An opposition filed by plaintiffs who are suing Robinhood in the wake of the “short squeeze” that skyrocketed stock prices earlier this year asserts that the stock trading and investing app operator and its subsidiaries cannot dodge liability after they restricted the trading of certain trending securities in January. Last Friday’s filing asserts that the plaintiffs have adequately pleaded facts showing that Robinhood failed to comply with applicable regulatory requirements and deviated from industry standards of care.
In the Southern District of Florida multidistrict litigation, the Robinhood user plaintiffs accuse the trading app of fueling market volatility, which it was unequipped to handle, then ducking responsibility for the harm it created. Specifically, the complaint alleges that Robinhood’s buy-side shut down artificially suppressed prices for several trending stocks to Robinhood’s benefit, in the form of fewer clearinghouse deposit requirements, and at the expense of both Robinhood customers and other retail investors, in the form of significant losses in the value of their holdings, the filing says.
The 63-page submission comes in response to Robinhood’s motion to dismiss. Therein, the company raised several defenses, including that it owed no duty of care to its customers and that by the terms customers agreed to, Robinhood is not liable to the plaintiffs for its actions.
The opposition refutes those assertions. It first contends that the complaint’s detailed facts state plausible negligence and gross negligence claims. The consumers assert that Robinhood owed tort duties to all foreseeable plaintiffs because Robinhood is responsible for risks it knowingly, or at least foreseeably, created.
Likewise, the opposition argues that Robinhood owed the plaintiffs fiduciary duties and disregarded them. For example, the filing says that the company’s actions knowing and intentionally wounded the high volume and volatile market for trading in the suspended stocks, “leading to dramatic drops in share values and artificially suppressed prices to the extreme financial detriment of its customers.”
In particular, the opposition focuses on the alleged fact that Robinhood markets to and recruits non-professional, novice investors. “By virtue of their inexperience, these investors naturally are especially reliant on Robinhood’s protection,” the filing says.
The Ferraro Law Firm P.A. is lead counsel for the Robinhood tranche plaintiffs and Grossman Roth Yaffa Cohen P.A. is liaison counsel. Robinhood is represented by Hunton Andrews Kurth LLP and Cravath, Swaine & Moore LLP.