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Robinhood Fails to Shake California Consumer Privacy Act Claims

Sept. 9, 2021, 3:30 PM

Robinhood Financial LLC and Robinhood Securities LLC must face claims they violated the California Consumer Privacy Act after a California federal judge found the plaintiffs had adequately alleged that a breach occurred.

The stock trading app company must also face claims it acted negligently and violated users’ constitutional right to privacy by failing to guard against the breach, Magistrate Judge Susan van Keulen wrote in an order filed Wednesday in the U.S. District Court for the Northern District of California.

Attorneys representing Robinhood didn’t immediately respond to a request for comment.

Robinhood was slapped with a class action lawsuit in state court in January and accused of failing to protect thousands of users from a data breach that made them lose millions of dollars. Only after news outlets reported on the breach did Robinhood alert users of the incident, the plaintiffs argued.

Allegations that Robinhood violated the Customer Records Act may also proceed, van Keulen wrote. That law requires California businesses that own or license consumer data to implement and maintain reasonable security practices.

While the plaintiffs in an earlier version of the complaint failed to sufficiently allege when Robinhood discovered the unauthorized access, this amended complaint cures that deficiency, van Keulen wrote.

“Plaintiffs also allege that while Robinhood customers saw their accounts being depleted as early as July 2020, Robinhood said and did nothing, only acknowledging ‘any type of widespread incident’ in October 2020,” she wrote. “At the motion to dismiss stage, the Court finds that these allegations are sufficient to suggest when Defendants learned of the breach.”

Van Keulen did, however, agree to dismiss several claims, including one alleging violations of the Consumers Legal Remedies Act. The plaintiffs’ allegations are “not sufficient,” but van Keulen left open the possibility of amendment.

Amended allegations “may satisfy the balancing requirements of providing sufficient notice to Defendants and the pleading requirements at the motion to dismiss stage,” she wrote.

Erickson Kramer Osborne LLP represents the plaintiffs and proposed class. Morrison & Foerster LLP represents Robinhood.

The case is Mehta v. Robinhood Financial LLC, N.D. Cal., No. 5:21-cv-1013, order 9/8/21.

To contact the reporter on this story: Jake Holland in Washington at jholland@bloombergindustry.com

To contact the editor responsible for this story: Kibkabe Araya at karaya@bloombergindustry.com

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