‘No Legitimate Reason’: Robinhood Hit with Class Action Over Halt on GameStop (GME) Stock Trading [UPDATE]

The multidistrict litigation over Robinhood’s decision to block investors from trading certain “meme stocks” in early 2021 has been dismissed for good by Chief United States District Judge Cecilia M. Altonaga. 

In granting Robinhood’s motion to dismiss, Judge Altonaga summarized in a 66-page order that both California and Florida law require courts to respect and enforce the terms of valid contracts, even when one party has greater bargaining power than another. The judge found that the plaintiffs failed to argue or allege that Robinhood’s customer agreement is unenforceable, and thus California and Florida law required the investors to be bound to Robinhood’s terms. 

“Those terms permitted Defendants to do precisely what they did,” the judge said, couching the plaintiffs’ case as an understandable but misguided “request to enlarge Defendants’ obligations” beyond what’s stipulated in Robinhood’s user agreement. 

Judge Altonaga wrapped up the order by acknowledging that although Robinhood investors were undoubtedly “disappointed” when the platform suspended purchases of the stocks at issue and their holdings dropped in value, the law does not afford relief to every “unfulfilled expectation.” 

“Plaintiffs’ claims fail because entertaining them would sanction a departure from the parties’ own agreement and California and Florida tort-law principles,” the order states. “For that reason, the Amended Complaint must be dismissed.”

Want to stay in the loop on class actions that matter to you? Sign up for ClassAction.org’s free weekly newsletter here.

The individual who goes by “Roaring Kitty” on YouTube and Twitter and “DeepF***ingValue” on Reddit has been hit with a proposed class action lawsuit alongside MML Investors Services, LLC and former employer Massachusetts Mutual Life Insurance Co.

The lawsuit, filed in Massachusetts federal court, alleges defendant Keith Patrick Gill fashioned himself online for more than a year as an amateur stock trader in order to increase the value of GameStop stock while failing to disclose that he’s worked as a licensed financial industry professional for the last decade. For their part, MassMutual and MML had a legal and regulatory obligation to supervise the defendant to prevent what eventually played out with regard to the GameStop price frenzy, the complaint alleges.

“Gill [achieved] his objective; he made tens of millions of dollars on his original investment,” the lawsuit alleges. 

ClassAction.org’s write-up of the case can be found here.

A California federal judge presiding over one of nearly three dozen lawsuits against Robinhood hinted this week that she will likely not issue a temporary restraining order or preliminary injunction against the company to prevent it from blocking certain transactions of volatile stocks.

As reported by Law360, United States District Judge Virginia Phillips relayed a tentative order via video conference on Wednesday denying a plaintiff attorney’s request while stopping short of making any final ruling. The plaintiff’s attorney argued a temporary restraining order or preliminary injunction is necessary in that nothing stands to prevent Robinhood from enacting the same trading restrictions it had amid the unprecedented GameStop price spike from late January. 

Subsequent analysis of Judge Phillips’ decision indicates that her hesitance to issue a temporary restraining order or preliminary injunction against Robinhood might not bode well for the lawsuits levied against the fintech brokerage company. Law360’s Dean Seal writes that according to Cornell University Law School professor Bob Hockett, Judge Phillips’ order shows “at least a provisional view of what the merits of the case are likely to be.” 

“The court here is dismissive of the likelihood of the plaintiffs prevailing on the merits that you could almost read it as a kind of merits decision,” Hockett told Law360. “It’s expressing a view that the plaintiffs really don’t even have a case here.” 

Notwithstanding the courtroom developments, Robinhood faces at least three more proposed class actions—found here, here and here.

Although Robinhood has eased the trading restrictions that have landed the company as a defendant in a slew of proposed class actions, that doesn’t mean the lawsuits against the company have stopped pouring in.   

The embattled brokerage platform, which for now sits atop of the Apple App Store download rankings, faces at least five more putative class actions, with one case alleging the company’s website is unlawfully inaccessible to blind and visually impaired users. Another suit, filed in California, names Charles Schwab & Co. as a co-defendant.

Amid the litigation, which can be found here, here, here, here and here, Florida U.S. District Judge William F. Jung recused himself from a suit filed last Tuesday, Law360 reports. The judge reportedly pulled himself from the proceedings over the fact that he’s read news reports and engaged in “extensive discussions” about the Robinhood/GameStop situation outside of court. Law360 states that the case will be randomly reassigned to another judge. 

