Exhibit A: Order — In re January 2021 Short Squeeze Trading Litigation (Dkt. 474-1, S.D. Fla.)
Summary
An Order [ECF No. 470] dated May 12, 2022 in In re: January 2021 Short Squeeze Trading Litigation, Case 1:21-md-02989-CMA, U.S. District Court for the Southern District of Florida, filed as Exhibit A (Document 474-1) to a notice of appeal entered on the FLSD docket June 1, 2022. The order grants Defendants' Motion to Dismiss the Amended Antitrust Tranche Complaint [ECF No. 456], filed February 18, 2022 by the Robinhood defendants and Citadel Securities LLC, after Plaintiffs' Response [ECF No. 459] and Defendants' Reply [ECF No. 463]. It calls the Amended Complaint Plaintiffs' third attempt at pleading an antitrust conspiracy claim arising from the January 2021 short squeeze. The 53-page order, done and ordered in Miami, Florida above the name of Chief United States District Judge Cecilia M. Altonaga, dismisses the Amended Consolidated Class Action Complaint [ECF No. 451].
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- Date
- 2022-06-01
Cite this document
“Exhibit A: Order (Dkt. 474-1).”
Original at archive.org, dated 2022-06-01. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2022-06-01-covid-era-misc/
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Case 1:21-md-02989-CMA Document 474-1 Entered on FLSD Docket 06/01/2022 Page 1 of 54
Exhibit A
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 21-2989-MDL-ALTONAGA/Torres
In re:
JANUARY 2021 SHORT SQUEEZE
TRADING LITIGATION
_________________________________/
This Document Relates to the Antitrust Actions
ORDER
THIS CAUSE came before the Court on Defendants’ 1 Motion to Dismiss the Amended
Antitrust Tranche Complaint [ECF No. 456], filed on February 18, 2022. Plaintiffs 2 filed a
Response [ECF No. 459], to which Defendants filed a Reply [ECF No. 463]. The Court has
carefully considered the Amended Consolidated Class Action Complaint (the “Am. Compl.”)
[ECF No. 451], the parties’ written submissions, the record, and applicable law. For the following
reasons, the Motion is granted.
I. INTRODUCTION
The Amended Complaint is Plaintiffs’ third attempt at pleading an antitrust conspiracy
claim arising from the January 2021 short squeeze. The Court dismissed Plaintiffs’ Corrected
Consolidated Class Action Complaint (the “CCAC”) last fall, giving Plaintiffs the opportunity to
amend. (See generally Nov. 17, 2021 Order [ECF No. 438]). They did so. What has changed
with the latest pleading? Not much.
1
The Defendants are Robinhood Markets, Inc.; Robinhood Financial LLC; Robinhood Securities, LLC;
and Citadel Securities LLC. (See Am. Compl. ¶¶ 42–49).
2
The Plaintiffs are Angel Guzman, Burke Minahan, Christopher Miller, and Terell Sterling. (See Am.
Compl. ¶¶ 23–41).
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The CCAC described a wide-ranging conspiracy purportedly orchestrated by a market
maker and involving over a dozen Defendants, including introducing brokerages, self-clearing
brokerages, and clearinghouses. Plaintiffs alleged the market maker, Citadel Securities, pressured
the other Defendants to halt trading in certain stocks that had undergone rapid and historic price
increases due to a retail trading frenzy. According to Plaintiffs, Citadel Securities held significant
short positions in the affected stocks, rendering it especially vulnerable to the retail-induced short
squeeze.
Plaintiffs adequately pleaded parallel conduct among the Defendants. But there were no
additional factual allegations supporting a plausible inference of a conspiracy — except for
references to a few vague and ambiguous emails that were exchanged between a brokerage,
Robinhood, 3 and its market maker, Citadel Securities. The Court dismissed the CCAC in its
entirety because a few questionable emails between two firms in an otherwise lawful business
relationship were not enough to support a plausible inference of an unlawful conspiracy.
This third time around, Plaintiffs only allege collusion between Robinhood and Citadel
Securities; they have dropped every other Defendant from the suit. While Plaintiffs profess to
have bolstered their factual allegations as to Robinhood and Citadel Securities, the allegations of
conspiracy are in substance the same and thus inadequate. In addition, Plaintiffs fail to plausibly
allege an unreasonable restraint of trade because their garbled market theory does not conform to
the alleged facts. The Court explains.
3
The Court refers to Robinhood Markets, Inc.; Robinhood Financial LLC; and Robinhood Securities, LLC,
collectively, as “Robinhood[.]” Robinhood Financial LLC and Robinhood Securities, LLC are wholly-
owned subsidiaries of Robinhood Markets, Inc. (See Am. Compl. ¶¶ 42–45).
2
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II. BACKGROUND
This putative class action is brought on behalf of individual investors (the “Retail
Investors”) who suffered losses as a result of Defendants’ response to a “short squeeze” — a
situation in which stocks or other assets rise sharply in value, distressing short positions. 4 (See
Am. Compl. ¶¶ 12, 15–16). This short squeeze occurred in late January 2021, as the Retail
Investors purchased the Relevant Securities en masse over a short period of time, 5 exposing those
with short positions in the Relevant Securities — such as Citadel Securities — to large potential
losses. (See id. ¶¶ 7, 11–12, 64–66). According to Plaintiffs, Citadel Securities pressured
Robinhood to restrict trading on its platform, which “artificially constricted the price appreciation
of the Relevant Securities[,]” in violation of the Sherman Act, 15 U.S.C. § 1. (Am. Compl. ¶ 16
(alteration added); see id. ¶¶ 13, 67, 403–415).
Parties.
Defendants. Robinhood Markets is the corporate parent of Robinhood Financial and
Robinhood Securities. (See id. ¶ 42). Robinhood Financial is an introducing broker: it provides
financial services through an electronic trading platform, or application, where individual investors
can trade financial assets. (See id. ¶ 43). Robinhood Securities is a clearing broker: it handles the
execution, clearing, and settling of trades placed on Robinhood Financial’s application. (See id.
¶¶ 44, 83). Collectively, Robinhood restricted the Retail Investors’ ability to purchase the
4
A “short” seller borrows a security from a lender, believing the price of the security will decrease. (See
Am. Compl. ¶ 108). It then sells the borrowed security to a buyer. (See id.). If the price of the security
drops, the short seller buys the security back at a lower price and returns it to the lender. (See id.). The
difference between the sell price and the buy price is the short seller’s profit. (See id.). Conversely, the
short seller loses money if the price of the security increases. (See id.).
5
The “Relevant Securities” are certain stocks the Retail Investors believed would increase in price:
GameStop (GME), AMC Entertainment (AMC), Bed Bath & Beyond (BBBY), BlackBerry (BB), Express
(EXPR), Koss (KOSS), Nokia (NOK), Tootsie Roll Industries (TR), and Trivago NV (TRVG). (See Am.
Compl. ¶ 7).
3
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Relevant Securities between January 28, 2021, and February 4, 2021 (the “Class Period”). (See
id. ¶¶ 46, 55).
Citadel Securities is a market maker: it acts as a market participant by providing bid and
ask prices for securities, maintaining an inventory of securities from its own trading, and matching
incoming buy and sell orders to fill those orders. (See id. ¶¶ 48, 85). Citadel Securities took short
positions in the Relevant Securities during the period in question. (See id. ¶ 49).
Plaintiffs. The named Plaintiffs are four individual investors who were subject to trading
limitations imposed on the Relevant Securities during the Class Period. (See id. ¶¶ 23–41). Each
Plaintiff held shares of one or more of the Relevant Securities at the close of the stock market on
January 27, 2021. (See id. ¶¶ 23, 28, 33, 38). The next day, January 28, 2021, they were all
prohibited from purchasing the Relevant Securities on Robinhood’s trading platform. (See id.
¶¶ 24, 29, 34, 39).
That same day, Guzman and Miller applied for accounts with Charles Schwab, Fidelity,
and TD Ameritrade — these did not prohibit customers from purchasing the Relevant
Securities — but Guzman and Miller were unable to complete purchases due to the amount of time
required to set up the accounts. (See id. ¶¶ 25, 35). Minahan successfully applied for an account
with Fidelity and was able to purchase a share of GameStop stock that day. (See id. ¶ 30). Each
Plaintiff then sold his or her shares of the Relevant Securities on Robinhood between January 28,
2021, and February 4, 2021. (See id. ¶¶ 26–27, 31–32, 36–37, 40–41).
Injury and proposed class. According to Plaintiffs:
As a direct and intended result of Defendants [sic] contract, combination,
agreement and restraint of trade or conspiracy, Defendants caused injury to
Plaintiffs by restricting purchases of Relevant Securities. Robinhood deactivated
the buy option on its platform and left Plaintiffs and Class members with no option
but to sell or hold shares of the stocks on their platforms. Plaintiffs and Class
members, faced with an imminent decrease in the price of their positions in the
4
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Relevant Securities due to the inability of Retail Investors to purchase shares, were
induced to sell their shares in the Relevant Securities at a lower price than they
otherwise would have, but for the conspiracy, combination, agreement and restraint
of trade. Additionally, Class members that would have purchased more stock in
the Relevant Securities given the upward trend in price could not do so.
(Id. ¶ 410 (alterations added)).
Plaintiffs seek to certify the following class:
All persons or entities in the United States that held shares of stock or call options
through Robinhood in GameStop Corp. (GME), AMC Entertainment Holdings Inc.
(AMC), Bed Bath & Beyond Inc. (BBBY), BlackBerry Ltd. (BB), Express, Inc.
(EXPR), Koss Corporation (KOSS), Nokia Corp. (NOK), Tootsie Roll Industries,
Inc. (TR), or Trivago N.V. (TRVG) as of the close of market on January 27, 2021,
and sold the above-listed securities from January 28, 2021 up to and including
February 4, 2021 (the “Class Period”).
(Id. ¶ 55).
Alleged facts.
Mechanics of securities trading on Robinhood. Individual investors’ market share of U.S.
equity trading has steadily increased since 2019 and has recently accounted for a third of all U.S.
stock market trading. (See id. ¶¶ 92–93). When individual investors make investments on their
own behalf, they execute their personal trades through websites, apps, and trading platforms
provided by brokerage firms or other investment service providers. (See id. ¶ 6).
Robinhood Financial provides one such trading application to individual investors. (See
id. ¶¶ 6, 43, 68). Robinhood Financial is one of the largest retail brokers in the United States —
the trading demand of its over 31 million users substantially influences the movements of stock
prices. (See id. ¶¶ 70–72).
Once a trade is placed on Robinhood Financial’s application, the customer’s cash and
securities are custodied by Robinhood Financial’s clearing broker, Robinhood Securities. (See id.
¶ 83). Robinhood Securities services the customer’s account by executing, clearing, and settling
the trade order. (See id.).
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Although individual investors historically had to pay a fee or commission to their
brokerages for executing personal trades, today most brokerages do not charge their investors a
fee per transaction. (See id. ¶ 8). Rather, in exchange for routing the order to a market maker,
brokerages earn revenue through rebates, kickbacks, and other payments — known collectively as
payment for order flow (“PFOF”). (See id. ¶¶ 8, 73).
Robinhood Securities typically routes a customer’s trade order to a large market maker like
Citadel Securities. (See id. ¶¶ 74, 84). As a market maker, Citadel Securities fills these orders
from its own inventory, by routing the order to an exchange, or by taking the other side of a
transaction (e.g., selling a security short in response to receiving an order to buy the security). (See
id. ¶¶ 85–86). Once an order is filled, the market makers pocket the difference between the bid
and ask prices; this is known as the “spread.” (Id. ¶¶ 74, 85). While the spreads may be small,
they are significant in the aggregate due to the large volume of orders filled. (See id.).
After an order is filled, the details of the executed order are sent to the National Securities
Clearing Corporation (“NSCC”) for clearinghouse and settling services. (See id. ¶ 87). Because
trades do not settle immediately, there is a risk that a party to a transaction may default before the
trade is completed. (See id. ¶¶ 87–88). The NSCC clears cash transactions by netting securities
deliveries and payments among NSCC’s clearing members and guaranteeing the completion of
trades, even if one party to the transaction defaults. (See id. ¶ 88). Thus, if a clearing member
such as Robinhood defaults on its settlement obligations, the NSCC guarantees the delivery of
cash and securities to its non-defaulting members. (See id.).
The NSCC collects clearing fund contributions, or margin, from clearing members at the
start of each day and intraday in volatile markets. (See id. ¶ 90). The margin protects the NSCC
and all market participants against clearing member defaults, and margin requirements must be
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met by clearing members on a timely basis. (See id.). Margin requirements are largely based on
risk and market volatility. (See id.). The rules for calculating the contribution requirements and
the timing of the collection of contributions are known to every clearing member; and the NSCC
provides reporting tools, calculators, and documentation to allow the members to monitor their
risk in near real-time and estimate clearing fund contribution requirements. (See id.).
