United States District Court, E.D. Missouri, Eastern Division
STEPHEN HINE, on Behalf of Himself and All Others Similarly Situated, Plaintiff,
SCOTTRADE, INC., and DOES 1 through 25, inclusive, Defendants.
MEMORANDUM AND ORDER
W. SIPPEL UNITED STATES DISTRICT JUDGE.
Scottrade moves to dismiss this putative class action on the
grounds that Plaintiff Stephen Hine's complaint is barred
by res judicata. Hine alleges that Scottrade breached its
brokerage agreement with him and other customers by failing
to prevent a data breach in 2013. His complaint was previously
consolidated with other Scottrade customers' complaints
arising from the same set of facts. The consolidated
complaint was dismissed with prejudice by United States
Magistrate Judge Shirley P. Mensah. Duqum v. Scottrade,
Inc., No. 4:15 CV 1537 SPM, ECRFF No. 80 (E.D. Mo. Aug.
2, 2016). Upon appeal, the United States Court of Appeals for
the Eighth Circuit affirmed the dismissal with prejudice, for
failure to state a claim upon which relief can be granted.
Kuhns v. Scottrade, Inc., 868 F.3d 711, 714 (8th
Cir. 2017). Because Hine was a party to the consolidated
complaint, he seeks the same relief in this complaint, and
the Eighth Circuit's judgment was final, I will find that
res judicata bars his complaint.
2013, hackers breached Scottrade's computer security
system and stole Stephen Hine's and other customers'
personal identifiable information. The hackers later used
that information for a stock price manipulation scheme,
illegal gambling websites, and a Bitcoin exchange. The
Federal Bureau of Investigation notified Scottrade of the
breach in late August 2015. After receiving FBI approval in
September 2015, Scottrade sent a letter to its customers
notifying them of the breach and offering free enrollment in
identity repair protection services. Between October and
December 2015, Hine and three other named plaintiffs filed
separate, but largely identical, putative class actions
complaints in United States District Courts in California,
Missouri, and Florida. See Hine v. Scottrade, Inc.,
, No. 3:15 CV 2213 (S.D. Cal); Duqum v. Scottrade,
Inc., , No. 4:15 CV 1537 (E.D. Mo); Kuhns v.
Scottrade, Inc., 4:15 CV 1812 (E.D. Mo); Martin v.
Scottrade, Inc., No. 8:15 CV 2791 (M.D. Fla). Their
complaints allege that Scottrade breached its brokerage
agreement with them, breached an implied contract, acted
negligently, was unjustly enriched, and violated state
consumer laws. Hine and Martin agreed to transfer their cases
to the Eastern District of Missouri and consolidate with
Kuhns' and Duqum's claims in one complaint.
the cases were consolidated, the magistrate judge dismissed
the complaint, with prejudice, for lack of standing. The
magistrate judge found that plaintiffs had not pleaded any
injury in fact under various legal theories. Duqum v.
Scottrade, Inc., No. 4:15-CV-1537-SPM, 2016 WL 3683001,
at *2. Hine himself did not appeal the district court's
decision. Instead, he litigated his case in the Superior
Court of California, County of San Diego. Kuhns, however,
appealed the district court's dismissal. While his appeal
was pending, Kuhns also filed a motion to voluntarily dismiss
his appeal and to dismiss Scottrade's cross-appeal.
Kuhns, 868 F.3d at 715. Kuhns wanted the litigation
to proceed in California state court through Hine's
action. Id. The United States Court of Appeals for
the Eighth Circuit denied that motion, because it was
untimely. Id. at 719.
Eighth Circuit ultimately reversed the magistrate judge's
holding on standing, Id. at 716, but it affirmed the
dismissal “with prejudice because the Consolidated
Complaint did not state claims upon which relief can be
granted.” Id. at 714. The court based its
reasoning on three conclusions: (1) the portion of the
brokerage agreement at stake was a representation not a
promise of performance; (2) Kuhns did not plead any facts to
show that Scottrade failed to use “security measures
that comply with federal law, ” or otherwise breached
the terms of the Privacy Statement; and (3) Kuhns failed to
plead facts that any customer suffered fraud, financial loss,
or any other actual damage as a result of the breach.
