Bass, Berry & Sims attorney Chris Lazarini provided insight on a case in which plaintiff in a putative class action sought injunctive relief under Rules 23(d) and 65 of the Federal Rules of Civil Procedure alleging the defendant provided misleading communications to potential class members. The court denies the request for ex parte injunctive relief, stating the plaintiff did not make a clear evidentiary showing of the following:

  • A particular form of communication had occurred or threatened to occur.
  • The communication was an abuse, threatening the proper functioning of the litigation.

Chris provided the analysis for Securities Online Litigation Alert (SOLA). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SOLA, please visit the SOLA website to sign up for the newsletter.

Taaffe vs. Robinhood Markets, Inc., No. 8:20-cv-513 (M.D. Fla., 3/31/20)

*A party seeking injunctive relief in a putative class action under FRCP 23(d) need not satisfy the requirements of FRCP 65.

**Instead, the movant must make a clear evidentiary showing that (a) a particular form of communication has occurred or is threatened to occur and (b) the communication is an abuse, threatening the proper functioning of the litigation.

Defendants provide an internet/cloud-based trading platform to customers through a mobile application. On the morning of March 2, 2020, a day on which the Dow, S&P, and NASDAQ soared, Defendants notified their customers via email that the platform was down. Defendants explained that the outages resulted from an “unprecedented load” on the platform. Plaintiff filed this putative class action on March 4, claiming the class suffered significant damages when they could not access Defendants’ platform on March 2.

On March 26, he filed this emergency motion for a temporary restraining order and preliminary injunction under Rule 23(d) and Rule 65 of the Federal Rules of Civil Procedure. In support, he alleged Defendants were misleading prospective class members into waiving their rights by offering them a “goodwill credit of $75,” which could only be obtained by electronically signing a short form release. Plaintiff requested Defendants be enjoined from sending additional misleading communications to prospective class members and be directed to notify prospective class members of this case and provide his counsel with their contact information. Plaintiff also requested that releases already signed be voided unless affirmed by the customer after receiving notice.

The Court declines to issue an injunction under Rule 23(d). The Court finds a particular communication occurred, but determines it was not an abuse. The Court questions whether the declarations from Plaintiff and his counsel are sufficient, particularly since neither explicitly said the communications misled customers, but does not focus on them, because Defendants stated they would stipulate that the releases would be used only against customers who filed individual actions outside of the class action context. The Court also faults Plaintiff for not requesting an evidentiary hearing.

Finding multiple procedural deficiencies, the Court then denies the request for ex parte injunctive relief under Rule 65. First, the Court finds Plaintiff failed to show notice and a hearing was impracticable, if not impossible. Referencing Defendants’ counsel’s assertions that Plaintiff’s counsel filed the motion within three hours of leaving a voicemail, and without waiting for a response, the Court concludes giving notice was not impractical or impossible. Second, the Court finds both proposed orders submitted by Plaintiff failed to strictly comply with Rule 65(b), as required by local rules, in that neither stated the basis for why the order was issued without notice or why the injury was irreparable.

The Court also notes that Plaintiff’s attorney’s certification failed to state why notice should not be required and surmises the absence is because notice was actually given. Finally, the Court finds the motion fails to satisfy the bond requirements of Rule 65(c) and the related local rule. The Court rejects Plaintiff’s effort to shift the burden of showing a need for security to Defendants and finds Plaintiff offered no basis for its suggestion that security was not required. The Court also finds the motion without facts on which to make a reasoned determination on security.