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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 Antitrust Tranche
DEFENDANTS’ REPLY IN SUPPORT OF THEIR MOTION TO DISMISS THE
AMENDED ANTITRUST TRANCHE COMPLAINT
Case 1:21-md-02989-CMA Document 463 Entered on FLSD Docket 03/25/2022 Page 1 of 29
TABLE OF CONTENTS
TABLE OF AUTHORITIES .......................................................................................................... ii
PRELIMINARY STATEMENT .....................................................................................................1
ARGUMENT ...................................................................................................................................3
I.
PLAINTIFFS FAIL TO SUFFICIENTLY PLEAD THAT DEFENDANTS
AGREED TO CONSPIRE. ..................................................................................................3
A.
Plaintiffs Do Not Contest That They Fail to Allege Direct Evidence of an
Agreement. ...............................................................................................................4
B.
Plaintiffs Do Not Plausibly Allege Circumstantial Evidence of an
Agreement. ...............................................................................................................4
II.
PLAINTIFFS FAIL TO PLEAD THE REMAINING ELEMENTS OF A
SECTION ONE CLAIM....................................................................................................10
A.
Plaintiffs’ Claim Does Not Qualify for Per Se or “Quick Look” Treatment
Under the Antitrust Laws. ......................................................................................11
B.
Plaintiffs Fail to State a Claim Under the Rule of Reason. ...................................13
III.
PLAINTIFFS’ ANTITRUST THEORY IS PRECLUDED BY THE FEDERAL
SECURITIES LAWS.........................................................................................................16
A.
The Dodd-Frank Act Savings Clause Does Not Apply. ........................................16
B.
Plaintiffs’ Antitrust Claims Are Precluded under Billing Because the
Conduct at Issue Is Regulated by the Federal Securities Laws. ............................17
IV.
PLAINTIFFS’ CLAIMS SHOULD BE DISMISSED WITH PREJUDICE. ....................20
CONCLUSION ..............................................................................................................................20
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ii
TABLE OF AUTHORITIES
Page(s)
Cases
2301 M Cinema LLC v. Silver Cinemas Acquisition Co.,
342 F. Supp. 3d 126 (D.D.C. 2018) .........................................................................................14
Ashcroft v. Iqbal,
556 U.S. 662 (2009) ...................................................................................................................5
Associated News, Inc. v. Curtis Circulation Co.,
Civ. A. No. H-80-1201, 1986 WL 13791 (S.D. Tex. Dec. 4, 1986) ..........................................6
Belcher v. Atlantic Capital Realty, LLC.,
No. 6:08-cv-1989-Orl-28DAB, 2010 WL 11507399
(M.D. Fla. Sept. 17, 2010) .....................................................................................................6, 7
Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007) ...............................................................................................................3, 6
In re Blue Cross Blue Shield Antitrust Litig.,
26 F. Supp. 3d 1172 (N.D. Ala. 2014) .....................................................................................12
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,
509 U.S. 209 (1993) .................................................................................................................14
Brown Shoe Co. v. United States,
370 U.S. 294 (1962) .............................................................................................................2, 13
Bus. Elecs. Corp. v. Sharp Elecs. Corp.,
485 U.S. 717 (1988) ...........................................................................................................12, 13
Cal. ex rel. Harris v. Safeway Inc.,
651 F.3d 1118 (9th Cir. 2011) .................................................................................................13
City of Rockford v. Mallinckrodt ARD, Inc.,
360 F. Supp. 3d 730 (N.D. Ill. 2019) .......................................................................................12
Costco Wholesale Corp. v. Johnson & Johnson Vision Care, Inc.,
No. 3:15-CV-734-J-20JRK, 2015 WL 9987969 (M.D. Fla. Nov. 4, 2015) .............................16
In re Credit Default Swaps Antitrust Litig.,
No. 13-md-2476, 2014 WL 4379112 (S.D.N.Y. Sept. 4, 2014) ..............................................16
Credit Suisse Sec. (USA) LLC v. Billing,
551 U.S. 264 (2007) ...............................................................................................17, 18, 19, 20
Case 1:21-md-02989-CMA Document 463 Entered on FLSD Docket 03/25/2022 Page 3 of 29
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DeLong Equip Co. v. Wash. Mills Abrasive Co.,
887 F.2d 1499 (11th Cir. 1989) .................................................................................................6
Dunnivant v. Bi-State Auto Parts,
851 F.2d 1575 (11th Cir. 1988) .................................................................................................3
In re EpiPen (Epinephrine Injection, USP) Mktg., Sales Pracs., & Antitrust Litig.,
336 F. Supp. 3d 1256 (D. Kan. 2018) ......................................................................................12
In re Farm-Raised Salmon & Salmon Prods. Antitrust Litig.,
No. 19-21551-CIV, 2021 WL 1109128 (S.D. Fla. Mar. 23, 2021) ...........................................3
In re Fla. Cement & Concrete Antitrust Litig.,
746 F. Supp. 2d 1291 (S.D. Fla. 2010) ............................................................................5, 8, 10
FTC v. Ind. Fed’n of Dentists,
476 U.S. 447 (1986) .................................................................................................................15
In re High Fructose Corn Syrup Antitrust Litig.,
295 F.3d 651 (7th Cir. 2002) .................................................................................................8, 9
In re High-Tech Emp. Antitrust Litig.,
856 F. Supp. 2d 1103 (N.D. Cal. 2012) ...................................................................................12
Hunter v. Booz Allen Hamilton, Inc.,
418 F. Supp. 3d 214 (S.D. Ohio 2019) ....................................................................................12
In re Interest Rate Swaps Antitrust Litig.,
261 F. Supp. 3d 430 (S.D.N.Y. 2017) ......................................................................................16
Intergraph Corp. v. Intel Corp.,
195 F.3d 1346 (Fed. Cir. 1999)..........................................................................................14, 15
Isaksen v. Vermont Casting, Inc.,
825 F.2d 1158 (7th Cir. 1987) ...................................................................................................7
Jacobs v. Tempur-Pedic Int’l, Inc.,
626 F.3d 1327 (11th Cir. 2010) .....................................................................................3, 12, 15
Kalmanovitz v. G. Heilman Brewing Co.,
769 F.2d 152 (3d Cir. 1985).....................................................................................................18
Monsanto Co. v. Spray-Rite Serv. Corp.,
465 U.S. 752 (1984) ...............................................................................................................3, 4
In re NASDAQ Mkt.-Makers Antitrust Litig.,
172 F.R.D. 119 (S.D.N.Y. 1997) .............................................................................................18
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Nat’l Bancard Corp. (NaBanco) v. VISA U.S.A., Inc.,
779 F.2d 592 (11th Cir. 1986) .................................................................................................12
Ohio v. Am. Express Co.,
138 S. Ct. 2274 (2018) ..................................................................................................... passim
Procaps S.A. v. Patheon, Inc.,
845 F.3d 1072 (11th Cir. 2016) ...............................................................................................12
Quality Auto Painting Ctr. of Roselle, Inc. v. State Farm Indem. Co.,
917 F.3d 1249 (11th Cir. 2019) ...........................................................................................5, 12
Rebel Oil Co. v. Atl. Richfield Co.,
51 F.3d 1421 (9th Cir. 1995) ...................................................................................................16
Skinner v. Legal Advocacy Center of Central Fla., Inc.,
No. 6:11-cv-1760-Orl-37KRS, 2013 WL 5720142 (S.D. Fla. Oct. 21, 2013) ......................4, 5
Spanish Broad. Sys. of Fla., Inc. v. Clear Channel Commc’ns, Inc.,
376 F.3d 1065 (11th Cir. 2004) ...............................................................................................11
In re Terzosin Hydrochloride Antitrust Litig.,
352 F. Supp. 2d 1279 (S.D. Fla. 2005) ....................................................................................12
Toys “R” Us, Inc. v. FTC,
221 F.3d 928 (7th Cir. 2000) ...................................................................................................15
United Am. Corp. v. Bitmain, Inc.,
530 F. Supp. 3d 1241 (S.D. Fla. 2021) ................................................................................6, 14
United States v. Gacnik,
50 F.3d 848 (10th Cir. 1995) .....................................................................................................6
United States v. Microsoft Corp.,
253 F.3d 34 (D.C. Cir. 2001) ...................................................................................................15
United States v. Siegler,
990 F.3d 331 (4th Cir. 2021) .....................................................................................................6
In re Urethane Antitrust Litig.,
No. 04-1616-JWL, 2013 WL 2097346 (D. Kan. May 15, 2013) ..............................................6
