By Jody Godoy
(Financial Eye) – Robinhood Markets Inc (NASDAQ:) has agreed in principle to settle a proposed class action filed by customers in the United States who claimed the investment app’s outages in March 2020 shut them out of trading on pandemic-related volatility.
The company filed notice of the pending deal with a San Francisco federal court on Thursday, saying it was resolving details of the agreement and would seek court approval of a settlement within 60 days. Court papers did not disclose how much Robinhood will pay to settle the action, which sought damages for a class of all U.S. users who held stock or options during a service outage on March 2, 2020.
The lawsuit also seeks damages for some users who lost money because of outages on March 2, 3 and 9, 2020.
A spokesperson for Robinhood declined to comment on Friday.
Robinhood shares were trading at around $10.38 on Friday afternoon, up around 11.9% from Thursday’s close.
The Menlo Park, California-based company, which advertised itself as democratizing finance, rode a surge of interest in stock trading from retail investors during the pandemic, but has since faced legal challenges from users claiming the app did not live up to its promises.
The lawsuit in San Francisco alleges Robinhood outages caused users to lose money when they could not trade. The users accused Robinhood of negligence, breach of contract, violating California’s fair business laws and other claims.
Other users sued after Robinhood temporarily restricted trading in January 2021 during a rally in Gamestop Corp, AMC Entertainment (NYSE:) and other so-called “meme stocks.” A judge dismissed the proposed class action in January, saying such restrictions were allowed under Robinhood’s customer agreement.