Case 1:21-md-02989-CMA Document 436 Entered on FLSD Docket 11/05/2021 Page 1 of 63
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF FLORIDA
`
`CASE NO. 21-2989-MDL-ALTONAGA/Torres
`
`
`IN RE:
`
`JANUARY 2021 SHORT SQUEEZE
`TRADING LITIGATION
`____________________________________/
`
`This Document Relates to the Robinhood Tranche
`
`
`PLAINTIFFS’ OPPOSITION TO DEFENDANTS ROBINHOOD MARKETS, INC.,
`ROBINHOOD FINANCIAL LLC, AND ROBINHOOD SECURITIES, LLC’S
`MOTION TO DISMISS THE ROBINHOOD TRANCHE COMPLAINT
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`Case 1:21-md-02989-CMA Document 436 Entered on FLSD Docket 11/05/2021 Page 2 of 63
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`TABLE OF CONTENTS
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`INTRODUCTION ...................................................................................................................................... 1
`
`I.
`
`FACTUAL BACKGROUND ..............................................................................................7
`
`A.
`
`
`B.
`
`Robinhood Profits From Exponential Customer Growth and
`High-Volume Trading ..............................................................................................7
`
`C.
`
`The Regulatory Framework for Securities Trading and the Standard of Care
`for Broker-Dealers Professionals .............................................................................9
`
`Robinhood’s History of Systemic Regulatory Failures .........................................10
`
`The Events of January 2021 ...................................................................................10
`D.
`LEGAL STANDARDS .....................................................................................................14
`
`A.
`
`B.
`
`Standard of Review ................................................................................................14
`
`Applicable Law ......................................................................................................14
`
`Robinhood’s Contractual “Governing” Law Provision Does Not Govern
`Plaintiffs’ Tort Claims ...............................................................................15
`
`(i)
`
`
`(ii)
`
`Florida has the “Most Significant Relationship” to Plaintiffs’
`Tort Claims ................................................................................................17
`
`
`ARGUMENT .....................................................................................................................19
`
`A.
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`
`
`B.
`
`
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`Plaintiffs’ Detailed Factual Allegations Are More than Sufficient to State
`Plausible Negligence and Gross Negligence Claims (Counts I–II) .......................19
`
`Robinhood Owes All Foreseeable Plaintiffs Independent Tort Duties ......20
`
`The Economic Loss Rule Does Not Bar Plaintiffs’ Negligence Claims ...22
`
`(i)
`
`(ii)
`
`(iii) Robinhood’s Extreme Departures from the Standards and Regulations
`Governing Securities Brokers Support Plaintiffs’ Negligence Claims ......26
`
`Plaintiffs’ Allegations Support a Plausible Breach of Fiduciary Duty
`(Count III) ..............................................................................................................29
`
`(i)
`
`Stockbrokers Have Fiduciary Duties, the Scope and Extent of Which
`Depends on the Particular Facts of Each Case...........................................29
`
`
`i
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`II.
`
`III.
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`Case 1:21-md-02989-CMA Document 436 Entered on FLSD Docket 11/05/2021 Page 3 of 63
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`(ii)
`
`Plaintiffs’ Plead Facts Supporting a Fiduciary Relationship Arising
`from a Special or Confidential Relationship ..............................................31
`
`(iii) Defendants’ Cited Case Law is Inapposite ................................................34
`
`(iv) Robinhood Securities Owed a Fiduciary Duty to the Robinhood
`Plaintiffs .....................................................................................................35
`
`Plaintiffs Adequately Plead Alternative Claims for Breach of Implied
`Covenant of Good Faith and Fair Dealing and Duty of Care (Counts IV–V) .......37
`
`(i)
`
`Robinhood’s Bad Faith and Unfair Dealing in Furnishing Brokerage
`Services Frustrated the Customer Agreement’s Purpose and Thwarted
`Plaintiffs’ Expectation of Contractual Benefits .........................................37
`
`Plaintiffs Plead Sufficient Facts to Plausibly Allege Robinhood
`Financial and Robinhood Securities Breached their Implied Duties .........43
`
`
`(ii)
`
`C.
`
`D.
`
`E.
`
`
`
`
`
`F.