Williamson Oil Co. v. Philip Morris USA,
346 F.3d 1287 (11th Cir. 2003) .................................................................................................8
Statutes & Rules
12 U.S.C. § 5303 ............................................................................................................................16
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15 U.S.C. § 78i ...................................................................................................................16, 18, 19
15 U.S.C. § 78j ...................................................................................................................16, 18, 19
15 U.S.C. § 78k-1 ..........................................................................................................................19
15 U.S.C. § 78o ............................................................................................................16, 17, 19, 20
15 U.S.C. § 78q ..............................................................................................................................20
15 U.S.C. § 78q-1 ..........................................................................................................................20
Dodd-Frank Act § 1(a) ...................................................................................................................16
Dodd-Frank Act § 6 .......................................................................................................................16
Dodd-Frank Act § 913(g)...............................................................................................................17
Dodd-Frank Act § 929X(a) ............................................................................................................17
Other Authorities
17 C.F.R. §§ 240.15a-1 to 240.15c6-1 ...........................................................................................20
17 C.F.R. § 240.15c3-5 ..................................................................................................................19
17 C.F.R. §§ 240.17Ab2-1 to 240.17Ab2-2 ..................................................................................20
17 C.F.R. §§ 240.17Ad-1 to 240.17Ad-24 ....................................................................................20
Phillip Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1508 (4th & 5th Eds.,
2015-2021) ...............................................................................................................................13
SEC, Staff Report on Equity and Options Market Structure Conditions in Early
2021 (October 15, 2021), available at https://www.sec.gov/files/staff-report-
equity-options-market-struction-conditions-early-2021.pdf ....................................................19
SEC, Thinking About Investing in the Latest Hot Stock? (Jan. 30, 2021),
https://www.sec.gov/oiea/investor-alerts-and-bulletins/risks-short-term-
trading-based-social-media-investor-alert .........................................................................18, 20
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PRELIMINARY STATEMENT
For more than a year, Plaintiffs have tried to manufacture an antitrust conspiracy
where none exists. After suing dozens of industry participants, Plaintiffs slowly abandoned their
claims against nearly all of them. What remains is their implausible theory that—despite similar
restrictions from many other brokers and a well-documented multi-billion-dollar collateral call
from its clearing agency—Robinhood implemented the relevant trading restrictions only because
doing so would benefit one of its market-makers, Citadel Securities. But just as the core of
Plaintiffs’ theory remains the same, so do the fatal flaws. Plaintiffs fail to identify any new or
different factual allegations in their Amended Antitrust Complaint to render this theory any less
implausible than it was when Plaintiffs alleged it in the complaint (“Dismissed Antitrust
Complaint” or “DAC”) the Court previously dismissed (in the “Antitrust Decision”). Indeed, the
Amended Antitrust Complaint contains no new material factual allegations to support Plaintiffs’
theory. It instead reflects a reshuffling of old allegations and the addition of unsubstantiated
conclusory assertions that still do not support a plausible inference of an agreement between
Citadel Securities and Robinhood. The Amended Antitrust Complaint also fails for two
additional legal reasons: Plaintiffs fail sufficiently to plead competitive harm under the rule of
reason and their antitrust claims are precluded by the federal securities laws. The Amended
Antitrust Complaint should be dismissed.
First, Plaintiffs point in the Amended Antitrust Complaint to the very same set of
communications that the Court previously concluded are “vague and ambiguous emails between
two firms in an otherwise lawful, ongoing business relationship” that are not “enough to nudge
Plaintiffs’ claims across the line from conceivable to plausible.” (Antitrust Decision at 50.)
Plaintiffs do not contest, or even attempt to address, the fact that they continue to rely on the
same communications that the Court has already found insufficient to support an inference of
conspiracy (see Mot. to Dismiss (“MTD”) Exhibit A). Nor do Plaintiffs provide any reason to
conclude that those identical communications somehow support an inference of conspiracy now,
even though they did not in the prior complaint. Plaintiffs also rely on the same circumstantial
evidence as before, merely adding conclusory statements in an attempt to bolster the inter-firm
communications alleged in the Amended Antitrust Complaint. In the Antitrust Decision, the
Court systematically analyzed those allegations of circumstantial evidence and rejected them as
insufficient to further a plausible inference of conspiracy. This conclusion still holds true. Most
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fundamentally, Plaintiffs cannot overcome the obvious alternative (and actual) explanation for
the purchase limitations, which is itself alleged in the Amended Antitrust Complaint: that
Robinhood acted in response to the $3 billion collateral call it received from the NSCC on the
morning of January 28, 2021, rather than because of some unlawful agreement with Citadel
Securities. The Court should again dismiss Plaintiffs’ claim for failure to plausibly plead the
existence of an unlawful agreement. (See infra Section I.)
Second, having now alleged a vertical (rather than horizontal) conspiracy in the
Amended Antitrust Complaint, Plaintiffs fail to plead the harm to competition that the rule of
reason requires for such a Section 1 claim. Specifically, they fail to plead harm to competition in
either of the two product markets that they allege—the alleged “upstream” PFOF Market in
which Citadel Securities competes, or the alleged “downstream” No-Fee Brokerage Trading App
Market in which Robinhood competes. (See AAC ¶¶ 305-315.) Plaintiffs’ alleged harm—“that
the stock prices for the Relevant Securities did not appreciate further” (id. ¶ 15)—concerns the
trading prices of the Relevant Securities, and thus is felt in the supposed market for the Relevant
Securities, not either of the markets in which Plaintiffs allege Defendants compete. In an effort
to avoid application of the rule of reason, Plaintiffs now assert in their Opposition, for the first
time, a newly constructed framework in which Citadel Securities and Robinhood are horizontal
competitors in a combined “market for securities trading services.” (Opp. at 23 n.26, 25.) This
is flatly contrary to the Amended Antitrust Complaint, where Plaintiffs allege that “[m]arket
makers and brokerages operate at two different levels,” and “Citadel (a market maker) operates
in a relevant market upstream of that in which Robinhood (a brokerage) operates.” (AAC ¶ 305.)
Plaintiffs’ newfound characterization also makes no sense, as antitrust markets are defined by
demand substitutability, see Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962), and the
distinction between Defendants’ services is plainly evident here. A consumer could not go to
Citadel Securities to obtain an alternative to Robinhood’s brokerage services, nor could a market
participant obtain Citadel Securities’ market-making services from Robinhood. Therefore, to the
extent that Plaintiffs plead any conspiracy, they plead a vertical conspiracy between parties
operating in different markets, for which the rule of reason applies. As the standard of review is
a matter of law, the Court can and should apply the rule of reason to the alleged agreement at the
motion to dismiss stage. And because Plaintiffs fail to plead harm to competition in either of the
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alleged markets in the Amended Antitrust Complaint (see AAC ¶¶ 305-315), Plaintiffs fail to
state a claim under the rule of reason. (See infra Section II.)
Third, the federal securities laws preclude Plaintiffs’ antitrust claim. In
opposition, Plaintiffs argue that the federal securities laws do not address collusive conduct—but
as explained in Defendants’ Motion and below, the crux of Plaintiffs’ claims is purported
manipulation of the trading prices of the Relevant Securities, which is in the heartland of federal
securities regulation. Plaintiffs cannot escape the scope of the federal securities laws by labeling
their claim as an antitrust conspiracy. For this independent reason, Plaintiffs’ Amended Antitrust
Complaint should be dismissed. (See infra Section III.)
After more than a year of litigation, review of thousands of documents from the
alleged conspirators and three attempts to plead a cognizable antitrust claim, Plaintiffs still have
failed adequately to plead an unlawful agreement in restraint of trade. Given the ample
opportunity this Court has already provided Plaintiffs, the Amended Antitrust Complaint should
now be dismissed with prejudice. (See infra Section IV.)
ARGUMENT
I.
PLAINTIFFS FAIL TO SUFFICIENTLY PLEAD THAT DEFENDANTS
AGREED TO CONSPIRE.
