Robinhood's Reply in Support of Its Motion to Dismiss the Robinhood Tranche Complaint — In re January 2021 Short Squeeze Trading Litigation (Dkt. 439, S.D. Fla.)
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Robinhood's Reply in Support of Its Motion to Dismiss the Robinhood Tranche Complaint in In re: January 2021 Short Squeeze Trading Litigation, Case 1:21-md-02989-CMA (Case No. 21-MD-2989-ALTONAGA/TORRES, Document 439, 41 pages), in the U.S. District Court for the Southern District of Florida, entered November 19, 2021, relating to the Robinhood Tranche. Robinhood argues that California law applies to all of Plaintiffs' claims and that the amended complaint should be dismissed even if the choice of law provision is inapplicable. The reply says the negligence and gross negligence claims fail because Robinhood owes its customers contractual obligations, not tort duties, and that regulations and self-regulatory rules are irrelevant to the motion.
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- Date
- 2021-11-19
Cite this document
“Robinhood's Reply in Support of Its Motion to Dismiss the Robinhood Tranche Complaint (Dkt. 439).”
Original at archive.org, dated 2021-11-19. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-11-19-aas-v-superior-court-12-p-3d-1125-cal-2000/
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Case 1:21-md-02989-CMA Document 439 Entered on FLSD Docket 11/19/2021 Page 1 of 41
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 21-MD-2989-ALTONAGA/TORRES
In re:
JANUARY 2021 SHORT SQUEEZE
TRADING LITIGATION
_____________________________________/
This Document Relates to the Robinhood Tranche
ROBINHOOD’S REPLY IN SUPPORT OF ITS MOTION TO DISMISS THE
ROBINHOOD TRANCHE COMPLAINT
Case 1:21-md-02989-CMA Document 439 Entered on FLSD Docket 11/19/2021 Page 2 of 41
TABLE OF CONTENTS
INTRODUCTION ...........................................................................................................................1
APPLICABLE LAW .......................................................................................................................5
I. CALIFORNIA LAW APPLIES TO ALL OF PLAINTIFFS’ CLAIMS.............................5
II. THE AMENDED COMPLAINT SHOULD BE DISMISSED EVEN IF THE
CHOICE OF LAW PROVISION IS INAPPLICABLE. .....................................................7
ARGUMENT ...................................................................................................................................9
I. PLAINTIFFS’ NEGLIGENCE AND GROSS NEGLIGENCE CLAIMS FAIL. ...............9
A. Robinhood Does Not Owe a Generalized Duty of Care. .........................................9
B. Robinhood Owes Its Customers Contractual Obligations, Not Tort Duties. .........12
C. Plaintiffs’ Arguments Based on Regulations and Self-Regulatory Rules
Are Irrelevant to This Motion. ...............................................................................16
II. PLAINTIFFS DO NOT STATE A CLAIM FOR BREACH OF ANY
FIDUCIARY DUTIES.......................................................................................................17
A. None of the Robinhood Defendants Owe Customers a General
Fiduciary Duty. ......................................................................................................18
B. Robinhood Securities, As a Clearing Broker, Does Not Owe
Fiduciary Duties. ....................................................................................................21
III. PLAINTIFFS CANNOT STATE A CLAIM FOR BREACH OF THE IMPLIED
COVENANT OF GOOD FAITH AND FAIR DEALING................................................22
IV. PLAINTIFFS CANNOT STATE A CLAIM FOR BREACH OF AN IMPLIED
DUTY OF CARE. ..............................................................................................................25
V. PLAINTIFFS’ TORTIOUS INTERFERENCE CLAIM AGAINST
ROBINHOOD MARKETS FAILS TO STATE A CLAIM. .............................................26
VI. PLAINTIFFS FAIL TO STATE A CLAIM OF CIVIL CONSPIRACY. .........................28
VII. ROBINHOOD OWES NO DUTIES TO NON-ROBINHOOD CUSTOMERS—
ALL CLAIMS BROUGHT BY NON-ROBINHOOD CUSTOMERS
THEREFORE FAIL...........................................................................................................29
VIII. PLAINTIFFS’ AMENDED COMPLAINT SHOULD BE DISMISSED WITH
PREJUDICE. .....................................................................................................................30
i
Case 1:21-md-02989-CMA Document 439 Entered on FLSD Docket 11/19/2021 Page 3 of 41
TABLE OF AUTHORITIES
Page(s)
Cases
Aas v. Superior Court, 12 P.3d 1125 (Cal. 2000) ....................................................................10, 13
Anthem Leather, Inc. v. Kamino Int’l Transp., Inc., No. Civ. A. 1:06-CV-3130JE,
2008 WL 516289 (N.D. Ga. Feb. 25, 2008) ..............................................................................6
Apollo Cap. Fund LLC v. Roth Cap. Partners LLC, 70 Cal. Rptr. 3d 199
(Ct. App. 2007) ............................................................................................................17, 18, 19
Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 869 P.2d 454 (Cal. 1994) ...............................28
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Automatic Vending Co. v. Wisdom, 6 Cal. Rptr. 31 (Ct. App. 1960) ............................................24
Badie v. Bank of Am., 79 Cal. Rptr. 2d 273 (Ct. App. 1998) .........................................................24
Banc of Am. Sec. LLC v. Stott, No. 04-81086-CIV, 2005 WL 8156027 (S.D. Fla.
Aug. 30, 2005) .........................................................................................................................20
Bankest Imports, Inc. v. ISCA Corp., 717 F. Supp. 1537 (S.D. Fla. 1989)....................................21
Barrier Specialty Roofing & Coatings, Inc. v. ICI Paints N. Am., Inc.,
No. CV-F-07-1614 LJO TAG, 2008 WL 1994947 (E.D. Cal. May 6, 2008)..........................14
Beattey v. Coll. Ctr. of Finger Lakes Inc., 613 So. 2d 52 (Fla. 4th DCA 1992) .............................8
Berwecky v. Bear Stearns & Co., 197 F.R.D. 65 (S.D.N.Y. 2000) ...............................................22
Biakanja v. Irving, 320 P.2d 16 (Cal. 1958) ..................................................................................14
Bishop v. Florida Specialty Paint Co., 389 So. 2d 999 (Fla. 1980) ................................................8
Body Jewelz, Inc. v. Valley Forge Ins. Co., 241 F. Supp. 3d 1084 (C.D. Cal. 2017) ..............10, 14
Bombardier Cap. Inc. v. Progressive Mktg. Grp., Inc., 801 So. 2d 131
(Fla. 4th DCA 2001) ................................................................................................................12
Brehm v. 21st Century Ins. Co., 83 Cal. Rptr. 3d 410 (Ct. App. 2008) .........................................22
Brown v. Cal. Pension Adm’rs & Consultants, Inc., 52 Cal. Rptr. 2d 788
(Ct. App. 1996) ........................................................................................................................18
Cannizzaro v. Bache, Halsey, Stuart, Shields, Inc., 81 F.R.D. 719 (S.D.N.Y.
1979) ........................................................................................................................................22
ii
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Caravan Mobile Home Sales, Inc. v. Lehman Bros. Kuhn Loeb, Inc., 769 F.2d 561
(9th Cir. 1985)..........................................................................................................................19
Casamassina v. U.S. Life Ins. Co., 958 So. 2d 1093 (Fla. 4th DCA 2007) ...................................11
Certain Underwriters at Lloyd’s of London, UK Subscribing to Pol’y No.
B1230AP56189A14 v. Ocean Walk Resort Condo. Ass’n, No. 6:16-cv-258-
ORL-37GJK, 2017 WL 3034069 (M.D. Fla. July 18, 2017) ...................................................16
Chicago Title Ins. Co. v. Alday-Donalson Title Co. of Fla., 832 So. 2d 810
(Fla. 2d DCA 2002) .................................................................................................................27
City of San Diego v. Amoco Chem. Co., No. Civ. 98-0474-E (LSP), 1999 WL
33548157 (S.D. Cal. Sept. 9, 1999) .........................................................................................14
City Sols., Inc. v. Clear Channel Commc’ns, Inc., 201 F. Supp. 2d 1048
(N.D. Cal. 2002).......................................................................................................................19
Clay Elec. Co-op., Inc. v. Johnson, 873 So. 2d 1182 (Fla. 2003) ..................................................11
County of Kern v. Tyler Techs., Inc., No. 1:20-cv-00853-AWI-HBK, 2021 WL
369588 (E.D. Cal. Feb. 3, 2021) ..............................................................................................13
Curd v. Mosaic Fertilizer, LLC, 39 So. 3d 1216 (Fla. 2010).........................................................11
Doctors’ Co. v. Superior Ct., 49 Cal. 3d 39 (1989) .......................................................................28
Duffy v. Cavalier, 264 Cal. Rptr. 740 (Ct. App. 1989) ..................................................................18
Dwyer v. Bicoy, No. SACV 09-0064-JVS (RNBx), 2009 WL 10697966 (Nov. 17,
2009) ........................................................................................................................................13
Eads v. Marks, 249 P.2d 257 (Cal. 1952) ......................................................................................13
eCapital Commercial Fin. Corp. v. Hitachi Capital Am. Corp.,
519 F. Supp. 3d 1129 (S.D. Fla. 2021) ......................................................................................8
Elsayed v. Maserati N. Am., Inc., 215 F. Supp. 3d 949 (C.D. Cal. 2016) .....................................14
Enhanced Athlete Inc. v. Google LLC, No. 19-cv-08260-HSG, 2020 WL 4732209
(N.D. Cal. Aug. 14, 2020) ..................................................................................................23, 24
Erlich v. Menezes, 981 P.2d 978 (Cal. 1999)...............................................................10, 12, 13, 14
Estate of Johnson ex rel. Johnson v. Badger Acquisition of Tampa LLC,
983 So. 2d 1175 (Fla. 2d DCA 2008) ......................................................................................11
Estate of Rotell ex rel. Rotell v. Kuehnle, 38 So. 3d 783 (Fla. 2d DCA 2010) ..............................11
iii
Case 1:21-md-02989-CMA Document 439 Entered on FLSD Docket 11/19/2021 Page 5 of 41
FDIC for IndyMac Bank, FSB v. Genesis Title Co., LLC, No. 11-20841-CIV,
2011 WL 13223744 (S.D. Fla. July 1, 2011) ...........................................................................15
Fla. Power & Light Co. v. Westinghouse Elec. Corp., 510 So. 2d 899 (Fla. 1987) ......................15
Florida Power & Light Co. v. Allis Chalmers Corp., 83 F.3d 1514 (11th Cir.