As of this writing, Robinhood faces upward of 30 civil lawsuits centered on the trading restrictions it set for certain stocks, including GameStop, AMC Entertainment and BlackBerry, among dozens of others. 

Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s free weekly newsletter here.

Robinhood has been hit with at least three more proposed class action lawsuits, with one suit out of Florida federal court alleging the securities trading platform is “yet another Wall Street Wolf disguised in sheep’s clothing.” 

The other two lawsuits, filed in California and found here and here, largely echo earlier cases against Robinhood, alleging the company, in “purposefully, willfully, and knowingly” removing users’ ability to buy certain stocks amid an unprecedented “short squeeze,” both deprived retail investors of their ability to invest in the open market while manipulating the open market itself to artificially lower share prices. 

According to the scathing lawsuit out of Florida, Robinhood worked hand-in-glove with hedge funds Citadel Securities and Point72 Asset Management to protect Citadel subsidiary Melvin Capital Management from bleeding any more money at the expense of “mom and pop retail investors.” 

“Citadel is Robinhood’s lifeblood,” the suit claims. “It strains credulity to believe that it is a mere coincidence that the primary beneficiary of Robinhood’s sacrifice of retail investors is the Citadel-Point71-Melvin trifecta.”

As of this morning, Robinhood faces lawsuits, including a number of proposed class actions, in at least seven federal courts, with more litigation potentially on the horizon. 

In addition to the cases already detailed on this page, Robinhood faces potential class actions in Florida, California, Connecticut and New Jersey federal courts over its intentional removal of GameStop (GME) and other companies’ stocks from its trading app amid an unprecedented price increase driven by Reddit users.

The suit filed in Florida expands upon Robinhood users’ initial claims, as it also cites the embattled brokerage firm’s removal of BlackBerry (BB), AMC Entertainment (AMC), Naked Brand Group (NAKD) and Sundial Growers (SNDL) stock from its platform. One case, filed in Illinois federal court, was not filed as a class action yet similarly alleges Robinhood has harmed app users by arbitrarily halting trading for certain stocks.  

ClassAction.org will continue to update this page as the situation develops. Sign up for our free weekly newsletter here. 

Robinhood has been hit with yet another proposed class action lawsuit, this time over its removal of AMC Entertainment (AMC) stock from its brokerage platform amid this week’s Reddit-driven trading frenzy. 

Filed in Pennsylvania federal court, the 14-page complaint, found here, alleges Robinhood has manipulated the open market and deprived retail investors of their ability to invest, a sharp departure from its “let the people trade” mission statement. 

“Upon information and belief, Robinhood’s actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers,” the breach-of-contract case alleges. “Since pulling the stock from their app, AMC prices have gone up, depriving investors of potential gains.” 

Amid a flurry of potential class action litigation, Robinhood this week has also drawn the ire of the U.S. Senate Banking Committee and the New York Attorney General’s Office over its conduct, as well as scorn from independent retail investors and members of Congress.

Shortly after this blog was published, Robinhood was hit with another proposed class action lawsuit over its ban on buying shares of GameStop (GME) stock. 

The plaintiff behind the 11-page lawsuit, filed in Florida federal court and found here, claims to have owned “thousands of dollars’ worth” of GameStop stock and options at the time Robinhood banned the trading of the video game retailer’s shares and canceled millions in orders, which caused prices to drop significantly.

The case’s filing comes amid the upending of hedge funds’ plan to short GameStop stock—a financial tactic by which money can be made if a stock’s price goes down in a particular time frame—by Reddit and other social media users. 

“There were roughly 70M shares of stock shorted with only approximately 40M shares of the stock available,” the lawsuit reads. “Traders saw an opportunity for a short squeeze to force those shorts to have to buy back their shares at much higher prices.” 

As GME stock skyrocketed in price, Robinhood alerted customers around 1:00 a.m. EST on January 28 that they were no longer able to buy options contracts on the shares and could only close out existing positions, a move that preceded the company’s outright ban on buying GameStop common stock the same day, according to the case.  

“In sum, this is blatant market manipulation by Robinhood which artificially caused the price of the stock to drop while large hedge funds could profited [sic] handsomely,” the lawsuit alleges.

The suit looks to cover all Robinhood users in the United States who owned GME securities as of January 28, 2021. 

Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s free weekly newsletter here.

Did you know there's usually nothing you need to do to join, sign up for, or add your name to new class action lawsuits when they're initially filed?

Read more here: How Do I Join a Class Action Lawsuit?