January 2021 market volatility. Retail Investors often exchange investment information
via online discussion forums like Facebook, TikTok, and, most relevant here, the WallStreetBets
financial discussion forum on Reddit. (See id. ¶¶ 64, 95, 127–28). WallStreetBets is characterized
by a particular culture centered around the discussion of financial investments and memes; many
of its users are sophisticated and shrewd individual investors. (See id. ¶ 128).
Beginning in 2019, the Retail Investors, through these online discussion forums,
hypothesized that shares of GameStop’s stock were significantly undervalued, trading at much
lower prices than they should have been, based on GameStop’s publicly available financial
disclosures and prospects. (See id. ¶¶ 95–96). The Retail Investors saw similar investment
opportunities in the other Relevant Securities. (See id. ¶¶ 97–98).
One such Retail Investor, the popular Reddit and YouTube user, Roaring Kitty, deduced
that GameStop was undervalued for a variety of reasons, including substantial short positions that
large financial institutions had taken against the stock. (See id. ¶¶ 96, 127). Roaring Kitty
continuously published his investments on WallStreetBets, such as his initial purchase of $50,000
of GameStop; he also posted an in-depth analysis of GameStop’s stock on his YouTube channel
in August 2020. (See id. ¶¶ 127, 129).
Leading up to January 27, 2021, the Retail Investors purchased long positions in the
Relevant Securities — primarily through Robinhood — with the expectation that the stocks would
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increase in value. (See id. ¶¶ 7, 64, 101). As more investors purchased the Relevant Securities
and “out of the money” call options 6 in the Relevant Securities, the market prices for the stocks
rose due to supply and demand. (Id. ¶¶ 99, 114). The Relevant Securities started appreciating to
“unprecedented levels.” (Id. ¶ 15).
To illustrate this rapid growth, a share of GameStop stock traded for as low as $2.00 a share
in 2019 (see id. ¶ 130); $43.03 on January 21, 2021 (see id. ¶ 132); $76.79 on January 25, 2021
(see id.); $147.98 on January 26, 2021 (see id. ¶ 135); and $380.00 on January 27, 2021 (see id.
¶ 137). GameStop’s stock price reached a closing high of $347.51 on January 27, 2021 — a
134.84% increase from the previous day. (See id.). Other Relevant Securities experienced similar
surges; for example, AMC’s and Express’s share prices increased over 300% and 200%,
respectively. (See id.).
As Retail Investors increased long positions in the Relevant Securities, those who held
short positions in the Relevant Securities, such as Citadel Securities (see id. ¶¶ 11, 141–42), were
caught in a short squeeze. (See id. ¶¶ 114–15). Investors with these short positions faced a rapid
increase in the shorted assets’ values, exposing short sellers to even greater losses because the
short sellers must at some point buy back the stocks to return them to their lenders. (See id. ¶¶ 12,
115). 7
6
A call option gives the holder the right to buy the asset at a stated fixed price or the “strike price.” (Am.
Compl. ¶ 114). An “in the money” option has a favorable strike price because it is lower than the market
price of a stock (id. ¶ 119), while an “out of the money” option has an unfavorable strike price because it is
higher than market price for the underlying asset (id. ¶ 120). If an option expires while out of the money,
the contract becomes valueless. (See id. ¶¶ 119–120, 140, 294).
7
Another phenomenon known as a “Gamma squeeze” occurred as the prices of the Relevant Securities
increased. (Am. Compl. ¶¶ 114, 116). Options are priced based on a variety of risk variables, including
one called “Gamma,” which increases as the option nears its expiration date or as the option approaches its
strike price (i.e., “being in the money”). (Id. ¶¶ 121, 123–26). When a security experiences a sharp price
increase, the Gamma increases; stated differently, options that were previously unlikely to reach their strike
prices before expiration become more likely to do so. (See id. ¶¶ 124–26). As the Gamma increases, market
makers hedge by purchasing more of the underlying security, which further drives the price of the security
8
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Around 5:00 p.m. on January 27, 2021, the SEC released a statement indicating it was
“aware of and actively monitoring the on-going market volatility in the options and equities
markets[.]” (Id. ¶ 144 (alteration added; quotation marks omitted)). It declined to step in and
restrict trading, however. (See id.).
Events of January 28, 2021. Right before markets opened on January 28, 2021, analytics
captured a significant volume of GameStop short transactions. (See id. ¶ 156). Retail brokers
generally do not allow individual investors to engage in after-hours trading to the same extent as
institutional investors, so this increase in short volume was likely the result of institutional
investors, like Citadel Securities, taking new short positions. (See id. ¶ 157). Additionally, failure
to delivers (“FTDs”), which occur when one of two transacting parties fails to meet its obligations
in a securities trade, rose dramatically in the period leading up to January 28, 2021, a phenomenon
consistent with increasing short interest by market makers like Citadel Securities. 8 (See id. ¶¶ 161,
165).
This increase in short positions baffled some observers. (See id. ¶ 175). The dominant
view in many financial discussion forums reflected a high degree of excitement and motivation
among Retail Investors. (See id.). Many announced plans to increase long positions in the
Relevant Securities on January 28, 2021. (See id.).
Around 1:00 a.m. EST on January 28, 2021, Robinhood informed its users that in the face
of unprecedented volatility surrounding GameStop and AMC stock, all GameStop and AMC
options with expirations of January 29, 2021 would be set to closing transactions only. (See id.
higher and creates a feedback loop as even deeper out of the money options approach their strike price.
(See id. ¶ 126).
8
FTDs can be strong indicators of naked short selling, which occurs when a short seller does not actually
possess the security it is supposed to borrow, or of market makers taking on more short positions. (See Am.
Compl. ¶¶ 162–63).
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¶ 176). Apparently, the restrictions would help Robinhood reduce risk. (See id.). For the
immediate future, customers could close out their positions in GameStop and AMC but could not
make new investments. (See id.).
At 5:11 a.m. EST, Robinhood received an email from the NSCC titled “NSCC Daily
Margin Statement” advising Robinhood had a collateral requirement deficit of over $3 billion. (Id.
¶ 178). At 8:00 a.m. EST, Gretchen Howard, Robinhood’s COO, messaged internally that
Robinhood had a “major liquidity issue” and was moving the Relevant Securities to Position Close
Only (“PCO”), meaning Robinhood users could sell the Relevant Securities but could not buy
them. (Id. ¶¶ 179–80 (quotation marks omitted)). Around that same time, David Dusseault,
Robinhood Financial’s President and COO, said in another internal message, “we will navigate
through this [NSCC] issue[,]” and “we are to [sic] big for them to actually shut us down[.]” (Id.
¶ 182 (alterations added)). Robinhood negotiated with the NSCC to significantly reduce its margin
requirements and was subsequently able to meet its revised NSCC deposit requirement shortly
after 9:00 a.m. EST. (See id. ¶¶ 183–185).
Robinhood moved the Relevant Securities to PCO by the time the markets opened on
January 28, 2021. (See id. ¶¶ 179–180). To their surprise, Robinhood users were no longer able
to purchase the Relevant Securities — the “buy” button was deactivated as a feature, leaving users
with no option but to sell or hold their securities. (See id. ¶¶ 186–88). Further, Robinhood blocked
users on its web platform and mobile app from searching for the Relevant Securities’ ticker
symbols. (See id. ¶ 190). Robinhood also canceled overnight purchase orders of the Relevant
Securities placed on January 27, 2021, which were queued to move forward when the markets
opened on January 28, 2021. (See id. ¶ 188).
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Customers were not given advance notice of the switch to PCO for the Relevant Securities.
(See id. ¶ 185). Robinhood announced the news via Twitter on January 28, 2021, stating it was
restricting the Relevant Securities to PCO due to market volatility. (See id. ¶¶ 192–94).
Other brokerages also restricted trading, adjusted margin requirements, or restricted trading
strategies. 9 (See id. ¶¶ 195, 365–67). On January 28, 2021, Ally, Dough, Public.com, SoFi, Stash,
Tastyworks, and WeBull restricted purchases of two or three of the Relevant Securities; 10 E*Trade
restricted purchases of GameStop and AMC; and Interactive Brokers restricted trading on options.
(See id.). Charles Schwab and TD Ameritrade did not halt trading but instead adjusted margin
requirements for certain securities and restricted certain strategies usually employed by advanced
traders. (See id. ¶ 365).
The broad prohibition on buying the Relevant Securities spawned a massive sell-off, which
sent prices of the Relevant Securities tumbling. (See id. ¶ 197). For example, on January 28, 2021,
GameStop shares reached an intraday peak of $483.00 before dropping down to a closing price of
$193.60 — a staggering 44.29% drop from the prior day’s closing price of $347.51. (See id.
¶ 198). Similarly, AMC shares dropped 56.63%, EXPR shares fell 50.79%, and BBBY shares
declined 36.40%. (See id.). The Retail Investors who wanted to take advantage of the price drops
to buy more shares of the Relevant Securities were unable to do so due to the prohibition on
purchasing. (See id.).
While individual investors were prohibited from purchasing the Relevant Securities,
institutional investors were not. (See id. ¶ 209). Large investment firms and market makers such
9
Internal Robinhood documents show Robinhood actively monitored the actions of other broker-dealers.
(See Am. Compl. ¶ 196).
10
Many of these brokerages reported that their clearing firm, Apex, was responsible for implementing the
restrictions. (See Am. Compl. ¶ 195). Apex only imposed restrictions on January 28, 2021. (See id.).
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as Citadel Securities were able to purchase the Relevant Securities at artificially reduced prices
because they had access to private stock exchanges known as “dark pools.” 11 (Id.). As the Retail
Investors sold their shares in the Relevant Securities because of the trading restrictions, firms like
Citadel Securities bought the Relevant Securities at artificially reduced prices to close out their
short positions. (See id. ¶¶ 209–10).
Events after January 28, 2021. When the market opened on January 29, 2021, Robinhood
lifted its trading restrictions and permitted individual investors to open new long positions in the
Relevant Securities; even so, Robinhood continued to heavily restrict such purchases. (See id.
¶¶ 249–51). For example, Robinhood placed limitations on the number of new positions its users
could open in the Relevant Securities, restricting purchases of GameStop stock to two shares and
then to one share. (See id. ¶¶ 253–55). It maintained trading limitations on certain securities
through February 4, 2021 (see id. ¶ 261); further suppressing the value of the Relevant Securities
and pressuring investors to sell, rather than buy or hold (see id. ¶¶ 251, 255–56).
On January 31, 2021, Vlad Tenev, Robinhood’s CEO, explained in an opinion piece
published in USA TODAY that Robinhood maintained trading restrictions because clearinghouse-
mandated deposit requirements were “increased ten-fold.” (Id. ¶ 262 (quotation marks omitted)).
Two days earlier, Robinhood had announced that it raised more than $1 billion to help meet rising
demands for cash and shore up its balance sheet. (See id. ¶ 261). Robinhood raised this money
on top of $500 million it accessed through credit lines to ensure it had sufficient capital to allow
its clients to trade the Relevant Securities. (See id.). On February 1, 2021, Robinhood announced
11
Private stock exchanges are known colloquially as “dark pools” or “dark exchanges” because they do not
disseminate public quotations of securities prices. (Am. Compl. ¶¶ 104–07). Through these private
exchanges, institutional investors can discreetly buy or sell securities in large blocks, mitigating some of
the price impacts that their buying or selling activity would otherwise have on a “lit,” or public, national
securities exchange. (Id. ¶ 106).
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it had raised an additional $2.4 billion in funding above the $1 billion it had already raised. (See
id.). Weeks later, Tenev testified before the U.S. House Committee on Financial Services that
Robinhood had met its revised deposit requirements a little after 9:00 a.m. on January 28, 2021.
(See id. ¶ 264).
Publicly available data reveal short interests 12 in the Relevant Securities climbed steadily
in the weeks leading up to January 28, 2021 (see id. ¶¶ 269–70, 284); and then decreased because
of the trading restrictions imposed during the Class Period, with the sharpest and most significant
decreases occurring after the restrictions imposed on January 28, 2021 (see id. ¶¶ 265, 269–72).
FINRA data show significant increases in dark pool trading activity for each of the Relevant
Securities on and around January 28, 2021, during the period when restrictions were first placed
on the Relevant Securities. (See id. ¶¶ 273–79). Institutions dominate trading in dark pools and
dark exchanges, which are generally beyond the reach of individual investors, so this activity
indicates high institutional investor trading activity consistent with the exiting of short positions.
(See id. ¶ 280).
The scale of Citadel Securities’s business also indicates that the bulk of the activity
captured by this FINRA data can be attributed to Citadel Securities. (See id. ¶¶ 281–84). Because
Citadel Securities accounts for about 50% of dark trading activity, a large shift in the percentage
of sales represented by short trades is likely to be caused by a shift in Citadel Securities’s position
from long to short or vice versa. (See id. ¶ 283).
