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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 21-02989-MDL-ALTONAGA/Damian
In re:
JANUARY 2021 SHORT SQUEEZE
TRADING LITIGATION
_________________________________/
This Document Relates to the Actions in the Federal Securities Tranche
ORDER
THIS CAUSE came before the Court on Maurice Scarborough and Scott Schiller’s Motion
for Appointment as Lead Plaintiffs for the Options Class and Approval of their Selection of Lead
Counsel (“Motion for Appointment”) [ECF No. 572], filed on June 9, 2023; and Plaintiffs’ Motion
to Consolidate and Discontinue the Noticed Lead Plaintiff Process as Moot (“Motion to
Consolidate”) [ECF No. 565], filed on May 26, 2023. Maurice Scarborough and Scott Schiller
filed a Response to Plaintiffs’ Motion to Consolidate [ECF No. 571], to which Plaintiffs filed a
Reply [ECF No. 577]. No response to the Motion for Appointment was separately filed. The
Court has carefully considered the parties’ written submissions, the record, and applicable law.
For the following reasons, the Motion to Consolidate is granted, and the Motion for Appointment
is denied as moot.
I. BACKGROUND
This litigation involves allegations against Defendants, Robinhood Financial LLC,
Robinhood Securities LLC, and Robinhood Markets, Inc. (collectively, “Robinhood”) for
violations of the Securities Exchange Act of 1934. Robinhood is a brokerage firm that offers self-
directed stock trading services to customers via its website and mobile application. (See Amended
Consolidated Class Action Complaint (“ACCAC”) [ECF No. 527] ¶ 23). On January 28, 2021,
Robinhood restricted trading of certain heavily traded securities on its platform in response to
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increased share prices and high collateral demands. (See generally id.). This caused the value of
the affected securities to plummet, generating losses for retail investors. (See generally id.).
Within a few months of the relevant events, Plaintiffs brought ten putative class actions
and two individual actions against Robinhood asserting violations of the Securities Exchange Act
of 1934.1 All were consolidated into this multi-district litigation (“MDL”) and administratively
grouped into a “tranche” — the Federal Securities Tranche — that included all actions under
federal securities laws. (May 18, 2021 Order [ECF No. 310] 1–2). Scarborough and Schiller were
named Plaintiffs in one such action where they alleged they owned option contracts for affected
securities, suffered losses as a result of Robinhood blocking trading on these derivatives, and
brought claims on behalf of options traders under section 10(b) of the Securities Exchange Act of
1934. See Gossett v. Robinhood Fin., LLC, No. 21-cv-00837, First Corrected Amended Complaint
[ECF No. 24] ¶¶ 21, 79–84, filed February 5, 2021 (C.D. Cal. 2021) (“Gossett FAC”) (asserting
claims on behalf of “[a]ll Robinhood clients and/or users within the United States who held
positions and/or were unable to execute any trade(s) of the Securities or the Derivatives on or after
January 28, 2021[.]” (alterations added)).
1 These actions are: Daniels v. Robinhood Financial, LLC, et al., No. 21-cv-21261 (filed Jan. 28, 2021);
Days v. Robinhood Markets, Inc., et al., No. 21-cv-21310 (filed Jan. 28, 2021); Gatz v. Robinhood
Financial, LLC, No. 21-cv-21296 (filed Jan. 28, 2021) (individual action); Diamond v. Robinhood
Financial, LLC, et al., No. 21-cv-21263 (filed Jan. 29, 2021); Lagmanson et al. v. Robinhood Markets, Inc.,
et al., No. 21-cv-21298 (filed Jan. 29, 2021); Gossett et al. v. Robinhood Financial, LLC, et al., No. 21-cv-
21293 (filed Jan. 29, 2021); Muncy v. Robinhood Securities, LLC, et al., No. 21-cv-21307 (filed Feb. 2,
2021); Krumenacker v. Robinhood Financial LLC, et al., No. 21-cv-21343 (filed Feb. 2, 2021); Kadin v.
Robinhood Financial LLC, et al., No. 21-cv-21511 (filed Mar. 25, 2021); Quat et al. v. Robinhood
Financial, LLC, et al., No. 21-cv-21404 (filed Apr. 12, 2021); Best et al. v. Robinhood Financial, LLC, et
al., No. 21-cv-21534 (filed Apr. 21, 2021); and Carrasco v. Robinhood Financial LLC, et al., No. 21-cv-
22702 (filed May 25, 2021) (individual action).
The Diamond and Kadin actions have since been voluntarily dismissed. (See Apr. 20, 2021 Order [ECF
No. 214]; Apr. 28, 2021 Order [ECF No. 272]). Another suit asserting federal securities claims also
consolidated into this MDL does not state any claims against Robinhood. See Eisen v. Apex Clearing Corp,
et al., No. 21-cv-21665 (filed Apr. 30, 2021).
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Of the consolidated actions, the Plaintiff in Muncy was the first to publish notice to the
class under the Private Securities Litigation Reform Act of 1995 (“PSLRA”). (See May 17, 2021
Order [ECF No. 307] 3).2 The Court found the initial notice insufficient under the PSLRA and
caused the Muncy Plaintiff to re-publish notice. (See generally id.). Notice was re-published on
May 28, 2021. (See Mot. to Appoint Lead Plaintiff Blue Laine-Beveridge and Approve Selection
of Lead Counsel [ECF No. 366] (“Motion to Appoint BLB”), Ex. 2, PSLRA Notice (“Muncy
Notice”) [ECF No. 366-2]).
The re-published Muncy Notice announced class action lawsuits “filed on behalf of those
who were unable to execute trades, sold, and/or purchased certain securities . . . on or around
January 28, 2021.” (Id. 2 (alteration added)).3 The Muncy Notice referred to “Affected Securities”
throughout; listed the relevant securities actions consolidated into the MDL (including the Gossett
action); and set a July 27, 2021 deadline to move to be appointed as lead plaintiff. (Id.).
Only two motions to be appointed lead plaintiff(s) — one on behalf of Abe Kurdi and
Teodoro Russell Pueyrrdon and another on behalf of Blue Laine-Beveridge — were filed in
response to the Muncy Notice. (See Oct. 14, 2021 Order [ECF No. 420] 1). The Court appointed
Blue Laine-Beveridge as Lead Plaintiff in the Federal Securities Tranche. (See generally id.).
Lead Plaintiff then selected The Rosen Law Firm as Lead Counsel in accordance with the PSLRA,
which vests authority in the lead plaintiff to choose and retain lead counsel to represent the
2 The Court uses the pagination generated by the electronic CM/ECF database, which appears in the headers
of all court filings.
3 The listed affected securities included American Airlines Group Inc. (NASDAQ: AAL); AMC
Entertainment Holdings Inc. (NYSE: AMC); BlackBerry Limited (NYSE: BB), Bed Bath & Beyond Inc.
(NASDAQ: BBBY); GameStop Corp. (NYSE: GME); Express (NYSE: EXPR); Koss Corporation
(NASDAQ: KOSS); Naked Brand Group (NASDAQ: NAKD); Nokia Corporation (NYSE: NOK); Sundial
Growers, Inc. (NASDAQ: SNDL); Tootsie Roll Industries (NYSE: TR); and Trivago NV (NASDAQ:
TRVG). (See Muncy Notice 2).
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proposed class. (See id. 11–12 (discussing 15 U.S.C. § 78u-4(3)(B)(v))). The Court approved
Lead Plaintiff’s selection of Lead Counsel and tasked Lead Counsel with coordinating all pretrial
proceedings in the Tranche. (See id. 11–14). Thereafter, Lead Plaintiff and additional named
Plaintiffs filed a Consolidated Class Action Complaint (“CCAC”) [ECF No. 446] and the ACCAC,
the operative pleading, which brings claims under sections 9(a) and 10(b) of the Securities
Exchange Act of 1934 but does not assert claims on behalf of options traders. (See generally
ACCAC; see Mot. Consolidate 5, 8, 12 n.10 (“Lead Plaintiff and Lead Counsel determined not to
include class-wide claims on behalf of options traders.”)).4
On April 6, 2023, Scarborough and Schiller filed a new class action against Robinhood on
behalf of persons or entities who held call options to purchase common stock in certain securities.
See Scarborough v. Robinhood Fin., LLC, No. 2:23-cv-02622, Complaint [ECF No. 1] filed Apr.
6, 2023 (C.D. Cal. 2023) (“Scarborough Complaint”).5 Similar to the ACCAC, the Scarborough
Complaint alleges Robinhood’s trading restrictions starting on January 28, 2021 caused class
members damages and violated sections 9(a)(2) and 10(b) of the Securities Exchange Act of 1934.
See generally id.
Plaintiffs in the Scarborough action issued a PSLRA notice on April 10, 2023. (See Mot.
Appointment, Ex. 3, PSLRA Notice [ECF No. 572-3] (“Scarborough Notice”)). The Scarborough
Notice is directed at investors who held call options in the relevant securities as of market close
on January 27, 2021; and “sold such options or such options expired[] during the period January
4 Scarborough and Schiller are not named Plaintiffs in the consolidated class action. (See ACCAC ¶¶ 21–
29).
5 The securities included in the Scarborough Complaint are the stocks and derivatives of American Airlines
Group Inc. (NASDAQ: AAL), AMC Entertainment Holdings Inc. (NYSE: AMC); BlackBerry Limited
(NYSE: BB); Bed Bath & Beyond Inc. (NASDAQ: BBBY); GameStop Corp. (NYSE: GME); and Nokia
Corporation (NYSE: NOK). See Scarborough Compl. ¶ 1.
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28, 2021 through and including February 19, 2021 . . . , and thereby suffered a loss.” (Id. 2
(alterations added)).
On April 25, 2023, the Scarborough action was transferred to this District for coordinated
or consolidated MDL proceedings (see generally Conditional Transfer Order [ECF No. 554]), and
the Court later entered an Order consolidating the action into the MDL “for all pretrial purposes[,]”
Scarborough v. Robinhood Fin., LLC, No. 1:23-cv-21572, Order of Consolidation and
Administrative Close-Out [ECF No. 16] filed on Apr. 27, 2023 (S.D. Fla. 2023) (alteration added).
Thereafter, the parties filed the instant Motions.
Following briefing on the Motions, the Court requested a joint report on the status of
consolidation in the Federal Securities Tranche. (See Aug. 9, 2023 Order [ECF No. 589]). The
parties submitted a Joint Status Report [ECF No. 601] on August 23, 2023 indicating they agree
with the Court’s characterization of the current status of consolidation in the Federal Securities
Tranche, discussed below.
II. LEGAL STANDARDS
The PSLRA provides that
[i]f more than one action on behalf of a class asserting substantially the same claim
or claims arising under this chapter has been filed, and any party has sought to
consolidate those actions for pretrial purposes or for trial, the court shall not make
the [lead plaintiff] determination . . . until after the decision on the motion to
consolidate is rendered.
