If you had yet to hear of Robinhood before the new year, your introduction likely came in late January, as the mobile trading app became entangled in the GameStop short squeeze . The GameStop battle pitted Wall Street investment funds against a collective of retail investors using Reddit. The volatility in the GameStop stock price impacted trading app Robinhood, particularly after it temporarily prevented users from transacting with the stock and other volatile stocks. The first of these lawsuits was filed on Jan. 28, 2021.
Overview
Waves of litigation are not new for Robinhood. Last year, Robinhood also faced litigation after the app went down during a high trading day. This litigation continued to trickle in throughout spring 2020. The trend subsided through the summer and fall, but significantly picked up in January and February 2021 in the wake of the aforementioned stock trading suspension. Both incidents indicate that much of the cases that Robinhood faced in recent years have been in response to specific incidents, both of which received large amounts of news coverage. Legal experts and firms suggest more is to come from a policy and regulatory perspective.
The volume of litigation in January and February 2021 was also larger than the litigation faced in March 2020, although it is worth noting that last year’s trend may have been affected by the early days of the COVID-19 pandemic when lockdowns were starting to take effect and courts were closed.
Since the beginning of 2019, Robinhood, including Robinhood Financial LLC, Robinhood Securities LLC, and Robinhood Markets Inc., faced a total of 86 federal court filings. During the past three months, the company has seen a 151% increase in filings. In total, the company has faced 61 suits in 2021.
The large majority of the lawsuits (a total of 48) were filed in the Northern District of California, where Robinhood is headquartered; no other district compares with the sheer number of filings in the Northern District of California. The remaining districts with Robinhood litigation range from one to six filings. In all of this litigation, Robinhood has been the defendant.
The types of suits varied; almost half were contract-related, asserting breach of contract claims. Other top case types included fraud, antitrust, product liability claims, securities, personal injury, the recovery and enforcement of judgment, and civil rights.
The Law Firms
Robinhood is primarily represented by Farella Braun + Martel in a total of 33 lawsuits; the firm has represented Robinhood in both 2020 and 2021. They have represented the trading app in contract violations as well as fraud and antitrust cases, paralleling Robinhood’s lawsuits overall.
Debevoise & Plimpton also represented Robinhood, although only for five suits in 2020. In some instances, both Farella Braun + Martel and Debevoise & Plimpton represent the company.
For the more recent cases, Robinhood’s counsel may have not filed its appearance by the time of publication.
The Judges
Judge James Donato of the Northern District of California has presided over the most Robinhood cases by more than two times the next judge. Interestingly, he appears to have presided over more of Robinhood’s lawsuits last year regarding its outage than the Robinhood litigation from the temporary suspension for retail traders in January 2021.
Outcomes
Generally, the lawsuits resulting from the March 2020 outage have been consolidated and are currently pending before Judge James Donato of the Northern District of California. The lawsuits relating to the January 2021 temporary suspension are currently pending.
As Yale Professor of Law Jonathan R. Macey and other legal experts detail the disparity of Securities and Exchange Commission treatment between Wall Street Funds and Main Street traders, Robinhood’s litigation will continue to unfold and possibly lead to more litigation among other stock trading apps.