Collusion between Defendants. Plaintiffs allege that Robinhood and Citadel Securities
colluded to limit buy-side trading in the Relevant Securities so that Citadel Securities could recoup
12
“Short interests” are defined as the number of shares of a security that have been sold short but have not
yet been covered or closed out. (Am. Compl. ¶ 268).
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losses in its short positions caused by the rise of the Relevant Securities’ prices. (See id. ¶ 154
(alterations added)).
Motive to collude. According to Plaintiffs, “Robinhood and Citadel Securities shared a
common motive to conspire — to protect their individual self-interest over the welfare of
Robinhood’s users. Robinhood restricted competition on its platform to protect itself and Citadel
from hemorrhaging losses totaling potentially billions of dollars.” (Id. ¶ 393). Further, “in light
of its planned 2021 IPO, Robinhood simply could not run the risk that its ‘transaction-based
revenue would be impacted negatively’ should Citadel Securities terminate its relationship with
Robinhood.” (Id. ¶ 401; see also id. ¶¶ 318, 400).
PFOF is Robinhood’s primary source of revenue. (See id. ¶¶ 5, 75, 316). Market makers
such as Citadel Securities pay more for Robinhood’s order flow than they do for Robinhood’s
competitors. (See id. ¶¶ 76, 402). Today, Robinhood derives somewhere between 60% to 70% of
its revenue from selling PFOF to market makers like Citadel Securities. (See id. ¶¶ 73–75).
Citadel Securities alone was responsible for 29% of Robinhood’s revenue in 2019, 34% in 2020,
and 43% of Robinhood’s PFOF revenue in the first quarter of 2021. (See id. ¶¶ 5, 78, 80, 318).
Indeed, Citadel Securities is Robinhood’s primary source of revenue. (See id. ¶ 5).
In its Form S-1, Robinhood stated:
For the three months ended March 31, 2021, 59% of our total revenues came from
four market makers. If any of these market makers, or any other market makers
with whom we do business, were unwilling to continue to receive orders from us
or to pay us for those orders (including, for example, as a result of unusually high
volatility), we may have little to no recourse and, if there are no other market
makers that are willing to receive such orders from us or to pay us for such orders,
or if we are unable to find replacement market-makers in a timely manner, our
transaction-based revenue would be impacted negatively.
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(Id. ¶ 81; see also id. ¶ 317 (“As set forth in Robinhood’s Registration Statement, Robinhood’s
‘PFOF . . . arrangements with market makers are not documented under binding contracts.’”
(alteration in original)).
Citadel Securities possessed significant short positions in the Relevant Securities during
the period in question. (See id. ¶ 394). As the prices of the Relevant Securities increased, Citadel
Securities was exposed to “potentially infinite” losses. (Id.). As of December 31, 2020, Citadel
Securities reported $57.5 billion in “securities sold, not yet purchased, at fair value” — which are
“likely representative of Citadel Securities’s short position.” (Id. ¶ 395 (quotation marks
omitted)).
Plaintiffs conclude that Citadel Securities used its relationship with Robinhood to pressure
the company into restricting trading in the Relevant Securities so it could buy the stocks at an
artificially reduced price to close out its short positions. (See id. ¶¶ 400–02).
According to Plaintiffs, Defendants’ public attempt to attribute the motivation for its
trading restrictions to market volatility and the resulting NSCC margin call was pretextual. (See
id. ¶¶ 357–69). In other words, Robinhood was not innocently responding to increased volatility;
it was trying to keep its most important customer happy, to the detriment of the Retail Investors.
Plaintiffs allege that restricting trading was against Robinhood’s self-interest because
Robinhood’s profits are based on the volume of transactions on its application. (See id. ¶¶ 358–
60). Further, Plaintiffs claim Robinhood could have either used its lines of credit instead of
restricting trading to meet its margin requirements, or it could have imposed less restrictive
measures like other brokerages did. (See id. ¶¶ 363–69).
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Communications among Defendants. In the run up to, during, and after January 28, 2021,
high-level executives of Citadel Securities communicated with high-level executives of
Robinhood. (See id. ¶ 226).
On January 20, 2021, the Citadel Securities Head of Execution Services extended an
unknown proposition to Josh Drobnyk, Robinhood’s Vice President of Corporate Relations and
Communications, who conferred with Daniel Gallagher and Lucas Moskowitz, Robinhood’s Chief
Legal Officer and Deputy General Counsel, respectively. (See id. ¶¶ 227–28). The Citadel
Securities executive and Drobnyk had a relationship because Drobnyk previously worked at
FINRA. (See id. ¶ 227). On January 25, 2021, Drobnyk replied via email that “[w]e are on board”
and Moskowitz would be the central point of contact for Robinhood. (Id. ¶ 230 (alteration added;
quotation marks omitted)). The Citadel Securities executive responded to Moskowitz with an offer
to chat, emphasizing the “strong relationship between the firms[.]” (Id. ¶ 231 (alteration added;
quotation marks omitted)). The details of the ensuing January 26, 2021 phone call have not been
disclosed. (See id. ¶¶ 232–33).
On January 26, 2021, during the short squeeze, Jim Swartwout, President and CEO of
Robinhood Securities, alerted other Robinhood executives through an internal chat that Robinhood
“was moving GameStop to 100% margin the next day, stating ‘I sold my AMC today.
FYI — tomorrow we are moving GME to 100% — so you are aware.’” (Id. ¶ 234).
On January 27, 2021, the day before the trading restrictions were implemented, Citadel
Securities and Robinhood executives exchanged several communications. (See id. ¶ 235). In an
internal conversation around 4:40 p.m., Robinhood COO Howard informed Tenev that she, along
with Gallagher and Swartwout, would be joining “a call with Citadel” at 5:00 p.m. that day. (Id.
¶ 237 (quotation marks omitted); see id. ¶ 239). Howard said she believed Citadel Securities
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would make demands on limiting PFOF. (See id. ¶¶ 237, 239). Tenev responded that “[m]aybe
this would be a good time for me to chat with Ken [G]riffin[,]” the CEO of Citadel Securities, and
told Howard, “[y]ou guys can mention that.” (Id. ¶ 239 (quotation marks omitted; alterations
added)). Tenev noted he had not previously met Griffin. (See id.).
Shortly thereafter, around 6:25 p.m., Swartwout messaged in an internal chat that he was
aware of “anecdotal evidence that several ‘very large’ firms [were] having really bad nights too.”
(Id. ¶ 240 (alteration adopted; alteration added; quotation marks omitted)). Swartwout replied,
“everyone is. [Y]ou wouldnt [sic] believe the conv[ersation] we had with Citadel. [T]otal mess.”
(Id. ¶ 241 (alterations added); see id. ¶ 240–41). At 8:16 p.m., Swartwout updated a Citadel
Securities employee that he was looking for “new Citadel numbers.” (Id. ¶ 242 (quotation marks
omitted)). The Citadel Securities employee responded that the numbers were “firming up right
now in light of the follow up [sic] conversation between Gallagher and [redacted.]” (Id. (alteration
adopted; alterations added; quotation marks omitted)).
At 8:29 p.m. that evening, the Citadel Securities Vice President of Business Development
notified Swartwout that one of Citadel Securities’s executives, whom Tenev had previously met,
was available to speak to Tenev that night. (See id. ¶¶ 243, 245). Swartwout replied, “[b]ecause
of our partnership, Vlad would like to have a discussion with Ken [Griffin] at some point, just
given our relationship. Not specific to this crazy issue.” (Id. ¶ 244 (first alteration added; second
alteration in original; quotation marks omitted); see id. ¶ 245). Swartwout emailed in the same
chain later that night that he was “beyond disappointed in how this went down[,]” and it was
“difficult to have a partnership when these kind[s] of things go down this way.” (Id. ¶ 245
(alterations added; quotation marks omitted)).
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On January 30, 2021, a Citadel Securities executive emailed Drobnyk, stating he “wanted
to generally coordinate messaging.” (Id. ¶ 258 (quotation marks omitted); see id. ¶ 260). The
Citadel Securities executive also introduced Drobnyk to someone who was “running point on this
narrative for [them]” and copied company lawyers “for privilege.” (Id. ¶ 258 (alteration added;
quotation marks omitted); see id. ¶ 260).
Market definitions. Plaintiffs define two relevant product markets “within the distribution
of securities trading services” — the upstream market in which Citadel Securities operates and the
downstream one in which Robinhood operates. 13 (Id. ¶ 305). Plaintiffs define these as the “PFOF
Market” and the “No-Fee Brokerage Trading App Market[,]” respectively. (Id. ¶¶ 306, 312
(alteration added)).
The PFOF Market. Citadel Securities competes with other market makers in the upstream
PFOF Market, which Plaintiffs geographically limit to the United States. (See id. ¶¶ 306, 311).
Plaintiffs allege Citadel Securities accounts for approximately 27% of the U.S. equities volume
and executes approximately 37% of all U.S.-listed retail volumes, making it a “relative
behemoth[,]” with the largest market share of any wholesale market maker in the PFOF Market.
(Id. ¶¶ 306–07 (alteration added)). The firm has garnered approximately 40% of all PFOF in the
United States for the past two years, more than its next three competitors combined. (See id.
¶ 307).
Citadel Securities paid brokers roughly $1.1 billion for their order flows in 2020, more than
any other market maker and nearly equal to its four largest competitors combined. (See id. ¶ 308).
From January 2021 through June 2021, Citadel Securities paid nearly $1.5 billion to brokers for
their order flow, more than any other market maker. (See id. ¶ 309).
13
“Upstream” here refers to an earlier stage in the production or distribution chain, while “downstream”
refers to a later stage. (Am. Compl. ¶ 305).
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No-Fee Brokerage Trading App Market. Robinhood competes with other brokerages in
the downstream or consumer-facing No-Fee Brokerage Trading App Market, which is also
geographically limited to the United States. (See id. ¶¶ 312–13, 315). Brokerages in this market
offer no-fee transactions on their trading applications because they receive PFOF from market
makers in the upstream market. (See id. ¶¶ 312–13).
Based on monthly active users, Robinhood is far and away the most popular electronic
trading application in the world and is responsible for a significant number of daily trades. (See
id. ¶¶ 326, 333). In January 2021, Robinhood had nearly three-times as many users as then second-
place brokerage Fidelity Investments (see id. ¶ 334); in July 2021, Robinhood had nearly three-
times as many users as then second-place brokerage WeBull (see id. ¶ 336).
Structure and characteristics of the markets. According to Plaintiffs, the “structure and
characteristics of the market for securities, and in particular the lack of disclosure of short interest
positions at any given time, make it conducive to collusion and anticompetitive conduct.” (Id.
¶ 370).
High barriers to entry. An entrant to the No-Fee Brokerage Trading App Market would
need specialized knowledge, licenses, and memberships, including memberships in organizations
such as FINRA. (See id. ¶ 373). The cost of compliance with applicable industry and regulatory
standards is substantial. (See id.). Entrants would need significant cash on hand to deposit at
clearinghouses such as the DTCC as collateral. (See id. ¶ 374). And entrants would need to have
the necessary technological infrastructure and expertise to navigate the digital market. (See id.
¶¶ 375–76). An entrant to the PFOF Market would also need extensive infrastructure and
significant mathematical expertise to design the sophisticated algorithms that are necessary to
compete in the high-frequency trading market. (See id. ¶¶ 377–78).
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High fixed costs and low variable costs. Both relevant markets are defined by high fixed
costs and low variable costs, and participants in these markets benefit greatly from scale. (See id.
¶ 379). Online broker-dealers participating in the No-Fee Brokerage Trading App Market require
significant IT infrastructure, software, and data security infrastructure to develop and maintain the
applications through which investors trade. (See id. ¶ 380). Market makers participating in the
PFOF Market require similar infrastructures and software to facilitate the digital clearing and
custodial services they provide to online broker-dealers. (See id. ¶ 381). Market makers — high
frequency trading market makers, in particular — must invest significant effort and resources to
increase the speed of trading technology to maximize their profits. (See id. ¶¶ 382–83).
Captive market. In the short run, retail investors in the securities market are locked into
the broker-dealers they already invest with. (See id. ¶¶ 158, 387). The process to open a trading
account with a broker-dealer may take several days. (See id. ¶ 388). If a broker-dealer like
Robinhood imposes short-term trading restrictions, retail investors may not have the opportunity
to switch or change broker-dealers before the restrictions are lifted. (See id. ¶ 392).
If Robinhood users wish to transfer or withdraw funds from their Robinhood accounts to
their personal bank accounts, they will not have access to their funds for three-to-five days after
initiating a request. (See id. ¶¶ 159, 389). During the week of January 25, 2021, Robinhood users
experienced additional delays or errors when attempting to transfer or withdraw funds or close
accounts. (See id. ¶¶ 160, 391). Robinhood also charges users a $75 fee to transfer their assets to
another brokerage, thereby compounding the difficulties associated with switching. (See id.
¶ 389).