The threshold requirement for pleading a Section 1 claim is “to locate the
agreement that restrains trade.” (Antitrust Decision at 26 (internal citations omitted).) Plaintiffs’
conspiracy claim should not survive Defendants’ motion to dismiss because the claim is not
supported by “direct or circumstantial evidence that reasonably tends to prove that the
[defendant] and others had a conscious commitment to a common scheme designed to achieve an
unlawful objective.” In re Farm-Raised Salmon & Salmon Prods. Antitrust Litig., No. 19-
21551-CIV, 2021 WL 1109128, at *10 (S.D. Fla. Mar. 23, 2021) (alteration in original) (quoting
Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984)). Circumstantial evidence
does “not support even an inference of conspiracy” if it is “equally consistent with permissible
competition.” Dunnivant v. Bi-State Auto Parts, 851 F.2d 1575, 1582 (11th Cir. 1988).
“Plausibility is the key, as the ‘well-pled allegations must nudge the claim across the line from
conceivable to plausible.’” Jacobs v. Tempur-Pedic Int’l, Inc., 626 F.3d 1327, 1333 (11th Cir.
2010) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007)).
In their Opposition, Plaintiffs fail to establish that the Amended Antitrust
Complaint alleges the requisite agreement. (Opp. at 7 & n.5.) First, Plaintiffs concede that they
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lack direct evidence of an agreement. Second, despite claiming they pleaded “ample
circumstantial evidence” to infer an agreement (id. at 6), Plaintiffs fail to identify a single new
allegation that supports the inference of such an agreement from their Amended Antitrust
Complaint. Rather, Plaintiffs rely on the exact same communications and rehash the same
already rejected circumstantial evidence arguments this Court already reviewed and found
insufficient.
Plaintiffs also fail to offer any new argument that casts doubt on the plausibility of
the alternative (and true) explanation for why Robinhood put purchasing restrictions in place. As
before, Plaintiffs themselves continue to allege what is an obvious alternative explanation—the
restrictions arose from “increased collateral requirements caused by market volatility.”
(Antitrust Decision at 37.) If anything, Plaintiffs’ conspiracy claim has become less plausible
than it was when the Court dismissed the previous complaint. Plaintiffs no longer allege that any
other brokers were part of the conspiracy, and have thus abandoned any allegations that those
brokers imposed restrictions similar to Robinhood’s for any improper reasons. In that context,
with various other market actors imposing similar restrictions for business reasons entirely
unrelated to any alleged conspiracy, that is all the more reason to reject as implausible Plaintiffs’
claim that Robinhood imposed the purchasing restrictions only because it agreed to do so to help
Citadel Securities.
A.
Plaintiffs Do Not Contest That They Fail to Allege Direct Evidence of an
Agreement.
Defendants demonstrated in their Motion that Plaintiffs failed to plead any direct
evidence of a purported agreement between Citadel Securities and Robinhood. (MTD at 14.)
Plaintiffs do not dispute their failure to plead direct evidence. (See Opp. at 8-20.) Plaintiffs have
therefore waived any argument that they have pleaded direct evidence of an agreement. See
Skinner v. Legal Advocacy Center of Central Fla., Inc., No. 6:11-cv-1760-Orl-37KRS, 2013 WL
5720142, at *2 n.3 (S.D. Fla. Oct. 21, 2013).
B.
Plaintiffs Do Not Plausibly Allege Circumstantial Evidence of an Agreement.
Plaintiffs’ lack of direct evidence of an agreement means they must plead a
plausible inference of conspiracy through circumstantial evidence to survive dismissal. (MTD
at 14-15.) As set out in Defendants’ Motion, such circumstantial evidence must demonstrate “a
conscious commitment to a common scheme designed to achieve an unlawful objective.” (Id.
at 15 (quoting Monsanto, 465 U.S. at 764).) The Court “may infer from the factual allegations in
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the complaint obvious alternative explanations, which suggest lawful conduct rather than the
unlawful conduct the plaintiff would ask the court to infer.” In re Fla. Cement & Concrete
Antitrust Litig., 746 F. Supp. 2d 1291, 1308 (S.D. Fla. 2010) (quoting Ashcroft v. Iqbal, 556 U.S.
662, 682 (2009)). (See Antitrust Decision at 37-38.) None of the supposed circumstantial
evidence addressed by Plaintiffs supports a reasonable inference of conspiracy.
Inter-Firm Communications. Plaintiffs rely on the same communications
between Citadel Securities and Robinhood that this Court previously concluded are insufficient
to plausibly plead a conspiracy. (Id. at 49-50.) As noted above, Defendants’ Motion
demonstrated this fact through a side-by-side comparison chart. (MTD at 16 & Ex. A.)
Plaintiffs offer no response to that comparison, effectively conceding that they have no new
allegations or inter-firm communications to support a plausible inference of a conspiracy.1
With no new factual allegations to rely upon, Plaintiffs simply try to add their
own spin to the communications the Court already reviewed and found insufficient.2 But
“[c]onclusory allegations of agreement or conspiracy are insufficient.” Quality Auto Painting
Ctr. of Roselle, Inc. v. State Farm Indem. Co., 917 F.3d 1249, 1262 (11th Cir. 2019) (en banc);
1 In their Opposition, Plaintiffs assert that “Defendants’ executives acted in ways consistent
with advanced knowledge of the conspiracy” and “Defendants’ executives were dumping their
stock,” even though this lacks any support in the Antitrust Amended Complaint. (Opp. at 9, 12.)
As shown in Exhibit A, the sole new communication is an internal message from Mr. Swartwout
to another Robinhood employee on January 26, 2021, which the Court already reviewed in
connection with its dismissal of the Robinhood Tranche’s Consolidated Amended Complaint
(Order, ECF No. 453). In that message, Mr. Swartwout reported selling his “AMC today,” and
informed his colleague that Robinhood would set a 100% margin requirement on GME (a
different stock) on January 27. (AAC ¶ 234.) Mr. Swartwout’s message was about margin
requirements (not part of the alleged conspiracy), not the purchase limitations imposed after
Robinhood received the $3 billion collateral call from the NSCC. (MTD at 16 n.10.) Indeed,
discussing a margin requirement would make little sense if Robinhood intended to prohibit
purchases, as initial margin pertains to the amount of cash on hand a customer must have to
purchase a stock. Although Plaintiffs suggest that Mr. Swartwout may have sold his AMC
shares in connection with a separate email exchange between a different Robinhood employee,
Josh Drobnyk, and a Citadel Securities employee the prior day (Opp. at 9-10; see also AAC
¶¶ 229-230), this is rank speculation. Mr. Swartwout did not receive Mr. Drobnyk’s email, and
that email does not refer to any stocks, let alone a plan to impose purchase limits on any stocks.
2 Plaintiffs’ assertion—which Defendants strongly dispute—that Citadel Securities was
unsurprised by Robinhood’s purchase restrictions (Opp. at 6 n.4, 11) is unsupported and is
contradicted by Citadel Securities’ internal emails produced to Plaintiffs and cited in the
Robinhood Tranche Amended Complaint. (ECF No. 409 ¶ 220 (“this may cause some big
moves”).)
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Twombly, 550 U.S. at 557. Put differently, a “complaint must state facts—not conclusions—that
plausibly suggest a conspiracy.” United Am. Corp. v. Bitmain, Inc., 530 F. Supp. 3d 1241, 1256
(S.D. Fla. 2021). There are no such facts here, and this case is a far cry from those on which
Plaintiffs rely, each of which involved robust factual allegations of inter-firm communications
indicative of conspiracy not present here.3
Pattern of Concealment. Plaintiffs argue that Defendants engaged in a “pattern
of concealment” because “the written records that Plaintiffs have obtained” allegedly show that
Robinhood and Citadel Securities did not document their communications in writing and because
some communications occurred over the phone. (Opp. at 14-15.) In effect, Plaintiffs ask the
Court to infer a conspiracy because (i) the documents they have obtained provide no evidence of
a conspiracy and (ii) Citadel Securities and Robinhood (two entities with an ongoing and lawful
business relationship) had some oral communications.4 Plaintiffs made the exact same
arguments concerning the Dismissed Antitrust Complaint (see Pls.’ Opp. to Defs.’ Mot. to
Dismiss the DAC, ECF No. 413 at 16), and the Court properly rejected them (Antitrust Decision
at 44-45 (“The Court will not infer a conspiracy simply because two business partners chose to
use phones to communicate.”)). Plaintiffs have alleged no new facts to alter the Court’s
conclusion this go-around, and none of the cases they cite support a different outcome.5
3 See, e.g., DeLong Equip Co. v. Wash. Mills Abrasive Co., 887 F.2d 1499, 1511 (11th Cir.
1989) (finding sufficient evidence of agreement on summary judgment in part because defendant
made payment to price fixing co-conspirator alleged to be share of inflated profits); Associated
News, Inc. v. Curtis Circulation Co., Civ. A. No. H-80-1201, 1986 WL 13791, at *6 (S.D. Tex.
