End Of The Road? Court Dismisses Class Action Lawsuit Against Robinhood

Robinhood seems to be finally done with a legal battle that has spanned the course of more than two years. Robinhood Markets recently defeated a group of investors as a United States Federal Appeals court just dismissed the appeal of a class action lawsuit against the crypto and stock trading firm.

Appeals Court Throws Out Case Against Robinhood

The lawsuit’s background dates back to January 2021, when Robinhood placed restrictions on trades of certain volatile “meme” stocks like GameStop and AMC Entertainment. The limits, including temporarily preventing buys of some stocks, outraged users who couldn’t take advantage of price swings. 

As a result, the stock trading platform was taken to court in September 2021 by 16 investors who claimed Robinhood prioritized its interests over users. By restricting purchases of these stocks, investors were unable to buy them as they continued to spike in value. 

After the cases were dismissed in lower courts, the plaintiffs appealed. However, the investors seem to have struck a wall again, as the case has now been dismissed by the 11th US Circuit Court of Appeals in Atlanta. 

The three-judge panel that heard the appeal has decided 3-0 in Robinhood’s favor. They explained in their decision that Robinhood’s decision to restrict stock buying was actually legal, as stated in its terms and conditions. 

“When Robinhood restricted its customers’ ability to buy meme stocks, it took a sizable and perhaps justifiable hit in the court of public opinion. But in this court, Robinhood is only accountable for specific legal duties,” wrote US Appellate Court Judge Britt Grant.

The ruling affirms Chief Judge Cecilia Altonaga’s November 2021 dismissal of the case in the Miami federal court.

End Of The Road?

The case’s background began during the January 2021 GameStop squeeze, when many investors started buying selected stocks to short-squeeze Wall Street firms who had bet these struggling stocks would decline in value. As a result, many brokers had to meet the requirements of the influx of deposits. During that period, Robinhood suffered a deposit deficit of over $3 billion.

Two separate lawsuits were filed, as another group of investors who sold nine meme stocks at a loss in late January and early February 2021 also filed a class action.

However, with the court dismissing Robinhood’s appeal, it looks like the end of the road for this round of litigation against the stock trading app. The investors could try appealing the dismissal to the US Supreme Court, but the odds are very low that the court would take up the case. 

This is because the Supreme Court receives thousands of petitions yearly but only hears oral arguments in about 100-150 cases.

Robinhood, on the other hand, has recovered well from the meme stock frenzy. In its latest quarterly report, the company’s total Q2 net revenues increased 10% to $486 million, and net interest revenue increased 13% to $234 million.