Antitrust injury. Plaintiffs allege the Retail Investors suffered “a reduction in the quality
of their trades” because of Citadel Securities’s and Robinhood’s collusive behavior. (Id. ¶ 350;
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see id. ¶ 351). According to Plaintiffs, Robinhood’s prohibition on purchases of the Relevant
Securities imposed transaction costs on the Retail Investors, forcing them to pay “a higher quality-
adjusted price as a result of Defendants’ conduct.” (Id. ¶¶ 350, 353). In exchange for allowing
Robinhood to route their trades to market makers like Citadel Securities, Robinhood users expect
efficient execution of intended trades. (See id. ¶ 350). By blocking the efficient execution of
trades of the Relevant Securities, the quality of user experience significantly decreased, effectively
increasing the price of trading on Robinhood. (See id. ¶¶ 350–51).
Further, the trading restrictions reduced the number of buy orders for the Relevant
Securities, artificially decreasing their price and harming the Retail Investors who held positions.
(See id. ¶ 353). Plaintiffs also allege harm to the companies whose securities the Retail Investors
wanted to purchase by reducing the output of their stock. (See id. ¶¶ 355–56).
Amended Complaint and Defendants’ Motion. Plaintiffs assert a violation of section 1 of
the Sherman Act, 15 U.S.C. § 1, against Defendants. (See Am. Compl. ¶¶ 403–415). Defendants
move to dismiss the Amended Complaint, arguing: (1) Plaintiffs fail to sufficiently plead that
Defendants agreed to conspire; (2) Plaintiffs fail to sufficiently plead the remaining elements of a
Sherman Act section 1 claim; and (3) Plaintiffs’ antitrust theory is precluded by federal securities
laws. (See generally Mot.; Reply).
III. STANDARD
“To survive a motion to dismiss [under Federal Rule of Civil Procedure 12(b)(6)], a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (alteration added; quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Although this pleading standard “does not
require ‘detailed factual allegations,’ . . . it demands more than an unadorned, the-defendant-
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unlawfully-harmed-me accusation.” Id. (alteration added; quoting Twombly, 550 U.S. at 555).
Pleadings must contain “more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (citation omitted). “[O]nly
a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 556 U.S.
at 679 (alteration added; citing Twombly, 550 U.S. at 556).
To meet this “plausibility standard,” a plaintiff must “plead[] factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Id. at 678 (alteration added; citing Twombly, 550 U.S. at 556). “The mere possibility the defendant
acted unlawfully is insufficient to survive a motion to dismiss.” Sinaltrainal v. Coca-Cola Co.,
578 F.3d 1252, 1261 (11th Cir. 2009) (citation omitted), abrogated on other grounds by Mohamad
v. Palestinian Auth., 566 U.S. 449 (2012). When considering a motion to dismiss, a court must
construe the complaint in the light most favorable to the plaintiff and take its factual allegations as
true. See Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1369 (11th Cir. 1997)
(citing SEC v. ESM Grp., Inc., 835 F.2d 270, 272 (11th Cir. 1988)).
IV. ANALYSIS
Plaintiffs assert one claim under section 1 of the Sherman Act, 15 U.S.C. § 1. (See Am.
Compl. ¶¶ 403–15). Section 1 of the Sherman Act provides “[e]very contract, combination . . . ,
or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations,
is declared to be illegal.” 15 U.S.C. § 1 (alterations added). Section 1 claims require two or more
parties agreeing on a restriction; “wholly unilateral” conduct is the exclusive province of section
2. Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 768 (1984) (quotation marks and
citations omitted). “Despite the different terminology, there is no magic unique to each term in
[section] 1; the terms ‘contract,’ ‘combination,’ and ‘conspiracy’ are used interchangeably to
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capture the concept of concerted action, that is an ‘agreement.’” Am. Contractors Supply, LLC v.
HD Supply Constr. Supply, Ltd., 989 F.3d 1224, 1233 (11th Cir. 2021) (alteration added; some
quotation marks and citation omitted).
“The purpose of the Sherman Act is to protect consumers from injury that results from
diminished competition.” Agnew v. Nat’l Collegiate Athletic Ass’n, 683 F.3d 328, 334–35 (7th
Cir. 2012) (citation omitted). “[T]he Supreme Court has long concluded that Congress intended
only to prohibit ‘unreasonable’ restraints on trade.” Quality Auto Painting Ctr. of Roselle, Inc. v.
State Farm Indem. Co., 917 F.3d 1249, 1260 (11th Cir. 2019) (alteration added; citation omitted).
Thus, section 1 “prohibits (1) conspiracies that (2) unreasonably (3) restrain interstate or foreign
trade.” Id. (citation omitted).
Defendants attack the sufficiency of the allegations directed at the first requirement — that
Plaintiffs adequately plead a conspiracy among the Defendants. (See Mot. 19–28). 14 Defendants
also dispute whether Plaintiffs adequately plead the alleged agreement unreasonably restrained
trade. (See id. 28–34). Lastly, Defendants assert that Plaintiffs’ antitrust theory is precluded by
federal securities laws. (See id. 34–42). Because Plaintiffs fail to plausibly allege the existence
of an agreement — let alone one that unreasonably restrains trade — the Court declines to reach
the third suggested ground for dismissal.
Defendants’ Relationship. “Restraints imposed by agreement between competitors have
traditionally been denominated as horizontal restraints, and those imposed by agreement between
firms at different levels of distribution as vertical restraints.” Bus. Elecs. Corp. v. Sharp Elecs.
Corp., 485 U.S. 717, 730 (1988) (footnote call number omitted). As an initial matter, it is
necessary to determine whether Plaintiffs have alleged a vertical or horizontal restraint on trade.
14
The Court uses the pagination generated by the electronic CM/ECF database, which appears in the
headers of all court filings.
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Plaintiffs insist Defendants have a horizontal relationship (see Resp. 30 n.26) — likely because
“virtually all vertical agreements now receive a traditional rule-of-reason analysis” rather than
straightforward per se condemnation. In Re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 318
(3rd Cir. 2010) (citing Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007);
other citation and footnote call number omitted). Contrary to Plaintiffs’ position, the relationship
in question is obviously vertical.
The agreement alleged in the Amended Complaint is among firms at different levels of
distribution. For Plaintiffs to argue otherwise is surprising, given the Amended Complaint
explicitly alleges that Defendants “operate at two different levels within the distribution of
securities trading services.” (Am. Compl. ¶ 305). Citadel Securities competes in the “upstream
product market consist[ing] of market makers that pay brokerage firms to route their clients’ trades
to that market maker[.]” (Id. ¶ 306 (alterations added)). Robinhood competes in the “downstream
or consumer-facing relevant product market consist[ing] of zero account-minimum, no-fee
brokerages[.]” (Id. ¶ 312 (alterations added)).
According to Plaintiffs, “‘upstream’ refers to an earlier stage in the production or
distribution chain” than the “downstream” stage. (Id. ¶ 305). It does not get any more vertical
than “up” and “down.” See Expert Masonry, Inc. v. Boone Cnty., 440 F.3d 336, 344 (6th Cir.
2006) (“In analyzing the economics of any given restraint, and determining thereby which kind of
legal treatment it merits, it is vital to distinguish between horizontal restraints that involve direct
competitors at a given level of the market, and vertical restraints that typically involve entities that
are upstream or downstream of one another.” (emphasis added)).
Tellingly, Plaintiffs also allege that Citadel Securities is Robinhood’s “real client[.]” (Am.
Compl. ¶ 402 (alteration added)). Much of the Amended Complaint is devoted to showing how
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dependent Robinhood is on Citadel Securities for PFOF revenue. (See, e.g., id. ¶¶ 316–23). As
Plaintiffs describe this relationship, “it is actually the Retail Investors who are Robinhood’s
product; a product for which Citadel Securities is paying Robinhood a premium.” (Id. ¶ 402). In
other words, Plaintiffs’ own description of Citadel Securities and Robinhood’s arrangement does
not illustrate an agreement to “eliminate competition between two entities that provide the same
product,” but instead “a vertical agreement between parties that provide very different services, in
which each party profits solely from a different level of the chain of commerce.” Cates v. Crystal
Clear Techs., LLC, No. 3:16-cv-08, 2016 WL 4379220, at *10 (M.D. Tenn. Aug. 17, 2016).
In their Response, Plaintiffs insist Citadel Securities is “on the same horizontal level of
distribution as clearing entities such as Robinhood Securities (Robinhood’s clearing entity).”
(Resp. 30 n.26). Yet, according to their Amended Complaint, customers place trades on
Robinhood Financial’s application, Robinhood Securities takes custody of the customer’s cash and
securities, and then “Robinhood Securities typically routes the trade to a market maker,
predominately Citadel.” (Am. Compl. ¶¶ 83–84). All three entities thus operate at different
distribution levels: Robinhood Securities (clearinghouse) acts in between Robinhood Financial
(introducing brokerage) and Citadel Securities (market maker). 15
Even if there are horizontal elements to Citadel Securities and Robinhood’s relationship,
the focus of Plaintiffs’ allegations is the vertical relationship between them. See AT&T Corp. v.
JMC Telecom, LLC, 470 F.3d 525, 531 (3rd Cir. 2006) (concluding an alleged restraint was vertical
despite the defendants having a relationship with “horizontal elements” because the relationship
15
Other courts have also held that restraints involving securities trading platforms and market makers are
vertical, not horizontal. See, e.g., In re Interest Rate Swaps Antitrust Litig., No. 16-mc-2704, 2018 WL
2332069, at *12 n.8 (S.D.N.Y. May 23, 2018) (“Tradeweb was not a horizontal competitor of the Dealers,
as it was a provider of electronic trading platforms, not a market maker. The label ‘naked restraint,’ which
antitrust law uses in connection with horizontal competitors, therefore, does not fit.” (quotation marks and
citation omitted)).
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“was primarily vertical”). Where predominantly vertical firms enter into a vertical restraint of
trade, rule of reason analysis is appropriate “[e]ven though in some ways the companies may have
operated in similar lines of business[.]” Generac Corp. v. Caterpillar, Inc., 172 F.3d 971, 977 (7th
Cir. 1999) (alterations added). So, the Court will analyze whether Plaintiffs plausibly allege an
unlawful vertical restraint on trade. But first, the Court analyzes whether Plaintiffs plausibly allege
an agreement at all.
Conspiracy. “The first inquiry[] in any section 1 claim . . . is to locate the agreement that
restrains trade.” Tidmore Oil Co., Inc. v. BP Oil Co./Gulp Prods. Div., a Div. of BP Oil Co., 932
F.2d 1384, 1388 (11th Cir. 1994) (alterations added). Adequately stating a section 1 claim
“requires a complaint with enough factual matter (taken as true) to suggest that an agreement was
made.” Twombly, 550 U.S. at 556. The “crucial question” with regard to a conspiracy claim under
section 1 “is whether the challenged anticompetitive conduct stems from independent decision or
from an agreement, tacit or express[.]” Id. at 553 (alteration added; other alteration adopted;
quotation marks and citation omitted).
To allege an antitrust conspiracy, the plaintiff “should present 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.” Monsanto Co. v.
Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984) (alteration added; quotation marks and citations
omitted). “Standing alone, parallel conduct is inconclusive, as it is consistent with an unlawful
conspiracy, as well as rational and competitive business strategy prompted by common perceptions
of the market.” United Am. Corp. v. Bitmain, Inc., 530 F. Supp. 3d 1241, 1258–59 (S.D. Fla. 2021)
(citing Twombly, 550 U.S. at 554).
In the November 17 Order dismissing the CCAC, the Court found Plaintiffs failed to allege
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direct evidence of an agreement among Defendants. (See Nov. 17, 2021 Order 27–31).
Defendants contend the Amended Complaint is similarly devoid of such allegations. (See Mot.
21). Plaintiffs do not argue otherwise and instead focus on whether there is circumstantial evidence
of an agreement. (See Resp. 14–16). The Court thus examines whether Plaintiffs plausibly allege
a conspiracy through circumstantial evidence, concluding they do not.
Allegations of circumstantial evidence of an agreement. Direct evidence of an antitrust
conspiracy is “extremely rare[.]” Am. Chiropractic Ass’n v. Trigon Healthcare, 367 F.3d 212, 226
(4th Cir. 2004) (alteration added; citation omitted). As an alternative, a plaintiff “may present
circumstantial facts supporting the inference that a conspiracy existed.” Gamm v. Sanderson
Farms, Inc., 944 F.3d 455, 465 (2d Cir. 2019) (quotation marks and citation omitted). The plaintiff
must allege “claimed facts that collectively give rise to a plausible inference that an agreement
existed.” Always Towing & Recovery, Inc. v. City of Milwaukee, 2 F.4th 695, 703 (7th Cir. 2021)
(quotation marks and citation omitted). Whether the plaintiff alleges a horizontal or vertical
conspiracy, the focus is similar: do the allegations plausibly suggest an agreement was made? See
Stewart Glass & Mirror, Inc. v. U.S.A. Glas, 17 F. Supp. 2d 649, 653 (E.D. Tex. 1998).
When deciding a dispositive motion in an antitrust conspiracy suit, a court will first “look
for evidence of interdependence or, put another way, that the defendants have an economic motive
to behave in concert.” In re Plasma-Derivative Protein Therapies Antitrust Litig., 764 F. Supp.
2d 991, 998 (N.D. Ill. 2011) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 596–97 (1986)). The court then “looks to all the evidence suggesting agreement, or ‘plus
factors,’ which can be in the form of economic or non-economic evidence.” Id. (citing In re High
Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 655 (7th Cir. 2002); In re Baby Food Antitrust
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Litig., 166 F.3d 112, 122 (3d Cir. 1999)). 16
“[A]ny showing by [plaintiffs] that tends to exclude the possibility of independent action
can qualify as a plus factor.” Williamson Oil Co., Inc. v. Philip Morris USA, 346 F.3d 1287, 1301
(11th Cir. 2003) (alterations added; other alteration adopted; quotation marks and citation omitted);
see also In re Delta/AirTran Baggage Fee Antitrust Litig., 245 F. Supp. 3d 1343, 1371 (N.D. Ga.
2017) (“There is no finite list of potential plus factors.”). Plaintiffs argue the existence of several
plus factors: motive to collude, interfirm communications, Defendants’ pattern of concealment and
pretextual explanations, and the structural characteristics and behavior of the market. (See Resp.
16–25). 17 The Court examines each.
Common motive to conspire. In the absence of direct evidence and parallel conduct
allegations, it is important for Plaintiffs to establish a plausible common motive to conspire. See
In re Plasma-Derivative Protein Therapies Antitrust Litig., 764 F. Supp. 2d at 998 (citing
Matsushita, 475 U.S. at 596–97); see also Quality Auto Painting Ctr. of Roselle, Inc., 917 F.3d at
1263 n.14 (“[The common motive] plus factor is more properly invoked in contexts where the
16
In the November 17 Order dismissing the CCAC, the Court first examined whether Plaintiffs alleged
parallel conduct between Defendants. (See Nov. 17, 2021 Order 32–35). This analysis was necessary
because Plaintiffs previously alleged a “hub-and-spoke conspiracy” involving horizontal relationships
between multiple clearinghouses and brokerages. (Id. 34). Now, Plaintiffs have narrowed the Defendants
to Robinhood and Citadel Securities, who are alleged to be important partners in a vertical relationship
rather than competitors. As such, Plaintiffs no longer rely on allegations of parallel conduct, which require
“‘plus factors’ to make the parallel conduct ‘more probative of conspiracy than of conscious parallelism.’”
Auto. Alignment & Body Serv., Inc. v. State Farm Mut. Auto. Ins. Co., 953 F.3d 707, 726 (11th Cir. 2020)
(citation omitted).
Still, “[a] plus-factor analysis provides a way to organize circumstantial evidence that, in the plaintiff’s
view, reduces the probability that defendants were acting independently.” In re Dealer Mgmt. Sys. Antitrust
Litig., No. 18-cv-864, 2022 WL 199274, at *14 (N.D. Ill. Jan. 21, 2022) (alteration added). The Court thus
continues to use the plus-factor framework to analyze Plaintiffs’ allegations of circumstantial evidence.
17
Plaintiffs no longer rely on several other plus factors the Court previously rejected, such as actions against
unilateral self-interest (see Nov. 17, 2021 Order 38–39), the opportunity to coordinate and collude (see id.
39–40), and government investigations (see id. 47–48). (See Resp. 14–25).
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motive is unique and specific to the alleged conspirators.” (alteration added; citation omitted)).
Parties with “independent reasons” for conspiring can still be “interdependent” for section 1
purposes. United States v. Apple, Inc., 791 F.3d 290, 317–18 (2d Cir. 2015) (citation and quotation
marks omitted). “Antitrust law has never required identical motives among conspirators when
their independent reasons for joining together lead to collusive action.” Id. (emphasis in original;
citation and quotation marks omitted).
According to Plaintiffs, a common motive stemmed from “Defendants’ lucrative self-
styled PFOF ‘partnership[.]’” (Resp. 22 (alteration added; quoting Am. Compl. ¶ 244)). Plaintiffs’
theory is that, during the trading frenzy in January 2021, Citadel Securities was at risk of incurring
substantial losses because of its short positions in the Relevant Securities, 18 so Robinhood
restricted trading to benefit Citadel Securities in the hopes of preserving their PFOF relationship.
(See id. 22–24).
The Court rejected Plaintiffs’ prior, similar motive theory as implausible. (See Nov. 17,
2021 Order 35–38). While Plaintiffs adequately explained why Citadel Securities would
orchestrate the trading restrictions, the Court was unconvinced as to why the other Defendants
would agree to implement the unlawful restrictions. (See id. 38). More specifically, the Court
found that (1) “[t]he mere fact that Citadel Securities is an important business partner of the other
Defendants d[id] not provide sufficient motive to conspire” (id. 37 (alteration added)), and (2) “the
CCAC provide[d] an ‘obvious alternative explanation’ for imposing the trading
restrictions” — the “increased collateral requirements caused by market volatility” (id. (alteration
added; quoting Iqbal, 556 U.S. at 682)). Given that Plaintiffs rely on the same general theory, the
18
“That Citadel Securities held short interests in the Relevant Securities is a reasonable inference to be
drawn in Plaintiffs’ favor.” (Nov. 17 2021 Order 36 (citing Spanish Broad. Sys. of Fla., Inc. v. Clear
Channel Commc’ns, Inc., 376 F.3d 1065, 1069 n.1 (11th Cir. 2004))).
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question now is whether they have sufficiently bolstered their allegations to render their motive
theory plausible.
In the Amended Complaint, Plaintiffs shift their focus to Robinhood and Citadel Securities’
relationship, dropping every other Defendant. In doing so, Plaintiffs add allegations expanding
upon the lucrative PFOF relationship between Robinhood and Citadel Securities. (See, e.g., Am.
Compl. ¶¶ 316–323). The Court previously determined this relationship alone did not provide
sufficient motive to conspire considering Plaintiffs did not allege that Citadel Securities threatened
or suggested it would end the relationship or explain why Robinhood would not simply use a
different market maker if it did. (See Nov. 17, 2021 Order 37). In other words, Plaintiffs failed to
explain why Robinhood would agree to an illegal demand to restrict trading.
Plaintiffs have added a new wrinkle that warrants consideration. In the Amended
Complaint, Plaintiffs state that Robinhood filed for an initial public offering (“IPO”) in March
2021 and went public on July 29, 2021. (See Am. Compl. ¶ 82). Plaintiffs allege that Robinhood
acquiesced to an anticompetitive agreement with Citadel Securities because Robinhood — which
was anticipating filing for an IPO — “simply could not run the risk that its ‘transaction-based
revenue would be impacted negatively’ should Citadel Securities terminate” their relationship. (Id.
¶ 401; see id. ¶¶ 318–19). This theory finds some support from Howard’s internal message on
January 27, 2021 informing Tenev that she believed Citadel Securities would make some demands
on limiting PFOF, although this message does not indicate what, if anything, Citadel Securities
was asking for in return. (See id. ¶¶ 237, 239).
According to Plaintiffs, Robinhood “could not rely on the possibility that other market
makers, such as Virtu Americas, were standing by willing and able to pay Robinhood for order
flow that Citadel would have otherwise accepted[,]” considering how much more PFOF Citadel
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Securities typically purchased than the others. (Id. ¶ 319 (alteration added); see id. ¶ 318; Resp.
23 n.17). This conclusion is supported by Robinhood’s Form S-1, where Robinhood disclosed
that its “transaction-based revenue would be impacted negatively” if any of its four biggest market
maker relationships ended and it could not find a replacement market maker in a timely manner.
(Id. ¶ 81 (quotation marks omitted)).
Still, the alleged motive for Robinhood is somewhat speculative and conclusory. There
are no factual allegations supporting the notion that Robinhood restricted trading with its
forthcoming IPO in mind. Plaintiffs essentially ask the Court to infer that Robinhood was
motivated to agree to unlawfully restrict trading simply because of the timing of its forthcoming
IPO. (See id. ¶ 318). Plaintiffs also ask the Court to infer that Citadel Securities wielded its
influence as Robinhood’s largest purchaser of PFOF to make anticompetitive demands. (See id.
¶¶ 318–19). And Plaintiffs ask the Court to infer that Robinhood could not and would not find
replacement buyers for PFOF because Citadel Securities was Robinhood’s largest purchaser of
PFOF. (See id.). Plaintiffs’ proffered motive theory thus rests on a series of inferences.
Taken together, Plaintiffs plausibly allege economic motives for why Citadel Securities
and Robinhood might have entered into an anticompetitive agreement, although Robinhood’s
motive tenuously rests upon a series of inferences. Plaintiffs’ motive allegations weakly support
an inference of a conspiracy.
Interfirm communications. “[E]vidence of a high level of interfirm communications” may
constitute a plus factor. Mayor & City Council of Balt. v. Citigroup, Inc., 709 F.3d 129, 136 (2d
Cir. 2013) (alteration added; footnote call number, quotation marks, and citation omitted). In
dismissing the CCAC, the Court examined Plaintiffs’ allegations of interfirm communications and
concluded they weakly support an inference of a conspiracy between Robinhood and Citadel
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Securities. (See Nov. 17, 2021 Order 44). The Amended Complaint does not add any new
allegations of communications between the two entities. (Compare CCAC ¶¶ 296–313, 332–35,
452–53, 455, 461–63, with Am. Compl. ¶¶ 226–235, 239–46, 257–60, 320–22). The Court
examines these allegations once more.
Embedded in the Amended Complaint are several vague and ambiguous emails between
high-level executives of Robinhood and Citadel Securities and internal Robinhood emails
discussing external conversations with Citadel Securities. Given their timing and overall context,
these communications could be inferred to relate to the trading restrictions imposed on January 28,
2021.
On January 20, 2021, Citadel Securities’s Head of Execution Services emailed Josh
Drobnyk, Robinhood’s Vice President of Corporate Relations and Communications, stating he was
happy they “will be working together” and asking Drobnyk to “let [him] know if [they are]
interested and who the main contact should be.” (Am. Compl. ¶ 229 (alterations added; quotation
marks omitted)). On January 25, 2021, Drobnyk replied “[w]e are on board” and copied Lucas
Moskowitz, Robinhood’s Deputy General Counsel, who was “going to be [Robinhood’s] central
point of contact[.]” (Id. ¶ 230 (alterations added)). Moskowitz and the Citadel Securities
executive then arranged a call for the morning of January 26, 2021, the details of which are
unknown. (See id. ¶¶ 231–33). Considering the Amended Complaint admits the details of this
agreement or discussion are unknown, these emails are only relevant given their timing and
participants.
Around 4:40 p.m. EST on January 27, 2021, Howard, Robinhood’s COO, messaged Tenev,
Robinhood’s CEO, that she, along with Daniel Gallagher and Jim Swartwout, Robinhood’s Chief
Legal Officer and Robinhood Securities’ President and CEO, respectively, would be joining “a
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call with Citadel” at 5:00 p.m. that day. (Id. ¶ 239; see id. ¶ 237). Howard told Tenev she believed
Citadel Securities would “make some demands on limiting [payment for order flow] across the
board” but that they “won’t agree to anything[.]” (Id. ¶ 239 (alterations added)). Tenev told
Howard that although he had never met Ken Griffin, the CEO of Citadel Securities, she could
mention on the call that “this would be a good time for [Tenev] to chat with [] [G]riffin[.]” (Id.
(alterations added)). The request from a market maker to limit the order flow sent to it is not
equivalent to a demand to restrict trading in certain securities; however, the timing and the
involvement of high-level executives render these emails relevant.
Roughly two hours later, Swartwout received an internal message stating there was
“[a]necdotal evidence that several ‘very large’ firms are having really bad nights too”; to which
Swartwout replied, “everyone is. [Y]ou wouldnt [sic] believe the conv[ersation] we had with
Citadel. [T]otal mess[.]” (Id. ¶ 240 (alterations added)). At 8:16 p.m., Swartwout updated a
Citadel Securities employee that he was looking for “new Citadel numbers”; the employee
responded that the numbers were “firming up right now in light of the follow up [sic] conversation
between Gallagher and [redacted.]” (Id. ¶ 242 (alteration adopted; alterations added; quotation
marks omitted)). Around 8:30 p.m. that night, Swartwout emailed Citadel Securities’s Vice
President of Business Development to offer to set up a call that night with Tenev and mentioned
Tenev would like to have a discussion with Griffin at some point, given their relationship, but
“[n]ot specific to this crazy issue[.]” (Id. ¶ 245 (alterations added); see id. ¶¶ 243–44). After the
Citadel Securities executive asked Swartwout if Tenev would like to have the call that night,
Swartout declined and said:
Just looking for your dictated schedule and caps. I have 20 minutes until batch so
whatever it is we are not going to be able to address it tomorrow given the notice.