1996) ........................................................................................................................................30
Foman v. Davis, 371 U.S. 178 (1962) ...........................................................................................30
Genet Co. v. Anheuser-Busch, Inc., 498 So. 2d 683 (Fla. 3d DCA 1986) ...............................28, 29
Gochnauer v. A.G. Edwards & Sons, Inc., 810 F.2d 1042 (11th Cir. 1987) ...........................18, 20
Graham v. Scissor-Tail, Inc., 623 P.2d 165 (Cal. 1981)................................................................12
Green Leaf Nursery v. E.I. DuPont de Nemours & Co., 341 F.3d 1292
(11th Cir. 2003)..........................................................................................................................5
Grey Fox, LLC v. Plains All Am. Pipeline, L.P., No. CV 16-3157 PSG, 2019 WL
4196066 (C.D. Cal. Apr. 8, 2019)............................................................................................14
Guz v. Bechtel Nat’l Inc., 8 P.3d 1089 (Cal. 2000)..................................................................22, 25
Hatton v. Chrysler Canada, Inc., 937 F. Supp. 2d 1356 (M.D. Fla. 2013) .....................................7
Heidelberg USA, Inc. v. PM Lithographers, Inc., No. CV 17-02223-AB, 2017
WL 7201872 (C.D. Cal. Oct. 19, 2017) ...................................................................................14
Holguin v. Dish Network LLC, 178 Cal. Rptr. 3d 100 (Ct. App. 2014) ........................................25
In re Checking Account Overdraft Litig., 694 F. Supp. 2d 1302 (S.D. Fla. 2010) ..........................7
In re Fundamental Long Term Care, Inc., 873 F.3d 1325 (11th Cir. 2017)..................................30
Integrity Factoring Grp. Inc. v. Powerhouse Fresh Holdings, LLC,
No. 17-81314-CIV, 2018 WL 7954520 (S.D. Fla. Oct. 30, 2018) ............................................6
Ixchel Pharma, LLC v. Biogen, Inc., 470 P.3d 571 (Cal. 2020) ..............................................26, 27
J’Aire Corp. v. Gregory, 598 P.2d 60 (Cal. 1979).........................................................................14
Jennings v. BIC Corp., 181 F.3d 1250 (11th Cir. 1999) ................................................................30
Kalitta Air, L.L.C. v. Cent. Tex. Airborne Sys., Inc., 315 F. App’x 603
(9th Cir. 2008)....................................................................................................................14, 15
Kaye v. Ingenio, Filiale de Loto-Quebec, Inc., No. 13-61687-CIV, 2014
WL 2215770 (S.D. Fla. May 29, 2014) ...................................................................................16
iv
Case 1:21-md-02989-CMA Document 439 Entered on FLSD Docket 11/19/2021 Page 6 of 41
Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937 (Cal. 2003) ........................................27
Koruga v. Fiserv Correspondent Servs., 183 F. Supp. 2d 1245 (D. Or. 2001) .............................22
Lacy v. BP P.L.C., 723 Fed. Appx. 713 (11th Cir. 2018) ..............................................................30
Lewis v. Guthartz, 428 So. 2d 222 (Fla. 1982) ..............................................................................15
Lipman v. Brisbane Elementary Sch. Dist., 359 P.2d 465 (Cal. 1961) ..........................................26
Loeb v. Geronemus, 66 So. 2d 241 (Fla. 1953) .............................................................................28
Margaret Hall Found., Inc. v. Atl. Fin. Mgmt., Inc., 572 F. Supp. 1475
(D. Mass. 1983)........................................................................................................................22
MasTec Renewables Puerto Rico LLC v. Mammoth Energy Services, Inc.,
No. 20-20263-Civ-Scola, 2020 WL 6781823 (S.D. Fla. Nov. 18, 2020) ..................................8
McDaniel v. Bear Stearns & Co., 196 F. Supp. 2d 343 (S.D.N.Y. 2002) .....................................22
Monroe v. Sarasota Cty. Sch. Bd., 746 So. 2d 530 (Fla. 2d DCA 1999) .......................................11
Moransais v. Heathman, 744 So. 2d 973 (Fla. 1999) ....................................................................15
Morris v. ADT Sec. Servs., Inc., No. 07-80950-CIV, 2009 WL 10691165
(S.D. Fla. Sept. 11, 2009)...........................................................................................................8
North American Chemical Co. v. Superior Court, 69 Cal. Rptr. 2d 466
(Ct. App. 1997) .......................................................................................................................10
Pacific Gas & Electric Co. v. Bear Stearns & Co., 791 P.2d 587 (Cal. 1990)..............................26
Palm Beach Cty. Health Care Dist. v. Pro. Med. Educ., Inc., 13 So. 3d 1090
(Fla. 4th DCA 2009) ................................................................................................................29
Perdue v. Crocker Nat’l Bank, 702 P.2d 503 (Cal. 1985) .............................................................23
Peregrine Pharms., Inc. v. Clinical Supplies Mgmt., Inc., No. 12-cv-1608-JGB,
2015 WL 13309286 (C.D. Cal. June 22, 2015) .................................................................10, 13
Petersen v. Sec. Settlement Corp., 277 Cal. Rptr. 468 (Ct. App. 1991) ..................................17, 21
Pycsa Panama, S.A. v. Tensar Earth Technologies, Inc., Case No. 06-20624-CIV-
GOLD/TURNOFF, 2006 WL 8432715 (S.D. Fla. Dec. 20, 2006)............................................7
Pycsa Panama, S.A. v. Tensar Earth Techs., Inc., 625 F. Supp. 2d 1198
(S.D. Fla. 2008)..........................................................................................................................8
Quelimane Co. v. Stewart Title Guar. Co., 960 P.2d 513 (Cal. 1998) ..........................................10
v
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Rayle Tech, Inc. v. DEKALB Swine Breeders, Inc., 133 F.3d 1405 (11th Cir.
1998) ..........................................................................................................................................5
Rejects Skate Magazine, Inc. v. Acutrack, Inc., No. C 06-2590 CW, 2006 WL
2458759 (N.D. Cal. Aug. 22, 2006).........................................................................................13
Resnick v. Hyundai Motor Am., Inc., No. CV 16-00593-BRO, 2017 WL 1531192
(C.D. Cal. Apr. 13, 2017) ........................................................................................................14
Richardson v. Progressive Am. Ins. Co., Case No. 18-cv-715, 2019 WL 2287955
(M.D. Fla. May 29, 2019) ........................................................................................................29
Robinson Helicopter Co. v. Dana Corp., 102 P.3d 268 (Cal. 2004) .............................................14
Rosen v. State Farm Gen. Ins. Co., 70 P.3d 351 (Cal. 2003) ........................................................10
Salit v. Ruden, McClosky, Smith, Schuster & Russell, P.A., 742 So. 2d 381
(Fla. 4th DCA 1999) ................................................................................................................28
Scolieri v. John Hancock Life Ins. Co. (U.S.A.), No. 2:16-cv-690-FTM-38CM,
2017 WL 700215 (M.D. Fla. Feb. 22, 2017) ...........................................................................21
Series AGI W. Linn of Appian Grp. Invs. DE, LLC v. Eves, 158 Cal. Rptr. 3d 193
(Ct. App. 2013) ........................................................................................................................25
SFM Holdings, Ltd. v. Banc of Am. Sec., LLC, 600 F.3d 1334 (11th Cir. 2010)...............20, 21, 22
Sheen v. Wells Fargo Bank, N.A., 250 Cal. Rptr. 3d 677 (Ct. App. 2019) ....................................12
Siemonsma v. Mut. Diversified Emps. Fed. Credit Union, No. SACV 10-1093-
DOC, 2011 WL 1485979 (C.D. Cal. Apr. 19, 2011) ...............................................................19
Southern California Gas Leak Cases, 441 P.3d 881 (Cal. 2019) ..............................................9, 10
Stallworth v. Hospitality Rentals, Inc., 515 So. 2d 413 (Fla. 1st DCA 1987) .................................8
State Farm Mut. Auto. Ins. Co. v. Olsen, 406 So. 2d 1109 (Fla. 1981) ...........................................8
Sun Life Ass. Co. of Canada v. Imperial Premium Fin., LLC, 904 F.3d 1197
(11th Cir. 2018)........................................................................................................................27
Sunbelt Veterinary Supply, Inc. v. Int’l Bus. Sys. U.S., Inc., 985 F. Supp. 1352
(M.D. Ala. 1997)........................................................................................................................5
Tech, Inc. v. Valley Tank Testing, L.L.C., 244 So. 3d 383 (Fla. 2d DCA 2018) ...........................11
Third Story Music, Inc. v. Waits, 48 Cal. Rptr. 747 (Ct. App. 1995) ............................................23
Tiara Condo. Ass’n v. Marsh & McLennan Cos., 110 So. 3d 399 (Fla. 2013) .......................15, 16
vi
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Tolz v. GEICO Gen. Ins. Co., No. 08-80663-Civ-MARRA/JOHNSON,
2009 WL 10667547 (S.D. Fla. July 16, 2009) .........................................................................11
Travelers Indem. Co. of Conn. v. Richard McKenzie & Sons, Inc.,
326 F. Supp. 3d 1332 (M.D. Fla. 2018) ...................................................................................16
Twomey v. Mitchum, Jones & Templeton, Inc., 69 Cal. Rptr. 222 (Ct. App. 1968) ......................18
Tyson & Assocs., Inc. v. Denko, No. 95-56351, 89 F.3d 846, 1996 WL 355566
(9th Cir. June 25, 1996) ...........................................................................................................14
Underwriters at Int. v. All Logistics Grp., Inc., 483 F. Supp. 3d 1199
(S.D. Fla. 2020)..................................................................................................................11, 16
Univ. Express, Inc. v. SEC, 177 F. App’x 52 (11th Cir. 2006) ........................................................1
Viera v. BASF Catalysts LLC, 2016 WL 1394333 (M.D. Fla. Apr. 8, 2016) ..................................7
Ware Else, Inc. v. Ofstein, 856 So. 2d 1079 (Fla. 5th DCA 2003) ..................................................6
Wolf v. Walt Disney Pictures & Television, 76 Cal. Rptr. 3d 585 (Ct. App. 2008) .......................23
Statutes & Rules
Rule 12(b)(6)..................................................................................................................................19
Other Authorities
FINRA Rule 2010 ..........................................................................................................................17
FINRA Rule 3110 ..........................................................................................................................17
FINRA Rule 4370 ..........................................................................................................................17
Restatement (Second) of Torts § 323 (1965) .................................................................................11
Restatement (Second) of Torts § 324A (1965) ..............................................................................11
Restatement (Third) of Torts: Liab. for Econ. Harm § 1, cmt. (e) (2020) .....................................15
Restatement (Third) of Torts: Liab. for Econ. Harm § 1(a) (2020) .................................................9
Restatement (Third) of Torts: Liab. for Econ. Harm § 3 (2020) ...................................................12
Restatement (Third) of Torts: Phys. & Emot. Harm § 7 (2010) ......................................................9
SEC Staff Report on Equity and Options Market Structure Conditions in Early
2021, available at https://www.sec.gov/files/staff-report-equity-options-
market-struction-conditions-early-2021.pdf ..............................................................................1
vii
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Testimony of Michael C. Bodson, DTCC President and CEO, U.S. House
Financial Services Committee (May 6, 2021), available at
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-
bodsonm-20210506.pdf .............................................................................................................3
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INTRODUCTION
Stripped of the rhetoric and hyperbole, Plaintiffs’ arguments in opposition boil
down to one absurd assertion: because Robinhood was founded on the ethos of empowering all
retail investors to access the financial markets, it somehow has a legal duty to all investors in the
United States—those who were Robinhood customers as well as those who had never even heard
of Robinhood—to permit unrestricted trading on its platform in all securities at all times. This
purported duty would exist regardless of market volume and volatility, and regardless of the
existence of unprecedented collateral deposit requirements from the NSCC. This purported duty
would also exist regardless of the risk that continued trading would create to Robinhood’s other
customers and the financial system as a whole. And, finally, this purported duty would exist
regardless of the facts that the SEC has explicitly stated that “broker-dealers may reserve the
ability to reject or limit customer transactions”1 and that Robinhood reserved exactly that right,
with each and every Robinhood customer explicitly agreeing in the Customer Agreement that
Robinhood could “in its sole discretion, and without prior notice to [the customer], prohibit or
restrict” any trade, refuse to accept any transaction and refuse to execute any transaction.
As discussed in more detail below, Plaintiffs fail to overcome the myriad legal
infirmities identified in Robinhood’s Motion. Plaintiffs also paint a fundamentally misleading—
and inaccurate—narrative of the relevant events, which is refuted by their own allegations and
the documents they incorporate into the operative complaint. Specifically, Plaintiffs assert in
opposition that as trading volume and volatility increased during the week of January 25,
Robinhood stood idly by while—Plaintiffs claim—its executives encouraged the unprecedented
market behavior and benefited themselves. That narrative is fanciful and has no grounding in
fact. As demonstrated by the very documents incorporated into the Amended Complaint,
Robinhood was monitoring the rise in volatility for GME and other relevant securities as early as
1
See Securities and Exchange Comm’n, “Thinking About Investing in the Latest Hot
Stock?” (Jan. 30, 2021) (“Jan. 30 SEC Statement”), https://www.sec.gov/oiea/investor-alerts-
and-bulletins/risks-short-term-trading-based-social-media-investor-alert; see also SEC Staff
Report on Equity and Options Market Structure Conditions in Early 2021 (“SEC Report”),
available at https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-
early-2021.pdf, at 32. The Court may take judicial notice of the January 30 SEC Statement and
the SEC Report because they are public records, the accuracy of which cannot reasonably be
questioned. See Univ. Express, Inc. v. SEC, 177 F. App’x 52, 53 (11th Cir. 2006) (taking judicial
notice of public records at the motion to dismiss stage).
Case 1:21-md-02989-CMA Document 439 Entered on FLSD Docket 11/19/2021 Page 11 of 41
Saturday, January 23, 2021, a day after the closing price for GME jumped from $43.93 on
January 21 to $65.01 on January 22. Among other issues, Robinhood began analyzing
Robinhood Securities’ overall exposure to the so-called meme stocks—particularly GME—and
the extent to which customers were placing self-directed trades in volatile stocks on margin.
(Am. Compl. ¶ 195.) In their discussions, Robinhood employees sought to understand the
impact of raising margin requirements (i.e., requiring customers to maintain sufficient collateral
on hand with Robinhood Financial to cover the stock’s purchase price), and the number of
Robinhood customers who would be impacted by margin requirements. (Id. ¶ 194.) Likewise,
Robinhood staffers discussed how to explain an increase in margin requirements to customers in
light of the risk of trading in volatile stocks. (Id. ¶¶ 194-95.)
