Jessy Edwards, Abraham Jewett|August 9, 2022
Category: Legal News
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Update:
- Robinhood agreed to pay $9.9 million to end claims revolving around recurrent service outages on its stock-trading app.
- Around 150,000 Robinhood users argued they were harmed by a series of repeated service outages on the app in the midst of a stock trading rally in March 2020.
- The class of Robinhood users claimed the outages likely caused them to suffer around $20.4 million in losses.
- Robinhood says it is happy the matter is resolved and that it has laboriously invested in its platform in the years since 2020.
- The company had previously argued that some of the investors’ claims against it were purely speculative.
Robinhood outage settlement class action overview:
- Who: Robinhood has reached a settlement agreement with customers who sued the investing platform over repeat outages
- Why: The plaintiffs said all investors were taken out of the market for a whole day in 2020 due to a service outage
- Where: California federal court
(06/01/2022)
Mobile securities app Robinhood Markets Inc. has reached a preliminary settlement with customers, stemming from a class action lawsuit filed after a March 2 outage.
Robinhood and the plaintiffs filed a joint notice of settlement in principle in a California federal court May 26. The notice didn’t include the specifics of the deal.
The settlement comes after Robinhood customers filed a class action lawsuit against the company in March 2020, just days after a series of outages in 2020, including one on March 2, 2020, that took investors out of the market for most of the day.
Robinhood offers “commission-free” trades in securities using an internet/cloud-based platform for customers.
In one class action launched against Robinhood soon after the outage, plaintiff Travis Taaffe alleged that on that day, Robinhood’s trading platform was fully inaccessible and not available to any of its customers.
The lawsuit argued users were not able to access their accounts on the Robinhood platform and were also powerless in buying, selling or trading securities.
Outage happened during record market day
Plaintiffs alleged Robinhood customers were unable to access the trading platform for all but three minutes of the New York Stock Exchange trading hours March 2; there additional outages the following day.
On top of this, the Robinhood class action lawsuit states, on March 2, the Dow Jones Industrial Average rose 1,294 points and the Nasdaq gained 384 points, the biggest-ever point gain in a 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.
The Robinhood users had been looking to certify a class of nearly 7 million account holders.
Earlier this year, counsel for the users said the main class would consist of funded account holders who held at least one equity or option position during the March 2 outage, Law360 reported.
Were you impacted by the outages? Let us know in the comments.
The Robinhood users are represented by Anne Marie Murphy, Mark C. Molumphy, Noorjahan Rahman, Tyson C. Redenbarger and Julia Peng of Cotchett Pitre & McCarthy LLP and Matthew B. George, Kathleen A. Herkenhoff and Laurence D. King of Kaplan Fox & Kilsheimer LLP.
The Robinhood Outage Class Action Lawsuit is In re: Robinhood Outage Litigation, Case No. 3:20-cv-01626, in the U.S. District Court for the Northern District of California.
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As an enthusiast well-versed in legal matters and financial technology, I can confidently delve into the intricate details of the article featuring the Robinhood outage settlement class action. My understanding stems from a deep knowledge of legal proceedings, financial platforms, and the implications of service disruptions on users.
The article, dated August 9, 2022, discusses a significant development in the legal battle between Robinhood, the popular mobile securities app, and its users. The company agreed to pay $9.9 million to settle claims related to recurrent service outages on its stock-trading app, culminating in a class action lawsuit filed in March 2020.
Around 150,000 Robinhood users contended that they were adversely affected by a series of repeated service outages during a stock trading rally in March 2020. The users claimed losses of approximately $20.4 million due to the outages. Robinhood, in response, stated that it is pleased the matter is resolved and highlighted its significant investments in platform improvements since 2020.
The settlement agreement, reached in a California federal court on June 1, 2022, is a preliminary resolution between Robinhood and the affected customers. The joint notice of settlement in principle, filed on May 26, did not disclose specific details of the agreement.
The class action lawsuit originated from an outage on March 2, 2020, which took investors out of the market for most of the day. During this outage, Robinhood users allegedly couldn't access the trading platform, leading to the inability to buy, sell, or trade securities. The lawsuit argued that users were effectively taken out of the market for an entire day.
Key details from the article include the plaintiffs' claim that on March 2, 2020, Robinhood's platform was fully inaccessible for all customers during the majority of New York Stock Exchange trading hours. This outage coincided with significant market growth, with the Dow Jones Industrial Average rising 1,294 points and the Nasdaq gaining 384 points—the largest point gain in a single day.
The users sought to certify a class of nearly 7 million account holders, focusing on funded account holders with at least one equity or option position during the March 2 outage. The legal representation for the users included Anne Marie Murphy, Mark C. Molumphy, Noorjahan Rahman, Tyson C. Redenbarger, and Julia Peng of Cotchett Pitre & McCarthy LLP, as well as Matthew B. George, Kathleen A. Herkenhoff, and Laurence D. King of Kaplan Fox & Kilsheimer LLP.
In summary, this legal dispute underscores the importance of platform reliability in the financial technology sector and the potential financial impact on users during service disruptions. The settlement represents a resolution to the claims brought forth by Robinhood users who alleged significant losses due to the platform's outages in 2020.
