Robinhood Moves for Summary Judgment in Outage Class Action

After answering the traders’ amended complaint, the online securities trading platform Robinhood has moved for summary judgment on all the plaintiffs’ claims. Robinhood asserts that the users’ contract and tort claims fail, chiefly because Robinhood does not have a legal duty to operate its platform free from interruptions or technological failures.  

The case concerns several dozen outages that occurred in March 2020, locking traders out of their accounts and allegedly causing them losses. The plaintiffs amended their complaint last June, contending that Robinhood, branded as an easy-to-use platform, is responsible for the outages due to lack of oversight.

Last week’s motion alleges just the opposite: Robinhood has no responsibility for outages, inevitabilities of the digital age, because in the customer agreement every user signed, they agreed to hold Robinhood harmless for trading losses and lost profits. Robinhood levies a barrage of additional arguments. 

The plaintiffs’ breach of contract and breach of the implied covenant of good faith and fair dealing claims purportedly fall short because the plaintiffs fail to identify customer agreement provisions that Robinhood breached or frustrated in connection with the outages.

Robinhood also asserts that it does not owe general fiduciary duties to its customers because it is a non-discretionary broker-dealer. As such it does not provide advice, make recommendations, solicit orders, or make discretionary trades.

The users’ negligence-related claims are barred by the economic loss doctrine, which prohibits tort recovery in pure economic loss scenarios. “Courts have consistently dismissed negligence and gross negligence claims asserted against broker-dealers on this basis,” the motion said, pointing to a recent decision in the Miami, Florida multidistrict litigation proceeding against it over the January 2021 short squeeze event.

The motion hearing is scheduled for May 12 before Judge James Donato.

The plaintiffs are represented by interim co-lead counsel Kaplan Fox & Kilsheimer LLP and Cotchett, Pitre & Mccarthy LLP.  Gibbs Law Group LLP is liaison counsel.

Robinhood is represented by Farella Braun + Martel LLP and Debevoise & Plimpton LLP.