`
`Plaintiffs’ Count VI States Plausible Claims for Tortious Interference with
`their Contractual and Business Relationships Against Robinhood Markets .........45
`
`(i)
`
`Plaintiffs Plead Facts Showing that Robinhood Markets Interfered
`with their Contracts with its Subsidiaries ..................................................45
`
`Robinhood Markets’ Half-Hearted Assertion that Plaintiffs Do Not
`Plead it Acted Intentionally or Unjustifiably is Meritless .........................47
`
`(ii)
`
`Plaintiffs Plead the Essential Elements of Civil Conspiracy (Count VII) .............49
`
`Should the Court Disagree, Any Dismissal Should Be with Leave to Amend ......50
`
`
`CONCLUSION ..............................................................................................................................50
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`ii
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` Page(s)
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`Case 1:21-md-02989-CMA Document 436 Entered on FLSD Docket 11/05/2021 Page 4 of 63
`
`TABLE OF AUTHORITIES
`
`
`
`
`Cases
`Aas v. Super. Ct.,
` 24 Cal. 4th 627 (2000) .......................................................................................................25, 26
`Am. Diversified Ins. Services, Inc. v. Union Fid. Life Ins. Co.,
` 439 So.2d 904 (Fla. 2d DCA 1983) ..........................................................................................49
`Am. United Life Ins. v. Martinez,
` 480 F.3d 1043 (11th Cir. 2007) ................................................................................................14
`Applied Equip. Corp. v. Litton Saudi Arabia Ltd.,
` 7 Cal. 4th 503 (1994) ...............................................................................................................50
`Apollo Capital Fund, LLC v. Roth Capital Partners, LLC,
` 158 Cal. App. 4th 226 (2007) ................................................................................30, 31, 33, 34
`April Enterprises, Inc. v. KTTV,
` 147 Cal. App. 3d 805 (1983) ....................................................................................................42
`AREI II Cases,
` 157 Cal. Rptr. 3d 368 (Ct. App. 2013)................................................................................49, 50
`Arndt v. Twenty-One Eighty-Five, LLC,
` 448 F. Supp. 3d 1310 (S.D. Fla. 2020) .....................................................................................15
`Ashcroft v. Iqbal,
` 556 U.S. 662 (2009) ..................................................................................................................14
`Automatic Vending Co. v. Wisdom,
` 182 Cal. App. 2d 354 (Ct. App. 1960) ......................................................................................41
`Badie v. Bank of Am.,
` 67 Cal. App. 4th 779 (Ct. App. 1998) .......................................................................................41
`Banc of Am. Sec. LLC v. Stott,
` No. 04-81086-CIV, 2005 WL 8156027 (S.D. Fla. Aug. 30, 2005) ..........................................29
`Bankest Imports, Inc. v. ISCA Corp.,
` 717 F. Supp. 1537 (S.D. Fla. 1989) ....................................................................................31, 33
`Barnett Bank of W. Fla. v. Hooper,
` 498 So. 2d 923 (Fla. 1986) .................................................................................................31, 33
`Barnext Offshore, Ltd. v. Ferretti Grp. USA, Inc.,
` No. 10-23869, 2012 WL 1570057 (S.D. Fla. May 2, 2012) .......................................................4
`Bell Atl. v. Twombly,
` 550 U.S. 544 (2007) ..................................................................................................................14
`Berwecky v. Bear Stearns & Co.,
` 197 F.R.D. 65 (S.D.N.Y. 2000) ...............................................................................................36
`
`
`
`iii
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`
`Bishop v. Fla. Specialty Paint Co.,
` 389 So. 2d 999 (Fla. 1980)........................................................................................................17
`Britz Fertilizers, Inc. v. Bayer Corp.,
` No. 1:07-cv-00846-OWW-SMS, 2008 WL 341628 (E.D. Cal. Feb. 5, 2008) .........................43
`Brown v. Cal. Pension Admin’r & Consultants, Inc.,
