In re January 2021 Short Squeeze Trading Litigation — Robinhood Response to R&R Objection

Summary

Exhibit A (Document 274-1) in Case 1:21-md-02989-CMA, entered on the FLSD docket 04/29/2021, is Robinhood's Response to Plaintiffs' Objection to the Report and Recommendation, relating to Siruk v. Robinhood Financial LLC, No. 1:21-cv-21448-CMA. Robinhood asks the Court to adopt the Magistrate Judge's Report and Recommendation that the first-to-file rule applies to the complaint of pro se Plaintiffs Petro Siruk and Marina Siruk and that the action should be dismissed. The response states that Judge Schultz determined the complaint met all three factors for the first-to-file rule because it was filed less than two weeks after Nelson v. Robinhood Financial LLC, with identical defendants and nearly identical subject-matter. It notes that this is the tenth case the Siruks have filed in less than a year and is dated April 29, 2021.

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Case 1:21-md-02989-CMA Document 274-1 Entered on FLSD Docket 04/29/2021 Page 1 of 9

EXHIBIT A
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

CASE NO. 21-2989-MDL-ALTONAGA
In re:

JANUARY 2021 SHORT SQUEEZE
TRADING LITIGATION

This Document Relates to
Siruk v. Robinhood Financial LLC, et al., No. 1:21-cv-21448-CMA

Robinhood’s Response to Plaintiffs’ Objection to the Report and Recommendation

Defendants Robinhood Financial LLC, Robinhood Securities, LLC, and
Robinhood Markets, Inc. (collectively, ““Robinhood’’) submit this response to pro se Plaintiffs
Petro Siruk and Marina Siruk’s (“Plaintiffs”) Respon[se] to Report and Recommendation (the
“Objection’’) filed in Siruk v. Robinhood Financial LLC, et al., No. 0:21-cv-00415-PJS-DTS (D.
Minn.) (ECF No. 7). For the reasons below, Robinhood respectfully requests that the Court
adopt the Magistrate Judge’s Report and Recommendation (“R&R’’) that the first-to-file rule
applies to Plaintiffs’ complaint (“Complaint”) and that the action should be dismissed.

BACKGROUND

Plaintiffs filed their Complaint pro se on behalf of themselves and a putative class
of all Robinhood customers on February 12, 2021.' (ECF No. 1.)? The same day, Plaintiffs filed

their Motion [to] Proceed Without Prepaying Fees or Cost[s] (the “/n Forma Pauperis

' Plaintiffs have not yet effected service on Robinhood, and Robinhood reserves the right to
raise any defenses to the Complaint pursuant to Rule 12 of the Federal Rules of Civil Procedure
at the appropriate time.

* Unless otherwise noted, ECF citations are to the District of Minnesota docket, Siruk v.
Robinhood Financial LLC, et al., No. 0:21-cv-00415-PJS-DTS, where Plaintiffs filed their
Objection.
Motion”).*> (ECF No. 2.) On March 31, 2021, Judge Schultz entered the R&R in response to the
In Forma Pauperis Motion. (ECF No. 3.) In the R&R, Judge Schultz conducted a threshold
review of Plaintiffs’ Complaint “for defects such as failure to state a claim or frivolity, under 28
U.S.C. § 1915(e)(2)(B).’* (R&R at 1-2.) Following his review, Judge Schultz recommended
“that the Siruks’ case be dismissed without prejudice under the first-to-file rule.” (/d. at 2.)
Judge Schultz determined that the Complaint met all three factors necessary for the first-to-file
rule to apply because: (1) Plaintiffs’ case was filed less than two weeks after Nelson v.
Robinhood Financial LLC, et al., No. 21-cv-0777-JMF (S.D.N.Y.), (2) the “defendants in the
Nelson litigation and the Siruks’ litigation are identical” and (3) the subject-matter was “nearly
identical because the Siruks have essentially copy-and-pasted the original complaint that was
filed in the Nelson litigation.” (/d. at 4.) Judge Schultz concluded that dismissal, rather than
transfer or a stay, of the Siruk action pursuant to the first-to-file rule was appropriate, particularly
in light of Plaintiffs’ “recent litigation history.” (/d. at 5.) This is “the tenth case the Siruks have
filed in less than a year,” and Judge Schultz concluded that dismissal would therefore “serv[e]

the purpose of cautioning the Siruks that frivolous class action litigation will not be tolerated|.|”

3 An Application to Proceed in District Court Without Prepaying Fees or Costs in both the
District of Minnesota and the Southern District of Florida requires the plaintiff to provide
information concerning the plaintiff's income and assets. The Plaintiffs’ In Forma Pauperis
Motion did not include such information. See Application to Proceed in District Court Without
Prepaying Fees or Costs, United States Courts, https://www.uscourts.gov/forms/fee-waiver-
application-forms/application-proceed-district-court-without-prepaying-fees-or (last visited April
29, 2021).

