DEY v. ROBINHOOD MARKETS INC (2025)

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

Re: Dkt. No. 30

On October 25, 2024, Basudeb Dey (“Plaintiff”) brought this action against Robinhood Markets, Inc., Robinhood Financial, LLC, and Robinhood Securities, LLC (“Defendants” or “Robinhood”), concerning Robinhood's IntraFi Network Deposit Sweep Program (“Deposit Sweep Program” or “Program”). As part of this Program, Robinhood offers its customers a choice to have their uninvested cash automatically transferred from their brokerage accounts into interest-bearing Deposit Accounts at other Program Banks, which are selected by Robinhood. According to Plaintiff, the purpose of the Program is to earn interest and provide customers with Federal Deposit Insurance Corporation (“FDIC”) insurance on their uninvested cash.

However, Plaintiff alleges that customers receive almost no interest because Robinhood's fees are so high that it “retains nearly all the returns its customers’ cash generates.” (Dkt. No. 1 (“Compl.”) ¶ 3.) Based on these allegations, Plaintiff brings the following claims: breach of fiduciary duty (Count I), gross negligence (Count II), negligent misrepresentation and omission (Count III), breach of the implied covenant of good faith and fair dealing (Count IV), and violation of California's Unfair Competition Law (“UCL”) (Count V). On January 10, 2025, Robinhood filed a motion to dismiss. (Dkt. No. 30.) For the reasons explained below, the motion is GRANTED IN PART AND DENIED IN PART. This order assumes that the reader is familiar with the facts of the case, the applicable legal standards, and the parties’ arguments.

Count I: Breach of Fiduciary Duty. “In order to plead a cause of action for breach of fiduciary duty, a plaintiff must show the existence of a fiduciary relationship, its breach, and damage caused by the breach.” Apollo Cap. Fund, LLC v. Roth Cap. Partners, LLC, 158 Cal.App.4th 226, 70 Cal. Rptr. 3d 199, 214 (2007).

California law is silent as to whether a fiduciary relationship presumptively exists in this context: that is, where Robinhood has undertaken the responsibility to set up and administer the Deposit Sweep Program, but assumes no further obligations. California imposes a fiduciary duty in broker-customer relationships. Duffy v. Cavalier, 215 Cal.App.3d 1517, 264 Cal. Rptr. 740, 752 (1989); see also Apollo, 70 Cal. Rptr. 3d at 214 (“It is a long-settled rule that a stockbroker owes a fiduciary duty to his or her customer” (internal quotation and citation omitted)). In the broker-customer context, fiduciary obligations apply because the broker is acting as “an adviser to the customer about investment decisions,” and has therefore assumed a position of confidence with respect to its customer. Apollo, 70 Cal. Rptr. 3d at 214 (internal quotation omitted). By contrast, in the bank-depositor context, California courts have held that no fiduciary relationship exists. See, e.g., Das v. Bank of America, N.A., 186 Cal.App.4th 727, 112 Cal. Rptr. 3d 439, 450 (2010). In that context, California courts point to the limited obligations owed to depositors, and the lack of confidential relationship that exists between the depositor and the bank. See id. at 451 (no fiduciary relationship where “contractual relationship does not involve any implied duty to supervise account activity” and the bank is not a “guarantor of [the customer's] success” or “liable for the hardships which may befall” the customer (internal quotations and citations omitted)).

