they were made in violation of the Investment Advisors Act. Transamerica, 

444 U.S. at 16-19. Even assuming this would be sufficient injunctive or declaratory 

relief under Rule 23(b)(2), the only contracts Donelson seeks to avoid are the 

arbitration clauses in the Client Agreements. But Donelson does not even hint at 
-18- 

The district court abused its discretion by denying Defendants’ motions to 

strike without considering whether Donelson could bring a class action under Rule 

23(b), as it is “apparent from the pleadings that the class cannot be certified” under 

Rule 23(b)(2). See Wright & Miller, supra, § 1383. Because the class-action 

allegations should have been stricken, the dispute between the parties here should 

have been deemed one encompassed by the arbitration clause. See M.A. Mortenson, 

676 F.3d at 1156. 

* * * 

In sum, the arbitration clause in question here is valid, and it encompasses the 

dispute between the parties. See id. Therefore, Defendants’ motions to compel 

arbitration “must be granted,” see id. at 1156-57, and the district court erred in 

denying them. 

VI.

Thus, we reverse the district court’s denial of Defendants’ motions to strike 

the class-action allegations and to compel arbitration, and we remand for entry of an 

order striking the class-action allegations and compelling arbitration. 

______________________________

how the arbitration clauses violate the Investment Advisors Act. Because his 

argument that the arbitration clause violates the Investment Advisors Act consists of 

nothing more than a sentence in his brief without argument or citation to legal 

authority, we deem this argument waived and hold that he cannot certify a class 

under § 80b-15 to invalidate the arbitration agreements. See Milligan v. City of Red 

Oak, Iowa, 230 F.3d 355, 360 (8th Cir. 2000) (“[I]nasmuch as [the appellant’s] brief

does not support his assertion with any argument or legal authority, he has waived 

the issue and we do not address it.”).