When the markets opened on January 25, trading in the meme stocks rapidly
spiked relative to the prior week, leading Robinhood to take further measures to mitigate risk and
volatility across its platform in the face of rising customer trading activity. (Id. ¶¶ 196-202.) In
addition to deploying additional resources to meet the technical demands imposed by the influx
of customer trade orders (id.), Robinhood Securities increased customer margin requirements for
GME to manage risk levels (id. ¶ 12). These increased margin requirements helped mitigate risk
by requiring that customers who held or wished to purchase GME (and later other meme stocks)
to have sufficient assets (cash or other stock) in their accounts with Robinhood Financial to
cover their positions. The increased margin requirements did not otherwise limit customers’
ability to purchase any of the meme stocks as long as they had sufficient cash or other stock in
their account to pay for the purchase they wanted to complete. Concurrently, Robinhood
Securities timely met each and every NSCC collateral deposit requirement, which grew from
$125 million on the morning of January 25 to $690 million by the end of January 27. (Mot. at 8-
9.)
But meme stock trading continued to push both share prices and volume upward,
which culminated in an unprecedented one-day spike in the Suspended Stocks’ trading volume:
from 1.86 billion shares on January 26 to 6.95 billion shares on January 27.2 Michael Bodson,
2
See Market Activity, Nasdaq, https://www.nasdaq.com/market-activity (last visited
Aug. 24, 2021). The Court may take judicial notice of stock information. (Mot. at 7 n.4.)
2
Case 1:21-md-02989-CMA Document 439 Entered on FLSD Docket 11/19/2021 Page 12 of 41
President and CEO of the DTCC, testified to Congress that this trading spike led to “the two
highest transaction volume days in [NSCC’s] history on Wednesday, January 27 and Thursday,
January 28.” (See Bodson Testimony at 4.)3 That extraordinary single-day increase in the
Suspended Stocks’ trading volume on January 27 had an equally dramatic effect on Robinhood
Securities’ NSCC deposit requirement on January 28. At approximately 5:11 a.m. EST,
Robinhood Securities received an email from NSCC stating that its deposit requirements had
jumped massively from the prior day’s: Robinhood Securities’ deposit deficit was over
$3 billion—more than quadruple the previous day’s deposit requirement. (Am. Compl. ¶ 215.)
The DTCC confirmed that, “[r]isk at NSCC, as measured by NSCC’s aggregate clearing fund
requirement, also increased substantially on January 28, to $33.5 billion, slightly higher than the
peak that occurred in March 2020 and just under NSCC’s historical maximum.” (See Bodson
Testimony at 4.)
In the face of this extraordinary market activity, Robinhood was left with no
choice but to set the Suspended Stocks to “position close only” (“PCO”), which enabled (but did
not require) Robinhood customers to exit their positions in those symbols if they wished, but
temporarily restricted new purchases of those volatile securities. (Am. Compl. ¶¶ 219, 240.) In
light of the unprecedented market volatility, Robinhood had to exercise its discretion under the
Customer Agreement to protect the firm and its customers. As seen in both the internal
documents that Plaintiffs cite, as well as the public statements that Plaintiffs attack, the PCO
decision was one that Robinhood did not make lightly, and was necessary to protect all of
Robinhood’s customers’ ability to continue trading in the thousands of other securities available
on its platform. Plaintiffs attempt to take Robinhood to task for allegedly being “inconsistent
and shifting” in explaining the reasoning behind the PCO decision. (Opp. at 4-5.) However, as
this Court recognized just two days ago when addressing this very same issue, Robinhood’s
statements were not inconsistent at all. (See Order Dismissing Antitrust Amended Complaint,
ECF No. 438 at 46.)
3
See Testimony of Michael C. Bodson (“Bodson Testimony”), DTCC President and CEO,
U.S. House Financial Services Committee, at 4 (May 6, 2021), available at
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-bodsonm-20210506.pdf.
3
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Plaintiffs’ charges of impropriety are similarly based on complete
mischaracterizations of the documents in the record. For example, Plaintiffs allege that
Mr. Swartwout, President and COO of Robinhood Securities, engaged in self-serving trades at
the expense of customers by selling “his AMC shares on January 26, 2021—a day before the
restrictions took effect.” (Opp. at 24.) This is false for three obvious reasons. First, the full text
of the message (copied in the Amended Complaint) shows that Plaintiffs confuse
Mr. Swartwout’s sale of AMC shares on January 26 with Robinhood Securities’ plan to increase
margin requirements for GME the following day—a completely different stock, and not the
restriction at issue. (Am. Compl. ¶ 12.) Second, none of the purchase restrictions at issue were
decided upon, or implemented until the morning of January 28 (after Robinhood Securities
received the NSCC email raising its collateral deposit requirement), and therefore Mr. Swartwout
did not know and could not have known that Robinhood later was going to impose purchase
restrictions on AMC at the time he sold his AMC shares. (Am. Compl. ¶ 219; Mot. at 9-10.)
Third, the “PCO” restriction that Robinhood implemented on January 28 permitted Robinhood
customers at all times to sell out of existing positions; thus, any Robinhood customer could sell
his or her AMC shares, just as Mr. Swartwout did. (Am. Compl. ¶ 240.) Plaintiffs also claim
that Robinhood had “intentionally fueled demand” due to Robinhood’s ongoing marketing
efforts and planned advertising time prior to and during Super Bowl LV (on February 5, 2021).
(Opp. at 21.) But Plaintiffs do not, and cannot, link any such marketing efforts for Robinhood’s
services generally to trading demand for the Suspended Stocks. (Am. Compl. ¶ 201.)
For these (and many other) reasons, the lengthy narrative that Plaintiffs present at
the opening of their opposition is completely untethered from reality. It is also entirely
irrelevant. None of those purported facts—even if true (they are not) and supported by the
allegations in the Amended Complaint (again, they are not)—could overcome the legal
infirmities that doom Plaintiffs’ attempt to create causes of action where none exist. That is true
for two primary reasons. First, as black-letter tort law doctrine, there is no duty in negligence to
avoid economic (non-physical) harm to any foreseeable plaintiff. Plaintiffs’ attempt to thrust
upon Robinhood such a duty, to all investors in the United States who held a share in one of the
meme stocks, is legally foreclosed. Second, Plaintiffs, who are all Robinhood customers, cannot
evade the clear terms of the Customer Agreement they signed to open their Robinhood accounts.
In short, the Robinhood Customer Agreement expressly permitted Robinhood to implement the
4
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challenged restrictions that are the basis for each of Plaintiffs’ claims. That same agreement
limited the extent of any agency relationship between Robinhood and its customers, precluding
the existence of any fiduciary duty. Accordingly, what Plaintiffs call an improper attempt to
“immunize” allegedly improper conduct is, in fact, nothing more than a request that the Court
enforce the relevant, unambiguous terms of a contract that Plaintiffs do not allege was
unenforceable and do not allege was breached. The relevant law precludes each of Plaintiffs’
claims, and the Amended Complaint should be dismissed with prejudice.
APPLICABLE LAW
Plaintiffs fail to state a claim against Robinhood, regardless of whether the Court
applies California law—as Robinhood argues—or Florida law—as Plaintiffs argue.
Nevertheless, Robinhood explains here why the broad choice-of-law provision in the Customer
Agreement should result in the application of California law.
I. CALIFORNIA LAW APPLIES TO ALL OF PLAINTIFFS’ CLAIMS.
Plaintiffs erroneously assert that the Robinhood Customer Agreement’s choice-of-
law provision is a narrow one that does not apply to their tort claims. (See Opp. at 15-16.)
Plaintiffs focus on the first two words of Robinhood’s choice-of-law provision—“This
Agreement”—and ignore the rest of the provision, thereby misconstruing its breadth. The full
provision states: “This Agreement and all transactions made in [customer’s] Account[s] shall be
governed by the laws of the State of California (regardless of the choice of law rules thereof).”
(Mot. at 12; Cust. Agmt. § 37.K (emphasis added).) Plaintiffs’ focus on the first two words to
the exclusion of the rest of the clause causes them two problems, which they cannot overcome.
First, the full scope of the choice-of-law provision renders inapposite the cases
Plaintiffs cite. Each of those cases concerns a narrow choice-of-law clause purporting to govern
only “[the] release,” “[the] contract” or “[the] Agreement”—without any additional language
broadening the clauses’ scopes beyond contract claims. (Opp. at 15-16.)4 None of Plaintiffs’
4
Plaintiffs’ cases all involve narrow choice-of-law provisions, which are limited to contract
claims. See Green Leaf Nursery v. E.I. DuPont de Nemours & Co., 341 F.3d 1292, 1301 (11th
Cir. 2003) (holding that a choice-of-law provision limited to “[t]his release” did not encompass
tort claims); Rayle Tech, Inc. v. DEKALB Swine Breeders, Inc., 133 F.3d 1405, 1408 (11th Cir.
1998) (interpreting a choice-of-law provision that provided that “[t]his contract shall be governed
by the laws of the State of Illinois” to exclude tort claims); Sunbelt Veterinary Supply, Inc. v.
Int’l Bus. Sys. U.S., Inc., 985 F. Supp. 1352, 1356 (M.D. Ala. 1997) (holding that a choice-of-
5
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cases involves a choice-of-law provision akin to the broad “all transactions” language set forth in
Robinhood’s Customer Agreement.
Second, courts that have considered provisions like Robinhood’s have confirmed
that the inclusion of broader language like “all transactions made in [customer’s] account”
unambiguously expands the provision’s scope beyond claims for breach of contract. See Anthem
Leather, Inc. v. Kamino Int’l Transp., Inc., No. Civ. A. 1:06-CV-3130JE, 2008 WL 516289, at
*2 (N.D. Ga. Feb. 25, 2008) (“[T]he plain meaning of ‘govern[s] all transactions between the
Parties’ is that the [agreement] would apply to every business dealing between the two parties.”);
Integrity Factoring Grp. Inc. v. Powerhouse Fresh Holdings, LLC, No. 17-81314-CIV, 2018 WL
7954520, at *2 (S.D. Fla. Oct. 30, 2018) (finding that the language “[t]his Agreement and all
transactions contemplated hereunder . . . shall be governed by, construed under, and enforced in
accordance with the internal laws of the state of Idaho” applied to claim for attorneys’ fees under
a separate contract entered into as a transaction contemplated under the contract with the choice-
of-law provision). Here, each Plaintiff claims that he or she was harmed either by selling a
portion of his or her meme stock holdings in Robinhood accounts at allegedly depressed prices
or by placing a purchase order for one or more of the Suspended Stocks through her Robinhood
account. (Am. Compl. ¶¶ 29-84.) Each of Plaintiffs’ allegations thus concern “transactions
made in [customers’] account.”
Because the choice-of-law provision in the Customer Agreement is unambiguous
and broad in scope, it applies to all of Plaintiffs’ claims (both in contract and in tort) even if, as
Plaintiffs contend, the Customer Agreement is a contract of adhesion. See Arndt v. Twenty-One
Eighty-Five, LLC, 448 F. Supp. 3d 1310, 1321 (S.D. Fla. 2020) (“Simply put, when an
unambiguous, valid choice-of-law provision exists, as it does here, there is no need for the court
to engage in a further conflict of laws analysis.”) (citations omitted); Ware Else, Inc. v. Ofstein,
856 So. 2d 1079, 1081 (Fla. 5th DCA 2003) (enforcing unambiguous choice-of-forum clause and
“disagree[ing] that the contract under consideration is not enforceable either because it is
considered to be a contract of adhesion, or is unreasonable or unjust”).
law provision that stated that “[t]his Agreement [was] governed by and construed under the laws
of the State of California” did not encompass tort claims).)
6
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II. THE AMENDED COMPLAINT SHOULD BE DISMISSED EVEN IF THE
CHOICE OF LAW PROVISION IS INAPPLICABLE.
Plaintiffs contend that the “most significant relationship” test results in the
application of Florida law to their tort claims. If the Court declines to apply the Customer
Agreement’s choice-of-law provision to the tort claims, however, the Court need not undertake
the full-blown choice-of-law analysis under the “most significant relationship” test at this stage
of the case. Rather, for purposes of resolving Robinhood’s Motion, the Court may assume
Florida law applies to the tort claims, as Plaintiffs suggest. See In re Checking Account
Overdraft Litig., 694 F. Supp. 2d 1302, 1314, 1324 n.12 (S.D. Fla. 2010) (assuming, for purposes
of motion to dismiss, that law of plaintiffs’ domiciles applied, but recognizing that “[a]ny
arguments regarding specific Plaintiffs or specific states may be raised at a later stage upon
Court consideration of class certification, summary judgment, or trial”); Viera v. BASF Catalysts
LLC, 2016 WL 1394333, at *1 n.2 (M.D. Fla. Apr. 8, 2016) (deciding motion to dismiss
assuming New York law applied but noting that “[t]he parties should be ready, however, to
address the choice-of-law issue at a later stage of the litigation”).
The Court may make that assumption because the choice of law does not change
the outcome on this Motion: Plaintiffs have not identified a conflict that makes a difference to
their ability to state a claim. As Robinhood demonstrated in the Motion (and addresses further
below), Plaintiffs’ claims all fail under Florida law as well. If the Court does not apply the
choice-of-law-provision in the Customer Agreement broadly, the Court may therefore apply
Florida law to the tort claims on this Motion. See Pycsa Panama, S.A. v. Tensar Earth
Technologies, Inc., Case No. 06-20624-CIV-GOLD/TURNOFF, 2006 WL 8432715, at *3 (S.D.
