Robinhood Class Action Prompted by System Outage

UPDATE 2: On Oct. 5, 2020, allegations that the Robinhood app outage cost investors are overbroad and “free of detail,” according to the online trading company in a motion to dismiss the case.

UPDATE: On March 26, 2020, the plaintiff in a Robinhood class action asked for a temporary restraining order, claiming the investment app is trying to “wipe out” liability for two days of loss trading by offering users a $75 “goodwill” credit if they sign a release of their legal rights.

Mobile securities app Robinhood Markets Inc. has been hit with a class action lawsuit by customers, stemming from an outage that occurred on March 2.

Plaintiff Travis Taaffe alleges that on that day, Robinhood’s trading platform was fully inaccessible and not available to any of its customers.

Robinhood offers “commission-free” trades in securities using an internet/cloud-based platform for customers, according to the plaintiff.

Taaffe argues that users were not able to access their accounts on the Robinhood platform and were also powerless in buying, selling, or trading securities.

The securities company sent an email to its users on the morning of the outage which stated that they had started to experience downtime across the platform, claims the Robinhood class action lawsuit.

Robinhood announced on Twitter that the trading platform went back online at 2:19 a.m. on March 3, according to the plaintiff.

The plaintiff maintains that Robinhood customers were unable to access the trading platform for all but three minutes of the New York Stock Exchange trading hours on March 2. In addition, the plaintiff argues that there were additional outages on March 3.

The Robinhood class action lawsuit states that on March 2, the Dow Jones Industrial Average rose 1,294 points and the Nasdaq gained 384 points, which was the biggest ever point gain in one single day. Both the Dow and Nasdaq are used as indicators for stock performance. Because of the outage, Taaffe and other users were allegedly unable to participate in this day of growth.

Robinhood’s CEO published a blog post on March 3, admitting liability and noting that the company bears the sole responsibility for the “complete failure,” according to Taaffe.

“As such, Robinhood admits that the platform outages were due to its own failures and expressly waive any defense related to failures of the platform being out Robinhood’s control,” states the Robinhood class action lawsuit.

The plaintiff claims that there are approximately 10 million Robinhood customers, all of which are possible Class Members in the class action. Prospective Class Members include: “Customers and/or users of Robinhood in the United States who lost the ability to access their Robinhood brokerage accounts to effectuate any transaction therein on March 2, 2020.”

The defendants have breached their contractual obligations to their customers by not providing a functional platform for them to access their personal funds and securities, the plaintiff states. In addition, Robinhood breached their duty to exercise reasonable care in protecting their customers’ assets from the system failures that occurred on March 2 and March 3, 2020, the plaintiff maintains.

“Defendants owed a duty to Plaintiff and class members to exercise reasonable care in maintaining and supporting Defendants’ internet/cloud-based trading platform so that Plaintiff and class members would not be adversely affected by extended system failures/outages,” claims the Robinhood class action lawsuit.

Also, the plaintiff claims that Robinhood had a duty to provide a system to its customers that was strong enough to handle a reasonable amount of trading of securities and should have had a backup system available to handle any outages. Taaffe also alleges that Robinhood has breached their implied warranty of merchantability.

Do you use Robinhood to trade securities? Leave a message in the comments section below.

The plaintiff is represented by Michael S. Taaffe, Michael D. Bressan and Jarrod J. Malone.

The Robinhood Outage Class Action Lawsuit is Taaffe v. Robinhood Markets Inc., et al., Case No. 8:20-cv-00513, in the U.S. District Court for the Middle District of Florida.

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