15 U.S.C. § 78u-4(a)(3)(B)(ii) (alterations added).
Under Federal Rule of Civil Procedure 42(a), a court may consolidate actions that “involve
a common question of law or fact.” Fed. R. Civ. P. 42(a). The decision to consolidate is committed
to the sound discretion of the district court. See Hendrix v. Raybestos-Manhattan, Inc., 776 F.2d
1492, 1495 (11th Cir. 1995) (citations omitted). In exercising this discretion, “district courts
should consider whether doing so could lead to prejudice or confusion.” Ramsay v. Broward Cty.
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Sheriff’s Office, 303 F. App’x 761, 765–66 (11th Cir. 2008) (citing Hendrix, 776 F.2d at 1495).
III. DISCUSSION
Scarborough and Schiller seek to be appointed lead plaintiffs “on behalf of a class
consisting of persons or entities who held call options [] to purchase common stock” in certain
securities. (Mot. Appointment 4 (alteration added)). Lead Plaintiff Laine-Beveridge opposes the
new class, arguing the Scarborough action should be consolidated into the existing class asserting
claims against Robinhood in the Federal Securities Tranche. (See generally Mot. Consolidate).
According to Scarborough and Schiller, consolidation is inappropriate because Lead Plaintiff has
no authority over options claims, and the Plaintiffs who held options would be prejudiced by
consolidation because Lead Plaintiff has failed to assert claims on behalf of options traders. (See
generally Resp.).
In accordance with the PSLRA, the Court first addresses consolidation before rejecting the
Scarborough Plaintiffs’ request to establish a separate class for options traders.
A. Current Status of Consolidation of Actions in the Federal Securities Tranche
As explained in the Court’s August 9, 2023 Order, the status of consolidation of the actions
in the Federal Securities Tranche is complex. Before analyzing the parties’ arguments, the Court
provides a brief summary.
All the cases the Judicial Panel on Multidistrict Litigation transferred, including the
Scarborough action, have been consolidated into the MDL for pretrial purposes. (See Oct. 14,
2021 Order 2); Scarborough v. Robinhood Fin., LLC, No. 1:23-cv-21572, Order of Consolidation
and Administrative Close-Out [ECF No. 16] filed on Apr. 27, 2023 (S.D. Fla. 2023) (“The above-
styled case is consolidated in MDL proceeding 21-2989-MDL for all pretrial purposes[.]”
(alteration added)). In addition, the May 18, 2021 Order established a separate tranche for federal
securities claims. (See id. 1–2). Therefore, all actions asserting claims under federal securities
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laws, including the Scarborough action, see generally Scarborough Compl., necessarily are
included in any pretrial proceedings in the Federal Securities Tranche.
The Court’s “tranche” structure was initially an administrative device to organize the
different categories of actions that did not, by itself, merge the actions grouped in a tranche. See
Gelboim v. Bank of Am. Corp., 574 U.S. 405, 413 (2015) (“Cases consolidated for MDL pretrial
proceedings ordinarily retain their separate identities[.]” (alteration added; footnote call number
omitted)); cf. In re Guidant Corp. Implantable Defibrillators Prod. Liab. Litig., 496 F.3d 863, 867
(8th Cir. 2007) (“MDL courts must be given greater discretion to organize, coordinate and
adjudicate [their] proceedings[.]” (alterations added)). But once Lead Plaintiff filed consolidated
complaints (see CCAC; ACCAC), these master complaints “supersede[d] prior individual
pleadings” and “merg[ed] the discrete actions [in the Federal Securities Tranche] for the duration
of the MDL pretrial proceedings[,]” Gelboim, 574 U.S. at 413 n.3 (alterations added; citing In re
Refrigerant Compressors Antitrust Litig., 731 F.3d 586, 590–92 (6th Cir. 2013)).
The Scarborough action was filed and transferred into this MDL after the filing of the
ACCAC. Although the Court consolidated the action into the MDL, and the action automatically
corresponds to pretrial proceedings in the Federal Securities Tranche, the Court has not clearly
addressed whether a later-filed action like Scarborough should also be superseded by the ACCAC.
It does so now.
B. Consolidation of the Scarborough Action with the ACCAC is Appropriate.
Lead Plaintiff seeks to consolidate the Scarborough action, which he considers to be
“nearly a carbon copy of the operative complaint . . . into the existing action under the auspices of
the existing Lead Plaintiff and Lead Counsel[.]” (Mot. Consolidate 14 (alteration added)). Both
the Scarborough Complaint and the ACCAC bring claims under sections 9(a) and 10(b) of the
Securities Exchange Act of 1934 that involve the same Defendants, the same events, and the same
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course of conduct. Compare Scarborough Compl. with (ACCAC). The two complaints plainly
“involve a common question of law or fact[,]” Fed. R. Civ. P. 42(a) (alteration added), and assert
“substantially the same claim or claims arising under” federal securities laws, 15 U.S.C. § 78u-
4(a)(3)(B)(ii).6
Nonetheless, as noted, the Scarborough Complaint asserts claims on behalf of options
traders, whereas the ACCAC pursues claims only on behalf of stockholders. The Scarborough
Complaint also includes claims related to options on American Airlines (AAL) stock, a security
omitted from the ACCAC, and proposes a longer class period. Compare Scarborough Compl. ¶ 1
(defining the class period from January 28, 2021 to February 19, 2021) with (ACCAC ¶ 1 (defining
the class period from January 27, 2021 to February 4, 2021)). Because Lead Plaintiff has not
asserted, and does not plan to assert, claims on behalf of options traders (see Mot. Consolidate 13
(stating Lead Plaintiff “considered and rejected the inclusion of options traders in the instant
consolidated action”)), the Court must consider whether these differences make consolidation
unduly prejudicial such that the Court should allow a parallel class on behalf of options traders to
proceed within the Federal Securities Tranche.