As alleged, Robinhood's relationship with customers in the Program is more akin to a bank-depositor relationship than a broker-customer relationship. In determining whether a fiduciary relationship has arisen, California law looks to the nature of the relationship, whether the agent has assumed a position of trust and confidence, and whether the agent has assumed control over the principal's property. See, e.g., Petersen v. Secs. Settlement Corp., 226 Cal.App.3d 1445, 277 Cal. Rptr. 468, 470-73 (1991); Brown v. Cal. Pension Adm'rs & Consultants, Inc., 45 Cal.App.4th 333, 52 Cal. Rptr. 2d 788, 796-97 (1996). The limited purpose of the Program as set forth in the Deposit Sweep Program Agreement (“DSA”) is to transfer a customer's uninvested cash into a deposit account when a customer enrolls in the Program. The facts alleged do not support a plausible inference that Robinhood has assumed a position of trust and confidence concerning that decision or has held itself out as offering advice to customers regarding their uninvested cash. Nor does the Complaint allege any facts to support an inference that Robinhood has obligated itself to optimize financial returns on the uninvested cash for its customers. Though the DSA obligates Robinhood to set up relationships with Program Banks and set the Priority Order by which funds are deposited into those Deposit Accounts (with the option for customers to veto certain Program Banks), the DSA does not provide that Robinhood applies its expertise in selecting those banks or setting the Priority Order. To the contrary, the DSA provides that Robinhood is “not responsible for negotiating interest rates on [the customer's] behalf,” nor do the Program Banks recruited into the Program have “a duty to offer the highest rates available or rates that are comparable to money market mutual funds.” (Dkt. No. 31-2 (“DSA”) at 4, 9.)¹

Moreover, even if there were a fiduciary duty, it would be limited to the act of creating the customer's Deposit Accounts at each Program Bank, and making deposits or withdrawals from those accounts. “The existence and extent of the duties of the agent to the principal are determined by the terms of the agreement between the parties, interpreted in light of the circumstances under which it is made.” Chen v. PayPal, Inc., 61 Cal.App.5th 559, 275 Cal. Rptr. 3d 767, 780 (2021) (quoting Restatement (Second) of Agency § 376); see also Petro-Diamond Inc. v. SCB & Assocs., LLC, 122 F. Supp. 3d 949, 959 (C.D. Cal. 2015) (“The scope of a fiduciary duty ‘varies with the facts of the relationship.’ ” (quoting Rosenthal v. Great W. Fin. Secs. Corp., 14 Cal.4th 394, 58 Cal.Rptr.2d 875, 926 P.2d 1061, 1080 (1996))). As described in the DSA, the scope of Robinhood's agency is limited to creating the deposit accounts at various banks and making the required deposits and withdrawals. The DSA expressly states that Robinhood charges fees in exchange for its services. There is no allegation that any of these responsibilities Robinhood undertook as an agent were carried out in a manner that violated fiduciary duties: that is, that Robinhood acted against its customers’ interest in its selection of the banks or its execution of the withdrawals and deposits.

Plaintiff also argues that the Regulation Best Interest gives rise to fiduciary obligations owed by Robinhood. However, the Regulation Best Interest “establishes a standard of conduct for broker-dealers and associated persons when they recommend securities transactions or investment strategies to retail customers.” SEC v. W. Int'l Secs., Inc., No. 22-cv-04119, 2023 WL 2480732, at *1 (C.D. Cal. Mar. 13, 2023). The facts alleged in the Complaint do not establish that Robinhood was operating the Program as a broker, nor that it made any recommendations regarding securities transactions or investment strategies relating to the Program. (See Dkt. No. 31-4 (“Regulation Best Interest Disclosure”) at 2, 8 (indicating that Robinhood's Regulation Best Interest disclosures apply to its ETF portfolio recommendations and its stock lending recommendations).) The motion to dismiss the claim for breach of fiduciary duty is therefore granted.

Count II: Gross Negligence. “Gross negligence long has been defined in California and other jurisdictions as either a want of even scant care or an extreme departure from the ordinary standard of conduct.” City of Santa Barbara v. Superior Court, 41 Cal.4th 747, 62 Cal.Rptr.3d 527, 161 P.3d 1095, 1099 (2007) (internal quotations and citations omitted); see also Fed. Deposit Ins. Corp. v. Switzer, No. 13-cv-03834, 2014 WL 12696532, at *3 (N.D. Cal. Apr. 9, 2014) (“To establish gross negligence, the [plaintiff] must show that the defendants failed to provide even scant care or engaged in an extreme departure from the ordinary standard of conduct” (internal quotation and citation omitted)). This claim is wholly derivative of the breach of fiduciary duty claim. Because no fiduciary duty claim is stated, there is no basis to find that Robinhood deviated significantly from the ordinary standard of conduct. Accordingly, the motion to dismiss this claim is granted.