Fla. Dec. 20, 2006) (“Because the outcome of Tensar’s motion to dismiss will be the same
regardless of which law is applied, no true conflict exists. Therefore, this Court will apply the
law of Florida, the forum state, to which the parties originally consented by virtue of their
application of that law.”); see also Hatton v. Chrysler Canada, Inc., 937 F. Supp. 2d 1356, 1367-
68 (M.D. Fla. 2013) (deciding motion to dismiss without deciding conflict of law issue because
there was no true conflict).
Although it is unnecessary for the Court to undertake a full-blown choice-of-law
analysis at this stage, if the Court were to reach the issue now (or at a later stage in the case),
Florida’s most significant relationship test would not—as Plaintiffs urge—result in application of
7
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Florida law to the merits of Plaintiffs’ tort claims. Under Florida’s most significant relationship
test, courts consider four factors: (i) where the alleged injury occurred, (ii) where the alleged
conduct causing injury occurred, (iii) the domicile, residence, nationality, place of incorporation
and place of business of the parties and (iv) the place where the relationship, if any, between the
parties is centered. See Bishop v. Florida Specialty Paint Co., 389 So. 2d 999, 1001 (Fla. 1980).
The first factor—where the alleged injury occurred—is given the most weight. Id. (“The state
where the injury occurred would, under most circumstances, be the decisive consideration in
determining the applicable choice of law.”); see also State Farm Mut. Auto. Ins. Co. v. Olsen,
406 So. 2d 1109, 1111 (Fla. 1981) (holding “Illinois has the most significant relationship with
the occurrence since the accident happened there”); Morris v. ADT Sec. Servs., Inc., No. 07-
80950-CIV, 2009 WL 10691165, at *6 (S.D. Fla. Sept. 11, 2009) (holding application of Florida
law to be “inappropriate” where the places of injury for the named plaintiffs included four
different states). Here, Plaintiffs are domiciled in seven different states, and Plaintiffs seem to
acknowledge that any alleged harm occurred in their respective home jurisdictions. (Opp. at 18);
see also MasTec Renewables Puerto Rico LLC v. Mammoth Energy Services, Inc., No. 20-
20263-Civ-Scola, 2020 WL 6781823, at *6 (S.D. Fla. Nov. 18, 2020) (holding, for factor one
purposes, that injury in tortious interference case occurred where plaintiff’s business was
harmed); eCapital Commercial Fin. Corp. v. Hitachi Capital Am. Corp., 519 F. Supp. 3d 1129,
1134 n.4 (S.D. Fla. 2021) (same).5
While the second factor (where the decision was made) points to Florida, the
remaining two factors point to California: it is where two of the three corporate defendants
maintain their principal place of business, see Pycsa Panama, S.A. v. Tensar Earth Techs., Inc.,
625 F. Supp. 2d 1198, 1225 (S.D. Fla. 2008) (holding factor three supported applying Panama
law to product liability claims because “three of the four key parties” were incorporated and had
5
Plaintiffs erroneously contend that because Robinhood’s decision to PCO the Suspended
Stocks was made in Florida, the “culmination” of Plaintiffs’ injuries occurred there. (Opp.
at 18.) But Plaintiffs are improperly conflating the location where the alleged injury occurred
(among the Plaintiffs, across seven states) with the place where the alleged conduct causing the
injury occurred. See Bishop, 389 So.2d at 1001. As Plaintiffs acknowledge, the location where
the conduct occurred is the second factor of the significant relationship test, not the first. (Opp.
at 18.) Unsurprisingly, Plaintiffs’ position is not supported by their cited authorities or by
Florida law. See MasTec, 2020 WL 6781823, at *6; eCapital, 519 F. Supp. 3d at 1134 n.4.
8
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their principal place of business there), and it is the forum identified in the Robinhood Customer
Agreement, see Beattey v. Coll. Ctr. of Finger Lakes Inc., 613 So. 2d 52, 54-55 (Fla. 4th DCA
1992) (applying New York law where parties’ contract included “several provisions pertaining to
New York law”); see also Stallworth v. Hospitality Rentals, Inc., 515 So. 2d 413, 417 (Fla. 1st
DCA 1987) (holding relationship centered in Florida because parties’ agreements had various
connections to Florida). While the Court may need to weigh this choice-of-law issue at later
stages if the case proceeds, Robinhood still wins this Motion regardless of the outcome of the
most significant relationship analysis because Plaintiffs do not state a claim under Florida law—
the law which they themselves advocate for their tort claims.
ARGUMENT
I. PLAINTIFFS’ NEGLIGENCE AND GROSS NEGLIGENCE CLAIMS FAIL.
Plaintiffs’ lead argument in support of their claims for negligence and gross
negligence (Counts I and II) is that Robinhood supposedly owes negligence duties to “all
foreseeable Plaintiffs” (Opp. at 20), by which Plaintiffs apparently mean their “Nationwide
Investor Class.” That is, Plaintiffs claim Robinhood owes tort duties to every single person or
entity in the United States who held one of the 13 stocks at issue, regardless of whether he, she
or it had ever even heard of Robinhood, or Robinhood had ever heard of them. This breathtaking
assertion is wrong as a matter of law, both with respect to Robinhood Customers (as addressed in
this Section I) and with respect to non-Robinhood Customers (as addressed in Section VII). The
relevant tort law upon which Plaintiffs rely makes clear that the concept of “foreseeable risk”
gives rise to a tort duty only in situations involving physical harm. (See infra Part I.A.) Once
stripped of their “foreseeable risk” argument, Plaintiffs cannot successfully invoke any exception
to the general rule that liability for their alleged losses must arise in contract rather than tort
given the existence of a binding contract between the parties. (See infra Part I.B.)
A. Robinhood Does Not Owe a Generalized Duty of Care.
Plaintiffs’ argument that Robinhood owes negligence duties to all foreseeable
plaintiffs is wrong. As explained in the Motion, black-letter law imposes a tort duty arising from
foreseeability of harm only when an “actor’s conduct creates a risk of physical harm.”
Restatement (Third) of Torts: Phys. & Emot. Harm § 7 (2010) (emphasis added). By contrast,
“[a]n actor has no duty to avoid the unintentional infliction of economic loss on another.”
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Restatement (Third) of Torts: Liab. for Econ. Harm § 1(a) (2020) (emphasis added). It does not
matter whether California or Florida law applies.
California law. The California Supreme Court most recently applied these
principles in Southern California Gas Leak Cases, 441 P.3d 881 (Cal. 2019), where the court
held that a natural gas utility, which permitted a prolonged gas leak, did not owe a duty not to
inflict economic damages on nearby businesses. The court explained that its precedents
“requir[e] more than mere foreseeability for imposing a duty of care” in cases involving
economic losses because the court has “appreciated the need to safeguard the efficacy of tort law
by setting meaningful limits on liability.” Id. at 887. This holding was consistent with many
prior decisions by the California Supreme Court confirming that there is no generalized
negligence duty to avoid non-physical harms. See Aas v. Superior Court, 12 P.3d 1125, 1130-31
(Cal. 2000) (“In actions for negligence, a manufacturer's liability is limited to damages for
physical injuries; no recovery is allowed for economic loss alone.”);6 Erlich v. Menezes, 981
P.2d 978, 983 (Cal. 1999) (explaining that “foreseeability alone is not sufficient to create an
independent tort duty,” and “foreseeability is not synonymous with duty; nor is it a substitute”);
Quelimane Co. v. Stewart Title Guar. Co., 960 P.2d 513, 532 (Cal. 1998) (“Recognition of a duty
to manage business affairs so as to prevent purely economic loss to third parties in their financial
transactions is the exception, not the rule, in negligence law” and “[f]oreseeability of financial
injury to third persons alone is not a basis for imposition of liability for negligent conduct . . . .”).
Plaintiffs ignore these controlling California Supreme Court cases and instead rely
entirely on, and misread, a non-binding Court of Appeal case, North American Chemical Co. v.
Superior Court, 69 Cal. Rptr. 2d 466, 476 (Ct. App. 1997). (See Opp. at 21.) North American
Chemical Co. does not hold that a general foreseeability test applies in cases that do not involve
physical harm. To the contrary, it applies the J’Aire “special relationship” test, which is an
exception to the general rule (on which Robinhood relies) that there is no general duty to avoid
non-physical harms. As discussed below, the J’Aire test is inapplicable in this case and, in any
event, the application of the J’Aire test in North American Chemical Co. has been widely
6
A narrow aspect of Aas relating to construction defects in newly constructed housing has
been superseded by California statute. See Rosen v. State Farm Gen. Ins. Co., 70 P.3d 351, 356-
57 (Cal. 2003). But this does not disturb the reasoning in Aas relevant here.
10
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criticized. See Peregrine Pharms., Inc. v. Clinical Supplies Mgmt., Inc., No. 12-cv-1608-JGB,
2015 WL 13309286, at *6 (C.D. Cal. June 22, 2015) (explaining that the “reasoning and
holdings” of N. Am. Chem. Co. “have been largely ignored or distinguished by subsequent
opinions of the California Supreme Court”); Body Jewelz, Inc. v. Valley Forge Ins. Co., 241 F.
Supp. 3d 1084, 1094 (C.D. Cal. 2017) (declining to follow N. Am. Chem. Co.).
Florida law. Plaintiffs fail to state a negligence claim under Florida law for the
same reasons. Florida courts also recognize that a plaintiff generally cannot recover in tort for
purely economic losses. See Tech, Inc. v. Valley Tank Testing, L.L.C., 244 So. 3d 383, 393 (Fla.
2d DCA 2018) (“[T]o proceed on a common law negligence claim based solely on economic
loss, there must be some sort of link between the parties or some other extraordinary
circumstance that justifies recognition of such a claim.”); Monroe v. Sarasota Cty. Sch. Bd., 746
So. 2d 530, 531 (Fla. 2d DCA 1999) (“[W]e continue to hold, as a general rule, that bodily injury
or property damage is an essential element of a cause of action in negligence.”); Underwriters at
Int. v. All Logistics Grp., Inc., 483 F. Supp. 3d 1199, 1211 (S.D. Fla. 2020) (“[P]laintiffs are
generally not permitted to recover ‘for purely economic losses when the plaintiff has sustained
no bodily injury [or] property damage.’”) (quoting Curd v. Mosaic Fertilizer, LLC, 39 So. 3d
1216, 1223-24 (Fla. 2010)), appeal dismissed, No. 20-14453-JJ, 2021 WL 2190226 (11th Cir.
Mar. 4, 2021).
The two Florida cases Plaintiffs cite to support their general foreseeability theory
(see Opp. at 20-21) do nothing to rebut this well-established doctrine—Clay Elec. Co-op., Inc. v.
Johnson, 873 So. 2d 1182, 1184 (Fla. 2003), and Estate of Rotell ex rel. Rotell v. Kuehnle, 38 So.
3d 783, 785 (Fla. 2d DCA 2010), each involve the risk of physical harm. Indeed, in Clay
Electric Co-op., the Florida Supreme Court relied on the Restatement standard, which requires
“physical harm” for a generalized negligence duty. 873 So. 2d at 1186 (quoting Rest. (Second)
of Torts § 324A (1965)); see also Rest. (Second) of Torts § 323 (1965). Accordingly, Florida
courts have held that the doctrine of Clay Electric Co-op. is “inapplicable” in “a case not
involving ‘physical harm’ within the meaning of Section 323 of the Restatement (Second) of
Torts (1965).” Casamassina v. U.S. Life Ins. Co., 958 So. 2d 1093, 1102 (Fla. 4th DCA 2007);
see also Estate of Johnson ex rel. Johnson v. Badger Acquisition of Tampa LLC, 983 So. 2d
1175, 1186 (Fla. 2d DCA 2008) (doctrine of Clay Electric Co-op. “is inapplicable where there is
11
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no physical harm”); Tolz v. GEICO Gen. Ins. Co., No. 08-80663-Civ-MARRA/JOHNSON, 2009
WL 10667547, at *4 (S.D. Fla. July 16, 2009) (same).
In short, Plaintiffs’ contention that Robinhood owes all foreseeable plaintiffs who
suffer economic harm a duty of care is wrong under basic principles of tort law.