The Court finds that consolidation is appropriate because Lead Plaintiff’s appointment
included authority over options claims; the differences between the two classes do not merit
severance at this juncture; and any prejudice is mitigated by Plaintiffs’ ability to file individual
claims.
6 Lead Plaintiff cites to the PSLRA in support of the request for consolidation. (See Mot. to Consolidate
14). While the PSLRA contemplates consolidation, the Court’s authority to consolidate is governed by
Rule 42.
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a. Lead Plaintiff Has Authority Over Options Claims.
Whether a putative options class should proceed separately in part depends on whether
options claims properly fell within the scope of Lead Plaintiff’s authority to begin with.
The PSLRA was enacted to combat the race-to-the-courthouse phenomenon created by
lawyer-driven securities litigation. See 7 William B. Rubenstein, Newberg and Rubenstein on
Class Actions § 22:23 (6th ed.). To that end, the PSLRA’s provisions regarding notice and lead
plaintiff appointment are geared toward selecting the most adequate plaintiff from a broad field of
potential candidates to lead the class. See 15 U.S.C. § 78u-4(3) (requiring notice in a “widely
circulated” publication and setting standard for appointing the “most adequate plaintiff”). Once
appointed, “a lead plaintiff is empowered to control the management of the litigation as a whole,
and it is within the lead plaintiff’s authority to decide what claims to assert on behalf of the class.”
In re Bank of Am. Corp. Sec., Derivative & Emp. Ret. Income Sec. Act (ERISA) Litig., No. 09-
MDL-2058, 2010 WL 1438980, at *2 (S.D.N.Y. Apr. 9, 2010) (“BoA I”) (citing Hevesi v.
Citigroup Inc., 366 F.3d 70, 82 n.13 (2d Cir. 2004); other citation omitted); see also In re
Facebook, Inc., IPO Sec. & Derivative Litig., No. 12-cv-4081, 2013 WL 4399215, at *3 (S.D.N.Y.
Aug. 13, 2013) (same).
Lead Plaintiff asserts he has “sole discretion to determine the boundaries of the class[,]”
including authority to decide not to bring claims on behalf of options traders. (Mot. 5, 11–13
(alteration added); see generally Reply). While Scarborough and Schiller do not dispute that lead
plaintiffs under the PSLRA generally enjoy a broad mandate, they argue Lead Plaintiff’s authority
here specifically excludes options claims because (1) the Muncy Notice provided insufficient
notice to options traders; (2) the Court granted Lead Plaintiff authority only over stock-related
claims; and (3) Lead Plaintiff and named Plaintiffs lack standing to assert options claims. (Resp.
15; see id. 9–10). Scarborough and Schiller’s arguments fail to persuade.
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i. The Muncy Notice Included Options.
Scarborough and Schiller first argue that Lead Plaintiff lacks authority over options claims
because the Muncy Notice did not include options in the definition of the class, and therefore,
“[a]ffected [o]ptions holders were not notified of their rights to seek to become Lead Plaintiff[.]”
(Resp. 10 (alterations added)). According to the Scarborough Plaintiffs, this flaw in the Muncy
Notice necessitated the issuance of the Scarborough Notice. (See Mot. Appointment 5 (“No prior
notice published in accordance with the PSLRA ever advised members of this [o]ptions [c]lass
that class claims had been asserted on their behalf or invited them to move to be appointed as lead
plaintiff.” (alterations added))). Lead Plaintiff contends “[t]his argument borders on frivolous[,]”
and that even if the Muncy Notice did not include the word “options,” it adequately provided
interested options class members enough information regarding the claims and their ability to
move to be appointed lead plaintiff. (Reply 7–9 (alterations added)).
The Court need not consider the Scarborough Notice if the Muncy Notice provided
adequate notice to options traders. (See May 17, 2021 Order 6 n.5 (finding that a later-filed notice
in a case asserting substantially similar claims had “no effect on the propriety of the Muncy notice
or the applicable time period for filing lead plaintiff motions.”)). The PSLRA provides that “[i]f
more than one action on behalf of a class asserting substantially the same claim or claims arising
under this chapter is filed, only the plaintiff or plaintiffs in the first filed action shall be required
to cause notice to be published[.]” 15 U.S.C. § 78u-4(a)(3)(A)(ii) (alterations added).
Scarborough and Schiller do not argue the Scarborough action is so dissimilar to the other federal
securities actions that it is properly considered the first-filed action for purposes of issuing a
PSLRA notice. (See generally Mot. Appointment; Resp.).
Therefore, the issue is whether the Muncy Notice was indeed so flawed that re-publication
of a PSLRA notice with respect to options traders was necessary. See In re Cavanaugh, 306 F.3d
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726, 738 (9th Cir. 2002) (“The notice requirement [is intended to] broaden the number of plaintiffs
who get involved and seek lead plaintiff status by assuring potential plaintiffs that they still have
a chance to take control of the case, even though they have lost the ‘race to the courthouse.’”
