Robinhood Markets, Inc. Jan. 2021 Short Squeeze (Negligence/Fiduciary Duties)

Count I & II – Negligence & Gross Negligence Claims under California Law and Florida Law:

. . . Here, Plaintiffs repackage their dissatisfaction with the PCO restrictions as negligence claims. In doing so, they seek to obtain precisely what the Customer Agreement that they freely entered denied: a right to unrestricted trading. They also ask the Court to extend California tort law into uncharted waters by imposing on Robinhood a tort duty to all foreseeable investors to permit trading of any security, at any time. California law does not endorse such freewheeling liability, and it is not the Court’s role to second-guess that policy determination. Counts I and II fail under California law. . .
In short, the Customer Agreement merits judicial respect under Florida law. And the Court declines Plaintiffs’ invitation to rewrite the Agreement under the guise of novel negligence claims. Because Counts I and II do not adequately allege the existence of a tort duty under either California or Florida law, they are dismissed. . .

Count III – Breach of Fiduciary duty against Robinhood Financial under California Law and Florida Law:
. . . Here, Plaintiffs do not plausibly allege that Robinhood Financial recognized confidential relationships as existing between itself and Plaintiffs. The Customer Agreement’s many provisions limiting Robinhood Financial’s duties indicate that Robinhood Financial generally keeps only an arms’-length relationship with its customers. And although Plaintiffs emphasize Robinhood’s marketing efforts, advertising to the public does not amount to assuming fiduciary obligations to recipients of the advertisements. . . Count III fails under Florida law for the same reasons that it fails under California law. . .

Count III – Breach of Fiduciary duty against Robinhood Securities under California Law and Florida Law:
. . .Under both California and Florida law, a clearing broker does not generally owe fiduciary duties to investors whose transactions it executes. . . Undeterred, Plaintiffs argue that a clearing broker owes fiduciary duties to the customers of an introducing broker when it involves itself in the introducing broker’s actions. . . For two reasons, this theory cannot shore up the claim against Robinhood Securities. First, it lacks legal support. Plaintiffs do not cite a single case where a court concluded that a clearing broker owes fiduciary duties to the customers of an introducing broker. . . Second, even if Robinhood Securities could be equated with an introductory broker, that fact would leave it in the same position as Robinhood Financial, which, under the facts alleged, did not owe fiduciary duties to Plaintiffs. . .

Breach of the Implied Duty of Care (Count IV) and Breach of the Implied Covenant of Good Faith and Fair Dealing (Count V)
. . .Once more, the Customer Agreement permits Robinhood Financial and Robinhood Securities to “at any time, in [their] sole discretion and without prior notice . . . prohibit or restrict [the customer’s] ability to trade securities.” (Cust. Agmt. § 5.F (alterations added)). It is difficult to imagine a clearer authorization to impose the limited trading restrictions Plaintiffs now object to. This plain authorization to restrict trading creates obstacles that Plaintiffs cannot surmount. The reason is simple: “if defendants were given the right to do what they did by the express provisions of the contract there can be no breach”. . .

Tortious Interference with Contract and Business Relationship (Count VI)
. . . Plaintiffs do not allege that Robinhood Markets caused a violation of any express provision of the Customer Agreement. In fact, neither Count VI nor Plaintiffs’ Response identifies what term of the Customer Agreement Robinhood Markets caused to be breached. (See Am. Compl. ¶¶ 334–41; Resp. 56–58). Plaintiffs argue only that Robinhood Markets caused its subsidiaries to breach implied terms of the Agreement. (See Resp. 57–58). That argument fails here for the same reason it fails as to Counts IV and V: a party does not breach a contract by doing something the contract expressly allows. . .

Civil Conspiracy (Count VII)
. . . “[O]ne cannot tortiously interfere with a contract to which it is a party.” . . . Count VII thus fails to allege a conspiracy by two or more parties who are legally capable of conspiring to commit a tort against Plaintiffs. . .