B. Robinhood Owes Its Customers Contractual Obligations, Not Tort Duties.
Stripped of their general foreseeability argument, Plaintiffs are left to argue that
some other aspect of their relationship with Robinhood gave rise to a tort duty. As a general
rule, however, “there is no liability in tort for economic loss caused by negligence in the
performance or negotiation of a contract between the parties.” Restatement (Third) of Torts:
Liab. for Econ. Harm § 3 (2020). Plaintiffs do not contest here that there is a binding contract
between Robinhood and its customers; indeed they bring claims premised on the very
enforceability of that contract. (See Counts IV–V.) The fact that Plaintiffs contend the contract
is a contract of adhesion is irrelevant here. See Graham v. Scissor-Tail, Inc., 623 P.2d 165, 172
(Cal. 1981) (“[A] contract of adhesion is fully enforceable according to its terms.”); Bombardier
Cap. Inc. v. Progressive Mktg. Grp., Inc., 801 So. 2d 131, 135 (Fla. 4th DCA 2001) (finding
allegations that a contract is one of adhesion does not “in itself . . . render the contract[] void”).7
Because Robinhood and its customers are parties to an enforceable contract, the
basic tort-law principle (recognized under both California and Florida law) that bars parties to a
contract from recovering in tort for economic loss precludes Plaintiffs’ negligence claims.
California law. As Robinhood explained in its Motion to Dismiss, “the duties of
care between parties who negotiate contracts are not governed by the law of tort.” Sheen v.
Wells Fargo Bank, N.A., 250 Cal. Rptr. 3d 677, 684 (Ct. App. 2019) (quoting Rest. 3d Torts,
Liability for Economic Harm (Tent. Draft No. 1) § 3, cmt. d). The California Supreme Court has
declared that “[i]f every negligent breach of contract gives rise to tort damages the limitation [on
tort recovery in contract breach cases] would be meaningless, as would the statutory distinction
between tort and contract remedies.” Erlich, 981 P.2d at 984. To be clear, Robinhood does not
take the position that it owes its customers no legal obligations. To the contrary, Robinhood’s
7
While it is true that an unconscionable contract of adhesion may be unenforceable,
Plaintiffs do not allege the Customer Agreement is unconscionable. (Mot. at 14; Opp. at 1.)
12
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obligations to its customers are clearly defined and governed by contract, the terms of which
each and every customer reviews and accepts prior to opening their accounts. (See Mot. at 14.)
As Robinhood also explained in the Motion, there are two exceptions that could
permit a plaintiff to bring a tort claim based on a contractual relationship—the independent tort
doctrine and the existence of a professional duty. (See Mot. at 15-17.) Plaintiffs do not argue
that either exception applies. Instead, Plaintiffs seek to rely on two other purported bases for
evading the default rule that no tort duties arise from a contractual relationship: (1) a supposed
exception for services contracts; and (2) the “special relationship” doctrine. Each argument fails.
First, Plaintiffs wrongly assert that “the economic loss rule does not apply where
the parties have contracted for the provision of services . . . .” (Opp. at 22.) The only decision
by the California Supreme Court that Plaintiffs cite is inapplicable because it involved physical
injury. See Eads v. Marks, 249 P.2d 257 (Cal. 1952) (severe facial injuries to toddler from
broken glass milk bottle). And the only other case Plaintiffs cite is North American Chemical
Co., which as discussed above has been roundly criticized and not followed. Since the California
Court of Appeal issued its decision in North American Chemical Co., the California Supreme
Court has confirmed that there is no special rule for services contracts, see Erlich, 981 P.2d at
980 (claim for emotional distress damages from negligent performance of a home construction
contract), and separately has explained that the argument in North American Chemical Co. about
services contracts “is not persuasive” because “[a] person may not ordinarily recover in tort for
the breach of duties that merely restate contractual obligations,” Aas, 12 P.3d at 1135.
Unsurprisingly, the court in Peregrine concluded that “the “reasoning and holdings” of North
American Chemical Co. “have been largely ignored or distinguished by subsequent opinions of
the California Supreme Court.” 2015 WL 13309286, at *6.8
8
Other federal courts in California have agreed. See, e.g., County of Kern v. Tyler Techs.,
Inc., No. 1:20-cv-00853-AWI-HBK, 2021 WL 369588, at *9 (E.D. Cal. Feb. 3, 2021) (“In light
of Erlich, the Court cannot find, as [plaintiff] urges, that the economic loss rule does not apply to
service contracts.”); Dwyer v. Bicoy, No. SACV 09-0064-JVS (RNBx), 2009 WL 10697966, at
*4 (Nov. 17, 2009) (“The principles found in Erlich, rather than North American, are controlling
in this case.”); Rejects Skate Magazine, Inc. v. Acutrack, Inc., No. C 06-2590 CW, 2006 WL
2458759, at *5 (N.D. Cal. Aug. 22, 2006) (holding that “the limitation on tort recovery applies to
the negligent performance of services as well as to the negligent manufacture of goods”).
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Second, Plaintiffs contend that, under California law, the J’Aire “special
relationship exception” applies. (Opp. at 23-26.) Notably, the J’Aire test is an exception to the
very rule that Plaintiffs contend does not exist—that a plaintiff generally cannot recover in tort
solely for economic losses. In any event, the J’Aire special relationship exception does not apply
here as a matter of law because Robinhood and its customers are in contractual privity through
the Robinhood Customer Agreement.
As Robinhood explained in its Motion, the California Supreme Court has applied
the exception only where the parties do not have a contract. See J’Aire Corp. v. Gregory, 598
P.2d 60, 63 (Cal. 1979) (“not in contractual privity”); Biakanja v. Irving, 320 P.2d 16, 18 (Cal.
1958) (“not in privity of contract”). Indeed, since deciding J’Aire and Biakanja, the California
Supreme Court has consistently emphasized the importance of preventing tort remedies from
subsuming contract remedies, and has cautioned that expanding the J’Aire special relationship
exception to parties in privity of contract would create exactly that problem. See, e.g., Erlich,
981 P.2d at 984 (“If every negligent breach of a contract gives rise to tort damages the limitation
[on tort recovery] would be meaningless, as would the statutory distinction between tort and
contract remedies.”); Robinson Helicopter Co. v. Dana Corp., 102 P.3d 268, 273 (Cal. 2004)
(explaining that the rule preventing plaintiffs from recovering for economic losses in tort
“prevent[s] the law of contract and the law of tort from dissolving one into the other”).
Numerous federal courts have also recognized the boundary that the California
courts have drawn around J’Aire by limiting it only to cases that do not involve parties in
contractual privity. See, e.g., Body Jewelz, Inc., 241 F. Supp. 3d at 1093 (“[T]he Court finds that
the special relationship exception is not applicable here where, unlike in J’Aire, Plaintiff and
Defendant are in privity of contract.”); see also Elsayed v. Maserati N. Am., Inc., 215 F. Supp. 3d
949, 963 (C.D. Cal. 2016) (“The Court refuses to extend the special relationship exception to
encompass direct relationships.”).9 Plaintiffs’ contention that “the bulk of California courts have
9
See also Tyson & Assocs., Inc. v. Denko, No. 95-56351, 89 F.3d 846 (table), 1996 WL
355566, at *1 (9th Cir. June 25, 1996) (J’Aire applies to “parties not in privity of contract”);
Grey Fox, LLC v. Plains All Am. Pipeline, L.P., No. CV 16-3157 PSG (JEMx), 2019 WL
4196066, at *7 n.5 (C.D. Cal. Apr. 8, 2019); Heidelberg USA, Inc. v. PM Lithographers, Inc.,
No. CV 17-02223-AB (AJWx), 2017 WL 7201872, at *9 (C.D. Cal. Oct. 19, 2017); Resnick v.
Hyundai Motor Am., Inc., No. CV 16-00593-BRO (PJWx), 2017 WL 1531192, at *11 (C.D. Cal.
Apr. 13, 2017); City of San Diego v. Amoco Chem. Co., No. Civ. 98-0474-E (LSP), 1999 WL
14
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held otherwise” (Opp. at 25)—a proposition for which Plaintiffs cite two unpublished cases
decided by the same federal judge—is therefore without basis.10 Plaintiffs’ overly broad reading
of the special relationship exception is inconsistent with fundamental principles of tort law and
should be rejected. 11
Florida law. Plaintiffs’ negligence claims are also barred under Florida law,
which recognizes the same fundamental principles of tort law as California. As Florida courts
have explained, “contract principles [are] more appropriate than tort principles for resolving
economic loss without an accompanying physical injury or property damage.” Fla. Power &
Light Co. v. Westinghouse Elec. Corp., 510 So. 2d 899, 902 (Fla. 1987). Thus, there must be a
tort “distinguishable from or independent of [the] breach of contract” in order for a plaintiff to
have a viable tort claim based on a breach in a contractual relationship. Lewis v. Guthartz, 428
So. 2d 222, 224 (Fla. 1982). Recognized independent torts include professional malpractice,
Moransais v. Heathman, 744 So. 2d 973, 981 (Fla. 1999), and breach of fiduciary duty, see
FDIC for IndyMac Bank, FSB v. Genesis Title Co., LLC, No. 11-20841-CIV, 2011 WL
13223744, at *2 (S.D. Fla. July 1, 2011) (Altonaga, J.)—not a (non-existent) general negligence
duty to avoid economic loss to contractual counterparties.
Plaintiffs unsuccessfully try to sidestep Florida law restricting the recovery in tort
for economic loss between contractual counterparties by relying on Tiara Condo. Ass’n v. Marsh
& McLennan Cos., 110 So. 3d 399 (Fla. 2013), where the Florida Supreme Court confined the
“economic loss rule” to product liability claims. (Opp. at 22.) But Plaintiffs fail to respond to
the showing in the Motion that Tiara is inapplicable here. (Mot. at 20 n.16.) Plaintiffs
33548157, at *4 (S.D. Cal. Sept. 9, 1999); Barrier Specialty Roofing & Coatings, Inc. v. ICI
Paints N. Am., Inc., No. CV-F-07-1614 LJO TAG, 2008 WL 1994947, at *8 (E.D. Cal. May 6,
2008).
10
Similarly, Plaintiffs’ implication that this Court could be admonished for failing to apply
all six J’Aire factors is also baseless, as the case Plaintiffs cite for that proposition, Kalitta Air,
L.L.C. v. Cent. Tex. Airborne Sys., Inc., 315 F. App’x 603, 604 (9th Cir. 2008), involved parties
who were not in privity, and so the exception was available to the plaintiffs.
11
Plaintiffs do not try to argue this exception exists under Florida law. Nor could they,
since it does not. See Rest. (Third) of Torts: Liab. for Econ. Harm § 1, cmt. e (2020)
(“J’Aire has not been overruled, but the extent of its vitality in California is questionable, and it
has not been influential elsewhere.” (citation omitted)).
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erroneously conflate the “economic loss rule”—which is indeed grounded in the product liability
context—with the separate, more general principle that tort recovery for purely economic losses
is unavailable without an independent tort. As the concurrence in Tiara explained, the Florida
Supreme Court’s holding with respect to the “economic loss rule” was “neither a monumental
upsetting of Florida law nor an expansion of tort law at the expense of contract principles.”
Tiara, 110 So. 3d at 408 (Pariente, J., concurring). “Basic common law principles already
restrict the remedies available to parties who have specifically negotiated for those remedies, and
. . . our clarification of the economic loss rule’s applicability does nothing to alter these common
law concepts.” Id. Indeed, following Tiara, Florida courts regularly affirm the principle that
economic losses are generally not recoverable in tort. See, e.g., Underwriters, 483 F. Supp. 3d at
1211 (explaining, post-Tiara, that plaintiffs still generally cannot recover for economic losses
absent personal injury or property damage).12
Plaintiffs have therefore failed to identify any tort duty to support a negligence
claim under either California or Florida law. Their negligence and gross negligence claims
(Counts I and II) should be dismissed.
C. Plaintiffs’ Arguments Based on Regulations and Self-Regulatory Rules Are
Irrelevant to This Motion.
Plaintiffs concede that “industry standards and customs do not give rise to an
independent legal duty” and that they “have not asserted a private right of action” based on
regulatory requirements. (Opp. at 26.) Rather, Plaintiffs argue only that various regulations and
rules of self-regulatory organizations “help define the standard of care.” (Id.) However, the
contours of any negligence-based standard of care are irrelevant to this Motion because
12
Other federal courts in Florida have agreed. See, e.g., Travelers Indem. Co. of Conn. v.
Richard McKenzie & Sons, Inc., 326 F. Supp. 3d 1332, 1345 (M.D. Fla. 2018) (“The post-
Tiara decisions continue . . . to bar a tort claim dependent on a contractual duty . . . .”); Certain
Underwriters at Lloyd’s of London, UK Subscribing to Pol’y No. B1230AP56189A14 v. Ocean
Walk Resort Condo. Ass’n, No. 6:16-cv-258-ORL-37GJK, 2017 WL 3034069, at *10 (M.D. Fla.
July 18, 2017) (collecting post-Tiara cases where courts have reaffirmed the barriers in
recovering against a contractual counterparty in tort); Kaye v. Ingenio, Filiale de Loto-Quebec,
Inc., No. 13-61687-CIV, 2014 WL 2215770, at *4 (S.D. Fla. May 29, 2014) (“[T]he fact that the
economic-loss rule does not apply [outside products-liability cases] does not mean that parties in
contractual privity may recast causes of action that are otherwise breach-of-contract claims as
tort claims.”).
