Court Deals Antitrust Tranche Plaintiffs’ Complaint Fatal Blow in Robinhood Short Squeeze MDL

Late last week, the Miami, Fl. federal judge overseeing the putative retail investor class action turned the antitrust tranche plaintiffs away for a second and final time. The 53-page opinion opened by asking, “[w]hat has changed with the latest pleading?” and answered, “[n]ot much,” in finding the pared down complaint against several Robinhood entities and Citadel Securities LLC insufficiently pleaded.

As previous coverage explained, the multidistrict litigation concerns a short squeeze that occurred in late January 2021. Retail investors purchased trending “meme” securities en masse over a short time, exposing those with short positions, including defendant Citadel, to large potential losses.

According to the plaintiffs, Citadel pressured Robinhood to limit trading on its platform, which artificially restricted the price appreciation of the meme stocks in violation of the Sherman Act. The plaintiffs filed suit in July of 2021 and amended their complaint once as a matter of course and again after the Southern District of Florida dismissed their pleading for failure to state a claim last November.

Chief Judge Cecilia M. Altonaga’s previous ruling found that though the plaintiffs illuminated a pattern of conscious parallelism between the defendants, which then included a larger pool of brokerages, self-clearing brokerages, and clearinghouses, they failed to establish the existence of “plus factors.” The court concluded that “[t]here were no additional factual allegations supporting a plausible inference of a conspiracy — except for references to a few vague and ambiguous emails that were exchanged between a brokerage, Robinhood, and its market maker, Citadel Securities.”

In last week’s opinion, the court noted that though the plaintiffs claimed to have pleaded further facts about the purported conspiracy between Robinhood and Citadel, “the allegations of conspiracy are in substance the same and thus inadequate.”

The court examined evidence of interfirm communication, which demonstrated an opportunity to conspire, but fell short of evincing a plausible inference of antitrust conspiracy because of the “obvious alternative explanation” at hand. Judge Altonaga said that given the defendants’ business relationship, “it would be understandable for employees — even executive-level employees — at a broker and a market maker to communicate about what impact the squeeze might have on each party’s ability to fulfill its obligations.”

The court also criticized the plaintiffs’ unreasonable restraint of trade claim as non-viable because their “garbled market theory does not conform to the alleged facts.”

The plaintiffs, like those alleging tortious conduct against Robinhood, can appeal the loss to the Eleventh Circuit.

The Joseph Saveri Law Firm LLP and Hach Rose Schirripa & Cheverie LLP are co-lead counsel for the antitrust tranche. 

Robinhood is represented by Hunton Andrews Kurth LLP and Cravath, Swaine & Moore LLP and Citadel Securities LLC by Quinn Emanuel Urquhart & Sullivan LLP and Bartlit Beck LLP.