Count III: Negligent Misrepresentations and Omissions. “To state a claim for negligent misrepresentation under California law, a plaintiff must allege: (1) the misrepresentation of a past or existing material fact; (2) without reasonable ground for believing it to be true; (3) with intent to induce another's reliance on the fact misrepresented; (4) justifiable reliance on the misrepresentation; and (5) resulting damage.” Crystal Springs Upland Sch. v. Fieldturf USA, Inc., 219 F. Supp. 3d 962, 969 (N.D. Cal. 2016) (citing Apollo, 70 Cal. Rptr. 3d at 213). Furthermore, “a positive assertion is required; an omission or an implied assertion or representation is not sufficient.” Apollo, 70 Cal. Rptr. 3d at 213; see also OCM Principal Opportunities Fund, L.P. v. CIBC World Mkts. Corp., 157 Cal.App.4th 835, 68 Cal. Rptr. 3d 828, 847 (2007) (“[W]hen the defendant purports to convey the whole truth about a subject, misleading half-truths about the subject matter may constitute positive assertions for the purpose of negligent misrepresentations” (internal quotation and citation omitted)). Each statement made by Robinhood is analyzed in turn.

As a threshold matter, negligent misrepresentation is a “fraud-based claim[ ], and must meet the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure.” Avakian v. Wells Fargo Bank, N.A., 827 F. App'x 765, 766 (9th Cir. 2020) (mem.). Under Rule 9(b), fraud allegations must include the “time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (internal quotation and citation omitted). Plaintiff has included sufficient information about the specific content of the false representations, which are detailed below, as well as the time and place in which they were disclosed, such to meet the heightened pleading requirement under Rule 9(b).

However, Plaintiff has failed to allege that he actually relied on the misrepresentations or that such reliance was justifiable. To establish the reliance element of the claim, a plaintiff must show “(1) that they actually relied on the defendant's misrepresentations, and (2) that they were reasonable in doing so.” OCM Principal, 68 Cal. Rptr. 3d at 863 (citation omitted). To prove actual reliance, a plaintiff must demonstrate that a “complete causal relationship [exists] between the alleged misrepresentations and the harm claimed to have resulted therefrom.” Id. at 864 (internal quotations and citations omitted). Additionally, for a plaintiff's reliance to be “justifiable,” the circumstances must be such to “make it reasonable for plaintiff to accept defendant's statements without an independent inquiry or investigation.” Jones v. Barrett, No. 23-cv-01102, 2024 WL 4142676, at *3 (S.D. Cal. Sept. 10, 2024) (quoting Wilhelm v. Pray, Price, Williams & Russell, 186 Cal.App.3d 1324, 231 Cal. Rptr. 355, 358 (1986) (emphasis in original)). Because Plaintiff has not alleged that he read any of the disclosures contained in the DSA, Plaintiff has not sufficiently pled that he actually relied on the misrepresentations when he chose to enter into the Program. Moreover, Plaintiff's Complaint contains only a conclusory allegation that he “justifiably relied on Robinhood's representations and omissions regarding the Program,” but does not allege any facts about his actual reliance, such as stating that he reviewed the DSA. (Compl. ¶ 122.) Thus, Plaintiff has failed to state a claim with respect to any of the misrepresentations, and the motion to dismiss this claim is granted.

At oral argument, Plaintiff's counsel represented that Plaintiff could amend his complaint to allege that he actually and justifiably relied on the misrepresentations. To determine whether leave to amend is appropriate, this order proceeds to analyze each alleged misrepresentation to consider whether it would state a claim if Plaintiff had sufficiently alleged actual and justifiable reliance.