I have to say I am beyond disappointed in how this went down. It’s difficult to
have a partnership when these kind [sic] of things go down this way.
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(Id. ¶ 245 (alteration added)). Again, these emails are vague and ambiguous, and they are only
relevant considering the timing and those involved.
Lastly, on January 30, 2021, a Citadel Securities executive informed Drobnyk that he
“wanted to generally coordinate messaging” and copied on the email Robinhood’s “[General
Counsels] as an FYI and for privilege.” (Id. ¶ 260 (alteration added); see id. ¶¶ 257–58). The two
then arranged an “[u]rgent” phone call. (Id. ¶ 260 (alteration added)). Given the context of the
preceding communications and the fact that this request to coordinate messaging occurred even as
Robinhood continued to restrict trading in the Relevant Securities, these emails — while vague
and ambiguous — do lend some credence to Plaintiffs’ conspiracy theory.
Of course, Defendants must frequently communicate given their business relationship.
See, e.g., In re Nexium (Esomeprazole) Antitrust Litig., 842 F.3d 34, 56–57 (1st Cir. 2016)
(explaining that companies operating in the same market can have legitimate business reasons to
communicate, and those communications do not themselves establish a plausible antitrust
conspiracy). But given the timing, the players involved, and the fact that each of these emails
could be inferred to relate to the trading restrictions imposed on January 28, 2021, Plaintiffs’
allegations of interfirm communications are supportive of a conspiracy.
But the support is thin. Plaintiffs cite In re Salmon, No. 19-21551-Civ, 2021 WL 1109128
(S.D. Fla. Mar. 23, 2021), where the undersigned found interfirm and intrafirm communications
supported a reasonable inference of conspiracy. (See, e.g., Resp. 14). There, the plaintiffs
“point[ed] to bilateral and multilateral agreements not to compete and a high level of
communications among [d]efendants,” including complete details of multiple meetings, such as
who was in attendance, when the meetings occurred, and the contents of those communications.
In re Salmon, 2021 WL 1109128, at *15 (alterations added). Here, Plaintiffs concede they do not
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know what was discussed during the several calls between the Robinhood and Citadel Securities
executives.
This is not necessarily fatal, for Plaintiffs do not have to plead the contents of the interfirm
communications to move the needle closer to plausibility. Interfirm communications can help
Plaintiffs establish an “opportunity to conspire,” even if “such opportunity alone is insufficient to
support an inference that a conspiracy actually happened.” Iowa Pub. Emps. Ret. Sys. v. Merrill
Lynch, Pierce, Fenner & Smith Inc., 340 F. Supp. 3d 285, 322 (S.D.N.Y. 2018).
Plaintiffs have alleged a sufficiently high level of interfirm communications to demonstrate
an opportunity to conspire. Allegations of occasional interfirm communications typically do not
establish the plus factor. See Mayor & Council of Balt., 709 F.3d at 140. Plaintiffs must allege a
“high level” of interfirm communications. Id. (quotation marks omitted). A “high level” of
interfirm communications contemplates multiple meetings, emails, phone calls, or other
communications taking place over time. See, e.g., SD3, LLC v. Black & Decker (U.S.) Inc., 801
F.3d 412, 432 (4th Cir. 2015) (“[T]he complaint describes phone calls, meetings, and discussions
among the various conspirators.” (alteration added)); Hendershot v. S. Glazer’s Wine & Spirits of
Oklahoma, LLLP, No. 20-cv-0652, 2021 WL 3501523, at *8 (N.D. Okla. Aug. 9, 2021)
(“[D]efendants communicated frequently via an industry group they created[.]” (alterations
added)); PharmacyChecker.com, LLC v. Nat’l Ass’n of Bds. of Pharmacy, 530 F. Supp. 3d 301,
318 (S.D.N.Y. 2021) (“Defendants share close business relationships, including common
founders, interlocking membership in organizations, attending the same meetings, and promotion
of each other’s products and activities[.]” (alterations added and citations omitted)); Miami Prods.
& Chem. Co. v. Olin Corp., 449 F. Supp. 3d 136, 169 (W.D.N.Y. 2020) (finding a “high level of
interfirm communications” where the amended complaint alleged the defendants participated in
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“three meetings during the Class Period that always coincided with price increase
announcements”).
Plaintiffs meet this standard here. According to the Amended Complaint, at least two
phone calls between Citadel Securities and Robinhood executives took place in the days leading
up to January 28, 2021, the day Robinhood curtailed trading on the Restricted Securities. (See
Am. Compl. ¶¶ 232, 237). The parties also exchanged numerous emails between January 20 and
January 28, indicating Robinhood and Citadel Securities kept frequent contact throughout the short
squeeze. (See id. ¶¶ 227–233, 235). In other words, Plaintiffs allege not just “isolated discussions”
but “a ‘high level’ of interfirm communications.” Mayor & Council of Balt., 709. F.3d at 140.
But Plaintiffs must allege more than that Robinhood and Citadel Securities communicated.
Plaintiffs have only alleged an opportunity to conspire; they have not connected that opportunity
to a plausible inference of an actual antitrust conspiracy. Interfirm communications, under the
right circumstances, can help give rise to a plausible conspiracy claim, but not when those
allegations have an “obvious alternative explanation.” Twombly, 550 U.S. at 567. The Court
cannot take allegations of communications, followed by allegations of a restriction, and simply fill
in the blanks for Plaintiffs, particularly where it “is just as plausible, if not more so,” that the
communications did not form the basis of an antitrust conspiracy. Stanislaus Food Prods. Co. v.
USS-POSCO Indus., 803 F.3d 1084, 1093 (9th Cir. 2015).
Here, the retail-driven short squeeze, driven in part by Robinhood users, had set the
financial world ablaze: “several ‘very large’ firms [were] having really bad nights[.]” (Am.
Compl. ¶ 240 (alterations added)). Given the PFOF relationship between Robinhood and Citadel
Securities, it would be understandable for employees — even executive-level employees — at a
broker and a market maker to communicate about what impact the squeeze might have on each
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party’s ability to fulfill its obligations. See, e.g., Int’l Constr. Prod. LLC v. Ring Power Corp., No.
5:20-cv-226, 2021 WL 6755717, at *8 (N.D. Fla. Dec. 23, 2021) (holding that interfirm
conversation between defendant companies’ “high-level executives” about plaintiff and its
business partner did not give rise to a boycott conspiracy because plaintiff and its partner “injected
an entirely new business model into the industry[,]” which was worthy of conversation (alteration
added)). Plaintiffs’ revisions to the Amended Complaint do little to advance the theory that when
Robinhood and Citadel Securities communicated, they conspired to stop purchases of the
Restricted Securities.
Certainly, interfirm communications between executives are a plus factor, and the
communications Plaintiffs allege are relevant. But in this instance, the messages at best create an
“equally plausible inference of mere interdependent behavior” that nevertheless “fall[s] short of a
tacit agreement” to restrict trading. Apex Oil Co. v. Di Mauro, 822 F.2d 246, 254 (2d Cir. 1987)
(alteration added and citation omitted). The Court thus “find[s] it difficult” to infer an antitrust
conspiracy. Id. (alteration added).
In sum, Plaintiffs’ allegations of vague and ambiguous communications between
Defendants only support a weak inference of a conspiracy, which does not, by itself, advance
Plaintiffs’ theory from possible to plausible.
Pattern of concealment. “[A]cts of concealment are circumstantial evidence of a
conspiracy’s existence[.]” In re Urethane Antitrust Litig., No. 04-1616, 2013 WL 2097346, at *11
(D. Kan. May 15, 2013) (alterations added; citing United States v. Curtis, 635 F.3d 704, 717 (5th
Cir. 2011)). To establish concealment, Plaintiffs must allege that Robinhood or Citadel Securities
engaged in some affirmative “trick or contrivance tending to exclude suspicion and prevent
inquiry.” Texas v. Allan Constr. Co., Inc., 851 F.2d 1526, 1529 (5th Cir. 1988) (quotation marks,
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citation, and footnote call number omitted). Plaintiffs argue they have plausibly alleged that
Defendants engaged in a pattern of concealment, as evidenced by Defendants’ vague and
ambiguous emails and reliance on oral communications. (See Resp. 21–22).
The Court previously rejected this same argument because it “is not unusual for two firms
in an ongoing business relationship to have conversations over the phone; and Plaintiffs admit they
do not know the substance of these conversations.” (Nov. 17, 2021 Order 45). The Court
distinguished In re Urethane Antitrust Litigation, 913 F. Supp. 2d 1145, 1154–56 (D. Kan. 2012),
a case Plaintiffs previously relied upon, given (1) the case included numerous, detailed facts
suggesting concealment such as document destruction, and (2) the oral communications in that
case were suspicious because the conspirators were direct competitors. (See Nov. 17, 2021 Order
44–45). Here, in contrast, Plaintiffs describe a handful of vague and ambiguous emails between a
firm and its client. Plaintiffs have not provided any new allegations of concealment and instead
rehash the same argument with new, inapt case citations. 19 (See Resp. 21–22).
As before, “[t]he Court will not infer a conspiracy simply because two business partners
chose to use phones to communicate.” (Nov. 17, 2021 Order 45 (alteration added)). Plaintiffs do
not make out a plus factor here.
Pretextual explanations. Pretextual statements may constitute circumstantial evidence of
a conspiracy. See In re McCormick & Co., Inc., 217 F. Supp. 3d 124, 132 (D.D.C. 2016). Plaintiffs
19
Plaintiffs’ cited cases do not provide support here. (See Resp. 21–22 (citing United States v. Siegler, 990
F.3d 331, 339 (4th Cir. 2021) (upholding inference that the defendant knowingly participated in a drug
distribution conspiracy because of the familiarity between the coconspirators and the coded language they
used); In re Urethane Antitrust Litig., 2013 WL 2097346, at *11 (D. Kan. May 15, 2013) (holding the
destruction of documents may be evidence of a conspiracy); United States v. Curtis, 635 F.3d 704, 717 (5th
Cir. 2011) (finding statements imploring one not to go to the authorities were highly probative of a
conspiracy); Belcher v. Atl. Cap. Realty, LLC, No. 6:08-cv-1989, 2010 WL 11507399, at *5 (M.D. Fla.
Sept. 17, 2010) (no discussion of concealment); United States v. Gacnik, 50 F.3d 848, 852 (10th Cir. 1995)
(finding the concealment of explosives was evidence of a conspiracy to manufacture explosives).
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renew their previously rejected contention that they have plausibly alleged that Robinhood made
pretextual statements to explain the trading restrictions. (Compare Resp. 25, with Nov. 17, 2021
Order 45–47). They allege that Robinhood used the NSCC’s $3 billion dollar margin call on
January 28, 2021 as a pretext to impose trading restrictions to benefit Citadel Securities. (See
Resp. 25; Am. Compl. ¶ 178). Plaintiffs offer the following three facts in support of this argument:
(1) “Robinhood’s executives were selling their own shares of the Relevant Securities” before the
margin call; (2) “Robinhood and Citadel were engaged in heated discussions regarding the
degrading market conditions” before the margin call; and (3) “Robinhood met its capital
requirements” before and after January 28, 2021. (Resp. 25). The Court examines each in turn.
To start, Plaintiffs point to a January 26, 2021 internal chat where Swartwout informed
another Robinhood executive “that Robinhood was moving GameStop to 100% margin the next
day, stating ‘I sold my AMC today. FYI — tomorrow we are moving GME to 100% — so you
are aware.’” (Am. Compl. ¶ 234). There are two problems with this point. First, Swartwout’s
message related to margin requirements, not trading positions. Second, the allegation undermines
Plaintiffs’ position: that Swartwout and other Robinhood executives knew they would impose
margin requirements on January 26, 2021 — before “the heated discussions” with Citadel
Securities occurred on January 27, 2021 — reinforces the notion that Robinhood was in fact
concerned about meeting the NSCC’s daily margin calls. (Reply 25; see Am. Compl. ¶¶ 234–35).
Next, Plaintiffs emphasize the “heated discussions” themselves. (Reply 25). As a brief
recap, on January 27, 2021, Howard informed Tenev that she was joining a call that evening with
Swartwout and Citadel Securities, and she believed Citadel Securities would “make some demands
on limiting PFOF across the board.” (Am. Compl. ¶ 239). A few hours later, Swartwout emailed
a Citadel Securities executive again, stating:
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Just looking for your dictated schedule and caps. I have 20 minutes until batch so
whatever it is we are not going to be able to address it tomorrow given the notice.
I have to say I am beyond disappointed in how this went down. It’s difficult to
have a partnership when these kind [sic] of things go down this way.
(Id. ¶ 245 (alteration added)).