Dec. 4, 1986) (finding, on summary judgment, sufficient evidence of conspiracy in part because
two witnesses claimed defendant agreed to deal exclusively with co-defendant).
4 Try as they might to avoid this characterization of their argument (Opp. at 15 n.13),
Plaintiffs cannot escape the fact that they explicitly argue that the Court should infer a
conspiracy because “communications between the two companies” were conducted “only in
person, via telephone or through lawyers with no written record” (id. at 14).
5 The concealment cases to which Plaintiffs cite include detailed allegations of attempts to
obscure the defendants’ activities, which are not present here. See, e.g., United States v. Siegler,
990 F.3d 331, 339 (4th Cir. 2021) (upholding conspiracy verdict in part because familiarity of
defendants and use of coded language provided evidence defendant acted as middleman); In re
Urethane Antitrust Litig., No. 04-1616-JWL, 2013 WL 2097346, at *11 (D. Kan. May 15, 2013)
(holding destruction of documents may be evidence of conspiracy); United States v. Gacnik, 50
F.3d 848, 852 (10th Cir. 1995) (hiding explosives in basement and denying knowledge of them
was evidence of conspiracy). One of Plaintiffs’ cited cases, Belcher v. Atlantic Capital Realty,
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Motive to Collude. Plaintiffs claim that Robinhood’s PFOF business relationship
with Citadel Securities gave it a motive to implement the relevant restrictions to benefit Citadel
Securities. (Opp. at 9, 15-17.) This Court already considered those very allegations and found
them insufficient to support an inference of conspiracy. (See Antitrust Decision at 37 (“The
mere fact that Citadel Securities is an important business partner of the other Defendants does
not provide sufficient motive to conspire.”).) In doing so, the Court noted that there were “no
allegations that Citadel Securities threatened or suggested it would cut off business relationships
with [Robinhood] if [it] did not impose trading restrictions.” (Id.) Plaintiffs have added no new
substantiated allegations in the Amended Antitrust Complaint to warrant a different conclusion.
Instead, they suggest in opposition that the Court’s prior analysis was incorrect by claiming that
whether Citadel Securities coerced Robinhood “is of no moment.” (Opp. at 12.) But that
entirely misses the point. As the Court previously held, a pre-existing business relationship itself
cannot give rise to a motive to collude. It is implausible to believe that, with no allegation of
coercion, Robinhood would act against its own interest simply to benefit Citadel Securities.6
Plaintiffs also fail to explain why, even if Citadel Securities had coerced
Robinhood, Robinhood would not “simply use another market maker in such a scenario.”
(Antitrust Decision at 37.) As Plaintiffs themselves allege, Robinhood had existing relationships
with other market makers. (AAC ¶¶ 78, 84.) While Plaintiffs baldly assert in opposition that,
“[h]ad Robinhood availed itself of alternatives to Citadel, Robinhood would have foregone
PFOF revenue” (Opp. at 20), Plaintiffs concede in their Amended Antitrust Complaint that
Robinhood earns PFOF revenue from all market makers to which it routes orders (AAC ¶¶ 76,
78). Nowhere do Plaintiffs allege that Citadel Securities paid higher PFOF fees to Robinhood
than any other market makers. Thus, as the Court noted in the Antitrust Decision, the
economically rational response on Robinhood’s part to a hypothetical demand from Citadel
Securities to impose purchase limitations would be to route order flow to other market makers
LLC, does not address concealment at all. No. 6:08-cv-1989-Orl-28DAB, 2010 WL 11507399,
at *5 (M.D. Fla. Sep. 17, 2010).
6 Plaintiffs’ reliance on Isaksen v. Vermont Casting, Inc., 825 F.2d 1158 (7th Cir. 1987), is
misplaced. Isaksen actually involved a threat by a supplier to a retailer to coerce the retailer into
agreeing to fix prices. See id. at 1163. No evidence—or allegation—of a threat is present here.
Case 1:21-md-02989-CMA Document 463 Entered on FLSD Docket 03/25/2022 Page 13 of 29
8
and continue earning PFOF.7 Plaintiffs therefore fail to offer a plausible argument that
Robinhood had any motive to collude with Citadel Securities to impose the purchase limits.
Market Structure. Plaintiffs claim that certain characteristics of the “market in
which Defendants operate” support an inference of conspiracy. (Opp. at 17.) But Plaintiffs
misunderstand how market structure can provide circumstantial evidence of a conspiracy—
market structure does so only when its features facilitate anticompetitive coordination, such as
price-fixing among competitors. See Williamson Oil Co. v. Philip Morris USA, 346 F.3d 1287,
1317 (11th Cir. 2003). Where a market’s structure is equally consistent with legal activities, it
provides no evidence of an agreement. See id. at 1317 & n.18 (holding allegations of market’s
high barriers to entry, inelastic demand and fungible product were not “probative of collusive
behavior”).
As Judge Posner explained in High Fructose Corn Syrup—the only case on which
Plaintiffs rely—the market structure factors that gave rise to the inference of a conspiracy there
included the presence of few sellers, a uniform product (due to standardization) and a lack of
product substitutes. 295 F.3d 651, 655-57 (7th Cir. 2002). Here, by contrast, there are numerous
brokers from which customers can choose, and the retail brokerage market (if such a market
exists) is not one with a uniform, undifferentiated product. Indeed, Plaintiffs themselves allege
that Robinhood “offer[s] an easy to use” “investment mobile app experience.” (AAC ¶ 324.)
And, while Plaintiffs allege high barriers to entry, they fail to explain how those factors could
support an inference of the vertical conspiracy that they allege, nor do they cite any authority
supporting how such barriers could do so. (Id. ¶¶ 372-378.) Nor could they. As a legal matter,
allegations of high barriers to entry are insufficient to constitute circumstantial evidence of an
agreement. See Williamson, 346 U.S. at 1317; Fla. Cement, 746 F. Supp. 2d at 1317 (“[N]one of
these features [including high barriers to entry] make conspiracy a more plausible
explanation . . . .”). As a factual matter, the alleged barriers to entry provide no support for the
existence of an agreement because customers could open accounts with other retail brokers
(alleged to operate in the same product market as Robinhood) and continue purchasing the
7 Plaintiffs’ assertion that “other alternative market makers did not have the capacity to route
orders had Citadel Securities refused” (Opp. at 20) has no support and does not appear as an
allegation in the Amended Antitrust Complaint. Plaintiffs’ assertion that Robinhood would not
go to a public exchange is entirely a non sequitur distracting from the evident presence of other
market makers. (See id.; see also MTD at 20 n.15.)
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9
Relevant Securities. Indeed, at least one named plaintiff—Plaintiff Minahan—opened an
account with Fidelity during the putative class period. (AAC ¶ 30.)
Market Effects. Plaintiffs allege that the Court may infer a conspiracy because,
after brokers imposed the trading restrictions, “the market behaved in a noncompetitive manner”
and the prices of the Relevant Securities fell. (Opp. at 17-18.) But the fact that Robinhood (and
other brokers not alleged to have been part of any agreement) imposed restrictions provides no
evidence whatsoever that the restrictions were the result of an agreement between Robinhood
and Citadel Securities. (AAC ¶¶ 195, 366.)8 Indeed, the fact that many other brokers that are
not alleged to be part of any conspiracy, such as WeBull, E*Trade and others, imposed similar
restrictions directly undermines Plaintiffs’ assertion that the market effects must demonstrate
conspiratorial behavior. (See Antitrust Decision at 38.)
Pretextual Explanations. Finally, Plaintiffs argue that the Court should infer a
conspiracy because Robinhood made allegedly pretextual statements explaining that it imposed
the purchase restrictions due to the market volatility and collateral requirements. (Opp. at 18.)
Once again, the Court has already rejected Plaintiffs’ pretext argument and Plaintiffs offer no
justification for reaching a different conclusion now. (See Antitrust Decision at 45-47.) As
Plaintiffs (correctly) allege, the NSCC increased Robinhood’s deposit requirements to over
$3 billion on the morning of January 28 and Robinhood put the purchase restrictions in place
shortly thereafter. (AAC ¶¶ 178-179.) Robinhood continued the restrictions after meeting its
deposit requirements that morning because, as the Court found plausible, doing so “reduce[d] the
volatility multiplier on the collateral that Robinhood Securities was required to post with the
NSCC.” (Antitrust Decision at 46.) In short, there was no pretext, and none of the challenged
statements proves otherwise, let alone gives rise to any inference of a conspiracy.