` 45 Cal. App. 4th 333, 52 Cal. Rptr. 2d 788 (1996) ..................................................................29
`Bryant v. Avado Brands, Inc.,
` 187 F.3d 1271 (11th Cir. 1999) ..............................................................................................1, 3
`Buckner v. Lower Fla. Keys Hosp. Dist.,
` 403 So.2d 1025 (Fla. 3d DCA 1981) ........................................................................................49
`Bulletin Mktg. LLC v. Google LLC,
` No. 17-cv-07211-BLF, 2018 WL 3428562 (N.D. Cal. July 13, 2018) .....................................43
`Burger King Corp. v. Austin,
` 805 F.Supp. 1007 (S.D.Fla.1992) .............................................................................................16
`Burns v. Neiman Marcus Group,
` 173 Cal. App. 4th 479 (2009) ...................................................................................................19
`Cannizzaro v. Bache, Halsey, Stuart, Shield, Inc.,
` 81 F.R.D. 719, 721 (S.D.N.Y. 1979) ........................................................................................36
`Catano v. Capuano,
` No. 18-20223, 2020 WL 639406 (S.D. Fla. Feb. 11, 2020) ...............................................31, 34
`City of Santa Barbara v. Super. Ct.,
` 41 Cal. 4th 747, 161 P.3d 1095 (2007) .....................................................................................19
`Clay Elec. Co-op v. Johnson,
` 873 So. 2d 1182 (Fla. 2003)..............................................................................19, 20, 21, 22, 23
`Cobos v. Robinhood Financial LLC, et al.,
` No. 2:21-cv-00843-VAP-MRWx, 2021 WL 1035123 (C.D. Cal. Feb. 10, 2021) .....................5
`Comunale v. Traders & Gen. Ins. Co.,
` 328 P.2d 198 (Cal. 1958) ..........................................................................................................38
`Cooper v. Meridian Yachts, Ltd.,
` 575 F.3d 1151 (11th Cir. 2009) ....................................................................................14, 15, 38
`Corral v. Select Portfolio Servicing, Inc.,
` No. C-15-1542 EMC, 2015 WL 4149144 (N.D. Cal. July 9, 2015) .........................................45
`Day v. Taylor,
` 400 F.3d 1272 (11th Cir. 2005) ................................................................................................14
`Diamond Resorts Int’l, Inc. v. U.S. Consumer Attys., P.A.,
` No. 18-80311-CIV-Rosenberg/Reinhart, 2019 WL 3412169, (S.D. Fla. May 14, 2019) ........48
`Digerati Holdings, LLC v. Young Money Ent., LLC,
` 123 Cal. Rptr. 3d 736 (Ct. App. 2011)......................................................................................38
`iv
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`
`Doe v. Evans,
` 814 So.2d 370 (Fla. 2002).........................................................................................................34
`Duffy v. Cavalier,
` 215 Cal. App. 3d 1517 (1989) ......................................................................................30, 31, 33
`eCapital Commercial Fin. Corp. v. Hitachi Capital Am. Corp.,
` 519 F. Supp. 3d 1129 (S.D. Fla. 2021) .....................................................................................17
`Eads v. Marks,
` 39 Cal. 2d 807, 249 P.2d 257 (1952) ........................................................................................22
`Eastburn v. Reg’l Fire Prot. Auth.,
` 31 Cal. 4th 1175 (2003) ............................................................................................................19
`Erlich v. Menezes,
` 21 Cal. 4th 543 (1999) ..............................................................................................................26
`Est. of Rotell ex rel. Rotell v. Kuehnle,
` 38 So. 3d 783 (Fla. 2d DCA 2010) ...........................................................................................20
`Ethyl Corp. v. Balter,
` 386 So. 2d 1220 (Fla. 3d DCA 1980) .......................................................................................50
`Fed. Deposit Ins. Corp. for IndyMac Bank, FSB v. Genesis Title Co., LLC,
` No. 11-20841-CIV, 2011 WL 13223744 (S.D. Fla. July 1, 2011) ...........................................22
`Fla. Power & Light Co. v. Allis Chalmers Corp.,
` 85 F.3d 1514 (11th Cir. 1996) ..................................................................................................50