First, Plaintiff alleges that the following statement contained in the DSA constitutes a negligent misrepresentation: “[I]nterest rates on the Deposit Accounts will vary based upon prevailing economic and business conditions” (“Statement #1”). (Id. ¶ 76; see also DSA at 4.) This sufficiently alleges a misrepresentation. Plaintiff has plausibly alleged that a reasonable customer would understand this statement to mean that interest rates will correlate to market conditions—that is, when market conditions improve, interest rates will go up, and when market conditions falter, interest rates will go down. However, as Plaintiff alleges in his Complaint, the interest rates paid by Robinhood appear to be entirely divorced from prevailing economic conditions. In fact, “while Robinhood's interest rates under the Deposit Sweep Program have ranged from 0.01% to 1.5% from June 2022 to present, the 1-Month U.S. Treasury Rate has exceeded 1.5% and reached over 5% during that same period.” (Compl. ¶ 56.) And as Plaintiff explains, “[i]n reality[,] even as prevailing interest rates climbed to their highest in over twenty years, Plaintiff and Class members were paid significantly below-market interest rates, as the rates paid to them were instead based on Robinhood's ability to generate revenue for itself.” (Id. ¶ 76.) These allegations plausibly support an inference that the interest rates paid to customers are not, in fact, determined by external market conditions but, instead, are more directly affected by Robinhood's choice to increase the amount of fees it extracts for itself. Thus, this statement is sufficiently alleged to be a negligent misrepresentation.

Plaintiff also alleges that the following statement is a negligent misrepresentation: “[The interest rates on the Deposit Accounts will be determined by the amount the Program Banks are willing to pay on the Deposit Accounts minus the fees, if any, paid to Robinhood” (“Statement #2”). (Id. ¶ 73; DSA at 8.) Although this is a closer question, Plaintiff has sufficiently alleged this statement to be false and misleading as well. The Complaint plausibly alleges that a reasonable consumer would understand this statement to mean that the interest rates paid to customers will correlate with the amount of interest the Program Banks decide to pay—meaning that if a Program Bank sets a higher interest rate, the payout to the customer will be higher in turn, and vice versa. (Compl. ¶ 73.) In reality, however, the amount of interest received by Plaintiff “bear[s] almost no relation” to the amount of interest the Program Banks are willing to pay. (Id. ¶ 74.) Thus, Plaintiff has sufficiently alleged that this statement constitutes a negligent misrepresentation because it misleads customers as to the method by which the interest rates paid to customers is determined.

As alleged, the remaining statements do not constitute negligent misrepresentations for purposes of stating a claim. First, the DSA states that “[t]he interest rates paid with respect to the Deposit Accounts at a Program Bank may be higher or lower than the interest rates available to depositors making deposits directly with the Program Bank or other depository institutions in comparable accounts, or other options in which you can invest free credit balances” (“Statement #3”). (Id. ¶ 72; DSA at 9.) Although Plaintiff alleges that this statement is false and misleading because the interest rates paid “will be lower than yields on essentially any other available cash alternatives,” Plaintiff has not plausibly alleged facts indicating that the rates paid will always be lower. (Compl. ¶ 72.) And nothing in the statement implies how often the interest rate in the Program will be higher or lower than other options. Accordingly, the statement is not plausibly alleged to be untrue.

The DSA also states that the “fee paid to Robinhood, if any, will affect the interest rate paid” to deposit accounts and that the fees “will affect the interest rate paid by the Program Banks” to customers enrolled in the Program (“Statement #4”). (Id. ¶ 77; DSA at 4, 11.) Although Robinhood does not disclose the amount of fees it extracts in this statement, which Plaintiff alleges is misleading, the reasonable implication of this statement is that fees paid to Robinhood will be subtracted from the interest rates paid to enrollees. This statement is factually true, and is therefore not sufficiently alleged to be misleading.