*
*
*
8 Plaintiffs again cite only to High Fructose Corn Syrup, 295 F.3d at 655. But Plaintiffs’
allegations concerning market effects are entirely different from those held sufficient to
demonstrate circumstantial evidence of a conspiracy in that case. There, the defendants’
uniform, synchronous and industry-wide price increases were evidence of agreement. Id. Here,
Plaintiffs have abandoned any allegation that Robinhood acted in tandem with other brokers and
instead allege (implausibly) that the institution of trading restrictions—including by other
brokers not part of the alleged conspiracy—may serve as circumstantial evidence of a vertical
conspiracy between Robinhood and Citadel Securities.
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As discussed above, none of the factual allegations in the Amended Antitrust
Complaint gives rise to a plausible inference of a conspiracy. That alone is fatal to Plaintiffs’
claim. But their continued insistence that the challenged purchase restrictions must have been the
result of an illegal conspiracy also remains “even less plausible given that the [Amended
Complaint] provides an ‘obvious alternative explanation’ for imposing trading restrictions”—the
increased collateral requirements during heightened market volatility. (Id. at 37.)9 Plaintiffs’
counterargument—that Robinhood Securities maintained the purchase restrictions after meeting
its deposit requirements on the morning of January 28, 2021—fails to acknowledge that “the
trading restrictions reduced the volatility multiplier on the collateral that Robinhood was required
to post with the NSCC.” (Id. at 46.) If Robinhood had removed the restrictions, it follows that
the volatility multiplier would have again increased. Nothing here has changed, except that
Plaintiffs now have abandoned any conspiracy allegation against other brokers that also
implemented various purchase limits concerning a number of the Relevant Securities. (MTD at
18-19.) Plaintiffs cannot explain why Robinhood supposedly imposed restrictions for
illegitimate reasons while other brokers (who Plaintiffs no longer allege were part of a
conspiracy) did so due to market volatility. (Id.) Having failed to plead any direct evidence of
an agreement, and having failed to adequately plead circumstantial evidence of agreement,
Plaintiffs fail to state a claim under Section 1 of the Sherman Act.
II.
PLAINTIFFS FAIL TO PLEAD THE REMAINING ELEMENTS OF A SECTION
ONE CLAIM.
In addition to failing to plausibly allege the existence of an agreement, Plaintiffs
also fail to address the other fundamental flaw in their Section 1 claim. As Defendants
explained, Plaintiffs fail to plead anticompetitive harm in either of their two alleged markets: the
“upstream” PFOF Market (in which Citadel Securities is alleged to compete) or the
“downstream” No-Fee Brokerage Trading App Market (in which Robinhood is alleged to
compete). (MTD at 25.) Instead, they allege harm in the trading prices of the Relevant
9 Plaintiffs erroneously suggest that it is improper for the Court to consider alternative
explanations for Robinhood’s conduct on a motion to dismiss. (Opp. at 11-12.) But the Court
may “infer from the factual allegations in the complaint obvious alternative explanations, which
suggest lawful conduct rather than the unlawful conduct the plaintiff would ask the court to
infer.” Fla. Cement, 746 F. Supp. 2d at 1308 (citation, internal quotations and alteration
omitted). Indeed, the Court properly applied this reasoning to dismiss the DAC. (See, e.g.,
Antitrust Decision at 37.)
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Securities, which are in a third, wholly separate (and undefined) market. (Id. at 25-27.) Thus,
Plaintiffs fail to plead anticompetitive harm in any relevant product market. See Spanish Broad.
Sys. of Fla., Inc. v. Clear Channel Commc’ns, Inc., 376 F.3d 1065, 1073 (11th Cir. 2004) (noting
that “specific allegations linking market power to harm to competition in that market” are
required) (emphasis added).
Rather than respond directly to this argument in opposition, Plaintiffs devote five
pages of briefing to arguing issues, including market definition and market power, that were not
the basis of Defendants’ Motion. (Opp. at 25-30.) This is a red herring because, while
Defendants dispute Plaintiffs’ flawed market definition and allegations of market power, for
purposes of this Rule 12(b)(6) Motion, Defendants have already accepted those allegations as
true. (MTD at 25-27.) Plaintiffs’ long preliminary discussions about market definition and
market power thus serve only to obscure that they have no response to Defendants’ showing that
Plaintiffs fail to plead anticompetitive harm in either of the markets defined in the Amended
Antitrust Complaint. (Id.) Indeed, Plaintiffs’ response to Defendants’ argument is essentially
relegated to three short paragraphs at the conclusion of Section IV of the Opposition, in which
Plaintiffs cite no authorities that support their argument and—fatally to their claim—simply
reiterate that the alleged harm to competition is that, “[w]hen the prices of the Relevant
Securities dropped due to Defendants’ scheme, Retail Investors sold the Relevant Securities at
lower prices.” (Opp. at 31.)
As a result, under the rule of reason, the standard of review in a vertical restraint
case such as this (see infra Section II.A), Plaintiffs fail to plead a Section 1 claim because they
fail to allege harm to competition in a relevant product market (see infra Section II.B). For this
independent reason, Plaintiffs’ claim should be dismissed with prejudice.
A.
Plaintiffs’ Claim Does Not Qualify for Per Se or “Quick Look” Treatment
Under the Antitrust Laws.
As explained in Defendants’ Motion, the Court may determine at the motion to
dismiss stage whether the per se or rule of reason standard applies to a Section 1 claim. (MTD
at 22-23.) This holds particularly true where, as here, the plaintiff alleges that the defendants
entered into a vertical agreement. That is because courts emphasize that only “‘horizontal
restraints’—restraints ‘imposed by agreement between competitors’—qualify as unreasonable
per se.” Ohio v. Am. Express Co., 138 S. Ct. 2274, 2283-84 (2018). Vertical agreements (other
than tying arrangements not alleged here) are assessed under the rule of reason. See id. at 2284.
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Plaintiffs’ cases underscore this basic statement of law. (Opp. at 22-23 (citing Bus. Elecs. Corp.
v. Sharp Elecs. Corp., 485 U.S. 717, 730 (1988)).)
Here, Plaintiffs allege that Citadel Securities operates in an “upstream” market
and Robinhood operates in a “downstream” market. (AAC ¶ 305.) Indeed, Plaintiffs’ theory is
predicated on a vertical relationship: Plaintiffs allege that Citadel Securities leveraged its
market-maker services relationship with Robinhood to pressure Robinhood into enacting
purchasing limits on its brokerage customers. (AAC ¶¶ 233, 236, 246.) Therefore, the Court
should apply the rule of reason to Plaintiffs’ claim. See, e.g., Nat’l Bancard Corp. (NaBanco) v.
VISA U.S.A., Inc., 779 F.2d 592, 596 (11th Cir. 1986). Plaintiffs’ arguments are unavailing.
First, Plaintiffs urge the Court to defer any ruling on whether to apply the per se
standard of review, calling for a fact-intensive inquiry. (Opp. at 21-22.) Plaintiffs’ position is
contrary to Eleventh Circuit law, which authorizes determining, on a motion to dismiss, whether
a claim is subject to per se liability. Tempur-Pedic, 626 F.3d at 1334-36; Quality Auto, 917 F.3d
at 1271-72. A fact-intensive inquiry is inappropriate and not required for a vertical agreement as
alleged here, which cannot be subject to a per se standard. See Am. Express, 138 S. Ct. at 2284.