(alteration added)); (see also May 17, 2021 Order 6 (“[A]bsent an adequate notice, the Court
cannot confidently say class members had sufficient knowledge or the opportunity to move for
appointment as lead plaintiff.” (alteration added; footnote call number and citation omitted))). The
Muncy Notice was not so flawed; for the reasons explained below, the Notice adequately alerted
options traders to the pendency of federal securities claims asserted on their behalf and of the
possibility to move for appointment as lead plaintiff.
Under the PSLRA, a notice must advise members of the purported plaintiff class “of the
pendency of the action, the claims asserted therein, and the purported class period[.]” 15 U.S.C.
§ 78u-4(a)(3)(A)(i) (alteration added). It must also advise potential class members of the time in
which to “move the court to serve as lead plaintiff of the purported class.” Id. The purpose of the
notice requirement is to provide enough information to allow interested class members to directly
“contact the [c]ourt and readily obtain a copy of the complaint . . . and/or file a motion to be
appointed as lead [plaintiff] in that case.” Del. Cnty. Emps. Ret. Sys. v. Cabot Oil & Gas Corp.,
No. 3:20-cv-1815, 2020 WL 6682531, at *2 (M.D. Pa. Nov. 12, 2020) (alterations added; citations
and quotation marks omitted).
The Muncy Notice referred to “those who were unable to execute trades, sold, and/or
purchased certain securities including” twelve “‘Affected Securities’[] on the Robinhood Trading
Platform on or around January 28, 2021.” (Muncy Notice 2 (alteration added)).7 It listed the
actions consolidated into the Federal Securities Tranche of the MDL, including the Gossett action,
7 The Affected Securities listed in the Muncy Notice included all the securities at issue in the Scarborough
Complaint. Compare Scarborough Compl. ¶ 1 with (Muncy Notice 2).
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and explained that “[t]hese actions assert largely similar allegations but are brought on behalf of
different classes and include different securities.” (Id. (alteration and emphases added)). It then
“urge[d] investors to review the different complaints and classes.” (Id. (alteration added)). Finally,
the Notice stated that any person wishing to serve as lead plaintiff should move the Court to do so
by July 27, 2021. (See id. 3). This was clearly sufficient to comply with the PSLRA and put
options traders on notice.
Scarborough and Schiller nevertheless assert the Muncy Notice was limited to “Affected
Stocks.” (Resp. 10 n.5; see also id. 9–10). But while the Muncy Notice did not include the word
“options,” it also did not include the word “stocks” — instead, it referred to “Affected Securities”
generally. (See generally Muncy Notice). Options are plainly a type of security. See 15 U.S.C. §
78c(a)(10) (defining “security” under the Securities Exchange Act of 1934 to include “any put,
call, straddle, option, or privilege on any security, certificate of deposit, or group or index of
securities (including any interest therein or based on the value thereof)”).
Further, the Muncy Notice directly referenced the Gossett action, which asserted options
claims. Scarborough and Schiller insist that the Notice needed to refer specifically to options
traders and not just include them by reference to an underlying action. (See Resp. 10 n.5 (citing
Ravens v. Iftikar, 174 F.R.D. 651, 656 (N.D. Cal. 1997))). But the authority they cite stands for
the proposition that where the notice is already insufficient, it cannot be cured by referencing
underlying pleadings “so distended and prolix that an investor who obtained copies of the
pleadings would not be able to divine the legal and factual basis of plaintiffs’ claim.” Ravens, 174
F.R.D. at 656 (citations omitted). Here, where Scarborough and Schiller themselves brought the
underlying Gossett action, any argument that the Muncy Notice failed to alert them of the action’s
nature does indeed seem frivolous.
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In sum, the Muncy Notice adequately informed potential members of a putative options
class of the claims against Robinhood and their ability to move to be appointed lead plaintiff.
Neither the Scarborough Plaintiffs, nor any other plaintiffs specifically representing options
traders, moved to be appointed lead plaintiffs in response to the Muncy Notice.
ii. The Court Appointed Lead Plaintiff to Manage the Federal
Securities Tranche as a Whole.
Scarborough and Schiller next argue that options traders are not bound by the decisions of
Lead Plaintiff because his appointment was circumscribed to claims concerning affected stocks,
not options. (See Resp. 10–13). They contend the Court’s appointment is limited by the content
of Laine-Beveridge’s motion to be appointed lead plaintiff, which Scarborough and Schiller argue
sought authority only over a “Stock Class.” (Id. 10; see generally Mot. Appoint BLB).
Scarborough and Schiller’s argument is unpersuasive. As Lead Plaintiff notes, he “moved
to be appointed lead plaintiff for the entire [F]ederal [S]ecurities [T]ranche — not just a subset
thereof[.]” (Reply 10 (alterations added)). The Motion to Appoint BLB made no mention of a
“stock class” and sought Laine-Beveridge’s appointment “as Lead Plaintiff on behalf of persons
or entities who sold any of the Affected Securities[.]” (Mot. Appoint BLB 4 (alteration added)).
And the Court unquestionably appointed Laine-Beveridge to lead all federal securities claims
asserted against Robinhood. (See generally October 14, 2021 Order).
The Court acknowledges it focused on stocks when analyzing the financial interests of
competing lead plaintiff candidates in its October 14, 2021 Order, but that was because only stock
traders moved to be appointed. (See id. 2, 4–5). In fact, the Order corresponds to all claims against
Robinhood in the Federal Securities Tranche, as is reflected in the header of the Order (see id. 1
(“This Document Relates to the Federal Securities Actions”)); the Court’s summary of the case
(see id. (“This litigation involves allegations against . . . Robinhood” (alteration added; internal
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quotation marks omitted))); the Court’s listing of the underlying actions, including the Gossett
action asserting options claims (see id. 2 n.4);8 and the reference to all the “federal securities
actions” against Robinhood as constituting one class (see id. 3 (“Of the federal securities actions,
the plaintiff in Muncy was the first to publish notice to the class[.]” (alteration added))). Therefore,
when the Court appointed Laine-Beveridge “to serve as Lead Plaintiff in this action,” it gave him
authority over all the claims against Robinhood in the Federal Securities Tranche. (Id. 12
(alteration added)); see also Cave v. Singletary, 84 F.3d 1350, 1354 (11th Cir. 1996) (“[A] district
court’s interpretation of its own [prior] order is properly accorded deference . . . when its
interpretation is reasonable.” (alterations added; citations omitted)).
If any doubt remains, the scope of Lead Counsel’s appointment further confirms Lead
Plaintiff was appointed to lead claims against Robinhood in the Federal Securities Tranche as a
whole. An MDL court may designate lead or liaison counsel to facilitate the administration of the
cases in an MDL independent from any lead plaintiff structure. See Manual for Complex Litigation
4d §§ 10.221, 22.62 (2004). The Court did so in this MDL — after extensive interviews, the Court
selected lead and liaison counsel to administer the Robinhood, Antitrust, and Other Broker
tranches. (See generally May 18, 2021 Order). This process differs from appointment of lead
counsel under the PSLRA, which, subject to a court’s approval, vests authority in the lead plaintiff
to select and retain lead counsel to represent the proposed class. See 15 U.S.C. § 78u-4(3)(B)(v).
8 The Court inadvertently overlooked listing the Gatz action, which asserts federal securities claims against
Robinhood on an individual basis. See Gatz v. Robinhood Fin., LLC, No. 21-cv-21296, Notice of Removal,
Ex. 1, Compl. [ECF No. 1-1] filed Jan. 28, 2021 (C.D. Cal 2021). As for the Eisen action, the Court made
reference to it but noted that it did “not state any claims against Robinhood.” (Oct. 14, 2021 Order 2 n.4).
Because the Order analyzed only claims against Robinhood, Lead Plaintiff’s appointment did not extend to
the claims in the Eisen action. (See generally id.). In any event, the Joint Status Report states “[c]ounsel
for all parties in Eisen informed Lead Plaintiff’s Counsel that the parties to that case anticipate a voluntary
dismissal of the action.” (Joint Status Report 4 (alteration added; citation omitted)).
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It follows that when a court approves a lead plaintiff’s choice of counsel, the lead counsel’s
authority would reflect the authority granted to the lead plaintiff.
Here, the Court explicitly approved The Rosen Law Firm as Lead Plaintiff’s choice of
counsel under the PSLRA. (See Oct. 14, 2023 Order 11–12). Further, the Court tasked Lead
Counsel with administration of the Federal Securities Tranche as a whole, including responsibility
for, among other obligations, preparing and presenting Plaintiffs’ position “on all matters arising
during pretrial proceedings[,]” coordinating settlement discussions, briefing and arguing motions,
and “performing such other duties as may be incidental to the proper coordination of Plaintiffs’
pretrial activities in the Federal Securities Tranche.” (Id. 12–14 (alteration added)). This broad
scope reflects Lead Plaintiff’s appointment over all claims against Robinhood in the Federal
Securities Tranche.
Consequently, Lead Plaintiff’s appointment over the Federal Securities Tranche included
broad authority over options claims. This is ultimately consistent with the purpose of the PSLRA,
which seeks to install the most adequate plaintiff to “control the management of the litigation as a
whole[.]” BoA I, 2010 WL 1438980, at *2 (alteration added; citations omitted).
iii. Scarborough and Schiller’s Standing Arguments Fail.
Regardless of the scope of Lead Plaintiff’s appointment, Scarborough and Schiller contend
Lead Plaintiff cannot have authority over options claims because he and the named Plaintiffs lack
standing to assert such claims. (See Resp. 13–14). This argument confuses the issues.
The record does not reflect that Lead Plaintiff traded options. (See ACCAC ¶ 21; see
generally Mot. to Appoint BLB, Ex. 4, Loss Chart [ECF No. 366-4]). But “[n]othing in the PSLRA
indicates that district courts must choose a lead plaintiff with standing to sue on every available
cause of action.” Hevesi, 366 F.3d at 82 (alteration added). In fact, “it is inevitable that, in some
cases, the lead plaintiff will not have standing to sue on every claim.” Id. (citations omitted).
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Instead, named plaintiffs with standing to sue on additional claims may be added “to aid the lead
plaintiff in representing a class.” Id. at 83 (citations omitted); see also In re Bank of Am. Corp.
Sec., Derivative, & Emp. Ret. Income Sec. Act (ERISA) Litig., No. 09-MD-2058, 2011 WL
4538428, at *1 (S.D.N.Y. Sept. 29, 2011) (“BoA II”) (“[W]here a lead plaintiff is without standing
to sue on a given claim, the PSLRA allows for a mechanism whereby additional class
representatives may be proposed by the lead plaintiff to pursue those claims.” (alteration added)).
Therefore, Lead Plaintiff’s potential lack of standing to sue on behalf of options traders does not
divest him of authority over the options claims.