* Courts in the Eleventh Circuit apply the procedures of Section 1915 to all indigent
applications and complaints. See Martinez v. Kristi Kleaners, Inc., 364 F.3d 1305, 1306 (11th
Cir. 2004) (per curiam).
(Id. at 5-6.)° Judge Schultz recommended that the District Court deny Plaintiffs’ In Forma
Pauperis Motion as moot. (/d. at 7.)

Plaintiffs objected “to the entire report and recommendation,” contending,
without support, that “(1) Plaintiffs [are] legally entitled to [] relief against said defendants;

(2) Defendants breached certain terms of the legal contract, therefore above-named defendants
are legally inde[b|ted to above-named plaintiffs.” (ECF No. 7.)

At the April 19, 2021 status conference, counsel for Robinhood advised the Court
that although Plaintiffs’ Objection was filed by the Clerk of the United States District Court for
the District of Minnesota on April 15, 2021, it was not a part of the docket transferred to this
Court that same day. (See 4/19/2021 Hr’g Tr. 48:7-50:8); compare Siruk, No. 0:21-cv-00415-
PJS-DTS (D. Minn. Apr. 15, 2021) (ECF No. 7) with Siruk, No. 1:21-cv-21448-CMA (S.D. Fla.)
(no objection filed). On April 20, 2021, Robinhood emailed Plaintiffs to advise them that their
action had been transferred to the Southern District of Florida as part of a multidistrict litigation

and that, at the April 19 status conference before the Court, Robinhood had informed the Court

> As Judge Schultz noted, including the instant action, Plaintiffs have filed ten putative class
actions in the District of Minnesota, eight of which were filed in the past six months alone (see
R&R at 5-6): (1) Siruk v. Assurance Partners LLC, et al., No. 19-cv-1021-NEB-SER (D. Minn.)
(filed April 12, 2019; voluntarily dismissed July 24, 2019); (2) Siruk, et al. v. Cofman, et al., No.
20-cv-1639-NEB-DTS (D. Minn.) (filed July 27, 2020; dismissed November 2, 2020); (3) Siruk
v. Mischeloff, et al., No. 20-cv-2269-PJS-HB (D. Minn.) (filed November 2, 2020; dismissed
March 9, 2021); (4) Siruk v. Kendall, No. 20-cv-2270-JRT-ECW (D. Minn.) (filed November 2,
2020; dismissed April 1, 2021); (5) Siruk, et al. v. State of Minnesota (City of Elk River), et al.,
No. 20-cv-2373-WMW-KMM (D. Minn.) (filed November 23, 2020; dismissed April 22, 2021);
(6) Siruk, et al. v. State of Minnesota, No. 20-cv-2385-NEB-TNL (D. Minn.) (filed November
24, 2020; dismissed February 24, 2021); (7) Siruk v. Healthy Beverage Company, No. 20-cv-
2431-ECT-DTS (D. Minn.) (filed November 30, 2020); (8) Siruk v. State of Minnesota, et al.,
No. 20-cv-2667-SRN-ECW (D. Minn.) (filed December 28, 2020; Report and Recommendation
to Dismiss entered February 5, 2021); (9) Siruk v. Mazur, et al., No. 21-cv-0054-JRT-HB (D.
Minn.) (filed January 5, 2021; Report and Recommendation to Dismiss entered February 3,
2021); and (10) Siruk v. Robinhood Financial LLC, et al., No. 21-cv-0415 (D. Minn.) (filed
February 12, 2021; Report and Recommendation to Dismiss entered March 31, 2021).
that the R&R remained pending for this Court’s consideration. Robinhood further informed
Plaintiffs that their Objection should be filed with this Court, and that Robinhood intended to
respond to Plaintiffs’ Objection on April 29, 2021. As of the date of this filing, Plaintiffs have
not filed their Objection with this Court. Nevertheless, as discussed at the April 19, 2021 status
conference, Robinhood submits this Response to Plaintiffs’ Objection pursuant to the 14-day
deadline set forth in Rule 72(b)(2) of the Federal Rules of Civil Procedure.

