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Trump-University-Lawsuit

Beneath all the noise of the Republican presidential primary and the unlikely ascendency of Donald Trump, there’s been a legal story quietly playing out: Trump is being investigated for fraud in three separate trials in two states.

Craig Ashton and Ed Schade recently discussed the details of the case and its legal implications recently on All Things Legal.

The Background on Trump University and Its Allegedly Defrauded Customers

Craig: “So basically, the National Review had a pretty interesting article about what’s going on with Trump… National Review talked about the three lawsuits that are occurring against Donald Trump. Two of them are class-action lawsuits filed in California, and one was filed in New York by Attorney General Eric Schneiderman. There’s a recent case in New York where they upheld standing, saying that the Attorney General’s office in New York had the right to sue Donald Trump University [and] Donald Trump for fraud.

“And then also said that they were ‘timely.’ There was a question as to whether or not the statute of limitations had expired, and Donald Trump argued that it was a three year statute of limitations. The Attorney General’s office in New York argued that it was a six year, and the court agreed that it was six, and said therefore it is a timely filing, and therefore it isn’t barred by the statute of limitations.”

Ed: “Which was kind of surprising. In California it’s a three year statute of limitations for fraud. But, what I thought was interesting—and you know, I can imagine [Trump is going to use this argument as a] counter to the attack ads—if I’d actually ripped you off to the extent you said, and I took all this money from you, why did it take you over three years to finally file a lawsuit to come after me to get it back, when I’ve always said… that I’ll never pay anything back because I didn’t do anything wrong. So it’s kind of interesting that it got that far. Why wait?”

Fraud Versus Mere Puffery

Craig: “So here are the allegations on both sides. The class action suit in California, what’s going on in New York, the arguments are essentially these: They said this was a bait-and-switch experience where you would pay for, I think, a 3 day seminar, it’s like 1,500 bucks, and said that these were hand-picked instructors by Donald Trump, which it turns out he didn’t handpick them. So that’s a material fact. When you say an opinion like, ‘this is huge,’ ‘this is the greatest,’ you can say those things, it’s called ‘puffery.’

“But when you make a statement of fact, it becomes an issue regarding to how you entice these people in, breach of contract to potentially misrepresentation, which becomes fraud. So the argument is, ‘Look, you said they were handpicked,’ some of the people said they were under the impression that they were going to meet Donald Trump, which never happened. And then it also said that these people are real estate experts, and it turns out, many of them, at least according to the allegations, had no real estate background. They were actually motivational speakers, and they were paid a commission to talk these people into signing up for the next level, which I think was like the ‘Platinum Status’ or something, which is something like $30,000.”

Ed: “I think it was thirty five. [Note: The ‘Gold Elite’ package was priced at $34,995.] But yeah, fraud. It’s got to be a misrepresentation of material fact, and when you get out there and say ‘Trump’s going to hand select them,’ may not be material. But when they say it’s going to be, ‘experts in the real estate field,’ and they don’t bring those experts, that starts [amounting to misrepresentation of material fact]… and especially when you’re getting your advice from guys that sell timeshares, who are absolutely pressuring you to get in there and buy something, that’s really another thing that doesn’t look good [for]… the Donald.”

Personal Experiences With Bait-and-Switch Schemes

Craig took a moment to step back and draw a comparison between the alleged experiences of those suing Donald Trump, and a much more common bait-and-switch experience that many people have unknowingly stumbled into: “My beautiful, erudite, bilingual, and very sharp, businesswise girlfriend [note: gentlemen, take special notice of how Craig began that segue—you could learn something]… signed up for something very similar recently here in Sacramento for these guys who flip houses on A&E or something like that. She went in because she wanted to know how this worked, and next thing you know, it turns into a hard sale, where, ‘Yeah, guess what? Thanks for the 200 bucks, but hey, if you give us $50,000 we’ll give you an inside track.’