Indeed, nearly all of the authorities on which Plaintiffs rely involve types of agreements where
the per se standard may apply (depending on the facts): horizontal agreements and tying
arrangements.10
Second, Plaintiffs attempt to recast their claim as a horizontal agreement between
Citadel Securities and Robinhood, perplexingly arguing that Citadel Securities and Robinhood
Securities are “on the same horizontal level of distribution.” (Opp. at 23 n.26.) This new
10 See Procaps S.A. v. Patheon, Inc., 845 F.3d 1072 (11th Cir. 2016) (alleging a horizontal
market allocation agreement); In re Blue Cross Blue Shield Antitrust Litig., 26 F. Supp. 3d 1172,
1186 (N.D. Ala. 2014) (alleging a horizontal market allocation agreement among health
insurers); In re High-Tech Emp. Antitrust Litig., 856 F. Supp. 2d 1103 (N.D. Cal. 2012) (alleging
a horizontal “Do Not Cold Call” agreement between employers); Hunter v. Booz Allen Hamilton,
Inc., 418 F. Supp. 3d 214 (S.D. Ohio 2019) (alleging a horizontal agreement between
employers); In re EpiPen (Epinephrine Injection, USP) Mktg., Sales Pracs., & Antitrust Litig.,
336 F. Supp. 3d 1256 (D. Kan. 2018) (alleging illegal tying practices); In re Terzosin
Hydrochloride Antitrust Litig., 352 F. Supp. 2d 1279 (S.D. Fla. 2005) (alleging a horizontal pay-
for-delay agreement between pharmaceutical companies). And the district court in City of
Rockford v. Mallinckrodt ARD, Inc. noted that vertical agreements are ordinarily analyzed under
the rule of reason, but deferred doing so because of a separate transaction in the case subject to a
Section 2 monopolization claim. 360 F. Supp. 3d 730, 753-54 (N.D. Ill. 2019).
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argument flatly contradicts the complaint, where Plaintiffs clearly allege two markets (AAC
¶¶ 305-315) and allege expressly that “[m]arket makers and brokerages operate at two different
levels” (id. ¶ 305). It is also plainly incorrect. An alleged conspiracy is “horizontal” only when
the actors are competitors in the same market. Am. Express, 138 S. Ct. at 2283-84. By contrast,
an alleged conspiracy is “vertical” when the actors operate in different markets and instead are in
a chain of distribution with each another (for example, a supplier and a manufacturer, or a
manufacturer and a distributor). See Bus. Elecs., 485 U.S. at 730. Under the antitrust laws, a
market is defined to mean that participants offer reasonably interchangeable substitutes. See
Brown Shoe, 370 U.S. at 325. The brokerage services that Robinhood offers and the market-
maker services that Citadel Securities offers are not substitutes. (Compare AAC ¶¶ 43-44, 68,
83 (Robinhood’s retail brokerage services), with id. ¶¶ 84-85 (Citadel Securities’ market-making
services to brokerages).) A consumer who wants brokerage services cannot obtain them from
Citadel Securities; a brokerage (e.g., a Robinhood competitor) seeking market-maker services for
execution of a trade cannot obtain such services from Robinhood. The conspiracy that Plaintiffs
allege can only be vertical.
Third, Plaintiffs suggest in the alternative that the “quick look” standard of review
should apply. (Opp. at 23.) But Plaintiffs cite no cases applying “quick look” review to a
vertical agreement. Indeed, “[m]ost of the antitrust cases that have explicitly considered a ‘quick
look’ approach involved restraints within the context of a joint venture, professional association,
network, or other joint association whose legitimacy was not in question.” Phillip Areeda &
Herbert Hovenkamp, Antitrust Law ¶ 1508 (4th & 5th Eds., 2015-2021) (last updated Sept.
2021). No such arrangement is alleged here.11
For these reasons, the Court should apply the rule of reason to Plaintiffs’ claim.
B.
Plaintiffs Fail to State a Claim Under the Rule of Reason.
Plaintiffs’ Section 1 claim fails because they do not plead harm to competition.
An antitrust plaintiff has the “initial burden to prove that the challenged restraint has a
substantial anticompetitive effect that harms consumers in the relevant market.” Am. Express,
11 Moreover, Plaintiffs’ own cases reject applying “quick look” review. See Cal. ex rel.
Harris v. Safeway Inc., 651 F.3d 1118, 1137 (9th Cir. 2011) (en banc) (rejecting “quick look”
analysis because the “limited duration” of the restraint and “the existence of other significant
external competitors in the market” rendered any anticompetitive effects “not obvious”).
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138 S. Ct. at 2284 (emphasis added). To be in the relevant market, the harm must be in “the area
of effective competition” where the defendant operates and the “prohibited conduct must be
directed towards competitors and must be intended to injure competition.” Intergraph Corp. v.
Intel Corp., 195 F.3d 1346, 1353 (Fed. Cir. 1999) (internal quotations omitted); see also Bitmain,
530 F. Supp. 3d at 1266 (“Before the Court can evaluate harm to competition, it must know the
market where this alleged harm has taken place.”).
In their Motion, Defendants demonstrated that Plaintiffs fail to plead
anticompetitive harm in either of their alleged product markets: the No-Fee Brokerage Trading
App Market or the PFOF Market. (MTD at 25-27.) Instead, the harm Plaintiffs assert occurs in
a distinct (and undefined) market, the market for the Relevant Securities, and results from the
“supply and demand” forces for trading securities. (AAC ¶¶ 99, 354-355.) Indeed, Plaintiffs’
Opposition repeats the same theory, contending that “Defendants harmed competition by
restraining consumer choice and artificially influencing the price of the Relevant Securities. In
so doing, they divorced the price of the Relevant Securities from the fundamental economics of
supply and demand.” (Opp. at 30; see also id. at 6, 8, 28, 31.) The alleged harm to competition
is in the supposed market for the Relevant Securities, and is not felt in either the PFOF Market or
the No-Fee Brokerage Trading App Market.
Plaintiffs’ response misses the mark. (Id. at 31-32.) First, Plaintiffs contend that
“Defendants attempt to misdirect the focus . . . on competition between Robinhood and the other
brokerage services for customers or between Citadel Securities and other market makers.” (Id. at
31.) But this is not misdirection. Plaintiffs rightly observe the first part of the formulation that
the “basic focus of the antitrust laws” is “the ‘protection of competition, not competitors.’” (Id.
(citing 2301 M Cinema LLC v. Silver Cinemas Acquisition Co., 342 F. Supp. 3d 126, 137
(D.D.C. 2018).) But the focus of the antitrust laws is on competition in the alleged product
markets, which here (according to Plaintiffs’ Amended Antitrust Complaint) are the No-Fee
Brokerage Trading App Market and the PFOF Market.
Second, Plaintiffs try to mask the market jumping nature of their asserted harm by
arguing “reduced output” of Robinhood’s brokerage services. (Opp. at 28.) This argument
makes no sense. In antitrust law, a “reduction in output” refers to a reduction in product volume
to create an artificially high price for that product. See Brooke Group Ltd. v. Brown &
Williamson Tobacco Corp., 509 U.S. 209, 233 (1993) (“Supracompetitive pricing entails a
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restriction in output.”). Nothing of the sort occurred in the brokerage market here, where
Robinhood continued to offer commission-free retail brokerage accounts to any member of the
public (there was no reduction in output) and Robinhood’s brokerage services remained free of
charge to customers (there was no increase in price). Plaintiffs do not allege otherwise. (See,
e.g., AAC ¶¶ 8, 69, 73.) The supposed “reduction in output” is merely a reduction in the number
of purchase orders for the Relevant Securities, which has nothing to do with harm to competition
in the alleged markets.
In any event, Plaintiffs quickly pivot back to the real focus of their theory: that
the harm to competition is felt in “the pricing of the Relevant Securities” and Defendants’
alleged interference with “the price discovery that would have occurred through the operation of
supply and demand.” (Opp. at 28-29; see also id. at 31 (“When the prices of the Relevant
Securities dropped due to Defendants’ scheme, Retail Investors sold the Relevant Securities at
lower prices—the precise result Defendants desired.”); id. at 31 n.38 (“The harm can be
estimated by the amount lost when Plaintiffs were unable to sell the Relevant Securities due to
the trading restrictions.”).) As explained above, this alleged harm is in a market for the Relevant
Securities, not in either the PFOF Market (in which Citadel Securities allegedly competes) or the
No-Fee Brokerage Trading App Market (in which Robinhood allegedly competes). Plaintiffs do
not, and cannot, plead that competitors were foreclosed from either of the alleged markets or that
prices rose in either of those markets. Accordingly, the anticompetitive harm Plaintiffs assert is
outside “the area[s] of effective competition” in which Defendants operate—i.e., it occurs in the
unalleged market for the Relevant Securities—and for this reason, Plaintiffs’ Section 1 claim
fails. Intergraph, 195 F.3d at 1353.12
12 None of Plaintiffs’ cited authorities supports their theory of harm because in each case the
anticompetitive effects arose in the market in which the defendant operated. See Am. Express,
138 S. Ct. at 2284 (“[T]he plaintiff has the initial burden to prove that the challenged restraint
has a substantial anticompetitive effect that harms consumers in the relevant market.”); Tempur-
Pedic, 626 F.3d at 1339 (same); United States v. Microsoft Corp., 253 F.3d 34, 52 (D.C. Cir.
