Gordon v. Robinhood Fin.

547 P.3d 945

Isaac GORDON, an individual, and all those similarly situated, Appellant,

v.ROBINHOOD FINANCIAL, LLC, a Delaware limited liability company, and subsidiary of Robinhood Markets, Inc., a Delaware corporation, Respondent.

No. 38623-6-III

Court of Appeals of Washington, Division 3.

Filed May 2, 2024

Appeal from Spokane Superior Court, Docket No: 19-2-04574-9, Honorable Michelle D. Szambelan, Judge

Philip Albert Talmadge, Talmadge/Fitzpatrick, 2775 Harbor Ave., Sw, Third Floor Ste. C, Seattle, WA, 98126-2138, Aaron Paul Orheim, Talmadge/Fitzpatrick, 2775 Harbor Ave., Sw Unit C, Seattle, WA, 98126-2168, Brian Cameron, Attorney at Law, 905 W Riverside Ave., Ste. 404, Spokane, WA, 99201-1099, for Appellant.

Sawyer Robert Margett, Riverside NW Law Group, PLLC, 905 W Riverside Ave., Ste. 208, Spokane, WA, 99201-1099, Kenneth E. Payson, Lauren Burdette Rainwater, Davis Wright Tremaine LLP, 920 5th Ave., Ste. 3300, Seattle, WA, 98104-1610, Amy M. Mensik, Williams Kastner & Gibbs, PLLC, 601 W. 1st Avenue, Suite 1442, Spokane, WA, 99201, Shelley Noelle Ripley, Paine Hamblen, P.S., 717 W Sprague Ave., Ste. 1200, Spokane, WA, 99201-3905, for Respondent.

PUBLISHED OPINION

Lawrence-Berrey, C.J.

¶1 Isaac Gordon commenced a class action lawsuit against Robinhood Financial, LLC, asserting that the company’s refer-a-friend text messaging practices for acquiring new customers violated Washington’s Consumer Protection Act (CPA), chapter 19.86 RCW, and Washington’s Commercial Electronic Mail Act (CEMA), chapter 19.190 RCW.

¶2 Through discovery, it became apparent that Gordon had received the offending text message from the brother of one of his attorneys, that Gordon and two of his attorneys had manufactured his claim, that they had done this in other class action lawsuits, and that they had made false and misleading statements in pleadings designed to hide this.

¶3 Once caught, Gordon and his attorneys surreptitiously dismissed the lawsuit without prejudice. On reconsideration of the dismissal order, the trial court dismissed the lawsuit with prejudice and assessed attorney fee sanctions against Gordon and his attorneys for almost $750,000. The legal bases for these sanctions were RCW 4.84.250 (the minor claims statute), RCW 4.84.185 (the frivolous claim statute), and CR 11.

¶4 On appeal, Gordon and his attorneys argue the trial court erred when it imposed sanctions. We conclude that a class action lawsuit is not a minor claim for purposes of RCW 4.84.250—even if the putative class representative’s claim is small, and that Gordon’s claim was not frivolous within the meaning of RCW 4.84.185. We, however, conclude that the trial court did not abuse its discretion when it found that Gordon’s and his attorneys’ misconduct warranted CR 11 sanctions. We remand for the trial court to reconsider what amount of CR 11 sanctions actually are necessary to deter Gordon and his attorneys from engaging in claim manufacturing in the future.

FACTS

¶5 Robinhood Financial, LLC, is an investment brokerage that allows its customers to invest commission-free in stocks, exchange-traded funds, options, and cryptocurrency utilizing Robinhood’s website and mobile applications (Apps). This case concerns a "refer-a-friend" marketing program operated by Robinhood, through which Robinhood’s customers can refer another person to join Robinhood. As part of the referral program, if a customer refers a person and that person signs up for Robinhood, then Robinhood will give the customer and the person one share of free stock each.

¶6 Robinhood provides customers with two methods for sending referral messages. The first method allows customers to copy a link from Robinhood’s website or Apps and share it via text message, e-mail, or other social media or messaging application. The second method allows customers to send messages by sharing their contacts from their mobile device’s address book. Robinhood does not itself send any of the referral program messages, and Robinhood customers have ultimate control over the message’s contents.

¶7 In July 2019, Isaac Gordon, a Washington resident, received a text message from Robinhood’s referral program. The text message contained a hyperlink to Robinhood’s website and stated, "Your free stock is waiting for you! Join Robinhood and we’ll both get a stock like Apple, Ford, or Facebook for free. Sign up with my link." Clerk’s Papers (CP) at 8-9.