LEGAL STANDARD

“The transferee court has responsibility over all subsequent proceedings in the
case until remand occurs. For the purpose of pretrial proceedings, the transferee judge exercises
all the powers a federal judge would have in actions properly filed in the district in which he or
she sits.” Multidistrict Litigation Manual § 9:2, Westlaw (database updated May 2020). “A
district court may accept, reject, or modify a magistrate judge’s report and recommendation.” 28
U.S.C. § 636(b)(1). “Those portions of the report and recommendation to which objection is
made are accorded de novo review, if those objections ‘pinpoint the specific findings that the
party disagrees with.’” Cox v. Porsche Financial Services, Inc., 342 F. Supp. 3d 1271, 1276
(S.D. Fla. 2018) (quoting United States v. Schultz, 565 F.3d 1353, 1360 (11th Cir. 2009)). “Any
portions of the report and recommendation to which no specific objection is made are reviewed
only for clear error.” Id. (citing accord Macort v. Prem, Inc., 208 F. App’x 781, 784 (11th Cir.
2006)) (emphasis in original). The district court, however, should review a magistrate judge’s
legal conclusions de novo, even in the absence of an objection. See Cooper-Houston v. Southern
Ry. Co., 37 F.3d 603, 604 (11th Cir. 1994).

The first-to-file rule “developed as a doctrine of federal comity” that “favors the
forum of the first-filed suit.” Laskaris v. Fifth Third Bank, 962 F. Supp. 2d 1297, 1298 (S.D.

Fla. 2013). Courts apply the first-to-file rule based upon the “(1) the chronology of the two
actions; (2) the similarity of the parties, and (3) the similarity of the issues.” Laskaris, 962 F.
Supp. 2d at 1299; (see also R&R at 3). “When the first-to-file rule is applicable, the district
court may elect to stay, transfer, or dismiss a duplicative later-filed action, and in applying the
first-to-file rule, judges are afforded an ample degree of discretion.” Strother v. Hylas Yachts,
Inc., No. 12-80283-CV, 2012 WL 4531357, at *1 (S.D. Fla. Oct. 1, 2012) (citations omitted).
Where the first-to-file rule applies, the objecting party bears the burden of demonstrating that
“compelling circumstances” warrant an exception to the rule. Manuel v. Convergys Corp., 430
F.3d 1132, 1135 (11th Cir. 2005).

ARGUMENT

I. The First-to-File Rule Applies and the Siruk Action Should Be Dismissed.

The Court should adopt Judge Schultz’s recommendation to dismiss Plaintiffs’
Complaint pursuant to the first-to-file rule because all three elements of the first-to-file rule are
satisfied here. First, Plaintiffs filed their Complaint two weeks after the first complaint was filed
in Nelson v. Robinhood Financial LLC, et al., No. 21-cv-0777-JMF (S.D.N.Y.) (the “Nelson
Complaint’). (Compare Compl., No. 0:21-cv-00415-PJS-DTS (D. Minn. Feb. 12, 2021) (ECF
No. 1), with Nelson Compl., No. 21-cv-0777 (JMF) (S.D.N.Y. Jan. 28, 2021) (ECF No. 1); see
also R&R at 4.) Second, there is similarity between the parties, as Plaintiffs’ Complaint names
the same defendants as the Ne/son Complaint. (Compare Compl. {f 4-6, with Nelson Compl.
{| 4-6; see also R&R at 4.) Third, there 1s no question that there is substantial overlap between
the issues presented because Plaintiffs copied verbatim the allegations in the Ne/son Complaint
and asserted identical causes of action. (Compare, e.g., Compl. § 16 (“On or about January 27,
2021 Robinhood, in order to slow the growth of GME and deprived their customers of the ability
to use their service, abruptly, purposefully, willfully, and knowingly pulled GME from their app.

Meaning, retail investors could no longer buy or even search for GME on Robinhood’s app.’’),
with Nelson Compl. § 16 (same); see also R&R at 4 (identifying other identical allegations).) In
their Complaint, Plaintiffs likewise purport to represent the same putative class of Robinhood
customers as the Ne/son plaintiffs, and again Plaintiffs copied verbatim the class action
allegations in the Ne/son Complaint. (Compare Compl. 9] 26-37, with Nelson Compl. §§ 26-37.)
Further, Plaintiffs failed to provide any “compelling circumstances” that warrant an exception to
the first-to-file rule. Manuel, 430 F.3d at 1135. As such, the first-to-file rule applies to
Plaintiffs’ action, and the Court has an “ample degree of discretion” as to how to proceed.
Strother, 2012 WL 4531357, at *1.