The same is true for the following statement: “Each Program Bank will pay Robinhood a fee equal to a percentage of the daily deposit balance in [the customer's] Deposit Accounts at the Program Bank․ The amount of the fee received by Robinhood will affect the interest rate paid by the Program Bank on [the customer's] Deposit Accounts” (“Statement #5”). (Compl. ¶ 79; DSA at 11.) Again, this statement is factually true, and merely describes the method by which Robinhood calculates its fees. Although this statement “omits the actual proportions of the returns that Robinhood receives as opposed to the customer,” which Plaintiff alleges is misleading (Compl. ¶ 79), that omission does not transform this statement into a “misleading half-truth” for purposes of a negligent misrepresentation claim, OCM Principal, 68 Cal. Rptr. 3d at 847.

Finally, Plaintiff alleges that the following statement is false and misleading: “When Robinhood makes a Recommendation to you, it is doing so as a broker-dealer, and the Recommendation will be made in your best interest, without placing the interest of Robinhood ahead of your interests” (“Statement #6”). (Compl. ¶ 80; Regulation Best Interest Disclosure at 2.) However, that statement is contained in Robinhood's Regulation Best Interest Disclosure—which only applies to recommendations regarding (1) ETF Portfolio Recommendations and (2) Stock Lending Recommendations—and is not contained in the DSA. Plaintiff does not allege that Robinhood made ETF portfolio recommendations or stock lending recommendations to him, or that Robinhood failed to act in his best interest in doing so. Thus, that statement is not sufficiently alleged to be false or misleading.

In conclusion, based on the foregoing analysis, Plaintiff has plausibly alleged only that Statements #1 and #2 constitute negligent misrepresentations. Accordingly, leave to amend is granted to allege actual and justifiable reliance only as to Statements #1 and #2, but not as to the other statements.

Count IV: Breach of Implied Covenant of Good Faith and Fair Dealing. To state a claim for breach of the implied covenant of good faith and fair dealing, a plaintiff must allege a defendant's “failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party.” Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal.App.3d 1371, 272 Cal. Rptr. 387, 399-400 (1990). Although a “breach of a specific provision of the contract is not a necessary prerequisite” to breach the implied covenant, Carma Devs. (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal.4th 342, 6 Cal.Rptr.2d 467, 826 P.2d 710, 727 (1991), the covenant “cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement,” Guz v. Bechtel Nat'l Inc., 24 Cal.4th 317, 100 Cal.Rptr.2d 352, 8 P.3d 1089, 1110 (2000). But “[w]here a contract confers on one party a discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing.” Shirley v. L.L. Bean, Inc., No. 18-cv-02641, 2019 WL 1205089, at *3 (N.D. Cal. Mar. 14, 2019) (internal quotations and citations omitted).

Robinhood argues that Plaintiff's claim for breach of the implied covenant is “foreclosed by the express terms of the DSA.” (Dkt. No. 30 at 20.) To support its argument, Robinhood points to the following disclaimers contained in the DSA: “Program Banks do not have a duty to offer the highest rates available or rates that are comparable to money market mutual funds”; “interest rates paid with respect to the Deposit Accounts at a Program Bank may be higher or lower than the interest rates available” elsewhere; and “Robinhood is not responsible for negotiating interest rates on [Plaintiff's] behalf.” (Id. at 21 (quoting DSA).) To the contrary, all that is disclaimed by these statements is that Robinhood was under no obligation to negotiate better rates with the Program Banks, and furthermore, that the Program Banks were under no obligation to offer the highest rates available to Robinhood's customers. But nothing in the DSA disclaims Robinhood's obligation to act in good faith when setting its own fees.

Moreover, the DSA also states that Robinhood pays its customers an interest rate based on the “amount the Program Banks are willing to pay” and the “prevailing economic and business conditions,” less the fee Robinhood extracts for itself. (DSA at 4, 8-9.) As previously explained, the natural reading of these statements is that the interest rates paid to customers are determined based on the rates set by the Program Banks and prevailing market conditions. Thus, Robinhood plausibly breached the implied covenant by exercising its discretion to set its own fee in a manner that frustrated those provisions of the contract and ran contrary to customers’ reasonable expectations. Moreover, as Plaintiff alleges, the purpose of the Program is to “earn interest on uninvested brokerage cash,” and as such, Robinhood's decision to set a fee so high that almost no interest can be earned by the customer defeats the purpose of the agreement. (Compl. ¶ 2; see also id. ¶ 130 (Defendants breached the implied covenant by “failing to pay Plaintiff and the Class a reasonable rate of interest on cash held in the Deposit Sweep Program”).)