2001) (en banc) (holding harm in market for operating systems for Intel compatible PCs, in
which defendant operated, was sufficient); Toys “R” Us, Inc. v. FTC, 221 F.3d 928, 937 (7th Cir.
2000) (affirming finding that horizontal agreement between toy manufacturers resulted in
anticompetitive harm in toy retailer market, in which defendant operated); FTC v. Ind. Fed’n of
Dentists, 476 U.S. 447, 456-57 (1986) (affirming finding that alleged agreement among dentists
to withhold x-rays harmed market for dentistry insurance, in which defendants participated);
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III.
PLAINTIFFS’ ANTITRUST THEORY IS PRECLUDED BY THE FEDERAL
SECURITIES LAWS.
Plaintiffs’ antitrust claims are also precluded by federal securities law.
A.
The Dodd-Frank Act Savings Clause Does Not Apply.
Plaintiffs try to avoid preclusion of their claims by relying on the Dodd-Frank
Act’s antitrust savings clause. As Defendants showed in their Motion, that reliance is misplaced.
(MTD at 34-35.) Section 6 of the Dodd-Frank Act states that “[n]othing in this Act, or any
amendment made by this Act, shall be construed to modify, impair, or supersede the operation of
any of the antitrust laws, unless otherwise specified.” 12 U.S.C. § 5303 (emphasis added).
“[T]his Act” refers to the Dodd-Frank Act, not the Exchange Act, see Dodd-Frank Act §§ 1(a), 6,
124 Stat. 1376, 1390 (2010), and the savings clause is codified in title 12 (banks and banking),
not title 15 (where the securities laws appear). See 12 U.S.C. § 5303.
The savings clause in the Dodd-Frank Act thus applies to conduct covered by the
Dodd-Frank Act or amendments made by that Act—concerning security-based swap agreements
(MTD at 34)—but not conduct covered by pre-existing provisions of the Exchange Act or other
statutes otherwise unamended by the Dodd-Frank Act. See In re Interest Rate Swaps Antitrust
Litig., 261 F. Supp. 3d 430, 495-98 (S.D.N.Y. 2017) (holding the Dodd-Frank Act savings clause
applied to alleged conspiracy among interest rate swap dealers, where Act regulated swap
markets); In re Credit Default Swaps Antitrust Litig., No. 13-md-2476, 2014 WL 4379112,
at *16-17 (S.D.N.Y. Sept. 4, 2014) (same for credit default swaps).
The conduct that Plaintiffs allege was unlawful is not conduct the Dodd-Frank
Act covers. Rather, pre-existing market manipulation provisions of the Exchange Act, which the
Dodd-Frank Act did not amend, cover the “manipulation of the prices of the Relevant Securities”
that Plaintiffs allege (AAC ¶ 354). See Exchange Act § 15(c)(2)(D), 15 U.S.C. § 78o(c)(2)(D);
Exchange Act § 9(a)(6), 15 U.S.C. § 78i(a)(6); Exchange Act § 10(b), 15 U.S.C. § 78j(b). Nor
did the Dodd-Frank Act amend the Exchange Act provisions concerning broker risk mitigation
and management. (See infra Section III.B.) Plaintiffs try to shoehorn their claims into the Dodd-
Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1444 (9th Cir. 1995) (alleged agreement to fix
predatory prices harmed the retail gasoline market, in which defendants operated); Costco
Wholesale Corp. v. Johnson & Johnson Vision Care, Inc., No. 3:15-CV-734-J-20JRK, 2015 WL
9987969 (M.D. Fla. Nov. 4, 2015) (holding allegations of vertical resale price maintenance
agreement adequately alleged harm in market for contact lenses, in which defendants operated).
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Frank Act’s savings clause by asserting that provisions of the Dodd-Frank Act “touch upon
issues alleged in the Amended Complaint,” namely short-selling. (Opp. at 33.) But the unlawful
conduct that Plaintiffs allege in this case concerns purchase restrictions that Robinhood imposed
on its stock trading platform, not any short-selling activity. (See id. at 1.) Plaintiffs’
(unsupported) suggestion that Citadel Securities’ alleged short sales provided a motive for the
alleged conspiracy does not make short sales an object of the conspiracy or bring this action
within the ambit of the Dodd-Frank Act. Indeed, Plaintiffs acknowledge that their claims “do
not attack or seek to prohibit short selling generally.” (Id. at 40.)13
Plaintiffs’ reliance on Section 929X(a) of the Dodd-Frank Act is equally
misplaced. That section authorizes the SEC to issue rules regarding the public disclosure of
short positions on a monthly basis. 124 Stat. at 1870. To date, the SEC has not issued
regulations under the provision, and if the SEC had done so by late January 2021, they would
have been limited to monthly disclosure of short positions, which would have had no impact on
Plaintiffs’ claims, and could not have prohibited short selling.14
As a result, Plaintiffs do not—and, as set out in Defendants’ Motion, cannot—
show that the Dodd-Frank Act or any of the amendments it made cover the trading restrictions at
issue in this action. (MTD at 34-35.) Therefore, the Act’s antitrust savings clause does not
apply.15 And, as the Supreme Court held in Credit Suisse Sec. (USA) LLC v. Billing, 551 U.S.
264, 275 (2007), the general savings clause in the Exchange Act is not “so broad as to preserve
all antitrust actions” and does not prevent implied preclusion of Sherman Act claims.
B.
Plaintiffs’ Antitrust Claims Are Precluded under Billing Because the
Conduct at Issue Is Regulated by the Federal Securities Laws.
The conduct underlying Plaintiffs’ claims is regulated by the securities laws, and
13 Plaintiffs note that “Dodd-Frank also has specific provisions related to market making”
without explaining how this statement relates to the alleged antitrust conspiracy. (Id. at 33.) In
any event, as with short sales, Plaintiffs do not allege that Citadel Securities’ market-making
activities were unlawful.
14 The SEC recently proposed regulations under Section 929X, requiring institutional
investment managers to make monthly disclosure of short positions. SEC Release No. 34-94313,
87 Fed. Reg. 14,950, 15,015-16 (Mar. 16, 2022) (proposed 17 C.F.R. § 240.13f-2).
15 Plaintiffs also argue that the Dodd-Frank Act modified portions of “Section 15 of the
Securities Exchange Act” without providing any explanation as to how this relates to their case.
(Opp. at 33.) In fact, these amendments, see Dodd-Frank Act § 913(g), 124 Stat. at 1828 (adding
15 U.S.C. § 78o(k)-(l)), have nothing to with the Exchange Act provisions relevant to this action.
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Plaintiffs’ antitrust claims are accordingly precluded—regardless of whether the Securities
Tranche Plaintiffs state a claim.16 Each of the four Billing factors weighs in favor of preclusion.
i.
The Conduct at Issue Lies at the Very Heart of the Securities Market.
Plaintiffs argue that the first Billing factor weighs against preclusion because
“Defendants do not—and—cannot demonstrate how cutting off retail investors’ access to the
securities market by restricting trading” is “central to the proper functioning of well-regulated
markets.” (Opp. at 35-36.) Plaintiffs’ argument fails for two reasons. First, Defendants showed
in their Motion that market integrity for stock prices, and the prohibition on market manipulation
of the kind Plaintiffs allege here, lie at the core of the securities laws. See Exchange Act §§ 9-
10, 15 U.S.C. §§ 78i-78j; (MTD at 29). Plaintiffs allege that the object of the purported
conspiracy was “to manipulate and artificially suppress the price of stock.” (AAC ¶ 405.)
Second, Defendants explained in their Motion how restrictions on purchasing volatile stocks
permitted Robinhood to meet clearing agency collateral calls and continue to serve all customers
trading all securities (beyond the volatile stocks). (MTD at 17.) That was central to the proper
functioning of well-regulated securities markets. Indeed, an SEC investor alert and bulletin has
explicitly stated that broker-dealers “may reserve the ability to reject or limit customer
transactions.”17 Accordingly, “limit[ing] financial exposure” by implementing trading
restrictions when necessary is a practice that “lie[s] squarely within an area of financial market
activity that the securities law seeks to regulate.” Billing, 551 U.S. at 276.
ii.
The SEC Is Authorized To Regulate All of the Activities in Question.
