Home Stock Market The lawsuits against Robinhood in GameStop saga are coming to court -...

The lawsuits against Robinhood in GameStop saga are coming to court – but there’s one big problem


When Robinhood suddenly placed buying restrictions at the height of the GameStop trading craze in the early months of 2021, users reacted with anger.

Now, the legal journey begins in earnest on Monday for angry investors.

April 19 is the first court date after the judicial panel’s decision to bring together nearly 40 lawsuits – and possibly more – before a Miami federal judge who will handle the “multi-county case.”

But there’s one big difficulty: If these plaintiffs think investment decisions are complex and don’t like slow responses to their own, experts say, they haven’t seen anything yet.


‘The complexity of the issues alone shows we’re looking for years.’


– Sergio Campos, a professor at the University of Miami Law School who teaches civil procedures and complex litigation

“Even though all of this is designed to speed up the proceedings, it goes on forever. These cases lasted for many years, ”said Sergio Campos, a professor at the University of Miami Law School who teaches civil procedures and complex litigation. “The complexity of the issues alone shows we’re looking for years.”

The January and February trading – spurred, at least in part, by members of Reddit’s WallStreetBets forum – surged in price for heavily understated stocks like GameStop.
GME,
-1.12%

and AMC Entertainment
AMC,
-5.76%
.


As the volatility of GameStop increased, trading platforms like Robinhood adopted temporary trading restrictions.

But as the volatility increased, trading platforms like Robinhood, a brokerage app popular with young investors, adopted temporary trading restrictions.

Vladimir Tenev, the co-CEO of Robinhood, later told lawmakers that his company had to take that step to raise capital from its own investors. as it meets its collateral requirements on the tower of trades.

“Despite the unprecedented market conditions in January, at the end of the day what happened was unacceptable to us,” Tenev said in a hearing in February before the Financial Services Committee of the House of Representatives. “To our customers, I’m sorry and I’m sorry.”

Other brokerage platforms, incl TD Ameritrade and Webull, also temporarily imposing certain restrictions. Spokesmen for Robinhood, TD Ameritrade and Webull declined to comment on the lawsuit.

Tenev’s apologies didn’t appease some of the affected investors, and class-action lawsuits dragged from California to Connecticut, Texas to Florida.


The lawsuits revolve around allegations that brokerage platforms have broken their promises of allowing users to trade as they see fit.

The lawsuits differ but all revolve around the allegation that brokerage platforms have broken their promises to users to allow them to trade as they see fit, according to court papers.

Some also accused Robinhood of limited trading to help institutional investors – an allegation that Robinhood’s lawyers called “unfounded (and unbelievable)” in a filing.

This is where a procedural, but important, step comes in.

The defendant firms, Robinhood and below, support the idea of ​​centralizing proceedings in one court. (Most cases only named Robinhood the defendant, but court papers say other cases involved more than 40 brokerage firms, funds, and clearing houses.) the plaintiff also supports this idea.

On April 1, a panel of three judges agreed to the approach.

“Given the number of parties and advisory lawyers, concentration is the only practical means of coordinating pre-trial proceedings in this case,” the three judges wrote in a case file titled “In Re: January 2021 Short Squeeze Trading Litigation.”


‘Given the number of parties and lawyers, concentration is the only practical means of coordinating pre-trial proceedings in this litigation.’


– The three judges wrote in a case file

The panel counted 39 pending cases in 14 different jurisdictions. The parties informed the court of 15 other relevant cases in advance of their decision.

The jury presented the case to District Court Judge Cecilia Altonaga County, seated in Florida’s Southern District. Ten of the actions are pending in Florida and four have been filed with Altonaga’s court.

Altonaga is a “competent jurist with multi-regional litigation experience,” the panel wrote. Previous cases from the judge, nominated under the George W. Bush administration, include a multidisciplinary case involving denture toothpaste.

The jury wrote that “it is confident that Judge Altonaga will conduct this case according to an efficient and prudent process.”

So where to next? Series of events that matter to Robinhood as it prepares for IPO and Spars with Massachusetts regulators people say they put their interests above the customers. It’s also important for rookie retail investors who are researching the market and say that Robinhood’s restrictions are at a disadvantage.

‘She has the power to make everything, soup to nuts’

Multi-regional lawsuits may be new for young investors, but it’s not new to the federal court system, which takes a pervasive approach as events spur the case. to sue. That includes crashing consumer products, dangerous drugs, or data breaches.

The courts had 187 multi-regional lawsuits as of mid-April, statistics show.

From here on, Altonaga has the ability to decide important topics such as evidence disputes and class certification, and Victoria Sahani, professor and vice dean at Arizona State University’s Sandra Day O’Connor Law School know.

The judge can also make a ruling on justification moves to bring the case to trial, Sahani said.


Once all pre-trial issues are determined, parties may choose to stick with Altonaga for trial.

“She has the power to do everything from soups to nuts,” says Sahani.

Once all pre-trial issues are determined, parties may choose to stick with Altonaga for trial. Or the case can go back to the original court where it was filed – that is, if the case was even brought to trial. Sahani notes that very few civil cases go to that point, due to settlement or layoffs.

Lawsuits can also end in the arbitration office rather than the courtroom. Although some consumer advocates have said that arbitration is on the side of employers and corporations, businesses see this process as fair. Robinhood has one arbitration terms, that is popular in the brokerage industry. Class action, however, can be one way around this problem.

But Sahani says this doesn’t automatically apply in the courtroom. She said: “The only way the referee gets triggered is if one of the parties raises their hands. Altonaga will make a ruling on whether to allow such movements to force arbitration, Sahani said.

A bill was introduced last week, Investor Selection Act, will prevent the broker-agent and investment advisor from using mandatory arbitration.

When cases are grouped together for effective purposes, so does the legal agency. As a result, steering committees of the main plaintiff’s lawyers were formed during the multi-district litigation process.

However, if a plaintiff registers with an attorney, how will they know if the primary attorney will represent them with the same interests?


‘If a plaintiff registers with an attorney, how will they know if the primary attorney will represent them with the same rights?

“It has become a controversial issue,” Campos said. As for the plaintiffs involved, “can be a little confusing.”

Matthew Wilson, principal at Meyer Wilson School in Columbus, Ohio, says representativeness concerns are a plausible point where he represents investors and consumers in class action lawsuits.

However, all class action attorneys have the best possible defense for anyone involved in their cases, he said. Wilson notes that members of a class also have the right to refuse any proposed mediation resolution.

Wilson represents investors in another case against Robinhood stemming from the 2020 service shutdown on the platform. Litigation is pending in the Northern District of California.

He said if he did it his way, there would be no such thing as a mandatory referee. He said clients will be able to decide whether to participate in arbitration or court proceedings after a dispute.

“We don’t live in that world yet. No success, here’s what you get, ”he said.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments