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Thompson Coburn attorneys win 8th Circuit victory for Scottrade in securities class action

January 19, 2018

For the second time in five months, a team of Thompson Coburn attorneys has secured a win for client Scottrade at the 8th U.S. Circuit Court of Appeals. 

In a decision announced January 9, the 8th Circuit affirmed the district court's dismissal of plaintiff Nicholas Lewis’s class action claims on the basis that his claims were precluded by the Securities Litigation Uniform Standards Act (SLUSA). 

SLUSA bans class actions that are based on the statutory or common law of a state and that allege deceptive practices in connection with the purchase or sale of a covered security. The appellate court agreed with Scottrade’s position that, despite the plaintiff’s attempts to plead around SLUSA, “the core of Plaintiff’s complaint” alleged “material misrepresentations or omissions” or employment of a “manipulative or deceptive device or contrivance” “in connection with the purchase or sale of securities” such that his claims were SLUSA-precluded. 

The plaintiff originally filed his complaint in the Southern District of California in December 2014, after which Scottrade filed and won a motion to transfer venue to the Eastern District of Missouri. The plaintiff, a Scottrade customer, alleged several state law claims stemming from his contention that Scottrade violated its duty of best execution by allegedly routing non-directed standing limit orders to trading venues that offered rebates to Scottrade. In August 2016, Judge Ross dismissed the plaintiff’s claims as SLUSA-precluded.

Writing for the court, U.S. Circuit Judge James Loken affirmed the lower court decision, taking the plaintiff to task for raising the “frivolous” argument that a breach of the duty of best execution is not “in connection with the purchase or sale of securities” and disagreeing with the plaintiff’s erroneous argument that the U.S. Supreme Court’s 2014 decision in Chadbourne & Parke v. Troice somehow narrowed the traditionally broad interpretation of the “in connection with” requirement. 

Scottrade was represented by Chris Hohn, Tom Douglass, Brandi Burke, and Dave Mangian. Chris Hohn argued the case in front of the 8th Circuit. 

In August 2017, the same team of Thompson Coburn attorneys obtained another victory for Scottrade when the 8th Circuit affirmed the dismissal of a data breach class action on the merits with prejudice. It was the first circuit-level opinion to squarely address the merits of a data breach class action, with the Court concluding that the plaintiffs’ allegations and purported claims of harm from the data breach were “not plausible,” “bare bones,” and “virtually unintelligible,” and writing that “[m]assive class action litigation should be based on more than allegations of worry and inconvenience.”

Media coverage in Law360: 8th Circ. Says SLUSA Sinks Customer Suit Against Scottrade