Id. at 717-18. The Eighth Circuit's Judgment
specifically named Hine as a plaintiff bound by the judgment.
the Eighth Circuit's ruling that plaintiffs had Article
III standing, Scottrade removed Hine's complaint to the
Southern District of California. The Southern District of
California then granted Scottrade's motion to transfer
the case-again-to the Eastern District of Missouri.
argues that I should dismiss Hine's complaint because it
is barred by res judicata and, as the Eighth Circuit found in
Kuhns, fails to state a claim upon which relief can
be granted. Hine argues that, because the Eighth Circuit did
not rule on his California State Law claims, res judicata
does not apply.
diversity case such as this, the law of the state where the
federal court sits governs the application of res judicata.
See Semtek Int'l Inc. v. Lockheed Martin Corp.,
531 U.S. 497, 508, (2001). Res judicata is a common law
doctrine that “bar[s] the reassertion of a cause of
action that has been previously adjudicated in a proceeding
between the same parties or those in privity with
them.” Lauber-Clayton, LLC v. Novus Properties
Co., 407 S.W.3d 612, 618 (Mo.Ct.App. 2013). For res
judicata to apply, “four identities” must occur:
1) the thing sued for; 2) the cause of action; 3) the persons
and parties to the action; and 4) the quality of those
persons. King Gen. Contractors, Inc. v. Reorganized
Church of Jesus Christ of Latter Day Saints, 821 S.W.2d
495, 501 (Mo. 1991). If these four items are the same in both
suits, then res judicata applies “to every point
properly belonging to the subject matter of litigation and
which the parties . . . might have brought forward at the
first two res judicata identities-the “thing sued
for” and the “cause of action”- depend on
the operative facts of the case and not the plaintiff's
legal theories. Chesterfield Vill., Inc. v. City of
Chesterfield, 64 S.W.3d 315, 319, 321 (Mo. 2002). As
defined by the Missouri Supreme Court, “[a] claim is
the aggregate of operative facts giving rise to a right
enforceable by a court. The definition of a cause of action
is nearly the same: a group of operative facts giving rise to
one or more bases for suing.” Id. at 18. If a
cause of action fulfills this test, “[s]eparate legal
theories are not to be considered as separate claims.”
King Gen. Contractors, Inc. v. Reorganized Church of
Jesus Christ of Latter Day Saints, 821 S.W.2d 495, 501
third and fourth res judicata identities pertain to the
parties. A party is identical when it is “the same
party that litigated the prior suit” or when it is in
privity with that party. Lauber-Clayton, LLC v. Novus
Props. Co., 407 S.W.3d 612, 619 (Mo.Ct.App. 2013). The
“quality” of the party is the same if the
person's status as an individual or representative in the
action is consistent. See Jordan v. Kansas City, 929
S.W.2d 882, 887 (Mo.Ct.App. 1996) (analyzing a city's
“status” in two lawsuits as a named defendant and
employer of a named defendant). If all of these identities
are fulfilled and the court in the prior case issued a final
judgment, res judicata applies and the claim is barred.
King Gen. Contractors, Inc., 821 S.W.2d at 501.
argues that the second, third, and fourth res judicata
identities are not met, and that therefore, res judicata does
not bar his claim. Hine bases this argument on the fact that
Kuhn appealed the magistrate judge's dismissal, not him.
According to Hine, the Eighth Circuit never ruled on his
California law claims, and the identity of his cause of
action is different. For the same reason, Hine argues that he
was not a party to the case dismissed by the Eighth Circuit,
either in an individual or representative capacity. He cites
to Eighth Circuit dicta purportedly holding ...