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Family of Young Man Who Thought He Owed Robinhood $170,000 Sues Over the App's Role in His Death

SAN ANSELMO, CALIFORNIA - DECEMBER 17: In this photo illustration, the Robinhood logo is displayed on an iPhone on December 17, 2020 in San Anselmo, California. The Securities and Exchange Commission has charged Silicon Valley start-up company Robinhood with deceiving customers about how the company makes money. The company has agreed to pay a $65 million civil penalty. (Photo Illustration by Justin Sullivan/Getty Images)
By Laura Temme, Esq. on February 25, 2021 1:30 PM

Alex Kearns was 20 years old in June 2020 when he rode his bicycle to a railroad crossing near his home and ran in front of an oncoming train. His family says that Robinhood, the investing app that made headlines earlier this year for its role in the GameStop short, is responsible for the distress that led Kearns to take his own life.

According to the family's wrongful death suit, Robinhood's "aggressive" and "reckless" tactics, coupled with poor customer service, caused Kearns to mistakenly believe he had lost $730,000 - and that he would have to pay at least $170,000 within just a few days.

"How was a 20-year-old with no income able to get assigned almost $1 million worth of leverage?" Kearns wrote in a note found by his cousin-in-law, Bill Brewster.

Except: Kearns owed Robinhood nothing.

Trying to Find Answers

The notifications on Kearns' Robinhood account were not the whole story. But despite his efforts to resolve the issue with customer service, Kearns was unable to contact anyone at Robinhood to find out what was going on.

Kearns was dealing with "put options" - a type of investment where the owner has the option to sell a certain amount of an underlying stock at a pre-determined price during a specific time frame.

Put Options in the Robinhood App

Through the Robinhood app, Kearns acquired and sold put options in the same stock in June 2020. In theory, this type of "spread" would limit his risk of losing money.

But Kearns didn't know there was a chance the put options he sold could be assigned before they expired -- meaning he would be required to purchase the underlying stocks before he could sell the options he still had.

And that seems to be what happened.

Family Says Notifications from Robinhood Were Behind Distress

Kearns was understandably distressed when he received emails from Robinhood stating that he had been "assigned." He was told he was required to purchase the more than $700,000 in shares he had optioned.

But the other thing Kearns didn't know -- and could not reach anyone at Robinhood to gain clarity on -- is that he could sell the put options he still held. This could easily cover what he owed.

The day after Kearns died, Robinhood sent an automated message to his account letting him know he owed nothing at all.

Issues With Robinhood's User Interface

Other Robinhood options traders have also reported seeing a negative cash balance that only exists until another portion of their trades is carried out.

However, the app's user interface doesn't make that clear.

Brewster told CNN Business that by pushing its product to young traders while not putting in safeguards to avoid this kind of confusion, Robinhood is responsible for his cousin's death.

Wrongful Death Lawsuits Involving Suicide

wrongful death lawsuit aims to hold a third party responsible for negligence or intent to cause harm that leads to someone's death. But claims involving suicide are much more complicated than traditional wrongful death claims.

In many jurisdictions, including California, courts have historically viewed suicide as an intervening event that breaks the chain of causation - removing the possibility of recovery under a wrongful death claim.

However, there is an exception. Kearns' family may be able to hold Robinhood responsible if they can show that the company's alleged negligence caused Kearns to suffer from an "uncontrollable impulse" to commit suicide.

Kearns' family argues that misleading communications from Robinhood directly caused Kearns' panic and desperation. And that because he was unable to reach anyone at the company, he spiraled out of control. In addition, they argue Robinhood's business model set Kearns up for failure:

"Though a young and inexperienced individual with little money cannot possibly possess the sophistication needed to make sound trading decisions...Robinhood created the illusion that those qualities are unnecessary."

Not only was Kearns' distress and subsequent suicide foreseeable, the complaint alleges, it was almost inevitable.

The case is currently in Santa Clara County Superior Court.

Related Resources:

Wrongful Death FAQ (FindLaw's Learn About the Law)

Quiz: What Legally Qualifies As Emotional Distress? (FindLaw's Learn About the Law)

Ex-Players Can Sue NFL Over Prescription Painkiller Use (FindLaw's Ninth Circuit)

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