Trump U: puffery defense rejected and class certification granted in 2 cases

Cohen v. Trump, 2014 WL 690513, No. 13–cv–2519 (S.D. Cal. Feb. 21, 2014)

Cohen brought a putative class action against Donald Trump based on Trump’s involvement with “Trump University.”  Allegedly drawn in by Defendant’s name and reputation, Cohen attended a free preview event, then paid $1,495 to Trump University to attend a real estate retreat, where he subsequently purchased a “Gold Elite” program for $34,995.  He alleged that misrepresentations led him to pay for these programs, specifically that the programs would give access to Donald Trump’s real estate investing secrets; that Donald Trump had a meaningful role in selecting the instructors for Trump University programs; and that Trump University was a “university.” His RICO claims used mail and wire fraud as predicate acts.  I won’t discuss the RICO-specific issues, but the court declined to dismiss the complaint.

Of note, the court rejected Trump’s argument that the statements at issue were nonactionable puffery.  Cohen’s allegations centered on the relationship, or lack thereof, between Trump and Trump University rather than Trump’s claims of general program quality.  Puffery involves a general statement that’s extremely unlikely to induce reliance; “misdescriptions of specific or absolute characteristics” are actionable.  Though many of the ads contain puffery, Cohen’s challenges related to Trump University delivered the specific or absolute characteristics of (1) Donald Trump’s involvement; and (2) an “actual university.”

Trump also made an argument that trademark law protected him, since Trump University was allegedly just a brand—no one would think that Michael Jordan made the sneakers bearing his name, or that Fred Astaire taught classes at the Fred Astaire Dance Studio.  First, Trump lacked legal support for his claim.  In any event, even the hypotheticals were distinguishable, given the extensive allegations that Trump made repeated representations as to his participation with Trump University beyond lending his name to the institution. The ads featured Trump’s signature, with statements such as “I can turn anyone into a successful real estate investor, even you.—Donald Trump.”

Nor did the court strike Cohen’s allegations that included slogans/puffery; he was challenging ads that, while they included puffery, at least created factual issues as well. Anyway, there was no indication that the statements created a serious risk of prejudice, delay, or confusion of the issues. Likewise, the court declined to strike allegations about government agency investigations into Trump University and about TU’s Better Business Bureau rating, since the investigations were potentially probative of Trump’s knowledge and intent to defraud.

Makaeff v. Trump University, LLC, 2014 WL 688164, No. 3:10–cv–0940 (S.D. Cal. Feb. 21, 2014)

The court here certified some consumer protection class claims against Trump University, though rejected nationwide classes. The Court certified a class and five subclasses of residents of California, New York and Florida who purchased a Trump University 3-day live “Fulfillment” workshop and/or a “Elite” program within the applicable limitations period who hadn’t received a full refund.

Plaintiffs alleged materially false representations in ads and the Trump University free preview, which led the named plaintiffs to pay anywhere from $1,495 for a three-day fulfillment seminar up to $35,000 for the “Trump Gold Elite Program.”  The following misrepresentations were allegedly common and pervasive in the materials: (1) Trump University was an accredited university; (2) students would be taught by real estate experts, professors and mentors handselected by Mr. Trump; and (3) students would receive one year of expert support and mentoring.

Plaintiffs alleged a campaign of free previews and ads throughout the US.  While the content varied, all of the marketing materials uniformly referred to the business as “Trump University” and uniformly claimed that Donald Trump was integrally involved in the teaching of students at Trump University. For example, print ads included quotes such as “I can turn anyone into a successful real estate investor, including you,” and “I’ll show you how”; the TU website used a large photograph of Mr. Trump and the message: “Are YOU My Next Apprentice? Prove it to me!”; marketing emails said “76% of the world’s millionaires made their fortunes in real estate … I’m ready to teach you how to do it too”; and print ads and letters signed by Mr. Trump told prospective customers that they would be shown real estate strategies by Mr. Trump’s “hand-picked experts.”

In order to get attendees at the free preview to pay for more, TU allegedly promised participants that they would learn Trump’s secrets from Trump’s hand-picked instructors over the course of a one-year apprenticeship. Transcripts of the preview and initial three-day program included numerous repetitions of the claim that Mr. Trump hand-picked the instructors and mentors.  Plaintiffs alleged, however, that this was untrue.  Trump’s interrogatories only identified four people he picked, and they developed TU course materials; the instructors and mentors were selected by TU representatives.

Those who paid for the $1495 seminar were allegedly promised a three-day seminar and a year of “expert interactive support,” but received a three-day infomercial and a phone number for a “client advisor.” Rather than teaching concrete real estate information, the seminars tried to get customers to buy the Trump Gold Elite Program for $34,995 to get the “full education.” TU representatives allegedly pressured customers to raise their credit card limits to purchase Trump Elite Programs.

As for that Gold Elite package, participants were allegedly promised unlimited mentoring for an entire year, but TU wouldn’t pay mentors for more than six one-hour mentoring sessions per consumer.

The common evidence included TU’s name (changed in 2010 to the Trump Initiative); TU ads that used “recognizable signs to appear to be an accredited academic institution” including a school crest; and evidence that TU was never accredited and was pressed by the New York Board of Education to cease any claim to being a “university” in 2010.  