Scarborough and Schiller also take issue with the fact that none of the named Plaintiffs’
sworn certifications reflect any of them invested in options. (See Resp. 13–14; see generally
ACCAC, Ex. 1, Certifications [ECF No. 527-1]). This argument expresses Scarborough’s and
Schiller’s disagreement with Lead Plaintiff’s litigation strategy rather than a substantive attack on
his authority over options claims. For starters, the sworn certifications are not conclusive that all
the named Plaintiffs lack standing to assert options claims: named Plaintiffs may very well have
standing for such claims, but because the ACCAC does not bring them, named Plaintiffs did not
need to demonstrate standing. See Davis v. Fed. Election Comm’n, 554 U.S. 724, 734 (2008) (“[A]
plaintiff must demonstrate standing for each claim he seeks to press and for each form of relief
that is sought.” (alteration and emphasis added; citations and quotation marks omitted)). But even
if the named Plaintiffs do not currently have standing, Lead Plaintiff could have certainly added
such named Plaintiffs. See Hevesi, 366 F.3d at 83. Ultimately, the absence of claims on behalf of
options traders in the ACCAC is irrelevant to whether Lead Plaintiff had authority to assert such
claims in the first place.
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b. The Differences Between the Classes Do Not Merit a Parallel Options
Class.
Having confirmed that Lead Plaintiff’s appointment included authority over options
claims, the Court next considers whether the differences between the two putative classes
nonetheless merit severance of an options class at this juncture. As noted, the Scarborough
Complaint and ACCAC differ on whether they assert claims on behalf of options traders, whether
they bring claims connected to AAL stock, and the length of the class period. Moreover, the parties
recognize damage calculations for options would be different than for stocks alone. (See Mot.
Consolidate 5; Resp. 23).
According to the Scarborough Plaintiffs, these differences compel treatment as separate
and distinct classes. (See Resp. 11). They argue the cases affirming lead plaintiffs’ broad authority
over the claims in a class are “inapposite” because, despite “assert[ing] the same claims[,]” the
“Stock Class” and the “Options Class” are “fundamentally different classes arising from distinct
financial instruments.” (Id. (alterations added)). By contrast, Lead Plaintiff characterizes the
differences between the classes as aspects falling under his “prerogative to determine class
membership[;]” that is, Lead Plaintiff has asserted his authority over the class, and the
Scarborough Plaintiffs’ disagreement with his litigation strategy does not provide a “legal basis
for insisting that a separate options class action with its own Lead Plaintiff and Lead Counsel
proceed.” (Mot. Consolidate 13 (alteration added)).
Lead Plaintiff has the better argument. Lead Plaintiff’s authority to “control the
management of the litigation as a whole” includes his authority “to decide what claims to assert
on behalf of securities holders.” BoA I, 2010 WL 1438980, at *2. “Lead plaintiffs necessarily
make determinations that limit the class of shareholders. Inevitably, any class definition
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establishes boundaries as to who may recover as part of the class.” In re Facebook, Inc., IPO Sec.
& Derivative Litig., 2013 WL 4399215, at *6 (alterations adopted; citation omitted).
Courts have repeatedly confirmed this authority in various contexts. See, e.g., In re
Barclays Bank PLC Sec. Litig., No. 09-Civ-1989, 2016 WL 3235290, at *7 (S.D.N.Y. June 9,
2016) (“[L]ead plaintiff [] is permitted to make tactical decisions to pursue some claims and not
others.” (alterations added; citation omitted)); New York State Teachers’ Ret. Sys. v. Gen. Motors
Co., 315 F.R.D. 226, 239 (E.D. Mich. 2016) (overruling objection to class settlement and finding
that the decision whether to include warrants holders as part of the class fell within the lead
plaintiff’s discretion), aff’d sub nom. Marro v. New York State Teachers’ Ret. Sys., No. 16-1821,
2017 WL 6398014 (6th Cir. Nov. 27, 2017). In fact, one court specifically found that whether to
assert claims on behalf of options holders and whether to add named plaintiffs with standing to
pursue such claims are “tactical decisions [within] the prerogative of a lead plaintiff.” BoA II,
2011 WL 4538428, at *1 (alteration added).
Given a lead plaintiff’s broad authority, it follows that “variations in class definition do not
defeat consolidation or justify a proliferation of overlapping classes.” In re Facebook, Inc., IPO
Sec. & Derivative Litig., 2013 WL 4399215, at *6 (citation omitted). This is especially true where
there is overlap between class members because “if a parallel class action were to be permitted,
both actions would therefore seek recovery for the same absent class members.” Id. at *5. Here,
options Plaintiffs are not wholly distinct from stocks Plaintiffs because some individuals bought
both types of securities — in fact, Scarborough owned shares of AMC and GME stocks during the
class period. See Gossett FAC ¶¶ 79–80. Accordingly, variations in Lead Plaintiff’s class
definition — including his choice to not assert options claims, drop allegations related to AAL
securities, and pursue a shorter class period — do not justify severance of an options class.
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In short, Lead Plaintiff had authority over options claims and properly exercised that
authority when he and Lead Counsel made the strategic decision not to bring such claims in the
ACCAC. The Court sees no impediment to consolidation based on the scope of Lead Plaintiff’s
authority.
c. Consolidating the Scarborough Action Would Not Be Unduly Prejudicial.
Finally, Scarborough and Schiller argue that consolidation would result in “enormous
prejudice” due to Lead Plaintiff’s decision to “extinguish[]” the options class. (Resp. 22 (alteration
added)). The Scarborough Plaintiffs analogize their situation to two cases where the respective
courts sought to mitigate prejudice by allowing class actions for different types of securities to
proceed separately. (See id. 20–23 (discussing In re Cent. Eur. Distrib. Corp. Sec. Litig., No. Civ-
11-6247, 2012 WL 5465799 (D.N.J. Nov. 8, 2012) (“CEDC”), and In re New Oriental Educ. &
Tech. Grp. Sec. Litig., 293 F.R.D. 483 (S.D.N.Y. 2013) (“New Oriental”))).
