Showing posts with label investment. Show all posts
Showing posts with label investment. Show all posts

Tuesday, February 9, 2021

Death case against Robinhood tests common law disfavor for liability upon negligence leading to suicide

U.S. CFPB images

The family of a 20-year-old college student who committed suicide has sued the lately notorious Robinhood financial services company.

Filed yesterday in California, the suit has been reported widely (e.g., Fortune), as was the death in the lockdown summer of 2020 (e.g., Financial Times, Forbes).  I feel compelled to mention the case here because, in tragic coincidence, my Torts II class covered suicide in causation just last night.  Hat tip to law student Paul McAlarney, who spied the story at CNBC.  Courthouse News has the complaint

In the instant case, decedent Alex Kearns, a sophomore at the University of Nebraska–Lincoln, ran in front of a train while believing mistakenly that he had lost about $730,000 in investments through Robinhood.  The service emailed him to demand a deposit of $178,000 to rectify his negative balance, Fortune explained, without clarifying that he had options in his account that could more than cover the deposit.

I am no investment wiz, but McAlarney said that a representation of negative balance like this is normal in margin trading, and that understanding one's actual position can be "tricky" and "super confusing" for beginners.  Kearns tried three times to reach Robinhood customer service, to no avail; we all know how that goes.

Historically, common law was not friendly to claims of tort liability against actors whose negligence was alleged to have precipitated suicide.  The abrupt and powerfully intentional act of suicide was, and usually still is, regarded as a supervening cause of loss, breaking the chain of legal causation between injury and the conduct of actors earlier in time, and freeing them of legal responsibility.  The rule arose naturally from the social stigma that attached to suicide historically, and, relatedly, the criminalization of the act.

In recent decades, however, the historic common law approach softened.  Understanding of mental health issues diminished the stigmatization of suicide and pushed a wave of decriminalization.  Insofar as suicide remains criminalized or regulated as a civil offense, the rationale today is more often to facilitate mental health intervention than to deter or punish.  Accordingly, courts have evidenced increased willingness to see negligence as a legally cognizable cause in the aggravation of mental illness.

I wrote here on the blog about two cases in the last three years arising in higher education in Massachusetts.  In a case against MIT, in 2018, the Supreme Judicial Court (SJC) held that the defendant university could not be held liable in the suicide of a student, Nguyen, for failure of duty.  However, the Court wrote that it was not rejecting wholesale a university-to-student duty to prevent suicide; rather, on the facts, MIT could not have foreseen the tragedy.  Then in a case against Harvard, in 2019, the Superior Court followed the SJC's lead and refused to dismiss a liability claim in the suicide of a student, Luke Tang (documentary film).  That case is now in discovery (search Middlesex County case no. 1881CV02603).

The civil iteration of the Michelle Carter case, in which Carter, by text message, exhorted teen peer Roy Conrad to commit suicide, would have marked a profound test of the old common law rule, but was settled in 2019.  Pending in the Massachusetts legislature is a bill, "Conrad's Law," that would explicitly criminalize the facilitation of suicide.  Carter was convicted of involuntary manslaughter, and the SJC upheld the conviction as against a First Amendment challenge.  The U.S. Supreme Court denied certioari.

At the end of December, the Sixth Circuit affirmed denial of a Cincinnati school board's motion to dismiss a suit over a third grader's suicide precipitated by bullying.  Professor Alberto Bernabe wrote about the case for his Torts Blog and observed, as to proximate causation, "the court found that the boy’s suicide was plainly foreseeable, especially considering [that] the school’s guidelines on bullying include suicide as a risk."

Tragedy arising from investment losses is not new.  My torts casebook with Professor Marshall Shapo, in the chapter on attenuated duty and causation, noted a mass shooting and suicide by a day trader in 1999.  The Georgia Court of Appeals affirmed summary judgment for the shooter's former employers as against claims by victims.  The court wrote that "the issue of proximate cause is so plain, palpable, and indisputable as to demand summary judgment for the defendants."  The Kearns case relocates the risk to the private home and compounds the matter with investor inexpertise, changes wrought, for better and worse, by the electronic democratization of access to financial markets.

The case is Kearns v. Robinhood Financial LLC, No. 21CV375872 (Cal. Super. Ct. Santa Clara Cty. filed Feb. 8, 2021).