In addition, TU’s Playbook directing how seminars should be advertised and conducted was the key common evidence of the allegedly standardized, tightly controlled schemes with the goal to up-sell students.  The Playbook provided sales and advertising guidelines, including tips and scripts to help pitch TU products and services, e.g. representations that the instructor was “hand-picked” by Donald Trump, as well as talking points for use in one-on-one sales sessions.  All TU members were required to use the Playbook.  Also, the PowerPoints used by instructors varied, but shared common messages: the Trump University logo and an image of Donald Trump; statements that the instructors were “hand-picked” or “hand selected” by the Donald Trump or the “TU founders;” and advertising for the three-day fulfillment seminar, one-year apprenticeship program, or Trump Elite packages. “A small sampling of transcribed TU seminar recordings indicates that several instructors made key statements at issue here, including the alleged misrepresentation that instructors were ‘hand-picked’ by Donald Trump and students would receive one year of unlimited mentorship.”

Numerosity was easy, as was adequacy (with respect to all but one named plaintiff).  Commonality requires “the capacity of classwide proceedings to generate common answers” to common questions of law or fact that are “apt to drive the resolution of the litigation” per Dukes. Dissimilarities within the proposed class can impede common answers. Here, plaintiffs alleged that all the class members suffered financial loss after exposure to deceptive ads. The common questions were: (1) whether Defendants misrepresented that Trump University was an accredited university; (2) whether Defendants misrepresented that Donald Trump was heavily involved in TU and “hand-picked” the TU instructors; and (3) whether Defendants made misrepresentations about the “yearlong” mentoring and interactive support.

Defendants argued that TU student experiences varied by program, price, contract, content, market, teacher, mentor and resulting individual performance, and that not all instructors or representatives used the Playbook or spoke directly from TU talking points or scripts. But verbatim recitation from a script isn’t required for commonality. “[T]he tightly orchestrated promotional campaign exposed class members to the alleged deceptive and misleading representations that are at issue here.” The class procedure could determine whether misrepresentations were made and whether they were material.

Defendants argued that the named plaintiffs weren’t typical because they bought at different prices, saw different ads, and received different benefits from the TU programs.  Nope.  Each proposed class representative purchased TU’s three-day fulfillment seminar for anywhere between $750 and $1,495, along with additional TU programs and services. Their purchases were sufficiently typical; the nature of the claims was the same, and was based on conduct not unique to the class representatives. “The fact that each Plaintiff may have seen a different advertisement, or no advertisement at all, does not defeat typicality.” The key in determining typicality and predominance is “determining the scope of the advertising and promotions and whether it is likely that all class members were exposed to the allegedly material misrepresentations.”

Predominance: here the court analyzed each claim separately.  First, the usual California statutory claims: Defendants argued that there weren’t proved misrepresentations, and that ads and promotional materials changed frequently, making it unlikely that all of the putative class members were exposed to the same representations. But the record contained “substantial evidence of common misrepresentations made to all putative class members,” as identified above.

Individualized showings of reliance and causation aren’t necessary as long as class members were exposed to the allegedly misleading ads.  After Mazza, without a massive ad campaign, the class has to be defined to include only members exposed to the challenged ads. Defendants argued that there weren’t any scripts or uniform promotional materials containing material misrepresentations, and that verbal representations had to be individually assessed, preventing any presumption of reliance. True, there wasn’t a massive ad campaign, but there was evidence that the campaign here was “uniform, highly orchestrated, concentrated and focused on its intended audience.”  This made it highly likely that each member of the putative class was exposed to the same misrepresentations. “There is substantial evidence that class members paid for TU seminars for reasons that track the advertising and promotional information provided in the highly orchestrated campaign.” Thus, the court found that members of the California class were likely to be deceived.

The NY and Florida consumer protection subclasses showed predominance for similar reasons. “With small differences in wording, all three states [California, New York and Florida] appear to employ the same causation and reliance standard [in their unfair trade and competition laws].”

The court also certified two subclasses for financial elder abuse.  California’s law applies when someone gets property from an elder or dependent adult “for a wrongful use or with intent to defraud,” and an elder is 65 or older.  Florida’s law applies when there are willful violations of Florida’s Deceptive and Unfair Trade Practices Act that victimize a senior citizen, which is someone 60 or older. Since these were premised on the same acts as the consumer protection law violations, common questions predominated.

Defendants argued that individualized determinations would be required on damages, since the court would need to determine what value each student actually received from the program. Individual damages don’t defeat certification as long as the plaintiff can present a likely method for determining class damages.  Plaintiffs sought the amount paid, plus interest, using defendants’ records for distribution. This proposed method of calculating damages didn’t defeat predominance or render the case unmanageable.

However, the nationwide common law causes of action for breach of contract/implied covenant of good faith and fair dealing, fraud, and unjust enrichment failed. Plaintiffs had to show uniformity or at least groupability for the 50 states’ laws.  This required an extensive analysis of state law variances. Plaintiffs proposed nine common law classes; the court found that common issues didn’t predominate. They provided a survey of the applicable common law of the 50 states and proposed verdict forms for the subclass causes of action. But the proposed verdict forms “gloss over the differences in the elements of each cause of action among the 50 states…. It is insufficient to merely refer the district court to densely worded articles, graphs, and charts pertaining to each state’s laws.” 

The court thought there were too many differences in the substantive law.

However, plaintiffs established superiority for the five claims for which they showed predominance.  Though the NY AG recently sued TU, that didn’t defeat superiority as to the NY claims, since it hadn’t yet resulted in restitution, an injunction, or other relief.
This entry was posted in california, class actions, consumer protection, http://schemas.google.com/blogger/2008/kind#post. Bookmark the permalink.

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