Crucially, these communications do not indicate whether Citadel Securities and Robinhood
executives discussed trading on January 27, 2021. A market maker’s demand to reduce its
purchases of PFOF from a broker is not equal to a demand that the broker impose trading
restrictions on certain stocks for all retail investors. To infer that Robinhood used the January 28,
2021 margin call as pretext to impose trading restrictions on behalf of Citadel Securities is a leap.
This inference is also not reasonable because the Amended Complaint provides several
indications that Robinhood was legitimately concerned about meeting its collateral requirements.
As stated, Robinhood executives discussed raising margin requirements for the Relevant Securities
before the discussions with Citadel Securities on January 27, 2021. (See Am. Compl. ¶ 234). And
on the morning of January 28, 2021, shortly after the NSCC sent Robinhood a $3 billion margin
call (see id. ¶ 178), Howard, Robinhood’s COO, “messaged internally that Robinhood ha[d] a
‘major liquidity issue’” (id. ¶ 180 (alteration and emphasis added)). In another internal message
on January 28, 2021, Dusseault, Robinhood Financial’s President and COO, said “we will navigate
through this [NSCC] issue[.]” (Id. ¶ 182 (alteration added)). Further, other brokerages not alleged
to be part of this conspiracy adjusted margin requirements or imposed trading restrictions on
January 28, 2021. (See id. ¶¶ 195, 365–367). These facts render it implausible that the margin
call was used as pretext simply because Robinhood and Citadel Securities engaged in some
unknown discussion about PFOF — the subject of their otherwise lawful business
relationship — on January 27, 2021.
Finally, Plaintiffs contend the margin call was used as pretext because Robinhood
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continued to impose some trading restrictions even after it met its capital requirements. (See Resp.
25). As the Court previously stated, however, “the fact that Robinhood continued to impose
restrictions after meeting its collateral requirements is of no moment because the trading
restrictions ‘reduce[d] the volatility multiplier on the collateral that Robinhood Securities was
required to post with the NSCC.’” (Nov. 17, 2021 Order 46 (alteration in original)). “It is not
suspicious for Robinhood to strive to avoid higher collateral requirements.” (Id.). 20
In short, Plaintiffs fail to make out a plus factor here. Further, an examination of the
Amended Complaint’s allegations reveals an “obvious alternative explanation” for the trading
restrictions: the increased collateral requirements imposed by the NSCC in response to
unprecedented market volatility. Twombly, 550 U.S. at 567.
Market structure. Plaintiffs renew their argument that structural characteristics of the
markets Defendants operate in render the markets “ripe for collusion.” (Resp. 24 (footnote call
number omitted)). The Court previously rejected this argument because Plaintiffs failed to
coherently define the market and because the case law Plaintiffs relied on “involve[s] price-fixing
conspiracies [where] the defendants utilized their market power to raise the prices of goods they
sold.” (Nov. 17, 2021 Order 49 (alterations added; citations omitted)).
Plaintiffs now define two markets: an upstream market maker market and a downstream
brokerage market. (See Am. Compl. ¶¶ 306, 312). They allege these markets are “defined by high
barriers to entry, high fixed costs, and low variable costs[;]” and the brokerage consumers “are
locked-in in the short run[.]” (Resp. 24 (alterations added; citing Am. Compl. ¶¶ 370–92)). The
20
Plaintiffs argue “the decision to implement restrictions on purchasing only was arbitrary” because
“[v]olatility is caused by both increases and decreases in a stock price.” (Resp. 25 n.20 (alteration added;
emphasis omitted); see also Am. Compl. ¶¶ 361–62). Why, then, would “other broker-dealers, including
Ally, Dough, Public.com, SoFi, Stash, Tastyworks and Webull implement[] purchasing restrictions” but
not sales restrictions? (Am. Compl. ¶ 195 (alteration added)).
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Court remains unconvinced that a plus factor exists here.
Plaintiffs once more rely on In re High Fructose Corn Syrup Antitrust Litigation, 295 F.3d
651, in arguing that a plus factor exists under these market characteristics. (Resp. 24). Yet, as the
Court previously stated, In re High Fructose Corn Syrup Antitrust Litigation involved price fixing
among competitors. (See Nov. 17, 2021 Order 49). Plaintiffs present a different anticompetitive
theory: a brokerage allegedly restricted output to lower prices for securities it did not buy or sell
for its own accounts, all for the benefit of its market maker client. Plaintiffs have made no effort
to address the distinction between this case and the price-fixing case they rely on, nor do they
otherwise provide legal authority supporting the application of this plus factor to their novel
anticompetitive theory. (See Resp. 24).
Even if the Court was convinced that this plus factor applies to Plaintiffs’ novel
anticompetitive theory and that Plaintiffs do not merely describe a legal oligopoly, Plaintiffs define
the wrong markets, as discussed below.
Market Behavior. Also in reliance on In re High Fructose Corn Syrup Antitrust Litigation,
295 F.3d 651, Plaintiffs argue for the application of a plus factor based on “evidence that the
market behaved in a noncompetitive manner.” (Resp. 24 (capitalization omitted)). But Plaintiffs
must do more than simply allege that “market behavior is interdependent and characterized by
conscious parallelism.” In re Ins. Brokerage Antitrust Litig., 618 F.3d at 322 (citations and
footnote call number omitted). Here, they maintain the trading restrictions imposed by Robinhood
were anticompetitive because retail customers were unable to purchase the Relevant Securities
despite their desire to do so. (See Resp. 24–25).
This clearly falls short. Robinhood was not the only firm in the brokerage market that
implemented purchasing restrictions — Ally, Dough, Public.com, SoFi, Stash, Tastyworks,
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Webull, E*Trade, and Interactive Brokers all implemented purchasing restrictions on January 28,
2021; and none of these brokerages is alleged to be part of the conspiracy. (See Am. Compl.
¶¶ 195, 366–67). Therefore, the trading restrictions themselves do not warrant the application of
a plus factor here.
***
To recap, Plaintiffs successfully advance two plus factors, each providing only weak
support for a plausible inference of a conspiracy. The first plus factor is the common motive to
conspire. Plaintiffs allege economic motives that explain why Citadel Securities and Robinhood
might have conspired to restrict trading in the Relevant Securities in January 2021. Citadel
Securities is alleged to have held substantial short positions in the Relevant Securities in January
2021, subjecting it to potentially massive losses considering the unprecedented increases in the
stocks’ prices caused by a retail trading frenzy.
Further, Robinhood allegedly acquiesced because it could not risk sustaining revenue
losses right before its forthcoming IPO. The plausibility of Robinhood’s motive is tenuous,
however, because it rests on a series of unsubstantiated inferences. Plaintiffs ask the Court to infer
that Robinhood was motivated by the forthcoming IPO simply based on the timing of the IPO, that
Citadel Securities wielded its influence as Robinhood’s most important client to pressure the
brokerage to restrict trading, and that Robinhood could not simply turn to another market maker
because Citadel Securities accounts for a large portion of Robinhood’s PFOF revenue. While
Plaintiffs do not bolster this theory with concrete allegations linking Robinhood’s decision to
impose restrictions and the IPO, they nevertheless allege economic motivations that could justify
why both firms would benefit from an agreement to restrict trading, so this plus factor provides
some support for Plaintiffs.
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The second plus factor is the communications between Defendants. High-level executives
at these firms exchanged several vague and ambiguous emails immediately before and after
Robinhood imposed trading restrictions on the Relevant Securities on January 28, 2021. These
emails set up telephone discussions between the executives, the substance of which is unknown to
Plaintiffs. Certainly, these emails may be somewhat suspicious given the participants and their
timing, and they indicate Defendants had an opportunity to conspire. But a few vague and
ambiguous emails between two firms in an otherwise lawful, ongoing business relationship only
provide thin support for Plaintiffs.
So, Plaintiffs have tenuously alleged conditions under which Defendants may have agreed
to restrict trading. Is it conceivable that Robinhood restricted trading on January 28, 2021 at
Citadel Securities’s direction? Sure. But do Plaintiffs’ allegations “nudge[] their claims across
the line from conceivable to plausible[?]” Twombly, 550 U.S. at 570 (alterations added). No.
What’s more, the Amended Complaint provides “an obvious alternative explanation” for
the trading restrictions: the increased collateral requirements imposed by the NSCC in response to
unprecedented market volatility. Id. at 567. Even before the allegedly contentious discussions
between Robinhood and Citadel Securities on January 27, 2021, in internal messages, Robinhood
executives discussed imposing margin requirements on the Relevant Securities. And on January
28, Robinhood executives sent internal messages expressing concern about the NSCC margin call
and liquidity problems. Further, Ally, Dough, Public.com, SoFi, Stash, Tastyworks, Webull,
E*Trade, and Interactive Brokers all imposed trading restrictions on January 28; and none of these
firms is alleged to have done so on behalf of Citadel Securities.
Altogether, Plaintiffs have not plausibly alleged an agreement between Robinhood and
Citadel Securities to restrict trading on January 28, 2021. For this reason, the Amended Complaint
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is due to be dismissed.
Unreasonable restraint on trade. Even if Plaintiffs plausibly alleged a conspiracy, they
fail to allege an “unreasonable restraint on competition[.]” State Oil Co. v. Khan, 522 U.S. 3, 10
(1997) (alteration added; citation omitted). “An unreasonable restraint of trade is one that harms
competition in general, rather than the plaintiff, or any other competitor.” Bitmain, 530 F. Supp.
3d at 1266 (citing Spanish Broad. Sys. of Fla., Inc., 376 F.3d at 1069). “In assessing whether an
agreement unreasonably restrains trade such that it violates [section 1], courts generally apply one
of three modes of antitrust analysis: (1) the per se rule, for obviously anticompetitive restraints;
(2) the quick look approach, for those restraints with some procompetitive justification; or (3) the
full ‘rule of reason,’ for restraints whose net impact on competition is particularly difficult to
determine.” In re Terazosin Hyrdochloride Antitrust Litig., 352 F. Supp. 2d 1279, 1310–11 (S.D.
Fla. 2005) (alteration added; citations omitted). “The presumption in cases brought under section
1 of the Sherman Act is that the rule-of-reason standard applies.” Seagood Trading Corp. v.
Jerrico, Inc., 924 F.2d 1555, 1567 (11th Cir. 1991) (citation omitted). 21
As explained, the Amended Complaint alleges a vertical relationship between Defendants
and thus a vertical restraint on trade. “Typically 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) (citation omitted). By contrast, “nearly every . . . vertical
21
Plaintiffs insist “it is premature for the Court to determine whether the per se or the rule of reason test
applies at the motion[-]to[-]dismiss stage.” (Resp. 13 (alterations added); see also id. 28–29). Not so.
Courts routinely determine which test applies at the motion-to-dismiss stage. See, e.g., Quality Auto
Painting Ctr. of Roselle, Inc., 917 F.3d at 1271–72; Jacobs v. Tempur-Pedic Int’l, Inc., 626 F.3d 1327,
1333–36 (11th Cir. 2010); In re Musical Instruments & Equipment Antitrust Litig., 798 F.3d 1186, 1191–
93 (9th Cir. 2015); Dickson v. Microsoft Corp., 309 F.3d 193, 205–206 (4th Cir. 2002); cf. PSKS, Inc. v.
Leegin Creative Leather Prods., Inc., 615 F.3d 412, 417–20 (5th Cir. 2010) (using the rule of reason test at
motion-to-dismiss stage); Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552
F.3d 430, 434–37 (6th Cir. 2008) (analyzing under both the per se and rule of reason tests at motion-to-
dismiss stage).
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restraint . . . should be assessed under the rule of reason.” Id. at 2284 (citations omitted). In half-
heartedly arguing the per se rule applies here, Plaintiffs ignore well-established Supreme Court
precedent establishing that “virtually all vertical agreements now receive a traditional rule-of-
reason analysis.” In re Ins. Brokerage Antitrust Litig., 618 F.3d at 318 (citing Leegin, 551 U.S.
877; other citation and footnote call number omitted). The Court is thus unconvinced the per se
rule applies.
Nor is the Court convinced it should evaluate the alleged agreement under the quick look
approach. The quick look approach “fills in the continuum between per se analysis and the full
rule of reason.” Cont’l Airlines, Inc. v. United Airlines, Inc., 277 F.3d 499, 510 (4th Cir. 2002)
(citation omitted). It only applies when “an observer with even a rudimentary understanding of
economics could conclude that the arrangements in question have an anticompetitive effect on
customers and markets.” Cal. Dental Ass’n v. F.T.C., 526 U.S. 756, 770 (1999) (citation omitted).
That is clearly not the case here.