Robinhood argues that another purpose of the agreement is to ensure that deposits are protected by FDIC insurance, and thus, that Plaintiff's rights to the benefits of the contract have not been extinguished. However, that inquiry is not suitable for determination on the pleadings, nor does it provide a basis for dismissal of the claim as a matter of law. As alleged, Plaintiff has plausibly established that the purpose of the Program was two-fold—that is, to provide some amount of interest on previously uninvested cash, in addition to providing FDIC insurance. Accordingly, because Plaintiff has adequately pled his claim, the motion to dismiss with respect to this claim is denied.

Count V: Violation of UCL. Plaintiff's equitable UCL claim must be dismissed because Plaintiff has not sufficiently alleged that he lacks an adequate remedy at law. In Sonner v. Premier Nutrition Corp., the Ninth Circuit held that a plaintiff “must establish that she lacks an adequate remedy at law before securing equitable restitution for past harm under the UCL.” 971 F.3d 834, 844 (9th Cir. 2020); see also Guzman v. Polaris Indus. Inc., 49 F.4th 1308, 1314 (9th Cir. 2022) (holding that equitable jurisdiction is “required for a federal court to hear the merits of an equitable claim”). Plaintiff's Complaint contains no allegations that he lacks an adequate remedy at law, and thus, his claim must be dismissed.

Moreover, “[t]he California Supreme Court [has] explained that because ‘reliance is the causal mechanism of fraud,’ a plaintiff ‘proceeding on a claim of misrepresentation as the basis of [their] UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements.’ ” Nacarino v. Chobani, LLC, 668 F. Supp. 3d 881, 892 (N.D. Cal. 2022) (quoting Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 120 Cal.Rptr.3d 741, 246 P.3d 877, 888 (2011)). As previously described, Plaintiff has not sufficiently alleged reliance, which he must do in order to survive dismissal with respect to his UCL claim as well.

The dismissal is with leave to amend. If Plaintiff is able to correct those deficiencies, he has otherwise sufficiently alleged that Robinhood engaged in fraudulent and unfair business practices. “To state a claim under the ‘fraudulent’ prong of the UCL, it is necessary only to show that members of the public are likely to be deceived by the business practice.” In re Carrier IQ, Inc., 78 F. Supp. 3d 1051, 1111 (N.D. Cal. 2015) (internal quotation and citation omitted). For the reasons explained above, the Complaint plausibly alleges that a reasonable consumer would be deceived by Robinhood's disclosures relating to its Program.

Likewise, Plaintiff has otherwise sufficiently alleged an unfair business practice. To determine whether conduct is “unfair” under the UCL, California courts have articulated two tests: the balancing test and the tethering test. The Complaint adequately alleges unfairness under either.

Under the balancing test, set forth in South Bay Chevrolet v. General Motors Acceptance Corp., 72 Cal.App.4th 861, 85 Cal. Rptr. 2d 301 (1999), “ ‘unfair’ conduct occurs when the practice offends an established public policy or when the practice is immoral, unethical, unscrupulous or substantially injurious to consumers,” Hodsdon v. Mars, Inc., 891 F.3d 857, 866 (9th Cir. 2018), and “requires the court to weigh the utility of the defendant's conduct against the gravity of the harm to the alleged victim,” Bardin v. DaimlerChrysler Corp., 136 Cal.App.4th 1255, 39 Cal. Rptr. 3d 634, 636 (2006). Plaintiff alleges that the “gravity of harm resulting from Defendants’ unfair conduct outweighs any potential utility” and that Robinhood retains almost all of the interest earned on the cash in the Program for itself, leaving almost nothing for their customers. (Compl. ¶¶ 73, 143.) That is sufficient at the pleading stage. See, e.g., Wang v. OCZ Tech. Grp., Inc., No. 11-cv-01415, 2012 WL 12924975, at *8 (N.D. Cal. June 6, 2012) (“Whether the alleged injury is outweighed by countervailing benefits is considered a factual issue that courts rarely decide at the pleading stage” (internal quotations and citations omitted)).