As Lead Plaintiff points out (see Reply 13–14), these cases are distinguishable. In CEDC,
the court considered whether two newly-transferred actions — the “Grodko” action and the
“Puerto Rico” action — should remain consolidated with an existing securities class. See
generally CEDC, 2012 WL 5465799. The court set aside the consolidation of the Grodko action
because, despite significant overlap with the existing class in the type of legal claims, the class
period, and discovery needs, there were “stark” differences in the course of conduct alleged in the
pleadings. Id. at *9 (explaining that due to the differences in the actions, prejudice would result
from “subjecting [the Grodko plaintiffs] to a lead plaintiff that would reject their claims” (alteration
added)). The court then used its discretion to de-consolidate the Puerto Rico action because the
claims alleged had not arisen during the class period in the existing class. See id. at *11–13.
In New Oriental, the court severed an action asserting claims on behalf of options traders
after the lead plaintiff in the consolidated action indicated it would not pursue such claims. See
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New Oriental, 293 F.R.D. at 487. But there, the options plaintiff had withdrawn his own motion
to be appointed lead plaintiff and stipulated to the appointment of an alternative candidate based
on representations that the alternative candidate would pursue claims on behalf of options traders.
See id. at 485. The court found severance was appropriate based on the stipulation, the early stage
of the litigation, and due to concerns about the statute of limitations running on the abandoned
claims. See id. at 487–88.
CEDC and New Oriental are factually distinguishable. Unlike the Grodko and Puerto Rico
actions at issue in CEDC, the Scarborough action concerns the same course of conduct and largely
the same class period as the existing class. Unlike the action at issue in New Oriental, Scarborough
and Schiller did not stipulate to the appointment of Laine Beveridge as Lead Plaintiff on the
condition that he bring claims on behalf of options traders, and this action is not in the same early
stage as New Oriental.
As a last resort, Scarborough and Schiller point out that Lead Plaintiff’s decision to
abandon options claims “risked the running of the statute of limitations on that class’[s] claims[.]”
(Resp. 22 (alterations added)); see also New Oriental, 293 F.R.D. at 487 (“[W]hen a consolidated
class action complaint redefines a class more narrowly than the prior individual complaints, and
no longer asserts claims on behalf of a portion of the consolidated class, the statute of limitations
is no longer tolled under American Pipe for that ‘abandoned’ subclass.” (alteration added;
discussing Am. Pipe Constr. Co. v. Utah, 414 U.S. 538 (1974); citations omitted)). Even so, this
is insufficient to prevent consolidation. Scarborough and Schiller “will not suffer any prejudice if
they are not permitted to bring their own separate class action[;] . . . [they] remain free to pursue
their claims through an individual action, which would permit them to obtain a ruling on the merits
of their claims.” In re Facebook, Inc., IPO Sec. & Derivative Litig., 2013 WL 4399215, at *6
(alterations added; citations omitted); (see also Mot. Consolidate 11).
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Until now, neither Scarborough, Schiller, nor any other option trader objected to Lead
Plaintiff’s handling of the case. Despite being named Plaintiffs in an underlying action in the
Federal Securities Tranche that was specifically referenced in the Muncy Notice, Scarborough and
Schiller did not move to establish an options class or to be appointed lead plaintiffs before the
Muncy Notice’s July 27, 2021 deadline. They also did not object following the Court’s
appointment of Lead Plaintiff, after Lead Plaintiff filed the CCAC on November 20, 2021, or after
the parties stipulated to filing the ACCAC on January 17, 2023.
A plaintiff in an MDL cannot silently sit on the sidelines for nearly two years, only to
spring up on the eve of the Court’s determination on class certification demanding a
reconfiguration of the class structure and claims. The Court agrees with Lead Plaintiff that
“[h]aving done nothing to protect [options] claims since [first] filing them [in the Gossett action]
on February 5, 2021, there is no equitable basis to deny consolidation or reward extreme delay
with a lead plaintiff appointment[.]” (Reply 13 (alterations added)).
C. Motion for Appointment
Because the Court grants Lead Plaintiff’s Motion to Consolidate the Scarborough action,
it need not consider Scarborough and Schiller’s Motion for Appointment as lead plaintiffs of a
parallel options class.
IV. CONCLUSION
For the foregoing reasons, it is
ORDERED AND ADJUDGED as follows:
1. Plaintiffs’ Motion to Consolidate and Discontinue the Noticed Lead Plaintiff Process
as Moot [ECF No. 565] is GRANTED. The class action claims brought on behalf of
options traders in the Scarborough Complaint are consolidated and superseded by the
ACCAC. If Scarborough and Schiller wish to assert individual claims that will proceed
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on a coordinated basis during pretrial proceedings in the Federal Securities Tranche,
they shall file an amended complaint by September 21, 2023.
2. Maurice Scarborough and Scott Schiller’s Motion for Appointment as Lead Plaintiffs
for the Options Class and Approval of their Selection of Lead Counsel [ECF No. 572]
is DENIED as moot.
DONE AND ORDERED in Miami, Florida, this 7th day of September, 2023.
_______________________________________
CECILIA M. ALTONAGA
CHIEF UNITED STATES DISTRICT JUDGE
cc:
counsel of record
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