Analysis: Robinhood protected from lawsuits by user agreement, Congress
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Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#2I am cautiously optimistic that this issue (which seems to have drawn “outrage” from both sides of the political spectrum) will spur some change with respect to contracts of adhesion that force arbitration and prohibit class action suits. It’s nearly impossible to hold a corporation accountable for wide-spread anticonsumer behavior in any meaningful way so long as they can tuck those two paragraphs into a massive contract most people don’t read and even fewer will understand.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#3Robinhood's vulnerability is their forced arbitration clause in the ToS. Similar to Doordash: https://www.vox.com/2020/2/12/21133486/doordash-workers-10-m...
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#4Robinhood won’t go out of business because of lawsuits, it’ll be an exodus of users.
Even if they just weren’t prepared and everything they did was legitimately the right thing to do, that ship has sailed. I know people I didn’t even know had a Robinhood account ask me if I was shutting my account down too.
This will be fascinating to watch. Can the repair the brand damage? I’m skeptical.
Is there any similar scenario that has occurred at another brokerage firm in the past that might leave clues to examine to understand potential user actions here?
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#5"It will be hard to prove users suffered as a result of Robinhood’s measures because GameStop and other stocks covered by the curbs fell sharply on Thursday after the restrictions were announced, said James Cox, a professor at Duke Law School."
Wait, what? Can anyone legitimately make the claim that the massive drop in value that cut off the price rise at the knees and allowed the worst short positions to cover their losses sub-$200 didn't materially harm the users? This is absolute madness.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#6Forced arbitration has always felt grossly unfair, but for the sake of argument, I'll consider the contrapositive. A company that is in a highly litigious industry may feel that lawsuits would eat up valuable time and resources, and that those lawsuits are not always filed in good faith. Perhaps the industry or subject matter is complex, and not easily understood by juries, courts, etc. From a business perspective forced arbitration makes perfect sense: It limits exposure, limits judgement amounts, and perhaps is more predictable than trials.
All that sounds good from the business perspective, but my problem has always been that the outcomes seem tilted grossly in favor of the company. Like Human Resources, it's there for the company, not the employee/consumer, and its the companies that have to pay for the arbitration. Banning them does not seem like a long term solution, although I support it, so I'm curious what alternatives may exist that could accomplish both.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#7Robinhood won’t go out of business because of lawsuits, it’ll be an exodus of users. Even if they just weren’t prepared and everything they did was legitimately the right thing to do, that ship has sailed. I know people I didn’t even know had a Robinhood account ask me if I was shutting my account down too. This will be fascinating to watch. Can the repair the brand damage? I’m skeptical. Is there any similar scenari…
Each FINRA arbitration case would be expected to cost the company up to 10,000 in fees. If anywhere near the 100,000 users who left negative reviews on the Google Play store for the app file an arbitration and pay the filing fee, Robinhood will absolutely go bankrupt.
If you are/were a Robinhood user: https://www.finra.org/arbitration-mediation/initiate-arbitra...
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#8Robinhood won’t go out of business because of lawsuits, it’ll be an exodus of users. Even if they just weren’t prepared and everything they did was legitimately the right thing to do, that ship has sailed. I know people I didn’t even know had a Robinhood account ask me if I was shutting my account down too. This will be fascinating to watch. Can the repair the brand damage? I’m skeptical. Is there any similar scenari…
I seriously doubt it will be even a blip on their radar. In fact, I think this will be their “no such thing as bad publicity” moment and they will have massive growth. People have short memories (no pun intended) and the switching costs are also nontrivial.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#9I am cautiously optimistic that this issue (which seems to have drawn “outrage” from both sides of the political spectrum) will spur some change with respect to contracts of adhesion that force arbitration and prohibit class action suits. It’s nearly impossible to hold a corporation accountable for wide-spread anticonsumer behavior in any meaningful way so long as they can tuck those two paragraphs into a massive con…
On the arbitration front, check out the situation with IndieGoGo and now Patreon. A large number of people acting in concert can fight back against them without going to a class action lawsuit (which are banned anyway). A few years back, the MO for companies was to require arbitration, not participate, and then let it linger forever. California changed the law recently (2019?) where if the company doesn't respond, they "lose" according to JAMS rules.
* I participated in the IndieGoGo arbitration process. Our fee was $250 while theirs was uncapped with most (public) estimates being in the $10-12k range. With a few hundred people, it starts turning into real money for them.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#10Robinhood won’t go out of business because of lawsuits, it’ll be an exodus of users. Even if they just weren’t prepared and everything they did was legitimately the right thing to do, that ship has sailed. I know people I didn’t even know had a Robinhood account ask me if I was shutting my account down too. This will be fascinating to watch. Can the repair the brand damage? I’m skeptical. Is there any similar scenari…
Each FINRA arbitration case would be expected to cost the company up to 10,000 in fees. If anywhere near the 100,000 users who left negative reviews on the Google Play store for the app file an arbitration and pay the filing fee, Robinhood will absolutely go bankrupt. If you are/were a Robinhood user: https://www.finra.org/arbitration-mediation/initiate-arbitra...
Submitting a negative review is a lot less effort than dealing with a court case. I think it’s unlikely a small percentage of 100,000 will pursue.