First, while Plaintiffs may emphasize that Robinhood Securities and Citadel Securities
operate at the same level of distribution (see Resp. 30 n.26), the restraint alleged is vertical, for its
participants are Citadel Securities, the upstream market maker, and Robinhood, the downstream
broker-dealer (see Am. Compl. ¶¶ 305–06, 312). Vertical restraints do not become horizontal
restraints just because one of the participants operates several lines of business, one of which is
similar to that of the other participant. See Generac Corp., 172 F.3d at 977. As this is a vertical
restraint, the rule of reason analysis should apply, not the quick look. See In re Ins. Brokerage
Antitrust Litig., 618 F.3d at 318 (holding that the quick look analysis applies to horizontal
restraints, while vertical restraints are evaluated using the rule of reason); Hannah’s Boutique, Inc.
v. Surdej, 112 F. Supp. 3d 758, 770 (N.D. Ill. 2015) (declining to apply the quick look because a
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“reasonable fact finder could not infer a horizontal agreement from these facts” (citation omitted));
Acton v. Merle Norman Cosms., Inc., No. 88-cv-7462, 1995 WL 441852, at *8 (C.D. Cal. May 16,
1995) (“The ‘quick look’ approach . . . has not been judicially approved for analyzing the vertical
nonprice restraints raised in this case[.]” (alterations added; citation omitted)).
Second, the restraint here involves a complicated scheme where one participant allegedly
shut down purchases of the Restricted Securities to mitigate the other’s losses, all in the face of a
largely unforeseen short squeeze orchestrated by retail investors on the Internet. In other words,
this is an unusual antitrust case. Courts do not use the quick look approach in unusual cases.
Where “the circumstances of the restriction are somewhat complex,” Cal. Dental Ass’n, 526 U.S.
at 775 n.12, or the “features of the arrangement” are “unique[,]” Cal. ex rel. Harris, 651 F.3d 1118,
1137 (9th Cir. 2011) (alteration added), the quick look approach is inappropriate. Accordingly,
the rule of reason applies here.
Rule of reason. In applying the rule of reason, a court must ask whether the defendant
“has shown that the alleged restraint has had an anticompetitive effect on the market.” Procaps
S.A. v. Patheon, Inc., 845 F.3d 1072, 1084 (11th Cir. 2016). “[C]ourts usually cannot properly
apply the rule of reason without an accurate definition of the relevant market.” Am. Express Co.,
138 S. Ct. at 2285 (alteration added; citation and footnote call number omitted). “Without a
definition of the market there is no way to measure the defendant’s ability to lessen or destroy
competition.” Id. (alterations adopted; citations and quotation marks omitted). The Amended
Complaint therefore “must ‘identify the relevant market in which the harm occurs.’” Bitmain, 530
F. Supp. 3d at 1256 (citing Jacobs, 626 F.3d at 1336). It does not.
Plaintiffs define two relevant product markets: the upstream PFOF Market where Citadel
Securities competes with other market makers (see Am. Compl. ¶ 306), and the downstream No-
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Fee Brokerage Trading App Market where Robinhood competes with other brokerages (see id.
¶ 313). The downstream No-Fee Brokerage Trading App Market is the “consumer-facing relevant
product market[.]” (Id. ¶ 312 (alteration added). Competitors in the No-Fee Brokerage Trading
App Market, such as Robinhood Financial, “offer[] brokerage services to Retail Investors.” (Id.
¶ 68 (alteration added); see also id. ¶¶ 69, 305, 350–51).
According to Plaintiffs, Defendants harmed Plaintiffs “[b]y forcing the Retail Investors to
sell their Relevant Securities at lower prices than they otherwise would have sold[.]” (Id. ¶ 16
(alterations added)). More specifically, Plaintiffs allege that “Defendants artificially constricted
the price appreciation of the Relevant Securities and reduced the price of the Relevant Securities
that Retail Investors either sold or held below the prices that they would have otherwise obtained
in a competitive market free of collusion.” (Id.; see also id. ¶¶ 407). In other words, Plaintiffs
allege that Defendants caused antitrust injury by reducing the number of trades in the Relevant
Securities, thereby distorting the supply and demand for the stocks and leading to their rapid price
decline. (See id. ¶ 354).
There is a curious gap between Plaintiffs’ defined markets and the injury alleged, which is
detrimental to Plaintiffs’ antitrust standing. “Congress did not intend the antitrust laws to provide
a remedy in damages for all injuries that might conceivably be traced to an antitrust violation.”
Associated Gen. Contractors v. Cal. State Council of Carpenters, 459 U.S. 519, 534 (1983)
(quotation marks and citation omitted). Antitrust standing requires that Plaintiffs sustain “antitrust
injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows
from that which makes defendants’ acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,
429 U.S. 477, 489 (1977).
Antitrust law is supposed to prevent injury to competition. See id. at 488 (citation omitted).
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Competition is injured if a defendant’s conduct, like entering into a conspiracy to restraint trade,
generates anticompetitive effects in that relevant market. See Spanish Broad. Sys. of Fla., Inc.,
376 F.3d at 1071 (citation omitted). This can involve “adverse effects on the price, quality, or
output of the relevant good or service.” N.Y. Medscan LLC v. N.Y. Univ. Sch. of Med., 430 F.
Supp. 2d 140, 146 (S.D.N.Y. 2006).
Importantly, there should be a “direct[]” connection between Plaintiffs’ antitrust injury and
the “alleged restraint in the relevant market[.]” Balaklaw v. Lovell, 14 F.3d 793, 797 n.9 (2d Cir.
1994) (alterations added; citation omitted). Put another way, the harm should take place in the
relevant market the plaintiff has defined. See Am. Express Co., 138 S. Ct. at 2285 (citation
omitted). Here emerges the critical issue: in which market did Robinhood and Citadel Securities
effectuate an unlawful restraint, and did Plaintiffs’ injury flow from anticompetitive effects in that
market?
This alleged antitrust injury certainly did not stem from any anticompetitive effects in the
PFOF Market, where Citadel Securities competes to provide market maker services. Plaintiffs do
not describe any connection between Defendants’ alleged agreement and competition in the PFOF
market, much less that any anticompetitive effects there caused the prices of the Restricted
Securities to fall.
Nor did the alleged restraint impose any anticompetitive effects in the No-Fee Brokerage
Trading App Market, where Robinhood competes to provide retail brokerage services. Plaintiffs
cannot plausibly argue a restraint harmed competition there, for the agreement between Robinhood
and Citadel Securities, as alleged, did not concern price, quality, or output for any other broker-
dealer’s services. Plaintiffs allege Robinhood curtailed purchases of the Relevant Securities on its
own platform to appease Citadel Securities. That harmed Robinhood users.
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But to trigger the antitrust laws, a restraint must harm competition. See Brown Shoe Co. v.
United States, 370 U.S. 294, 320 (1962). Defendants’ alleged agreement left Ally, Dough,
Public.com, SoFi, Stash, Tastyworks, Webull, E*Trade, Interactive Brokers, and any other
brokerage free to adopt or eschew any policy they desired with respect to the Restricted Securities
— or anything else, for that matter. Further, it imposed no further restrictions on Retail Investors’
ability to trade with any of Robinhood’s competitors. (See, e.g., Am. Compl. ¶ 30). Plaintiffs thus
may not hedge their antitrust claim on anticompetitive effects in the No-Fee Brokerage Trading
App Market.
The alleged anticompetitive injury occurred in entirely separate markets: the markets for
the Relevant Securities. The products in question are the Relevant Securities, the prices of which
were negatively affected by the trading restrictions. Plaintiffs, however, do not center their market
definition around the sales of the Relevant Securities. This is not surprising, as there is an
extensive body of persuasive case law holding “that transactions in a particular stock do not fall
within [section] 1” of the Sherman Act. Kalmanovitz v. G. Heileman Brewing Co., Inc., 769 F.2d
152, 156 (3rd Cir. 1985) (alteration added; citing Bucher v. Shumway, 452 F. Supp. 1288 (S.D.N.Y.
1978), aff’d, 622 F.2d 572 (2d Cir. 1980), cert. denied, 449 U.S. 841 (1980); Schaefer v. First
Nat’l Bank, 326 F. Supp. 1186 (N.D. Ill. 1970), appeal dismissed, 465 F.2d 234 (7th Cir. 1972)).22
22
The Supreme Court has stated that “the Sherman Act applies only to a ‘restraint upon commercial
competition in the marketing of goods or services.’” Kalmanovitz, 769 F.2d at 156 (quoting Apex Hosiery
Co. v. Leader, 310 U.S. 469, 495 (1940)). And lower courts have “observed that the purchase or sale of
stock by investors does not fit easily within the definition of goods or services as used by the antitrust laws.”
Id. (footnote call number omitted; citing Bucher, 452 F. Supp. 1288). The court in Kalmanovitz held the
sale of stock of a single company within the context of a takeover battle did not fall within the definition of
section 1 of the Sherman Act. See id. In its reasoning, the Kalmanovitz court relied on two other lower
court opinions: in Bucher, the court held an agreement to effectuate a tender offer was not an unreasonable
restraint of trade even though it fixed the price of the company’s shares to the shareholders’ detriment, 452
F. Supp. at 1289; and in Schaefer, the court concluded the common law interpretation of “restraint of trade”
never encompassed stock market manipulation and accordingly dismissed the plaintiffs’ Sherman Act suit,
326 F. Supp. at 1191–92. See Kalmanovitz, 769 F.2d at 156. While the Kalmanovitz court noted “a number
of cases in which the antitrust laws have been applied to the securities industry[,]” id. at 157 (alteration
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Plaintiffs continue to reject a market definition based on the Relevant Securities in their Response
but do so in vain. (See Resp. 38).
That Plaintiffs do not define the relevant market is fatal to their rule of reason analysis.
“Regardless of whether the plaintiff alleges actual or potential harm to competition . . . , he must
identify the relevant market in which the harm occurs.” Jacobs, 626 F.3d at 1336 (alteration added;
citing F.T.C. v. Ind. Fed’n of Dentists, 476 U.S. 447, 460–61 (1986)). This remains true even
where, unlike here, a plaintiff “rel[ies] exclusively on direct evidence” of “anticompetitive
effects[.]” Am. Express Co., 138 S. Ct. at 2284–85 (alterations added; footnote call number
omitted). Unfortunately, the Amended Complaint’s failure to plausibly do so leaves Plaintiffs with
little more than a garbled market theory that ignores a crucial fact: the alleged harm to competition
occurred in an entirely separate market from the markets Plaintiffs define. And Plaintiffs do not
even attempt to define that third, relevant market. That fatal flaw renders Plaintiffs’ theory of
harm unworkable.
Accordingly, the Amended Complaint is due to be dismissed.
V. CONCLUSION
The Amended Complaint fails for two reasons. One, Plaintiffs fail to plausibly allege the
existence of an agreement to restrict trade between Defendants. Sure, Citadel Securities would
have economically benefited given its short positions. But Robinhood’s supposed incentive
depends on the assumptions that it was motivated by its forthcoming IPO, that Citadel Securities
threatened to cut off its relationship with Robinhood in exchange for the trading restrictions, and
that Robinhood was unwilling to find another market maker. Plaintiffs do not plausibly allege that
Robinhood had such a motivation here, and even if they had done so, economic incentive is not in
added; collecting cases), Kalmanovitz, Bucher, and Schaefer caution against the creation of a market
defined by the sale of certain stocks to investors.
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itself enough for the Court to infer that Defendants actually had an unlawful agreement to restrain
trade.
The only additional evidence plausibly alleged by Plaintiffs consists of vague and
ambiguous emails between two entities in an otherwise lawful business relationship that, while
suspicious given their timing, do little to bolster the strength of Plaintiffs’ allegations. And
juxtaposed with the compelling alternative explanation for the trading restrictions — the increased
collateral requirements imposed by the NSCC in response to historic market
volatility — Plaintiffs’ theory is speculative and implausible.
Two, even if Plaintiffs did plausibly allege an agreement, they fail to plausibly allege an
unreasonable restraint of trade. Plaintiffs allege a vertical restraint of trade, which must be
evaluated under a rule of reason analysis and thus requires an accurate market
definition — something they do not provide. Indeed, Plaintiffs ignore the reality of their suit: they
allege that Defendants caused harm to the market for Relevant Securities, but they neglect to define
that market. And because they do not define the market for Relevant Securities, their claim fails.
Defendants request that the Court dismiss the Amended Complaint with prejudice. (See
Mot. 42–43). As the Court stated in the November 17 Order dismissing the CCAC, the Amended
Complaint would be Plaintiffs’ final opportunity. (See Nov. 17, 2021 Order 50). Plaintiffs do not
insist otherwise, and the Court sees no reason to give Plaintiffs a fourth attempt to plead.
For the foregoing reasons, it is
ORDERED AND ADJUDGED that Defendants’ Motion to Dismiss the Amended
Antitrust Tranche Complaint [ECF No. 456] is GRANTED. The Amended Consolidated Class
Action Complaint [ECF No. 451] is DISMISSED.
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DONE AND ORDERED in Miami, Florida, this 12th day of May, 2022.
________________________________________
CECILIA M. ALTONAGA
CHIEF UNITED STATES DISTRICT JUDGE
cc: counsel of record; Pro Se Plaintiffs
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