E*TRADE dismissal from “meme stock” MDL

Davis Polk secured the dismissal of several class action lawsuits filed against E*TRADE in connection with the historic market activity that occurred at the end of January 2021 related to the trading of certain “meme stocks,” including GameStop Corp. and AMC Entertainment Holdings Inc., driven in large part by the Reddit community WallStreetBets.

In January and February 2021, multiple class action lawsuits were filed against major broker-dealers, including E*TRADE, in jurisdictions across the country asserting antitrust, securities, and state law breach of contract and tort claims over allegations that the broker-dealers restricted trade and engaged in a coordinated scheme to fix prices of the relevant “meme stocks.”

On April 1, 2021, the actions were consolidated into a multidistrict litigation (MDL) and transferred to the Honorable Cecilia M. Altonaga in the Southern District of Florida. Judge Altonaga subsequently divided the case into four tranches, including one composed of antitrust claims against defendants (the “Antitrust Tranche”). Plaintiffs subsequently filed consolidated complaints for all four tranches, superseding the 71 previously filed individual complaints. Only the Antitrust Tranche included E*TRADE as a defendant.

On August 30, 2021, Davis Polk, alongside counsel for other defendants, filed a motion to dismiss the Antitrust Tranche complaint with prejudice. On November 17, 2021, Judge Altonaga dismissed the Antitrust Tranche complaint without prejudice, finding that plaintiffs had failed to allege direct or circumstantial evidence of a conspiracy, as required to maintain a claim under Section 1 of the Sherman Act, but allowing plaintiffs to file a final amended complaint. On January 20, 2022, Antitrust Tranche plaintiffs filed their final amended complaint, and they did not name E*TRADE as a defendant, ending E*TRADE’s involvement as a named party in the MDL.

The Davis Polk team included partner Brian S. Weinstein and counsel Gina Cora.