Transfer Order (Chavez) — In re January 2021 Short Squeeze Trading Litigation (Dkt. 475, S.D. Fla.)

Summary

A Transfer Order of the United States Judicial Panel on Multidistrict Litigation in In re: January 2021 Short Squeeze Trading Litigation, MDL No. 2989, filed June 1, 2022 as Document 332 (4 pages) and entered on the Southern District of Florida docket June 2, 2022 as Document 475 in Case 1:21-md-02989-CMA. The Chavez plaintiffs moved under Panel Rule 7.1 to vacate the conditional transfer of Chavez, et al. v. Apex Clearing Corporation, C.A. No. 1:22−01233 (Southern District of New York); defendant Apex Clearing Corporation and interested party Robinhood opposed the motion. The Panel finds that Chavez shares common factual questions with the MDL actions, noting the transferee court's January 10, 2022 dismissal of the 'other broker' master complaint, and orders the action transferred to the Southern District of Florida and assigned to the Honorable Cecilia M. Altonaga.

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Date: 2021-01-28

Cite this document

“Transfer Order (Chavez) (Dkt. 475).” Original at archive.org, dated 2021-01-28. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-01-28-covid-era-misc-ac3307fb-1/, SHA-256 ac3307fbe7cc79c6271ad818192d5a8143e2613adaa51bf32235381c3bfcc904.

Full text

Case 1:21-md-02989-CMA Document 475 Entered on FLSD Docket 06/02/2022 Page 1 of 4

Case MDL No. 2989 Document 332 Filed 06/01/22 Page 1 of 4

PE
UNITED STATES JUDICIAL PANEL
on
MULTIDISTRICT LITIGATION Jun 2, 2022

Miami
IN RE: JANUARY 2021 SHORT SQUEEZE
TRADING LITIGATION MDL No. 2989

TRANSFER ORDER

Before the Panel: Plaintiffs in the Southern District of New York Chavez action move
under Panel Rule 7.1 to vacate our order that conditionally transferred Chavez to the Southern
District of Florida for inclusion in MDL No. 2989. Defendant Apex Clearing Corporation (Apex)
and interested parties Robinhood Financial LLC, Robinhood Securities, LLC, and Robinhood
Markets, Inc. (collectively, Robinhood) oppose the motion.

MDL No. 2989 arises from a massive “short squeeze” that occurred in January 2021
affecting several stocks, and various brokers’ decision to restrict the ability of retail investors to
purchase the relevant securities on or about January 28, 2021, which led to a massive selloff of
those securities. See In re January 2021 Short Squeeze Trading Litigation, MDL No. 2989, 2021
WL 1258399, at *2 (J.P.M.L. Apr. 2, 2021). In support of their motion to vacate, plaintiffs argue
that Chavez does not present common questions of fact with the actions remaining in MDL No.
2989. Chavez involves claims that Apex restricted trading in three of the affected securities for a
period of approximately three hours and twenty-five minutes on January 28, 2021. Plaintiffs
contend that Apex is not a defendant in any action pending in the MDL, that the claims against
other defendants in the MDL (such as Robinhood) involve different trade restrictions and different
stocks, and that, in any event, the transferee court has dismissed the state law claims against
Robinhood. Plaintiffs also argue that New York is more convenient for the parties and witnesses
in this Apex-centered action, and that transfer would introduce new claims under different state
laws into the consolidated litigation.

The reason why there are no claims currently pending in the MDL against Apex, however,
is telling. Following centralization, the transferee court divided the claims into four tranches:
(1) antitrust claims directed at numerous brokers, funds and clearinghouses; (2) federal securities
law claims against Robinhood and others; (3) state law claims against Robinhood and related
entities; and (4) state law claims against other brokers. See Order at 1–2, In re January 2021 Short
Squeeze Trading Litig., C.A. No. 1:21-md-02989 (S.D. Fla. May 18, 2021), ECF No. 310. A
master complaint was filed in the “other broker” tranche, which named only Apex as a defendant
and was brought by only two plaintiffs—the same two plaintiffs who bring the Chavez action. The
transferee court dismissed the “other broker” master complaint because the plaintiffs named in that
complaint had not filed a separate civil action, either in the transferee court or in a transferor court.
See Order, In re January 2021 Short Squeeze Trading Litig., C.A. No. 1:21-md-02989 (S.D. Fla.
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Case MDL No. 2989 Document 332 Filed 06/01/22 Page 2 of 4

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Jan. 10, 2022), ECF No. 450. Instead, plaintiffs first appeared in a master complaint filed in the
master MDL docket. The transferee court held that it lacked subject matter jurisdiction over
plaintiffs’ claims and allowed plaintiffs in the “other broker” tranche to file an amended complaint
by February 14, 2022. Id. at 17. No amended complaint in the “other broker” tranche appears to
have been filed in the MDL. Instead, plaintiffs filed Chavez in the Southern District of New York.

Plaintiffs suggest the MDL has reached a point at which transfer of Chavez is not
appropriate. Yet the MDL remains at the pleading stage, and the only reason no action against
Apex is currently pending is because: (a) the transferee court dismissed plaintiffs’ prior attempt to
bring such claims without first instituting a separate civil action; and (b) lead counsel for the “other
broker” tranche did not file an amended master complaint in the MDL, but instead filed the Chavez
action in New York. Plaintiffs seemingly seek to take advantage of the dismissal of the “other
broker” master complaint to reestablish that tranche outside the auspices of the MDL. But the
transferee court did not dismiss plaintiffs’ claims in the MDL because those claims were not related
to the subject-matter of the centralized litigation. Given that plaintiffs were selected for inclusion
in a master complaint filed in the MDL that asserted substantially identical claims as presented in
Chavez, there is no question that Chavez shares common factual questions with the actions in the
MDL. Like all the actions in the MDL, Chavez involves “factual questions arising from trading
restrictions imposed by Robinhood and other brokers in late January 2021 in response to a dramatic
rise in trading and share prices for a group of ‘meme stocks.’” In re January 2021 Short Squeeze
Trading Litig., 2021 WL 1258399, at *2.

Moreover, the transferee court already has considered a motion to dismiss pertaining to the
same parties and claims as in Chavez. The court also recently decided a motion to dismiss
pertaining to state law claims against Robinhood. Although plaintiffs contend that decision
involves different state law than will be at issue in Chavez, the claims in the Robinhood tranche
were markedly similar. We have little doubt that the transferee court’s familiarity with the
allegations, issues, parties, and counsel involved in this docket will further the expeditious
resolution of the litigation taken as a whole. And the transferee court “is best able to determine
whether the state law claims” against Apex or other brokers should continue to be litigated in the
MDL. In re Merscorp Inc., et al., Real Estate Settlement Procedures Act (RESPA) Litig., 560 F.
Supp. 2d 1371, 1372 (J.P.M.L. 2008). Should the transferee court deem remand of Chavez to be
warranted, procedures are available whereby this may be accomplished with a minimum of delay.
See Panel Rules 10.1–10.3.

Therefore, after considering the parties’ arguments, we find that the action listed on
Schedule A involves common questions of fact with the actions transferred to MDL No. 2989, and
that transfer under 28 U.S.C. § 1407 will serve the convenience of the parties and witnesses and
promote the just and efficient conduct of the litigation. In our order centralizing this litigation, we
held that the Southern District of Florida was an appropriate Section 1407 forum for actions
sharing factual questions arising from trading restrictions imposed by Robinhood and other brokers
in late January 2021 in response to a dramatic rise in trading and share prices for a group of “meme
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Case MDL No. 2989 Document 332 Filed 06/01/22 Page 3 of 4

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stocks.”1 See In re January 2021 Short Squeeze Trading Litig., 2021 WL 1258399, at *2. Like
many of the cases in the MDL, plaintiffs in Chavez allege that they suffered injury due
to restrictions imposed upon their ability to purchase shares of certain securities and assert
various state common law claims. That the claims are directed against Apex is of no moment, as
the MDL was intended from the outset to encompass such claims. See id. at *2–3. Transfer
will yield significant efficiencies.

IT IS THEREFORE ORDERED that the action listed on Schedule A is transferred to the
Southern District of Florida and, with the consent of that court, assigned to the Honorable Cecilia
M. Altonaga for coordinated or consolidated pretrial proceedings.

PANEL ON MULTIDISTRICT LITIGATION

Karen K. Caldwell
Chair

Nathaniel M. Gorton Matthew F. Kennelly
David C. Norton Roger T. Benitez
Dale A. Kimball Madeline Cox Arleo

1
These meme stocks allegedly include: GameStop Corp. (GME); AMC Entertainment Holdings
Inc. (AMC); American Airlines Group Inc. (AAL); Bed Bath & Beyond Inc. (BBBY); BlackBerry
Ltd. (BB); Express, Inc. (EXPR); Koss Corporation (KOSS); Naked Brand Group Ltd. (NAKD);
Nokia Corp. (NOK); Sundial Growers Inc. (SNDL); Tootsie Roll Industries, Inc. (TR); and
Trivago N.V. (TRVG).
Case 1:21-md-02989-CMA Document 475 Entered on FLSD Docket 06/02/2022 Page 4 of 4

Case MDL No. 2989 Document 332 Filed 06/01/22 Page 4 of 4

IN RE: JANUARY 2021 SHORT SQUEEZE
TRADING LITIGATION MDL No. 2989

SCHEDULE A

Southern District of New York

CHAVEZ, ET AL. v. APEX CLEARING CORPORATION, C.A. No. 1:22−01233

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