Panel allows AG’s Trump ‘University’ Suit to go forward
By Ben Bedell, From New York Law Journal
New York Attorney General Eric Schneiderman may proceed with fraud claims against Donald Trump related to “Trump University,” an appellate court has ruled.
The Appellate Division, First Department, in affirming a lower court’s refusal to dismiss the government’s claims, ruled that the applicable statute of limitations for certain of the claims was six years, not three, thus exposing Trump to larger damages. The panel on Tuesday also reinstated one claim the lower court had thrown out.
Schneiderman alleged that between 2005 and 2011, through various fraudulent practices, Trump intentionally misled more than 5,000 students nationwide, including more than 600 New York residents, into paying as much as $35,000 each to participate in live real estate investment seminars and mentoring programs the students thought were taught by seasoned professionals as part of a licensed university.
Neither Trump University, nor its successor entity, The Trump Entrepreneur Initiative, was ever licensed as a teaching enterprise, as required by New York law. The entity shut down in 2010.
In his 2013 complaint, Schneiderman accused Trump of engaging in a “bait and switch” scheme that promised Trump’s “handpicked instructors” would teach students real estate investing strategies.
“Just copy exactly what I’ve done and get rich,” Trump said in advertisements, according to the attorney general.
Schneiderman claimed that, in fact, the instructors had little or no experience in real estate investing, and instead had prior experience in unrelated fields such as food service management and graphic design.
Trump did not hand-pick the instructors, Schneiderman said in a sworn affidavit, asserting that only one of the live event speakers for Trump University had ever met Donald Trump.
Prospective students were invited to “free” seminars, the affidavit said, at which instructors would induce students to enroll in increasingly expensive seminars, starting with a three-day $1,495 seminar, and then an additional $5,000 session.
“Trump mentorship packages,” which ranged anywhere from $10,000 to $35,000 were then pitched as “the only way to succeed in real estate investment,” according to Schneiderman.
Trump had sought to get the claims dismissed, and Schneiderman moved for summary judgment.
In an October 2014 ruling, Supreme Court Justice Cynthia Kern denied Trump’s dismissal motion but ruled the applicable statute of limitations was three years on most of the fraud claims. She granted Schneiderman summary judgment only on the claim Trump had operated an unlicensed university.
Kern also ruled Trump could be held personally liable.
In a news release Tuesday, Schneiderman said the First Department decision “means our entire fraud case can move forward and confirms that the case is subject to a six-year statute of limitations.”
Schneiderman said Trump University was a “sham, for-profit college,” and that the ruling was “a clear victory in our effort to hold Donald Trump and Trump University accountable for defrauding thousands of students.”
The panel’s ruling also reversed an earlier First Department holding that said the attorney general could not bring a “stand-alone action” for fraud—rather than a motion for an injunction—under Executive Law §63(12). The panel said the court’s earlier ruling had been “a patent judicial mistake.”
Joining in the ruling in People v. The Trump Entrepreneur Initiative, 451463/13, were Justices Angela Mazzarelli, Dianne Renwick, David Saxe and Karla Moskowitz.
lan Garten, general counsel for the Trump Organization, said, “We respectfully disagree with the court’s decision,” which he called “internally inconsistent.” Garten said his client intends to appeal.
Belkin Burden Wenig & Goldman partner Jeffrey Goldman argued for Trump.
At a campaign event several days before the ruling, Trump said Schneiderman’s case was “a small deal. Very small.”
Steven Wu argued the appeal for the New York Attorney General’s Office.
IMAGE: Donald Trump speaks at a campaign stop in Ohio on Tuesday. AP/John Minchillo
