Investors who sued online brokerages over claims they were unfairly blocked from trading shares of high-flying stocks like
So far, at least 18 lawsuits have been filed against
While such claims already must overcome the
Those seeking class-action status “are much more likely to end up consolidated before some federal judge,” said Benjamin Edwards, a securities law professor at the University of Nevada Las Vegas’s Boyd School of Law. Once there, the Private Securities Litigation Reform Act “will then likely stop all discovery until after that motion to dismiss on the federal cases,” Edwards said.
The parties are likely to ask the Judicial Panel on Multidistrict Litigation to consolidate the cases, said
Once that consolidation request is made, many of the lawsuits will be stayed, although injunctive relief may be decided before that, Stein said. A judge, once appointed to manage the combined cases, would vet all pretrial motions and allow evidence collection for any case that survives dismissal requests, Stein said. After that, any trial would be conducted in the court where it was filed, he said.
Edwards, the UNLV law professor, said many investors signed agreements when they opened brokerage accounts that require all claims to be arbitrated by the Wall Street-backed Financial Industry Regulatory Authority, “or go there as soon as Robinhood files a motion to compel arbitration.” Discovery, he said, will come under Finra rules.
Robert Frenchman of Mukasey Frenchman & Sklaroff LLP, who specializes in securities law, said he doubts many of the Robinhood lawsuits will be consolidated. “There are likely to be stragglers here because it sounds like the theories are quite disparate,” he said. “It seems unlikely they will be wrapped up in a neat little bow.”
(Updates with comments from senator.)
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