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Robinhood does not have a duty sounding in negligence to prevent economic loss as a matter of
law. Accordingly, while Plaintiffs’ arguments about regulations and self-regulatory rules are
premised on erroneous factual allegations, those allegations may be disregarded for this Motion.
Plaintiffs also fail to explain how Robinhood deviated from those standards even
if they were relevant here. Instead, Plaintiffs refer to a string of self-regulatory rules and
regulations without citing to any authorities as to how those rules apply to brokers or how any
alleged conduct constituted a violation of those rules. For example, Plaintiffs cite FINRA Rule
2010, which provides generally that FINRA members shall observe “high standards of
commercial honor” (Am. Compl. ¶ 168; Opp. at 28), but Plaintiffs do not cite any authorities
suggesting Robinhood’s conduct violated this rule. Similarly, Plaintiffs invoke FINRA Rules
3110 and 4370 (Am. Compl. ¶ 169), which provide generally that a broker must maintain a
supervisory system and engage in risk management, but Plaintiffs allege that Robinhood had a
supervisory and risk management system in place—which resulted in the limited PCO
restrictions—and again cite no authorities suggesting Robinhood’s system was inadequate under
either FINRA Rule 3110 or 4370. Finally, Plaintiffs cite the SEC’s Net Capital Rule, which
provides a formula regarding the amount of net capital a broker must have at a given time, but
Plaintiffs do not actually allege (nor could they) that Robinhood violated this rule.13
II. PLAINTIFFS DO NOT STATE A CLAIM FOR BREACH OF ANY FIDUCIARY
DUTIES.
Plaintiffs’ fiduciary duty claim (Count III. ) fail for two reasons. First, Plaintiffs
are wrong as a matter of law to contend that all brokers owe their customers general fiduciary
duties, even if the broker, like Robinhood, provided no investment advice to its customers and
merely executed its customers’ orders. (Opp. at 29-35.) Second, contrary to Plaintiffs’
contentions, clearing brokers such as Robinhood Securities do not owe fiduciary duties to their
introducing broker’s customers. (Id. at 35-37.)
13
Plaintiffs do not allege that Robinhood violated the Net Capital Rule. (See Am. Compl.
¶ 161.) Plaintiffs (impermissibly) make this assertion for the first time in their opposition to
Robinhood’s Motion to Dismiss. (Opp. at 28.)
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A. None of the Robinhood Defendants Owe Customers a General
Fiduciary Duty.
Plaintiffs do not allege that Robinhood provided investment advice to them. As
Robinhood explained in its Motion, courts routinely hold that non-discretionary brokers that do
not provide investment advice do not owe their customers a general fiduciary duty. (Mot. at 23-
25.) Where the relationship between the broker and a customer is “confined to the simple
performance of transactions ordered by a customer,” a general fiduciary duty “do[es] not arise.”
Petersen v. Sec. Settlement Corp., 277 Cal. Rptr. 468, 473 (Ct. App. 1991); see also Apollo Cap.
Fund LLC v. Roth Cap. Partners LLC, 70 Cal. Rptr. 3d 199, 214 (Ct. App. 2007) (finding no
fiduciary duty to undertake diligence on investments where the stockbroker was not an “adviser
to the customer about investment decisions”); Brown v. Cal. Pension Adm’rs & Consultants,
Inc., 52 Cal. Rptr. 2d 788, 797 (Ct. App. 1996) (finding a non-discretionary broker did not have
“an expansive fiduciary relationship giving rise to a duty to notify the customer of the risky
nature of an investment, or . . . of the poor performance of similar investments held by different
customers”); Gochnauer v. A.G. Edwards & Sons, Inc., 810 F.2d 1042, 1050 (11th Cir. 1987)
(“The focus of the [fiduciary duty] inquiry is how the fiduciary acted in his selection of the
investment . . . .”). Plaintiffs’ arguments to the contrary fail under California and Florida law.
California Law. To support their sweeping (and incorrect) statement that brokers
owe customers a broad, general fiduciary duty, Plaintiffs rely on cases discussing retail
brokerage practices that were commonplace before today’s online, self-directed discount
brokerages, such as Robinhood, E*Trade, Fidelity, Charles Schwab and many others. Those
cases involved traditional retail services in which live stockbrokers would interact directly with
their customers to make investment recommendations and accept trade orders. See, e.g., Twomey
v. Mitchum, Jones & Templeton, Inc., 69 Cal. Rptr. 222 (Ct. App. 1968); Duffy v. Cavalier, 264
Cal. Rptr. 740 (Ct. App. 1989); Apollo, 70 Cal. Rptr. 3d 199.
In each of these cases, in finding a fiduciary duty existed, the court’s conclusion
was based on the fact that the relevant broker provided investment advice to its customer. For
example, in Twomey, the court found that a broker owed a fiduciary duty to determine the
customer’s actual financial situation and needs because the broker’s recommendations “were for
all practical purposes the controlling factor in the transactions” and the broker was not “acting
merely as agent to carry out purchases or sales selected by the customer.” Twomey, 69 Cal. Rptr.
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at 242. The court reached a similar conclusion in Duffy, 264 Cal. Rptr. at 754. Courts have
properly read Twomey, Duffy and their progeny as providing that a fiduciary duty lies only where
the broker provides investment advice or where the broker manages a discretionary account (i.e.,
where the broker makes trading decisions on its customers’ behalf). See Apollo, 70 Cal. Rptr. 3d
at 214 (“It is a long-settled rule that a stockbroker owes a fiduciary duty to his or her customer.
However, in the cases so holding, the stockbroker was an adviser to the customer about
investment decisions.”) (citations and internal quotations omitted). As Robinhood explains in its
Motion, none of these factors applies here. Rather, Robinhood “act[ed] merely as agent to carry
out purchases or sales selected by the customer.” Twomey, 69 Cal. Rptr at 242.
Instead, to the extent that Robinhood owed a duty to its customers, that duty arose
under agency law. See Caravan Mobile Home Sales, Inc. v. Lehman Bros. Kuhn Loeb, Inc., 769
F.2d 561, 567 (9th Cir. 1985) (“A stockbroker is an agent of his client.”). As explained in
Robinhood’s Motion, parties can limit agency duties by contract, and Robinhood did so here
through the Customer Agreement. (See Mot. at 28-29.) Because the Customer Agreement
expressly permitted Robinhood to impose trade restrictions, Robinhood could not have breached
any duty when it imposed limited purchase restrictions on the Suspended Stocks. (See id.)
Plaintiffs attempt to salvage their fiduciary duty claim and get beyond the Rule
12(b)(6) motion by pointing repeatedly to the statement in Apollo that “the scope or extent of the
fiduciary duty obligation . . . depends on the facts of the case.” 70 Cal. Rptr. at 216. (Opp. at
30-31, 34.) But Plaintiffs have identified no case holding that a broker, like Robinhood, that was
in a mere agency relationship (not providing investment advice or managing a discretionary
account) owes a fiduciary duty to accept trades from its customers in all securities at all times.
That is because there is no such case. Finding there was such a broad fiduciary duty here would
be inconsistent with the Customer Agreement and the facts of the customer relationship (an
online, self-directed, commission-free brokerage platform) alleged in the Amended Complaint.
In the alternative, Plaintiffs contend a fiduciary duty arose from a supposed
“special” or “confidential” relationship between Robinhood and its customers. They suggest that
Robinhood had a relationship of trust and repose with each of its millions of customers by virtue
of the brokerage services it offered. (Opp. at 33-34.) But Plaintiffs ignore the weight of
authority cited in Robinhood’s Motion showing that confidential or special relationships are
supposed to be just that—confidential or special—something that cannot possibly exist between
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Robinhood and its millions of self-directed customers. See Siemonsma v. Mut. Diversified Emps.
Fed. Credit Union, No. SACV 10-1093-DOC, 2011 WL 1485979, at *3 (C.D. Cal. Apr. 19,
2011) (“To find a confidential relationship arising out of the mere depositing of funds would
make confidential relationships ubiquitous in the lending industry, which strikes the Court as
contrary to the meaning of a confidential relationship.”).
Plaintiffs also gloss over the fact that Robinhood cannot be said to have
“accepted” any fiduciary obligations, as Plaintiffs must to state a claim under the “special” or
“confidential” relationship doctrine. See City Sols., Inc. v. Clear Channel Commc’ns, Inc., 201
F. Supp. 2d 1048, 1050 (N.D. Cal. 2002). Even though Plaintiffs agreed in the Customer
Agreement that Robinhood neither provides investment advice nor recommends any securities,
Plaintiffs contend this provision was insufficient to disclaim any fiduciary obligations because
the Customer Agreement does not mention the word “fiduciary.” (Opp. at 33.) However, as
explained above, no general fiduciary duty can lie where a party does not provide investment
advice or manage a customer’s discretionary account—both of which Robinhood expressly
disclaimed in the Customer Agreement. Plaintiffs cite no law suggesting a party is required to
include the word “fiduciary” in an agreement to disclaim legal obligations that courts have held
arise only under factual circumstances expressly disclaimed in the governing agreement.
Florida Law. Plaintiffs’ fiduciary duty claim fares no better under Florida law.
Plaintiffs primarily rely on Gochnauer v. A.G. Edwards & Sons, Inc., 810 F.2d 1042 (11th Cir.
1987) to support their proposition that brokers owe their customers general fiduciary duties, but
this case was also premised on an assumption that brokers typically provide their customers
investment advice (or, alternatively, direct their customers’ finances through discretionary
accounts). Indeed, Gochnauer makes clear that a broker’s duties are different depending on
whether the account is “discretionary or nondiscretionary,” see id. at 1049 n.9 (assuming that
even in a nondiscretionary account, “the customer and broker confer as to a particular
transaction”), and the court’s finding of a fiduciary duty is premised on the broker’s provision of
investment advice, see id. at 1050 (“The focus of the inquiry is how the fiduciary acted in his
selection of the investment . . . .”). Plaintiffs also cite Banc of Am. Sec. LLC v. Stott, No. 04-
81086-CIV, 2005 WL 8156027 (S.D. Fla. Aug. 30, 2005), but in that case, the court found the
broker owed a fiduciary duty because the broker “had complete discretion to do as he wished
with the funds in [the plaintiff’s] account.” Id. at *4. Because Plaintiffs directed their own
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finances and Robinhood did not provide them any investment advice, Robinhood does not owe
them a fiduciary duty under Florida law. Instead, to the extent Robinhood owed them any duties,
it was again only in its capacity as an agent, with the scope of those duties delineated in the
Robinhood Customer Agreement. See SFM Holdings, Ltd. v. Banc of Am. Sec., LLC, 600 F.3d
1334, 1340 (11th Cir. 2010) (finding the defendant broker, which did not make decisions
regarding the accounts but “simply executed” the transactions, did not owe a fiduciary duty and
that its “actions were appropriate within the limited agency created by the [] Agreement”).
Because, as stated above, the Customer Agreement expressly permits Robinhood to restrict
trading, Robinhood could not have breached any fiduciary duty when it imposed limited
purchase restrictions on the Suspended Stocks.
A fiduciary duty also could not have arisen as a result of a special or confidential
relationship under Florida law. The services Robinhood provides through programs such as
Robinhood Learn and Robinhood Snacks cannot reasonably be characterized as investment
advice (see Mot. at 26) and accordingly do not amount to “advis[ing], counsel[ing], and
protect[ing]” Robinhood customers such that they could give rise to a fiduciary duty. See
Bankest Imports, Inc. v. ISCA Corp., 717 F. Supp. 1537, 1541 (S.D. Fla. 1989). Plaintiffs have
also not pleaded facts constituting a “recognition” or “acceptance” of fiduciary obligations by
Robinhood that could give rise to a fiduciary duty. See id. Robinhood expressly disclaimed that
it provided investment advice in the Customer Agreement, and Florida courts recognize that
contracts can limit the scope of any fiduciary duties owed. See, e.g., Scolieri v. John Hancock
Life Ins. Co. (U.S.A.), No. 2:16-cv-690-FTM-38CM, 2017 WL 700215, at *5 (M.D. Fla. Feb. 22,
2017) (finding no fiduciary relationship because “any expectations Plaintiffs may have for advice
from [defendant] were expressly and unequivocally disclaimed” by the relevant contract).
Therefore, Plaintiffs’ fiduciary duty claim fails under Florida law as well.