Although dismissing Plaintiffs’ Complaint under the first-to-file rule is within this
Court’s discretion, the more common “course of action [is] for the court to transfer the case to
the [first-filed] court to determine which case should, in the interests of sound judicial
administration and judicial economy, proceed.” Laskaris, 962 F. Supp. 2d at 1299 (citations
omitted). Transfer is moot at this stage since both the Siruk and Nelson actions already have
been transferred to this Court and consolidated for pretrial proceedings. Dismissal of Plaintiffs’
Complaint is nonetheless warranted here, where Plaintiffs, serial filers of putative class action
complaints, have simply copied verbatim the allegations and causes of action of another putative
class action complaint that is also consolidated with this multidistrict litigation. Plaintiffs
therefore do not advance any claims that are not already being pursued by represented putative
class plaintiffs on behalf of a putative class of Robinhood customers, which would include
Plaintiffs. Further, although Plaintiffs have styled their action as being on behalf of themselves
and a putative class of all Robinhood customers, as pro se litigants, Plaintiffs could not be
appointed as class representatives. See Wallace v. Smith, 145 F. App’x 300, 302 (11th Cir. 2005)

(noting it is “plain error” to permit a litigant who 1s unassisted by counsel to represent a class);
see also Class v. U.S. Bank Nat’l Ass’n, 734 F. App’x 634, 636 (11th Cir. 2018) (the “right to
appear pro se .. . is limited to parties conducting their own cases, and does not extend to non-
attorney parties representing the interests of others”). Finally, Judge Schultz’s recommendation
that “dismissal [without prejudice] serves the purpose of cautioning the Siruks that frivolous
class action litigation will not be tolerated” (R&R at 6) is consistent with the inherent discretion
of federal courts to “limit the filing of frivolous law suits on a case by case basis,” including
taking “other, more creative, actions to discourage hyperactive litigators as long as some access
to the courts is allowed.” Cofield v. Alabama Public Comm’n, 936 F.2d 512, 518 (11th Cir.
1991); see also May v. Hatter, No. 00-4115-CIV-MOORE, 2001 WL 579782, at *1-2 (S.D. Fla.
May 15, 2001) (permanently enjoining pro se litigant who filed 22 civil actions in one year from
filing any further complaints without leave of court).

Therefore, dismissing Plaintiffs’ Complaint under the first-to-file rule promotes
judicial economy because it eliminates duplicative actions while still affording Plaintiffs ample
opportunity to participate as class members if a putative class 1s ultimately certified in the
January 2021 Short Squeeze Trading Litigation.® (See R&R at 5.)

CONCLUSION

For the foregoing reasons, the Court should overrule Plaintiffs’ Objection, adopt

the Magistrate Judge’s R&R and dismiss Plaintiffs’ Complaint.

° To the extent the Court sustains Plaintiffs’ Objection and Plaintiffs pursue their litigation
individually, Robinhood will move to stay the Siruk action pending the resolution of class
certification in the January 2021 Short Squeeze Trading Litigation pursuant to the arbitration
clause in the Robinhood Customer Agreement under the Federal Arbitration Act. (See 4/19/2021
Hr’g Tr. 44:10-46:6.) Should Plaintiffs opt out of proceeding as part of any class, Robinhood
would move to stay their action in favor of arbitration. (/d.)
Dated: April 29, 2021

Respectfully submitted,

/s/ Samuel A. Danon

Samuel A. Danon (FBN 892671)

Gustavo J. Membiela (FBN 513555)

Maria Castellanos Alvarado (FBN 116545)

HUNTON ANDREWS KURTH LLP

Wells Fargo Center

333 SE Second Avenue, Suite 2400

Miami, Florida 33131

Tel.: (305) 810-2500

Fax: (305) 810-2460

E-mail: sdanon@HuntonAK.com
gmembiela@HuntonAK.com

Antony L. Ryan

Kevin J. Orsini

Brittany L. Sukiennik

CRAVATH, SWAINE & MOORE LLP

Worldwide Plaza

825 8th Avenue

New York, NY 10019-7475

Tel.: (212) 474-1000

Fax: (212) 474-3700

E-mail: aryan@cravath.com
korsini@cravath.com
bsukiennik@cravath.com

Counsel for Robinhood Financial LLC,
Robinhood Securities, LLC, and Robinhood
Markets, Inc.


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