Court denies class certification in short squeeze lawsuit targeting Robinhood
Traders suing Robinhood over trading restrictions imposed in early 2021 have suffered another bitter defeat in Court.
On November 13, 2023, Chief Judge Cecilia M. Altonaga of the Florida Southern District Court denied the plaintiffs’ motion for class certification.
Lead Plaintiff, Blue Laine-Beveridge and Named Plaintiffs, Abraham Huacuja, Ava Bernard, Brendan Clarke, Brian Harbison, Cecilia Rivas, Doi Nguyen, Joseph Gurney, Marcel Poirier, Sandy Ng, Santiago Gil Bohórquez, and Thomas Cash have filed a Motion for Class Certification. They sought to certify a class asserting market manipulation claims under the federal securities laws against Robinhood Markets, Inc., Robinhood Financial LLC, and Robinhood Securities, LLC.
The Court said it carefully considered the parties’ written submissions, the record, and applicable law. Plaintiffs’ Motion was denied.
This case involves allegations of market manipulation by Robinhood arising from its transaction restrictions in early 2021 following the “meme stock” short squeeze. Specifically, in January 2021, market volatility prompted regulators to raise deposit requirements for clearing brokers, including Robinhood, to ensure they could cover the costs of unexecuted trades.
Robinhood could not afford the new deposit requirements and sought another way to appease regulators. It succeeded after regulators agreed to waive the deposit requirements — so long as Robinhood restricted its customers’ access to certain stocks.
Robinhood blamed market volatility for its restrictions and vehemently denied any trouble with its own liquidity. Plaintiffs allege Robinhood manipulated the market when it imposed such restrictions, accompanied by “half-truths” about market volatility while conveniently omitting any mention of liquidity issues.
Plaintiffs sought to certify a class asserting market manipulation claims.
Robinhood asked the Court to deny class certification because the class representatives are deficient, and individualized issues of reliance and damages will predominate over common issues.
Plaintiffs insisted their representatives are adequate and the case is otherwise appropriate for class certification.
The Court noted that the plaintiffs demonstrate in most respects that the case and their representatives are adequate for class treatment. However, they failed to convince the Court that individualized reliance issues will not predominate.