Likewise, under the tethering test, set forth by the California Supreme Court in Cel-Tech Communications, Inc. v. L.A. Cellular Telephone Co., 20 Cal.4th 163, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999), “unfair” means “conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” Id., 83 Cal.Rptr.2d 548, 973 P.2d at 544; see also Hodsdon, 891 F.3d at 866 (“The Cel-Tech test did not apply to actions by consumers, but some courts in California have extended the Cel-Tech definition to consumer actions, while others have applied the South Bay test” (internal quotation and citation omitted)). The California Financial Code states a policy against “unfair” practices “in the provision of financial products and services” because those practices “undermine the public confidence that is essential to the continued functioning of the financial system and sound extensions of credit to consumers.” Cal. Fin. Code § 90000. Plaintiff's allegations that Robinhood kept almost all of the interest earned in the Program for itself are sufficient to state a violation to the spirit of this policy, at the pleading stage.

Accordingly, the UCL claim is dismissed with leave to amend.

Dismissing Robinhood Markets. Finally, Defendants argue that Robinhood Markets, Inc. should be dismissed from the case because it is “not a party” to the agreements at issue in this dispute. (Dkt. No. 30 at 22.) “[A] parent corporation ․ is not liable for the acts of its subsidiaries” without a showing that it operates the subsidiary as an “alter ego” to itself. Santa Clarita Org. for Plan. & Env't v. Castaic Lake Water Agency, 1 Cal.App.5th 1084, 206 Cal. Rptr. 3d 33, 50 (2016). To allege that Robinhood Markets may be held liable for the conduct of its subsidiaries, Plaintiff must allege facts from which Robinhood Markets could plausibly be inferred to have moved beyond the mere establishment of general policy and direction of its subsidiaries and, instead, to have “taken over performance of the subsidiary's day-to-day operations in carrying out that policy.” Sonora Diamond Corp. v. Superior Court, 83 Cal.App.4th 523, 99 Cal. Rptr. 2d 824, 839 (2000) (emphasis in original). Although that inquiry is often “highly fact intensive [ ] and inappropriate to resolve at the motion to dismiss stage,” Berrios-Bones v. Nexidis, LLC, No. 07-cv-00193, 2007 WL 3231549, at *9 (D. Utah Oct. 30, 2007), Plaintiff's Complaint contains no allegations whatsoever on that topic. Accordingly, Robinhood Markets is dismissed from the case, but with leave to amend.

Conclusion. Based on the foregoing reasons, the motion to dismiss is granted in part and denied in part. With respect to Counts I and II, the motion to dismiss is granted with leave to amend. With respect to Count III, the motion to dismiss is granted with leave to amend as to Statements #1 and #2, but without leave to amend as to the other statements. With respect to Count IV, the motion to dismiss is denied. With respect to Count V, the motion to dismiss is granted with leave to amend.

If Plaintiff wishes to file an amended complaint correcting the deficiencies identified above, counsel shall do so by May 19, 2025. The amended complaint may not add new claims or parties, or otherwise change the allegations, except to correct the identified deficiencies, absent leave of the Court or stipulation by the parties pursuant to Federal Rule of Civil Procedure 15. If no amended complaint is filed by that date, the case will proceed as to Count IV only, and the remaining claims will remain dismissed with prejudice.

IT IS SO ORDERED.

FOOTNOTES

1.   Citations to page numbers refer to the ECF pagination.

RITA F. LIN, United States District Judge