B. Robinhood Securities, As a Clearing Broker, Does Not Owe Fiduciary Duties.
Plaintiffs’ argument that Robinhood Securities, specifically as the clearing broker,
owed them a general fiduciary duty is also misplaced under the law of California and Florida. In
fact, Plaintiffs do not cite a single case where a court has found that a clearing broker owed a
fiduciary duty to its introducing broker’s customers. (See Opp. at 35-37.) Plaintiffs wrongly
contend that Petersen v. Sec. Settlement Corp., 277 Cal. Rptr. 468, 474 (Ct. App. 1991), supports
their position. As Plaintiffs acknowledge, however, the Petersen court declined to find that a
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clearing broker had a duty of disclosure regarding the nature of investments it had not
introduced. (Opp. at 35.) The court’s statement in dicta that “arguably there are circumstances
under which even a clearing broker . . . might be required to provide a customer with information
about the nature of his or her investment” has no bearing here, as Plaintiffs have not alleged that
Robinhood Securities failed to provide Plaintiffs with any information about the nature of their
investments. Plaintiffs also rely on SFM Holdings, Ltd. v. Banc of Am. Sec., LLC, 600 F.3d
1334, 1338-39 (11th Cir. 2010), but in SFM, the court found the clearing broker defendant owed
no fiduciary duty because, as was the case here, the clearing broker did not “provide investment
advice” to the customer. Id. The other cases Plaintiffs cite do not even involve fiduciary duty
claims, and instead concern a clearing broker’s potential liability for fraud and securities
violations committed by introducing brokers.14 These cases are completely inapposite. Plaintiffs
have provided no support for the Court to depart from the well-established rule that clearing
brokers generally do not owe fiduciary duties to the customers of their introducing broker clients.
III. PLAINTIFFS CANNOT STATE A CLAIM FOR BREACH OF THE IMPLIED
COVENANT OF GOOD FAITH AND FAIR DEALING.
Plaintiffs’ good faith and fair dealing claim (Count V) fails because the Customer
Agreement expressly and unambiguously permitted Robinhood to put in place the limited
purchase restrictions that Plaintiffs now claim constituted a breach of the implied covenant.
(Mot. at 30; Cust. Agmt. § 5.F.) The implied covenant of good faith and fair dealing “cannot
substantively alter [a contract’s] terms.” Guz v. Bechtel Nat’l Inc., 8 P.3d 1089, 1094-95 (Cal.
2000).15 Where, as here, conduct is expressly permitted by the contract, that conduct cannot
14
See McDaniel v. Bear Stearns & Co., 196 F. Supp. 2d 343, 353 (S.D.N.Y. 2002)
(confirming arbitration award holding clearing broker liable for breach of contract and aiding
and abetting fraud); Berwecky v. Bear Stearns & Co., 197 F.R.D. 65, 67 (S.D.N.Y. 2000)
(certifying class action alleging clearing broker “directly participated” in scheme violating the
federal securities laws); Cannizzaro v. Bache, Halsey, Stuart, Shields, Inc., 81 F.R.D. 719, 721
(S.D.N.Y. 1979) (denying motion to dismiss claim that clearing broker aided and abetted
introducing broker’s fraud); Margaret Hall Found., Inc. v. Atl. Fin. Mgmt., Inc., 572 F. Supp.
1475, 1480-81 (D. Mass. 1983) (denying motion to dismiss claims that clearing broker violated
securities laws and aided and abetted introducing broker’s fraud); Koruga v. Fiserv
Correspondent Servs., 183 F. Supp. 2d 1245, 1248 (D. Or. 2001) (confirming arbitration award
where the arbitration panel found clearing broker liable as “direct participant” in fraud).
15
Plaintiffs concede that California law applies to their good faith and fair dealing claim.
(Opp. at 15 n.12, 38 n.21).
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serve as the basis for a breach of the implied covenant of good faith and fair dealing claim. See
Brehm v. 21st Century Ins. Co., 83 Cal. Rptr. 3d 410, 422 (Ct. App. 2008) (“The implied
covenant of good faith and fair dealing cannot prohibit a contracting party from doing that which
is expressly permitted by the agreement itself . . . .”). That is true regardless of the alleged
motive for the conduct. See Guz, 8 P.3d at 1111 (where contract permits conduct, motive and
lack of care in accomplishing conduct are irrelevant). Plaintiffs concede this basic legal
principle, writing that “the scope of conduct prohibited by the covenant cannot contradict the
express terms of the contract[.]” (Opp. at 38.) Their attempts to overcome this problem fail.
First, Plaintiffs argue that an implied covenant limiting Robinhood’s discretionary
power to restrict trading under Section 5.F must be read into the Customer Agreement because
otherwise the Customer Agreement would be an illusory contract. (Opp. at 41.) This argument
misconstrues California contract law and has been rejected by California courts. The implied
covenant of good faith and fair dealing does not apply to contracts granting one party unfettered
discretion unless the contract as a whole provides no consideration whatsoever to the other party.
See Third Story Music, Inc. v. Waits, 48 Cal. Rptr. 747, 753 (Ct. App. 1995) (holding the implied
covenant applies to discretion-granting provisions only in the “rare instances when reading the
provision literally would . . . result in an unenforceable, illusory agreement.”); see also Perdue v.
Crocker Nat’l Bank, 702 P.2d 503, 510 (Cal. 1985) (a contract is illusory “only if the total
discretion granted one party renders the contract lacking in consideration”) (emphasis added).
Where, as here, “the express purpose of the contract is to grant unfettered discretion, and the
contract is otherwise supported by adequate consideration, then the [discretionary] conduct is, by
definition, within the reasonable expectation of the parties and ‘can never violate an implied
covenant of good faith and fair dealing.’” Wolf v. Walt Disney Pictures & Television, 76 Cal.
Rptr. 3d 585, 597 (Ct. App. 2008) (citations omitted). In other words, even when contractual
provisions grant unfettered discretion, “implied terms cannot vary the express terms of a
contract; if the defendant did what it was expressly given the right to do, there can be no breach.”
Id. (citations omitted).
Here, the implied covenant of good faith and fair dealing does not apply to
Robinhood’s discretionary power to restrict trading under Section 5.F because the Customer
Agreement is supported by consideration separate from 5.F’s discretion-granting provision. The
Customer Agreement specifically provides that the consideration owed to customers is
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“Robinhood . . . opening one or more accounts on my behalf . . . .” (Cust. Agmt. Preamble.)
Plaintiffs themselves allege that as Robinhood customers with Robinhood accounts, they receive
services and other benefits from Robinhood that are unrelated to placing the specific trades at
issue here. (See Am. Compl. ¶ 123.) Courts have accordingly dismissed claims for breach of the
covenant of good faith and fair dealing where plaintiffs have attempted to challenge broad
discretionary provisions nearly identical to the provision in the Robinhood Customer Agreement,
where the contract was otherwise supported by consideration. See, e.g., Enhanced Athlete Inc. v.
Google LLC, No. 19-cv-08260-HSG, 2020 WL 4732209, at *6 (N.D. Cal. Aug. 14, 2020)
(dismissing plaintiff’s good faith and fair dealing claim where the relevant customer agreement
gave Google the discretion “to decide whether Content violates th[e] Terms of Service,” and “at
any time, without prior notice and in [their] sole discretion, [to] remove such Content and/or
terminate a user’s account for submitting such material”).16 Simply put, this is nothing like
Badie v. Bank of Am., 79 Cal. Rptr. 2d 273 (Ct. App. 1998), which Plaintiffs cite to support their
position. There, the court found the covenant of good faith and fair dealing applied to the
defendant’s exercise of discretion because the defendant had “unilateral rights” to change the
terms of the contract, rendering the contract as a whole illusory and unenforceable absent
application of an implied covenant. Id. at 285.17
Second, Plaintiffs contend (in contradiction to their first argument) that the
Customer Agreement is actually ambiguous about when Robinhood may restrict trading. (Opp.
at 42.) It is not. Section 5.F authorizes Robinhood to restrict trading “at any time, in its sole
discretion.” (Cust. Agmt. § 5.F.) Plaintiffs cite to a wholly separate provision of the Customer
16
Perhaps recognizing this fatal flaw in their claims, Plaintiffs further suggest that other
alleged conduct—beyond the temporary purchase restrictions—breached the implied covenant of
good faith and fair dealing, including, inter alia, taking on new customers, failing to maintain
adequate capital, and facilitating high volume and volatile trading on the platform. (Opp. at 37-
38). But absent the PCO restrictions, none of this alleged conduct would ever have affected
Plaintiffs. It is the PCO restrictions that Plaintiffs allege caused them harm. And those
restrictions were directly permitted by the Customer Agreement.
17
Plaintiffs also cite Automatic Vending Co. v. Wisdom, 6 Cal. Rptr. 31 (Ct. App. 1960).
That case is inapposite; the party exercising discretion there had discretion over the price of the
services provided under the contract, rendering the agreement as a whole illusory. That is not the
case here, where customers receive Robinhood’s services for free.
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Agreement—Section 13—to claim the contract is ambiguous with respect to “investments in
high volume and volatile securities.” (Opp. at 42.) But Section 13 provides, in pertinent part:
I understand that, whether I place a market or limit order, I will receive the price at
which My order is executed in the marketplace, subject to any clarification stated
below. Particularly during periods of high volume, illiquidity, fast movement or
volatility in the marketplace, the execution price received may differ from the quote
provided on entry of an order, and I may receive partial executions of an order at
different prices. I understand that Robinhood Financial is not liable for any price
fluctuations. I also understand that price quotes generally are for only a small
number of shares as specified by the marketplace, and larger orders are relatively
more likely to receive executions at prices that vary from the quotes or in multiple
lots at different prices.
(Cust. Agmt. § 13; see also Opp. at 42.) This provision discloses to Robinhood customers that
accepted market or limit orders may vary in terms of pricing during times of volatility (among
other scenarios), and has nothing to do with whether trade orders may or may not be accepted in
the first place. Thus, Section 13 does not conflict with, or limit, Robinhood’s discretionary
authority to restrict trading under Section 5.F in any way. It certainly does not create ambiguity.
In sum, the implied covenant of good faith and fair dealing exists “merely to
prevent one contracting party from unfairly frustrating the other party’s right to receive the
benefits of the agreement actually made.” Guz, 8 P.3d at 1110 (emphasis in original). None of
Robinhood’s alleged conduct deprived Plaintiffs of any benefits guaranteed under the Customer
Agreement, which explicitly provides that customers’ ability to trade can be restricted.
Plaintiffs’ good faith and fair dealing claim should therefore be dismissed.
IV. PLAINTIFFS CANNOT STATE A CLAIM FOR BREACH OF AN IMPLIED
DUTY OF CARE.
Plaintiffs’ implied duty of care claim (Count IV) fails for the same reason as their
good faith and fair dealing claim: the assertion that Robinhood owes an implied duty of care is
directly contradicted by the Customer Agreement. California law is clear that an implied duty of
care claim cannot lie where, as here, express terms in the contract permit the conduct at issue.18
See Holguin v. Dish Network LLC, 178 Cal. Rptr. 3d 100, 114 (Ct. App. 2014) (explaining it is
“express contractual terms [that] give rise to implied duties, violations of which may themselves
18
Plaintiffs concede that California law applies to their implied duty of care claim (Opp. at
15 n.12, 43), as they must because Florida law does not recognize an implied duty of care.
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constitute breaches of contract”) (emphasis added). To permit purported implied duties to
change the express terms of the contract would be inconsistent with basic principles of contract
law. See Series AGI W. Linn of Appian Grp. Invs. DE, LLC v. Eves, 158 Cal. Rptr. 3d 193, 204
(Ct. App. 2013) (“The courts will not imply a better agreement for parties than they themselves
have been satisfied to enter into, or rewrite contracts whenever they operate harshly.”).
To get around this barrier, Plaintiffs advance the same two arguments they
attempted to advance with their good faith and fair dealing claim: first, that interpreting the
Customer Agreement to give Robinhood full discretion to impose trading restrictions would
render the Customer Agreement unenforceable, and second, that there is an ambiguity in the
contract as to when Robinhood is authorized to restrict trading. (Opp. at 44-45.) For the reasons
explained above, these arguments are unavailing. Because Plaintiffs advance no other arguments
that could sustain their implied duty of care claim, the claim should be dismissed.
V. PLAINTIFFS’ TORTIOUS INTERFERENCE CLAIM AGAINST ROBINHOOD
MARKETS FAILS TO STATE A CLAIM.
Plaintiffs’ tortious interference claim against Robinhood Markets (Count VI) fails
under both California and Florida law.
California Law. As explained in the Motion, under California law, a plaintiff
alleging a claim for tortious interference must allege “actual breach or disruption of the
contractual relationship[.]” Ixchel Pharma, LLC v. Biogen, Inc., 470 P.3d 571, 575 (Cal. 2020)
(citation omitted). The facts Plaintiffs allege do not constitute disruption, as a matter of law.
Plaintiffs concede that they do not assert a breach of contract by either Robinhood Financial or
Robinhood Securities (the parties to the Customer Agreement). (See Opp. at 46.) Plaintiffs
argue that they can nevertheless satisfy this element of a tortious interference claim by alleging
conduct short of breach—namely “that Robinhood Markets interfered with their contractual
relationship with its subsidiaries” even if that interference did not cause a contractual breach.