`Fresh Results, LLC v. ASF Holland, B.V.,
` No. 17-cv-60949, 2019 WL 4573257 (S.D. Fla. Sept. 20, 2019) .............................................48
`George v. Pinellas Cnty.,
` 285 F.3d 1334 (11th Cir. 2002) ................................................................................................14
`Gilison v. Flagler Bank,
` 303 So. 3d 999 (Fla. 4th DCA 2020) ........................................................................................49
`Gochnauer v. A.G. Edwards & Sons, Inc.,
` 810 F.2d 1042 (11th Cir. 1987) ....................................................................................30, 34, 36
`Gracey v. Eaker,
` 837 So. 2d 348 (Fla. 2002)........................................................................................................29
`Green Leaf Nursery v. E.I. DuPont De Nemours & Co.,
` 341 F.3d 1292 (11th Cir. 2003) ....................................................................................15, 16, 17
`Grupo Televisa, S.A. v. Telemundo Commc’n Group, Inc.,
` 485 F.3d 1233 (11th Cir. 2007) ................................................................................................17
`Hicks v. E. T. Legg & Assoc.,
` 108 Cal. Rptr. 2d 20 (Ct. App. 2001)........................................................................................38
`Holguin v. Dish Network LLC,
` 178 Cal. Rptr. 3d 100 (Ct. App. 2014) .....................................................................................43
`v
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`
`Honig v. Kornfeld,
` 339 F. Supp. 3d 1323 (S.D. Fla. 2018) .....................................................................................34
`Ixchel Pharma, LLC v. Biogen, Inc.,
` 470 P.3d 571 (Cal. 2020) .........................................................................................................45
`J’Aire Corp. v. Gregory,
` 24 Cal.3d 799, 598 P.2d 60 (1979) .........................................................................23, 24, 25, 26
`Javitch v. First Montauk Fin. Corp.,
` 279 F. Supp. 2d 931, 938 (N.D. Ohio 2003) .............................................................................28
`Jennings v. BIC Corp.,
` 181 F.3d 1250 (11th Cir. 1999) ................................................................................................50
`Kaiser Steel Corp. v. Westinghouse Elec. Corp,
` 55 Cal. App. 3d 737 (Cal. 1976) ...............................................................................................26
`Kalitta Air v. Central Texas Airborne Sys.,
` 315 Fed. App’x 603 (9th Cir. 2008) .........................................................................................25
`Klaxon Co. v. Stentor Elec. Mfg. Co.,
` 313 U.S. 487 (1941) ..................................................................................................................17
`Korea Supply Co. v. Lockheed Martin Corp.,
` 63 P.3d 937 (Cal. 2003) ...........................................................................................................47
`
`Koruga v. Fiserv Correspondent Servs.,
` 183 F. Supp. 2d 1245 (D. Or. 2001) .........................................................................................37
`L.A. Fitness Intern. v. Mayer,
` 980 So. 2d 550 (Fla. 4th DCA 2008) ........................................................................................26
`Lamm v. State St. Bank & Tr.,
` 749 F.3d 938 (11th Cir. 2014) ..................................................................................................21
`Land O’Lakes, Inc. v. DairyAmerica, Inc.,
` No. 1:15-cv-01937-DAD-MJS, 2017 WL 495644, (E.D. Cal. Feb. 6, 2017) ...........................43
`Letizia v. Facebook Inc.,
` 267 F. Supp. 3d 1235 (N.D. Cal. 2017) ....................................................................................43
`Lipman v. Brisbane Elementary Sch. Dist.,
` 359 P.2d 465 (Cal. 1961) ..........................................................................................................46
`Margaret Hall Found., Inc. v. Atlantic Fin. Mgmt., Inc.,
` 572 F. Supp. 1475 (D. Mass. 1983) ..........................................................................................36
`MasTec Renewables P. R. LLC v. Mammoth Energy Servs., Inc.,
` No. 20-CIV-20263, 2020 WL 6781823 (S.D. Fla. Nov. 18, 2020) ..........................................17