“I said, ‘Babe, now we are getting real. And this is… clearly, they’re there to sell you something. They’re not there to give you ideas to make you successful. They’re there to sell you their idea to make them successful.”

Ed: “Yeah… I’m gonna bring you into a class to teach you how to make money on how to sell realty, but I’m making a ton of money on getting money from you [for teaching you]…”

And then, as is so often the case, Ed’s remark unexpectedly sparked a seemingly unrelated—but in fact very relevant!—brief history lesson from Craig: “Well, you know who made the most money during the Gold Rush? The people that sold the equipment to the people trying to find the gold, right?”

Ed: “And Levi Strauss.”

Craig: “Right. So [the people involved with Trump University] are people that are trying to sell the equipment to find the gold—which is real estate riches—and they’re going to win no matter what. So if you give them 50,000 bucks, it doesn’t matter if you find gold or not, they’ve already got theirs.”

Sometimes, You Don’t Have to Win in Court—You Just Have to Make the Other Side Give Up

Craig: “So basically, Trump’s counterargument is this, is, “Look, first of all, I never said you were going to meet me. Second of all, you didn’t work hard enough. I gave you some tools, and guess what? If you are not one who’s going to commit to the experience, and take the information that I’ve given you to succeed [and not successfully apply it], that’s not my fault. I can figuratively lead the horse to water, but I can’t make you drink.’ And he says, ‘98% of all of the reviews that I got are positive.’ And a lot of the people that are suing him actually said, ‘This was a great experience.’

“One of them is a yoga instructor in San Diego, who now wants out [of the lawsuit]. She says, ‘I’ve had enough of this. It’s too much. I’ve been through the wringer. This is not conducive to me enjoying my life, and I no longer want to be a named plaintiff in the class action, as a representative of the class,’ and she wants out of the lawsuit. Trump has taken her deposition, I think, four times now. Over sixteen hours. Sued her for defamation for a million dollars, which she was able to prevail on, and the court ordered him to pay $798,779 in her legal fees. And now she just says, ‘I can’t take this anymore… It’s not that this case doesn’t have merit, it’s just that the stakes and the way this is approached is too aggressive for me and I don’t want to participate in the process anymore.’

“And Trump says if she’s out, the rest of the case needs to be dismissed. I don’t know what’s going to happen. I don’t think that they’re going to dismiss the whole case if she gets out, because they’ve already let two other plaintiffs out, and there’s still two others that are representative of the class.

The Psychology of Fraud Victims

Craig: “[As I’ve noted, Trump’s] argument says, ‘Hey, look. Bottom line is, I gave you the tools. You didn’t make them work, that’s not my fault. And I have 98% of the people saying—including you—how great this experience was.’ And she says, ‘The reason I filled out the surveys this way was that I didn’t want to risk alienating anyone who might advance my career’. In other words, ‘I’ve still got 60,000 bucks invested in this thing. I’m not going to say you guys are a bunch of idiots because I’m still hoping you might help me.’”

Ed: “Well that, and think about it. Even from a psychological point of view, you and dump a ton of money in something, and your friends go, ‘How was it?’ ‘Oh, it was awesome.’ You’re not going to tell him, ‘Hey, I just got ripped off and feel like an idiot.’ So you have to—to some degree—back it, so you can self-justify it…”

They went on to discuss how oftentimes, only after the dust has settled on an experience, do people find the perspective and the clarity of mind to realize that they’ve been taken advantage of. It takes time for the human desire to not show weakness to be outweighed by the anger of being defrauded (and the acceptance that the money is not, in fact, going to magically reappear in the bank account). This can go a long ways towards explaining the long delay that often elapses between when fraud occurs, and when victims finally find the wherewithal to take the matter to court.

This case will definitely be interesting to follow, especially since, depending on the how the cases are scheduled, Trump may well have to take the witness stand as the primaries wind to a close. If he manages to secure the Republican presidential nomination, then brace yourself for the news to become even more saturated with the latest news about Trump’s campaign and concurrent legal investigation.

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