Robinhood is pushing for a Court order compelling arbitration of the remaining individual actions in a multi-district litigation concerning the January 2021 short squeeze.
The relevant motion was submitted by Robinhood Markets, Inc., Robinhood Financial LLC, and Robinhood Securities, LLC (collectively, “Robinhood”) at the Florida Southern District Court on December 9, 2024.
Robinhood requests the Court to enter an order (1) compelling arbitration of the remaining individual actions in this multidistrict litigation (MDL) and (2) staying those actions pending arbitration.
Each plaintiff a remaining individual claim is a Robinhood customer who, before opening their respective brokerage account, entered into a customer agreement that contained a mandatory arbitration clause providing for pre-dispute arbitration before Financial Industry Regulatory Authority Dispute Resolution (FINRA DR). Accordingly, all the remaining claims against Robinhood in this MDL must proceed in arbitration before FINRA DR.
On January 28, 2021, in response to extreme market volatility spurred by retail investors purchasing so-called “meme stocks,” Robinhood took a number of steps, including modifying initial and maintenance margin requirements and imposing a temporary position closing only (PCO) status for certain of the meme stocks.
Robinhood’s decision to implement the PCO resulted in immediate litigation. Scores of individual plaintiffs brought claims against Robinhood and others in federal courts, asserting causes of action for antitrust violations, a variety of state law claims including breach of contract and torts, and violations of the federal securities laws.
On April 1, 2021, the Judicial Panel on Multi-District Litigation consolidated all these individual claims into a single MDL. This Court established four tranches of claims: (1) Antitrust Tranche, (2) Robinhood Tranche, (3) Other Broker Tranche, and (4) Federal Securities Tranche.
After lead plaintiffs’ counsel for each tranche filed Master Complaints, and the parties completed briefing on Robinhood’s motions to dismiss, this Court ultimately dismissed with prejudice the Robinhood, Antitrust, and Other Broker Tranches. The Eleventh Circuit has affirmed each of these dismissals.
As for the Federal Securities Tranche, this Court granted Robinhood’s motion to dismiss in part. Accordingly, the Federal Securities Tranche proceeded to discovery on class certification and the merits.
The Court dismissed the claims of the lead plaintiffs in the Federal Securities Tranche on August 14, 2024.
With the Antitrust, Robinhood, and Other Broker Tranches dismissed with prejudice, and class certification denied in the Federal Securities Tranche, there remains only one category of claims in this MDL: individual, federal securities claims brought by plaintiffs who—though their claims were consolidated into the MDL—were not one of the settling named plaintiffs in the Federal Securities Tranche.
At the September 18, 2024 Status Conference, Robinhood informed the Court that Robinhood would seek to compel arbitration of these remaining individual claims (at that time, ten cases brought by twenty-one plaintiffs), pursuant to the terms of Robinhood’s customer agreement. Robinhood has been conferring with counsel for the remaining individual plaintiffs to (1) confirm their clients’ consent or opposition to Robinhood’s forthcoming motion to compel arbitration and (2) explore the potential for resolution without the need for arbitration.
Robinhood has been successful in resolving three of the remaining cases. Now, there remain the following seven individual actions (the “Remaining Actions”), which are the subject of this Motion:
- • Daniels v. Robinhood Financial, LLC, No. 21-cv-21261;
- Days v. Robinhood Markets, Inc., No. 21-cv-21310;
- Gatz v. Robinhood Financial, LLC, No. 21-cv-21296;
- Gossett v. Robinhood Financial, LLC, No. 21-cv-21293;
- Scarborough v. Robinhood Financial LLC, No. 23-cv-21572;
- Krumenacker v. Robinhood Financial, LLC, No. 21-cv-21343; and
- Quat v. Robinhood Financial, LLC, No. 21-cv-21404.
Each of the plaintiffs in the Remaining Actions were Robinhood customers in January 2021. Prior to opening their individual Robinhood brokerage accounts, each plaintiff assented to Robinhood’s customer agreement. As part of the account-opening process (either through the Robinhood mobile application or website), each plaintiff acknowledged that the customer agreement contained a pre-dispute arbitration clause.
Each plaintiff also represented that they carefully reviewed, understood, and agreed to the customer agreement in effect at the time, a copy of which was available via hyperlink during the sign-up process.
Although the plaintiffs signed up for Robinhood accounts at different times, each version of the customer agreement that was in effect when the plaintiffs signed up contained a mandatory arbitration clause.
The earliest relevant version of the customer agreement, agreed to by plaintiff Mike Ross in December 2014, contained the following arbitration clause:
A. This Agreement contains a pre-dispute arbitration clause. By signing an arbitration agreement, the parties agree as follows:
(1) All parties to this Agreement are giving up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed.
.. .
B. Any controversy or claim arising out of or relating to this Agreement shall be settled by arbitration in accordance with the rules of FINRA Dispute Resolution, Inc. (“FINRA DR”). I agree to arbitrate any controversy or claim before FINRA DR . . . .
Consistent with FINRA arbitration rules, the Customer Agreement provided that Robinhood could not seek to arbitrate a putative class member’s claims until class certification was denied, the class was decertified, or the customer was excluded from the class by a court. Now that the Court has denied class certification in the Federal Securities Tranche, Robinhood seeks to arbitrate the Remaining Actions in accordance with the parties’ agreement to mandatory arbitration.