`McCain v. Fla. Power Corp.,
` 593 So. 2d 500 (Fla. 1992)..................................................................................................22, 23
`McDaniel v. Bear Stearns & Co., Inc.,
` 196 F.Supp.2d 343 (S.D.N.Y. 2002)...................................................................................35, 36
`vi
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`
`Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Cheng,
` 697 F. Supp. 1224 (D.D.C. 1988) .............................................................................................28
`Michelson v. Hamada,
`29 Cal. App. 4th 1566, 36 Cal. Rptr. 2d 343 (1994) ......................................................................31
`Middleton v. IBM,
` 787 F. App’x 619 (11th Cir. 2019) ...........................................................................................14
`Milburn v. United States,
` 734 F.2d 762 (11th Cir. 1984) ..................................................................................................14
`Miley v. Oppenheimer & Co.,
` 637 F.2d 318 (5th Cir. 1981) ....................................................................................................29
`MP, LLC v. Sterling Holding, LLC,
` 231 So. 3d 517 (Fla. 3d DCA 2017) .........................................................................................49
`N. Am. Chem. Co. v. Super. Ct.,
` 59 Cal. App. 4th 764 (Cal. 1997) ........................................................................4, 21, 22, 23, 26
`Orangi v. JPMorgan Chase Bank,
` No. 5:11-cv-1229 JF (HRL), 2011 WL 1807174 (N.D. Cal. May 11, 2011) ...........................22
`Owens v. Stifel, Nicolaus & Co., Inc.,
` No. 7:12-CV-144 HL, 2014 WL 2769044 (M.D. Ga. June 18, 2014) ......................................27
`Pac. Gas & Elec. Co. v. Bear Stearns & Co.,
` 971 P.2d 587 (Cal. 1990) .........................................................................................................46
`Paszamant v. Ret. Accts., Inc.,
` 776 So. 2d 1049 (Fla. 5th DCA 2001) ......................................................................................21
`Peregrine Pharm. v. Clinical Supplies Mgmt.,
` No. 12-cv-1608-JGB-ANx, 2015 WL 13309286 (C.D. Cal. June 22, 2015) .....................25, 26
`Petersen v. Sec. Settlement Corp.,
` 277 Cal. Rptr. 468 (Ct. App. 1991) ..........................................................................................35
`Pierce v. Lyman,
` 1 Cal. App. 4th 1093, 3 Cal. Rptr. 2d 236 (1991) ...............................................................28, 29
`R. Power Biofuels v. Chemex,
` No. 16-cv-00716-LHK, 2016 WL 6663002 (N.D. Cal. 2016) ...........................................25, 26
`Rayle Tech, Inc. v. DEKALB Swine Breeders, Inc.,
` 133 F.3d 1405 (11th Cir.1998) .................................................................................................16
`Remington v. Newbridge Sec. Corp.,
` No. 13-60384-CIV, 2013 WL 2444719 (S.D. Fla. June 5, 2013 ........................................27, 28
`Richelle L. v. Roman Cath. Archbishop,
` 106 Cal. App. 4th 257, 130 Cal. Rptr. 2d 601 (2003) .........................................................31, 34
`Robinson Helicopter Co. v. Dana Corp.,
` 102 P.3d 268 (Cal. 2004) ..........................................................................................................23
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`
`Series AGI W. Linn of Appian Grp. Inv’rs DE, LLC v. Eves,
` 158 Cal. Rptr. 3d 193 (Cal. App. 2013) ....................................................................................45
`SFM Holdings, Ltd. v. Banc of Am. Sec., LLC,
` 600 F.3d 1334 (11th Cir. 2010) ..........................................................................................35, 36
`Siedman v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
` 465 F. Supp. 1233 (S.D.N.Y. 1979)..........................................................................................28
`Sunbelt Veterinary Supply, Inc. v. Intl. Bus. Sys. U.S., Inc.,
` 985 F. Supp. 1352 (M.D. Ala. 1997) ........................................................................................16
`Starr Indemnity & Liab. Co.,
` No. 1:17-CV-00213-DAD-BAM, 2018 WL 1142207 (E.D. Cal. Mar. 2, 2018) .....................30
`Strategic Income Fund, LLC v. Spear, Leeds & Kellogg Corp.
