Robinhood is free of state-law allegations over its decision to temporarily halt trading in certain meme stocks last winter, after a federal judge in Florida dismissed the claims with prejudice in an order docketed Thursday.
Traders accuse Robinhood of negligence, breach of fiduciary duty, and civil conspiracy for blocking them from purchasing meme stocks such as
But “entertaining their claims “would sanction a departure from the parties’ own agreement” and tort law principles, the U.S. District Court for the Southern District of Florida said.
Traders sued Robinhood Markets Inc., Robinhood Financial LLC, and Robinhood Securities LLC following the online brokerage’s January 2021 decision to pause meme stock trading after Reddit’s r/WallStreetBets forum spurred intense interest in the securities. The Robinhood customers allege that the pause—which helped the company comply with collateral requirements—also forced prices to fall, costing them money.
The traders sought to “repackage” their dissatisfaction with Robinhood’s restrictions as a negligence claim, Judge Cecilia M. Altonaga’s order said. “In doing so, they seek to obtain precisely what the Customer Agreement that they freely entered denied: a right to unrestricted trading.”
The customer agreements also block the breach of fiduciary duty claims. The traders’ “misplaced reliance on their broker is no reason to impose on it a fiduciary responsibility it never accepted,” Altonaga said.
The traders next argued that the customer agreements included implied duties of care and good faith and fair dealing. But the contract’s “plain authorization to restrict trading creates obstacles that Plaintiffs cannot surmount,” the order said.
Altonaga threw out the civil conspiracy claim following the dismissal of the tort claims the traders based it on.
The traders had “ample time and resources—more than most litigants—to refine their claims,” so they won’t get a chance to amend their complaint, the order said
Robinhood also faces federal securities allegations. It moved to dismiss that portion of the multidistrict litigation Jan. 7.
Hunton Andrews Kurth LLP and Cravath, Swaine & Moore LLP represent Robinhood. Ferraro Law Firm PA represents the traders behind the state-law claims as lead counsel.
The case is In re Jan. 2021 Short Squeeze Trading Litig., S.D. Fla., No. 1:21-md-02989, order docketed 1/27/22.