(Opp. at 46 (emphasis added).) However, the cases on which Plaintiffs rely, Pacific Gas &
Electric Co. v. Bear Stearns & Co., 791 P.2d 587 (Cal. 1990) (“PG&E”), and Lipman v.
Brisbane Elementary Sch. Dist., 359 P.2d 465 (Cal. 1961), make clear that Plaintiffs are arguing
for a standard that does not apply under these circumstances as a matter of law.
Specifically, PG&E and Lipman stand for the proposition that a claim for tortious
interference may lie for disruption (rather than actual breach) only where “the plaintiff’s
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performance has been prevented or rendered more expensive or burdensome[.]” Lipman, 359
P.2d at 469 (emphasis added). This is not what Plaintiffs allege. Plaintiffs instead allege that
Robinhood Markets, a defendant, made performance by its subsidiaries (Robinhood Financial
and Robinhood Securities), also defendants, more difficult. (Am. Compl. ¶ 338.) That is the
converse of the situation that a claim for tortious interference based on disruption of contractual
performance addresses. See PG&E, 791 P.2d at 521 (“We have recognized that interference
with the plaintiff’s performance may give rise to a claim for interference with contractual
relations if plaintiff’s performance is made more costly or more burdensome.” (emphasis
added)). Plaintiffs do not allege that Robinhood Markets made their performance under the
Robinhood Customer Agreement more burdensome or costly, nor could they. Plaintiffs have no
obligations under the Robinhood Customer Agreement to trade on Robinhood’s application at
all—let alone in any of the Suspended Stocks. (See generally Cust. Agmt.) The PCO
restrictions did not render Plaintiffs unable to perform under the Customer Agreement, hinder
their performance, or make their performance more costly—as would be required under
California law to plead tortious interference based on disruption of contractual performance.
Moreover, as Robinhood explained in its Motion, even if Plaintiffs had pleaded
facts to support a “breach or disruption,” Plaintiffs nonetheless fail to allege that Robinhood
Markets committed any “intentional acts designed to induce a breach or disruption of the
contractual relationship.” Ixchel, 470 P.3d at 575. As an initial matter, Plaintiffs concede that
the decision to implement a PCO on the Suspended Stocks was made by Robinhood Securities—
not Robinhood Markets. (Am. Comp. ¶ 28.) And Plaintiffs’ allegations concerning Robinhood
Markets consists entirely of omissions and failures to put business plans and processes into
place, rather than undertaking any purposeful, intentional acts. (See Am. Compl. ¶¶ 338-39.)
Nowhere do Plaintiffs plead that any such alleged omissions or failures to plan ahead by
Robinhood Markets were “designed to induce a breach or disruption of the contractual
relationship,” Ixchel, 470 P.3d at 575, or that it “[knew] that the interference [was] certain or
substantially certain to occur as a result of [its] action,” Korea Supply Co. v. Lockheed Martin
Corp., 63 P.3d 937, 952 (Cal. 2003) (citation omitted).
Florida Law. Plaintiffs do not argue that they could state a claim under Florida
law for “disruption” of contractual relations as they argue would be the case under California
law. Nor could they; Florida law requires an underlying breach of contract as an element of the
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tortious interference claim. See Chicago Title Ins. Co. v. Alday-Donalson Title Co. of Fla., 832
So. 2d 810, 814 (Fla. 2d DCA 2002) (requiring that “the plaintiff establish that the defendant’s
conduct caused or induced the breach” of contract); Sun Life Ass. Co. of Canada v. Imperial
Premium Fin., LLC, 904 F.3d 1197, 1215 (11th Cir. 2018) (“defendant’s intentional and
unjustified procurement of a breach” of contract is an element). Because Plaintiffs do not allege
a breach of contract (see supra Parts III–IV), that defect alone is fatal to this claim if Florida law
applies. Plaintiffs’ claim also would fail because, like California law, Florida law requires
allegations—wholly absent here for the reasons described in the preceding paragraph—that
Robinhood Markets engaged in intentional and unjustified conduct. See Salit v. Ruden,
McClosky, Smith, Schuster & Russell, P.A., 742 So. 2d 381, 385 (Fla. 4th DCA 1999).
VI. PLAINTIFFS FAIL TO STATE A CLAIM OF CIVIL CONSPIRACY.
Under both California and Florida law, a claim for civil conspiracy must fail
absent a wrongful predicate act. See Doctors’ Co. v. Superior Ct., 49 Cal. 3d 39, 44 (1989) (“A
civil conspiracy however atrocious, does not per se give rise to a cause of action unless
a civil wrong has been committed resulting in damage.”); Loeb v. Geronemus, 66 So. 2d 241,
243 (Fla. 1953) (“The gist of a civil action for conspiracy is not the conspiracy itself but the civil
wrong which is alleged to have been done pursuant to the conspiracy.”). Plaintiffs assert that
their tortious interference claim serves as the predicate act, but for the reasons discussed above in
Section V, Plaintiffs fail to state a claim for tortious interference. Accordingly, Plaintiffs’ civil
conspiracy claim (Count VII) must also fail for that reason alone.
Regardless, Plaintiffs’ civil conspiracy claim also fails because they cannot assert
the claim against one party, as they have done here. As discussed in Robinhood’s Motion, the
Supreme Court of California has held that “tort liability arising from conspiracy presupposes that
the coconspirator is legally capable of committing the tort.” Applied Equip. Corp. v. Litton
Saudi Arabia Ltd., 869 P.2d 454, 511 (Cal. 1994). Thus, to state a civil conspiracy claim, there
must be at least two parties legally capable of committing the underlying tort (here, tortious
interference). In Applied Equipment, the court held that because a party to a contract is not
legally capable of committing tortious interference with its own contract, a party to a contract
“cannot be bootstrapped into tort liability by the pejorative plea of conspiracy” to commit
tortious interference. Id. at 514. For the exact same reason, Robinhood Financial and
Robinhood Securities, which are both parties to the Robinhood Customer Agreement—the
28
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underlying contract at issue—cannot be held liable for conspiracy to tortiously interfere with
their own contract. Plaintiffs are thus left attempting to assert a conspiracy claim, which requires
two or more parties, against a single party: Robinhood Markets.
The decision in Applied Equipment was based on the principle, which—as
Plaintiffs acknowledge—is equally accepted by Florida courts (Opp. at 50 n.25), namely that
“the tort cause of action for interference with contract does not lie against a party to the
contract.” Id.; see also, e.g., Genet Co. v. Anheuser-Busch, Inc., 498 So. 2d 683, 684 (Fla. 3d
DCA 1986) (“Under Florida law, a cause of action for tortious interference does not exist against
one who is himself a party to the business relationship allegedly interfered with.”); Palm Beach
Cty. Health Care Dist. v. Pro. Med. Educ., Inc., 13 So. 3d 1090, 1094 (Fla. 4th DCA 2009) (“For
the interference to be unjustified, the interfering defendant must be a third party, a stranger to the
business relationship. A defendant is not a ‘stranger’ to a business relationship if the defendant
‘has any beneficial or economic interest in, or control over, that relationship.’”). For this reason,
the outcome is the same even if Florida law is applied. See Richardson v. Progressive Am. Ins.
Co., Case No. 18-cv-715, 2019 WL 2287955, at *8 (M.D. Fla. May 29, 2019) (finding that under
Florida law, “one cannot tortiously interfere with a contract to which it is a party” and
“[t]herefore, . . . as a party to the contract with plaintiffs, [the defendant] cannot conspire to
tortiously interfere with the contract”). The civil conspiracy claim should be dismissed.
VII. ROBINHOOD OWES NO DUTIES TO NON-ROBINHOOD CUSTOMERS—ALL
CLAIMS BROUGHT BY NON-ROBINHOOD CUSTOMERS THEREFORE
FAIL.
Plaintiffs double down on their extraordinary position that Robinhood owed “all
foreseeable Plaintiffs tort duties,” including individuals who are not even Robinhood customers.
(Opp. at 20.) However, Robinhood does not owe duties of care to parties with whom it has no
relationship. Plaintiffs’ argument is premised entirely on their assertion that a tort duty to non-
customers may be imposed on Robinhood based on “foreseeability of the risk”—a doctrine that,
under California law and Florida law, applies only to physical harm. (See supra Section I; Mot.
at 17.) Plaintiffs do not—and cannot—claim any physical harm here.
Moreover, none of the named Plaintiffs are non-Robinhood customers. They
could not, therefore, meet the typicality and adequacy requirements to represent a putative
“Nationwide Investor Class.” (Am. Comp. ¶¶ 30, 34, 42, 47, 51, 55, 61, 65, 69, 73 and 81)
(alleging that each named Plaintiff was a Robinhood customer).) And, in any event, Plaintiffs
29
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provide no argument even suggesting that Robinhood could be liable to individuals with whom it
has no contractual or commercial relationship for a breach of fiduciary duty (Count III), a breach
of the duty of good faith and fair dealing or implied duty of care (Counts IV–V) or for tortious
interference and civil conspiracy (Counts VI–VII). Each of these claims should be dismissed
entirely for the reasons set forth in Argument Sections II–VI above, and also independent of
those arguments to the extent they are brought by or on behalf of non-Robinhood customers.
VIII. PLAINTIFFS’ AMENDED COMPLAINT SHOULD BE DISMISSED WITH
PREJUDICE.
Plaintiffs’ request for leave to amend their complaint—again—should be denied.
Plaintiffs already have had three opportunities, over nearly ten months, after substantial
discovery and a previous motion to dismiss, to plead viable claims, but to no avail. (Mot. at 4,
36-37.) In these circumstances, dismissal with prejudice is appropriate. See Foman v.
Davis, 371 U.S. 178, 182 (1962). Nor do Plaintiffs provide any reason to believe they could
amend their complaint to remedy its deficiencies if given the opportunity. See Lacy v. BP
P.L.C., 723 Fed. Appx. 713, 717 (11th Cir. 2018) (upholding dismissal of complaint with
prejudice where, “despite multiple opportunities to do so, [plaintiff] failed to demonstrate that he
would be able to resolve the defects in his amended complaint” if given leave to amend).
None of Plaintiffs’ cases hold otherwise. In fact, Plaintiffs cite no cases in which
leave to amend was granted. In Florida Power & Light Co. v. Allis Chalmers Corp., the
Eleventh Circuit affirmed a decision to deny a proposed amendment that would not survive a
motion to dismiss. 83 F.3d 1514, 1520-21 (11th Cir. 1996). Plaintiffs have similarly failed to
demonstrate any amendment would survive a motion to dismiss.19 Indeed, Plaintiffs have
already had the chance to review thousands of pages of Robinhood’s documents and still have
failed to state a claim. See In re Fundamental Long Term Care, Inc., 873 F.3d 1325, 1342 (11th
Cir. 2017). Plaintiffs’ claims should be dismissed with prejudice.
19
Plaintiffs’ citation to Jennings v. BIC Corp., 181 F.3d 1250, 1258 (11th Cir. 1999), is
inapposite. In Jennings, the Eleventh Circuit affirmed the denial of leave to amend because the
deadline for amending pleadings had passed and the amendment would cause undue delay.
30
Case 1:21-md-02989-CMA Document 439 Entered on FLSD Docket 11/19/2021 Page 40 of 41
Dated: November 19, 2021 /s/ Samuel A. Danon
HUNTON ANDREWS KURTH LLP
Samuel A. Danon (FBN 892671)
Gustavo Javier Membiela (FBN 513555)
María Castellanos Alvarado (FBN 116545)
333 S.E. 2 Avenue, Suite 2400
Miami, FL 33131
Telephone: (305) 810-2500
Facsimile: (305) 810-2460
sdanon@huntonak.com
gmembiela@huntonak.com
mcastellanos@hunton.com
CRAVATH, SWAINE & MOORE LLP
Antony L. Ryan
Kevin J. Orsini
Brittany L. Sukiennik
825 Eighth Avenue
New York, NY 10019
Telephone: (212) 474-1000
Facsimile: (212) 474-3700
aryan@cravath.com
korsini@cravath.com
bsukiennik@cravath.com
Counsel for Defendants Robinhood Markets,
Inc., Robinhood Financial LLC and
Robinhood Securities, LLC
31
Case 1:21-md-02989-CMA Document 439 Entered on FLSD Docket 11/19/2021 Page 41 of 41
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on November 19, 2021, I electronically filed the
foregoing document with the Clerk of the Court using CM/ECF. I further certify that the
foregoing document is being served this day on all counsel of record via transmission of Notices
of Electronic Filing generated by CM/ECF or in some other authorized manner for those counsel
or parties who are not authorized to receive Notices of Electronic Filing.
Dated: November 19, 2021 /s/ Samuel A. Danon
Samuel A. Danon (FBN 892671)
32
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