` 305 F.3d 1293 (11th Cir. 2002) ................................................................................................36
`Sutter Home Winery, Inc. v. Vintage Selections, Ltd.,
` 971 F.2d 401 (9th Cir. 1992) ....................................................................................................17
`Syverson v. Jones,
` 10 So. 3d 1123 (Fla. 1st DCA 2009) ........................................................................................17
`In re Takata Airbag Prod. Liab. Litig.,
` 255 F. Supp. 3d 1241 (S.D. Fla. 2017) .....................................................................................17
`Tank Tech, Inc. v. Valley Tank Testing, L.L.C.,
` 244 So. 3d 383 (Fla. 2d DCA 2018) ........................................................................................22
`Taylor Woodrow Homes Fla., Inc. v. 4/46-A Corp.,
` 850 So. 2d 536 (Fla. 5th DCA 2003) ........................................................................................34
`Thompson v. Smith Barney, Harris Upham & Co., Inc.,
` 709 F.2d 1413 (11th Cir. 1983) ................................................................................................30
`Tiara Condo. Ass’n v. Marsh & McLennan Cos.,
` 110 So. 3d 399 (Fla. 2013)........................................................................................................22
`Third Story Music, Inc. v. Waits,
` 41 Cal. App. 4th 798, 48 Cal. Rptr. 2d 747 (1996) ...................................................................42
`Thrifty Payless, Inc. v. The Americana at Brand, LLC,
` 160 Cal. Rptr. 3d 718 (Ct. App. 2013)......................................................................................38
`Twomey v. Mitchum, Jones & Templeton,
` 262 Cal. App. 2d 690 (1968) ....................................................................................................30
`United States v. United Healthcare Ins. Co.,
` 848 F.3d 1161 (9th Cir. 2016) ..................................................................................................14
`Whitesides v. E*Trade Sec., LLC,
` No. 20-CV-05803-JSC, 2021 WL 930794 (N.D. Cal. Mar. 11, 2021) ...............................24, 25
`Wyndham Vacation Ownership, Inc. v. Clapp Bus. Law, LLC,
` 411 F. Supp. 3d 1310 (M.D. Fla. 2019) ....................................................................................49
`viii
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`In re Yahoo! Inc. Customer Data Sec. Breach Litig.,
` 313 F. Supp. 3d 1113, 2018 WL 1243332 (N.D. Cal. 2018) ....................................................25
`
`STATUES AND REGULATIONS
`Fla. Stat. § 768.72(2)(b) .................................................................................................................20
`
`FEDERAL RULES
`Fed. R. Civ. P. 8(a)(2) ....................................................................................................................14
`Fed. R. Civ. P. 8(d)(2) ....................................................................................................................47
`Fed. R. Civ. P. 8(d)(3) ......................................................................................................................4
`Fed. R. Civ. P. 12(b)(6) ......................................................................................................14, 15, 30
`Fed. R. Evid. 201(b)(2) ....................................................................................................................1
`
`OTHER AUTHORITIES
`Judicial Council of California Civil Jury Instructions, No. 4100 entitled “Fiduciary Duty”
`(2020 Edition) ...............................................................................................................................30
`Restatement (Second) of Conflict of Laws § 145 ..........................................................................17
`Restatement (Second) of Agency § 425.........................................................................................30
`5 Witkin, Cal. Procedure, Pleading § 921(5th ed. 2008) ..................................................................
`FINRA Regulatory Notice 21-12, (March 18, 2021), https://www.finra.org/rules-
` guidance/notices/21-12 ...............................................................................................................3
`Securities and Exchange Comm’n, “Staff Report on Equity and Options Market Structure
` Conditions in Early 2021” (Oct. 14, 2021), https://www.sec.gov/files/staff-report-equity-
` options-market-struction-conditions-early-2021.pdf.22 .............................................................3
`
`Securities and Exchange Comm’n, “Thinking About Investing in the Latest Hot Stock?”