Plaintiffs further argue that the second Billing factor weighs against preclusion
because the “SEC does not have authority to supervise ‘all of the activities in question here,’ in
particular Robinhood’s imposed limitations on trading.” (Opp. at 36.) Again, this is simply
16 Plaintiffs erroneously rely on In re NASDAQ Mkt.-Makers Antitrust Litig., 172 F.R.D. 119
(S.D.N.Y. 1997), and Kalmanovitz v. G. Heilman Brewing Co., 769 F.2d 152, 157 (3d Cir.
1985), to argue that “[a]ntitrust laws have long been enforced with respect to wrongdoers in the
securities market.” (Opp. at 35 n.44.) Both cases predate Billing. The NASDAQ court did not
consider any preclusion arguments, 894 F. Supp. 703, 710-15 (S.D.N.Y. 1995), and the
Kalmanovitz court recognized that the securities laws may preempt the antitrust laws where
“necessary to make [the securities laws] work,” 769 F.2d at 157. Neither case is in tension with
applying Billing preclusion to the claims here.
17 SEC, Thinking About Investing in the Latest Hot Stock? (Jan. 30, 2021) (“SEC
Statement”), https://www.sec.gov/oiea/investor-alerts-and-bulletins/risks-short-term-trading-
based-social-media-investor-alert.
Case 1:21-md-02989-CMA Document 463 Entered on FLSD Docket 03/25/2022 Page 24 of 29
19
untrue. The SEC has the authority to promulgate rules to prevent fraudulent, deceptive or
manipulative conduct by broker-dealers, which is fundamentally what Plaintiffs allege here. 15
U.S.C. § 78o(c)(2)(D); (AAC ¶ 405 (alleging conspiracy “to manipulate and artificially suppress
the price of stock”); see also 15 U.S.C. § 78k-1 (authorizing SEC to promulgate rules relating to
the national market system for securities). For example, in a related context, the SEC requires
brokers with “market access” to have risk management controls and supervisory procedures in
place to “prevent the entry of orders,” and “reject[] orders,” if such orders would “exceed
appropriate pre-set credit or capital thresholds in the aggregate for each customer and the broker
or dealer.” 17 C.F.R. § 240.15c3-5(c)(1). Moreover, as set forth in Defendants’ Motion, the
SEC has the authority to enact regulations governing the market manipulation that Plaintiffs
allege here. See Exchange Act §§ 9(a)(6) & 10(b), 15 U.S.C. §§ 78i(a)(6) & 78j(b); (MTD at 30-
31). Thus, the SEC clearly has the “regulatory authority under the securities law to supervise the
activities in question.” Billing, 551 U.S. at 275.18
iii.
There Is Substantial Evidence That the SEC Exercises Its Authority.
Although Plaintiffs concede that “the SEC investigated the events concerning the
market activities of January 28, 2021,” they still contend “there is simply no evidence to suggest
that the SEC investigated the claims of concerted activity at issue here.” (Opp. at 37-38.) But as
discussed in Defendants’ Motion, the SEC Staff reviewed the facts at issue and concluded that
broker-dealers decided to restrict trading in certain stocks as a result of intraday margin calls
from a clearinghouse. (MTD at 32.) Indeed, Plaintiffs’ contention that the SEC did not
investigate the alleged concerted activity is belied by the SEC Staff’s Report, which expressly
addressed the “narrative at the time,” which “attributed the broker-dealer trading restrictions to
pressure from hedge funds and their commercial partners.” (SEC Staff Report at 32-33.)
Furthermore, as set out in Defendants’ Motion, the SEC is exercising its authority to enforce the
federal securities laws through various enforcement programs, as demonstrated by the SEC’s
ongoing investigation into the market events of January 2021. (MTD at 31-32.) The SEC may
18 Plaintiffs apparently misread 15 U.S.C. § 78o(c)(2) and 15 U.S.C. § 78j(b). (Opp. at 36-
37.) These statutes expressly grant authority to the SEC to promulgate rules and regulations
defining acts and practices that are fraudulent, deceptive, or manipulative. See 15 U.S.C.
§ 78o(c)(2)(D) (for broker-dealers); 15 U.S.C. § 78j(b) (for all market participants). That the
SEC has chosen not to prohibit the imposition of purchase restrictions here shows that
Defendants’ conduct is lawful, not that the SEC lacks authority to regulate it.
Case 1:21-md-02989-CMA Document 463 Entered on FLSD Docket 03/25/2022 Page 25 of 29
20
conclude that Plaintiffs’ claims of a conspiracy to manipulate the securities markets are baseless,
but that would be an entirely appropriate exercise of the SEC’s authority.
iv.
Allowing This Claim To Proceed Would Create a Conflict Between
the Antitrust and Securities Laws.
Plaintiffs assert that “Defendants cite to no law that would be in conflict with or
undermined were Plaintiffs[’] claims to succeed.” (Opp. at 39.) That is untrue. Defendants
cited to the SEC’s comprehensive regulations for broker-dealers (including net capital
requirements), see 17 C.F.R. §§ 240.15a-1 to 240.15c6-1, and for clearing agencies (including
collateral call requirements), see id. §§ 240.17Ab2-1 to -2, 240.17Ad-1 to -24. (See MTD at 37.)
There is an actual conflict because Congress has expressly authorized these regulations. See
Exchange Act §§ 15, 17 & 17A, 15 U.S.C. §§ 78o, 78q & 78q-1. In any event, Billing does not
require an actual conflict. See Billing, 551 U.S. at 273, 276. As Plaintiffs correctly note, a
“conflict may occur when there is either an actual conflict or a potential conflict between
antitrust law and securities regulations.” (Opp. at 38.) Here, despite extensive SEC regulation in
this area, the SEC’s rules do not prohibit the purchase restrictions at issue, and an SEC investor
alert has stated that broker-dealers “may reserve the ability to reject or limit customer
transactions.”19 Accordingly, there is an actual conflict between the securities laws and the
application of federal antitrust law in this action, and Plaintiffs’ antitrust claims are precluded.
IV.
PLAINTIFFS’ CLAIMS SHOULD BE DISMISSED WITH PREJUDICE.
Plaintiffs have now had three opportunities to state a claim against Defendants, to
no avail. Plaintiffs do not even argue that they could remedy the deficiencies in their complaint
and therefore should not be afforded any further leave to amend. Plaintiffs’ claims should be
dismissed with prejudice.
CONCLUSION
For the foregoing reasons, the Court should dismiss the Amended Complaint with
prejudice.
19 SEC Statement, supra note 17.
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21
Dated: March 25, 2022
/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 Financial
LLC, Robinhood Securities, LLC and
Robinhood Markets, Inc.
Case 1:21-md-02989-CMA Document 463 Entered on FLSD Docket 03/25/2022 Page 27 of 29
22
/s/ Adam L. Hoeflich (with consent)
QUINN EMANUEL URQUHART & SULLIVAN,
LLP
Christopher D. Kercher
Peter H. Fountain
51 Madison Avenue, 22nd Floor,
New York, New York, 10010
Telephone: (212) 849-7000
Facsimile: (212) 849-7100
christopherkercher@quinnemanuel.com
peterfountain@quinnemanuel.com
QUINN EMANUEL URQUHART & SULLIVAN,
LLP
William A. Burck
1300 I Street NW, Suite 900
Washington, D.C. 20005
Telephone: (202) 538-8000
Facsimile: (202) 538-8100
williamburck@quinnemanuel.com
QUINN EMANUEL URQUHART & SULLIVAN,
LLP
John F. O’Sullivan (FBN 143154)
2601 South Bayshore Drive, Suite 1550
Miami, FL 33133
Telephone: (305) 439-5008
johnosullivan@quinnemanuel.com
BARTLIT BECK LLP
Adam L. Hoeflich
Dawson Robinson
54 W. Hubbard St., Ste. 300
Chicago, IL 60654
Telephone: (312) 494-4400
Facsimile: (312) 494-4440
adam.hoeflich@bartlitbeck.com
dawson.robinson@bartlitbeck.com
Counsel for Defendant Citadel Securities LLC
Case 1:21-md-02989-CMA Document 463 Entered on FLSD Docket 03/25/2022 Page 28 of 29
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on March 25, 2022, 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: March 25, 2022
/s/ Samuel A. Danon
Samuel A. Danon (FBN 892671)
Case 1:21-md-02989-CMA Document 463 Entered on FLSD Docket 03/25/2022 Page 29 of 29