Traders seek to compel Robinhood deposition in short squeeze trading lawsuit
As the multi-district litigation against Robinhood Markets continues, the company seems to be reluctant to appear for a deposition. This becomes clear from documents filed earlier this week in the Florida Southern District Court.
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 submitted a discovery memorandum seeking the Court’s aid in compelling defendant Robinhood Markets, Inc. to appear for a properly noticed 30(b)(6) deposition.
Let’s recall that Robinhood is a defendant in a lawsuit concerning the trading restrictions imposed by the company in January 2021.
The crux of the latest dispute is that Robinhood refuses to sit for a 30(b)(6) deposition for 53 of the 57 noticed topics. Robinhood agreed only to provide a witness to testify as to four topics. These four topics relate solely to the existence of insurance policies, employee stock trading policies, its human resources management system, and the nature of its data analytics platform. Robinhood refuses to testify on any of the substantive issues in the case.
The only basis for Robinhood’s refusal to testify as to the 53 other topics is that it insists that Plaintiffs must depose Robinhood’s designated 30(b)(6) witnesses in their personal capacity as fact witnesses on the same date that these witnesses provide 30(b)(6) testimony as corporate designees of Robinhood. Robinhood states it will not let Plaintiffs take the depositions of these people twice, once as a 30(b)(6) designee and then again as fact witnesses.
Defendants have not produced the bulk of documents requested, particularly emails, and Plaintiff intends to use the 30(b)(6) deposition to aid in the discovery process as well as to understand Robinhood’s positions as to the important elements of the claims and defenses at issue. Thus, an early 30(b)(6) is essential to Plaintiff’s roadmap for discovery and preparing its case for trial.
Combining the 30(b)(6) deposition with fact witness depositions will force Plaintiff to delay the 30(b)(6) until Robinhood completes its production of documents, so that relevant documents can be shown to specific fact witnesses. This will prevent Plaintiff from learning at an early stage what exactly Robinhood’s positions are as to the relevant claims and defenses.
It also prevents Plaintiff from learning what potential sources of documents and other evidence may exist and who potential witnesses may be. This will prejudice Plaintiffs by denying them the ability to engage in discovery in the most effective and efficient manner.
The traders requests the Court to compel Robinhood Markets to appear for its 30(b)(6) deposition on August 25, 2023 or on an agreed date within two weeks thereafter and to be fully prepared to testify as to all of the 57 topics listed in the deposition notice. Plaintiff also requests the Court impose appropriate sanctions on Robinhood in its discretion, including $10,000 in legal fees to compensate Plaintiff for failing to appear at the properly noticed June 5th 30(b)(6) deposition, causing an unnecessary 90-day delay in discovery, and for the time and effort in filing and arguing this motion to compel Robinhood to testify as to all 57 topics listed in the August 25th properly noticed 30(b)(6) deposition.
The Consolidated Class Action Complaint (CCAC) contains two claims for relief. Count I alleges that Robinhood manipulated the prices of the Affected Stocks in violation of section 9(a) of the Securities Exchange Act of 1934. Count II alleges an identical theory, but it relies on section 10(b) and rule 10b-5 promulgated thereunder.
- Count I contains two subclaims under sections 9(a)(2) and 9(a)(4), respectively. Plaintiffs allege that Robinhood violated section 9(a)(2) by intentionally manipulating the market to artificially depress the prices of the Affected Stocks. As for section 9(a)(4), Plaintiffs allege that Robinhood misstated or omitted material facts to mislead investors into thinking that it did not have a liquidity problem — a problem that would cause Robinhood to lose investors, customers, money, and relatedly, the chance at a lucrative initial public offering.
- Count II alleges that Robinhood manipulated the market when it (1) raised margin requirements (2) canceled purchase orders for the Affected Stocks, (3) closed out options in AMC and GME early, and (4) prohibited and restricted purchases of the Affected Stocks on its platform. These actions allegedly “created a false impression of actual demand for the Affected Stocks” and “artificially increased supply of the Affected Stocks.
In August 2022, the Court partially dismissed the complaint but left the bulk of the claims to which Robinhood had to respond.