Superior court proceedings

¶8 In October 2019, Gordon filed a class action complaint against Robinhood Financial, LLC, in Spokane County Superior Court. He alleged he received an unsolicited commercial electronic text message from Robinhood’s referral program that enabled its existing users to transmit unsolicited text messages to targeted recipients like himself, He also alleged he did not consent, affirmatively or otherwise, to receive the text message from Robinhood or its existing users. He further alleged the text message violated the CPA, chapter 19.86 RCW, through Washington’s CEMA, chapter 19.190 RCW. Gordon sought to represent a class of similarly situated individuals who also received referral text messages from Robinhood. His complaint alleged that he and other putative class members were each entitled to recover $500 under the CEMA, $1,000 in exemplary damages, and attorney fees and costs for each CEMA violation.

Removal to federal court

¶9 In November 2019, Robinhood removed the case to the United States District Court for the Eastern District of Washington under the "Class Action Fairness Act of 2005" (CAFA), Pub. L. No. 109-2, 119 Stat. 4 (2005). In doing so, Robinhood alleged that the aggregated amount of damages, fees, and costs Gordon sought "surpass CAFA’s $5,000,000 amount-in-controversy requirement." CP at 23.

Robinhood offers to settle

¶10 In September 2020, Robinhood made a settlement offer to Gordon for $1,501. The letter stated that, pursuant to RCW 4.84.250 and .270, Gordon’s maximum recovery possible on his claim as pleaded was $1,500. The letter further stated that if he failed to accept the settlement offer, he would be liable for Robinhood’s attorney fees, which exceeded $100,000 at that time. Robinhood did not receive a response to this settlement offer.

Class certification

¶11 In November 2020, Gordon filed a motion for class certification. Robinhood opposed the motion. Relying on Gordon’s allegations, the federal court certified the class and appointed Gordon as the class representative. The court appointed Kirk D. Miller as class counsel, and Brian G. Cameron and Shayne J. Sutherland as co-class counsel. Soon after, the court granted Gordon’s motion for E. Michelle Drake and Sophia Rios to appear as pro hac vice counsel and later appointed E. Michelle Drake as co-class counsel.

¶12 Discovery proceeded and, in April 2021, Gordon responded to Robinhood’s first set of discovery requests. In response to two interrogatories, Gordon stated he received two unsolicited Robinhood referral text messages. As for the first, he described the sender as "unknown" with whom he had no relationship, and he was "uncertain" if he provided the sender with his telephone number. CP at 2133. As for the second, he described being "uncertain" whether he had a relationship with the sender or knew the sender’s name. CP at 2134. Gordon also produced screenshots of the text messages:

547 P.3d 951_1.bmp547 P.3d 951_2.bmp

CP at 2233, 2235. The screenshots showed only the referral text message and no other messages between Gordon and the senders before or after the referral text message. In response to another of Robinhood’s

interrogatories, Gordon disclosed that he was a plaintiff in three other class action lawsuits.

Robinhood’s motion to stay

¶13 In May 2021, Robinhood filed a motion to stay the case so that it could conduct additional discovery into "facts that strongly suggest that class counsel orchestrated sending to Plaintiff Isaac Gordon the very text messages that form, the basis for Gordon’s claim in this lawsuit." CP at 2078. Robinhood explained it had learned that the first text message was sent from a telephone number belonging to Nathan Budke, a friend and classmate of Ewan Cameron, the son of Brian Cameron, one of Gordon’s attorneys. Robinhood discovered that the second text message was sent from a telephone number belonging to John Cameron, Brian Cameron’s brother. Robinhood also learned that Brian Cameron represented Gordon in two of the class actions Gordon identified: Gordon v. MOD Super Fast Pizza, LLC¹ and Gordon v. Healthy Halo Insurance Services, Inc.² Both of those cases were premised on CEMA violations involving referral text messages, and their complaints were nearly identical to Gordon’s complaint against Robinhood. In light of this information, Robinhood explained that it may seek to disqualify Brian Cameron as counsel, remove Gordon as class representative, decertify the class due to fraud and misrepresentation, and seek sanctions under Rule 11.

¶14 Soon after Robinhood’s motion to stay, Gordon served amended interrogatory answers on Robinhood in which he admitted, contrary to his prior answers, that he had been friends with John Cameron for years and had smoked cigars, played fantasy role play and card games, and attended a concert with him. Gordon admitted to providing his telephone number to John Cameron. Gordon also produced additional screenshots of text message conversations that he had with John Cameron immediately before and after the second Robinhood referral text message. The screenshots showed light-hearted banter between the two men, making it dear they knew each other well. Gordon continued to deny that he knew the identity of the sender of the other text message.

¶15 In response to Robinhood’s motion to stay, Gordon agreed that the case should be stayed, but opposed allowing Robinhood to conduct additional discovery. Instead, Gordon requested that the court stay all discovery in order for him to file motions for his class counsel...