` (Jan. 30, 2021) https://www.sec.gov/oiea/investor-alerts-and-bulletins/risks-short-term-
` trading-based-social-media-investor-alert ..................................................................................3
`
`Virtual Hearing – Game Stopped? 117th Cong. at 10 (2021) (statement of
` Vladimir Tenev, Chief Executive Officer, Robinhood Markets, Inc.),
` https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstatetenevv-
` 20210218.pdf ............................................................................................................................18
`
`
`
`RealClearPolitics, “Elon Musk Interviews Robinhood CEO Vlad Tenev On Stock
` Trading Restrictions On ‘Clubhouse’ App,” (“Musk Tenev Interview”),
`
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`Case 1:21-md-02989-CMA Document 436 Entered on FLSD Docket 11/05/2021 Page 11 of 63
`
` https://www.cnbc.com/2021/01/29/robinhood-raises-1-billion-and-taps-credit-lines-to-
` make-trading-of-gamestop-available-tocustomers). ...................................................................5
`
`“[Robinhood] Ordered to Pay Approximately $70 Million for Systemic Supervisory
` Failures and Significant Harm Suffered by Millions of Customers” (June 30, 2021),
` https://www.finra.org/mediacenter/newsreleases/2021/finra-orders-record-financial-
` penalties-against-robinhood-financial .......................................................................................10
`
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`x
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`Case 1:21-md-02989-CMA Document 436 Entered on FLSD Docket 11/05/2021 Page 12 of 63
`
`Plaintiffs, Andrea Juncadella, Cody Hill, Edward Goodan, Jaime Rodriguez, Jonathan
`Cornwell, Joseph Daniluk, Mark Sanders, Patryk Krasowski, William Makeham, Sammy
`Gonzalez, and Julie Moody (collectively, “Plaintiffs”), respectfully submit this response in
`opposition to Defendants Robinhood Markets, Inc. (“Robinhood Markets”), Robinhood Financial
`LLC (“Robinhood Financial”), and Robinhood Securities, LLC’s (“Robinhood Securities,”
`together with Robinhood Markets and Robinhood Financial, “Robinhood” or “Defendants”)
`Motion to Dismiss the Robinhood Tranche Complaint (the “Motion” or “Mot.”) [ECF No. 421].
`INTRODUCTION
`“Our founders deeply believe that everyone should have access to the financial system.”1
`The foundation of the securities industry is fair dealing with investors. This core principle
`underlies the rules and regulations that govern securities brokers like Robinhood, which are
`designed to protect Plaintiffs and similarly situated investors during (as opposed to except during)
`times of market stress and price volatility. Despite operating a $35 billion company as both an
`introducing and clearing broker-dealer of highly-regulated securities, Robinhood claims that it
`owed no duty of care whatsoever to the millions of customers to whom it aggressively marketed
`its services even while on the precipice of a foreseeable collateral deficit. Robinhood seeks
`dismissal and judicial immunity from its admitted bad acts based on a one-sided, clickthrough
`“Customer Agreement” that, according to Robinhood, grants it unfettered discretion to abandon
`its duties of care, good faith, and fair dealing. Robinhood claims broad immunity from any harm
`flowing from its discretion to “prohibit or restrict” trading, regardless of what it knew, or should
`have known, as a securities broker, would be the outcome of its decision to eliminate an essential
`component without which no market can exist—demand.
`One short email from Chief Operating Officer James Swartwout epitomizes Robinhood’s
`audacity to bid for dismissal on this basis: “I sold my AMC today. FYI—tomorrow we are moving
`GME to 100% - so you are aware.” Plaintiffs did not have the luxury of insulating their investments
`
`
`1 See Robinhood Markets, Inc., Form S-1 Registration Statement filed with the U.S. Securities and
`Exchange Commission (“SEC”) (“Form S-1”), at 8 (Aug. 31, 2021), incorporated by reference
`into the Amended Consolidated Class Action Complaint (the “Amended Complaint” or “AC”)
`[ECF No. 409], ¶¶ 1, 85, 95, 100–08, 113–17, 122–23, 127–28, 150, 155, 178, 266). The Court
`may take judicial notice of Robinhood’s Form S-1 pursuant to FED. R. EVID. 201(b)(2) as a
`document legally required by and publicly filed with the SEC and not subject to reasonable dispute.
`See Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1278 (11th Cir. 1999) (“SEC filings are generally
`recognized as the most accurate and authoritative source of public information about a company.”).
`
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`1
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`Case 1:21-md-02989-CMA Document 436 Entered on FLSD Docket 11/05/2021 Page 13 of 63
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`from the devastating impact of Robinhood’s decision. In contrast, Robinhood’s upper echelon, like
`Mr. Swartwout, steered clear of the havoc that the now infamous broker-dealer caused. Tellingly,
`Robinhood does not (and cannot) argue that its decision to shut down buying, without any limit on
`selling, did not wipe out billions of dollars in investment. Instead, the SEC and Financial Industry
`Regulatory Authority (“FINRA”) registered and regulated broker-dealer inconsistently argues that
`its status as a “self-directed platform” leaves investors free to trade at their own peril and absolves
`it from any responsibility for those trades, while at the same time entitling it to prevent those very
`investors from trading.
`Betraying its disarming namesake, Robinhood’s