Robinhood Class Action Lawsuit Judge Denies Restraining Order

UPDATE: 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.

The plaintiff in a Robinhood class action lawsuit recently 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.

According to plaintiff Travis Taaffe, by offering these credits Robinhood is attempting to bar their customers from participating in the pending class action lawsuit.

“Defendants are attempting to mislead the putative class members into unknowingly waiving their rights to participate in the class action — whether they know it exists or not — in exchange for as little as a $75 credit,” Taaffe said in his motion. “Defendants’ conduct must not be allowed to continue.”

Based on these actions, Taaffe asked for a temporary restraining order which would block Robinhood from continuing with their “misleading communications to prospective class members.” Taaffe also asked that the company be required to void any releases that may have been signed and notify users about his and other Robinhood class action lawsuits.

Robinhood then filed a response to the restraining order request, calling Taaffe’s motion “unnecessary.” According to the company, none of their users will be barred from joining a class action lawsuit. Instead, the releases and $75 goodwill credits were reportedly intended to stop individual lawsuits against the company.

“Robinhood is voluntarily providing compensation to affected customers that reached out to us based on a case-by-case review of data,” a Robinhood spokesperson told Law360.

“We are doing so as quickly as possible because we believe it is in our customers’ best interests to receive compensation now — without the burdens of a litigation process. The plaintiff’s assertion that we intend to preclude any customers from participating in any pending class action is inaccurate.”

Despite these assurances, Taaffe and his attorneys remain unconvinced. The plaintiff noted in a statement that the claims released as a part of the goodwill credit are similar to those he brought in his class action lawsuit.

Taaffe also reveals that, despite Robinhood calling the motion “unnecessary,” he and his counsel had “no choice” but to file for a temporary restraining order because the company refused to speak to them before.

Unfortunately for Taaffe, U.S. District Judge Charlene Edwards Honeywell denied his motion after finding that the plaintiff “failed to establish a clear record of abusive communications from defendants.”

Although the judge said that there is a dispute regarding the purpose of Robinhood’s payments and releases, Judge Honeywell noted that Taaffe “does not request an evidentiary hearing.”

“Instead, he asks this court to rush to an evidentiary determination and issue injunctive relief immediately based on an undeveloped record,” she wrote. “The court declines this invitation.”

Judge Honeywell also asked Taaffe to defend his suit from dismissal based on lack of jurisdiction. The Robinhood class action lawsuit reportedly fails to mention where Robinhood is headquartered, although Florida resident Taaffe included that the company was incorporated in Delaware.

The judge says she needs more information to determine if the Middle District of Florida has jurisdiction and to make other determinations about diversity citizenship.

The plaintiff filed his Robinhood lawsuit in early March, alleging that he and other users of the mobile app were barred from using it due to repeated outages. Allegedly, Taaffe was unable to access his accounts on March 2 and March 3.

This alleged inability to access and trade his stocks was reportedly made worse by the fact that March 2 was a historic day on the stock market. The Dow Jones Industrial Average had its largest point gain in history on March 2, rising more than 1,294 points. Other indicators of stock performance, the S&P and Nasdaq, reportedly had similar increases.

Robinhood has admitted to the outages. In a statement, the company’s founders said that “multiple factors contributed to the unprecedented load that ultimately led to the outages. The factors included, among others, highly volatile and historic market conditions; record volume; and record account sign-ups.”

Taaffe argues that he and other users were financially harmed by the outages and accuses the company of breach of contract, negligence and other breaches.

Were you affected by the Robinhood system outages in early March? Have you been contacted by the company about a goodwill credit? Share your experiences in the comment section below.

Taaffe and the proposed Class are represented by Michael S. Taaffe, Michael D. Bressan and Jarrod J. Malone of Shumaker, Loop & Kendrick LLP.

The Robinhood 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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