Antitrust Law Daily Wrap Up, RICO—S.D. Cal.: Consumer’s RICO claims over advertising for Trump University survive motion to dismiss, (Feb 25, 2014)

By Linda O’Brien, J.D., LL.M.

In action against businessman Donald J. Trump for mail and wire fraud in violation of the RICO Act in connection with the advertising of Trump University, the federal district court in San Diego has denied the defendant’s motion to dismiss the complaint as time-barred and for lack of specificity (Cohen v. Trump, February 21, 2014, Curiel. G.).

Art Cohen, a businessman interested in real estate investments, learned about Trump University from a news advertisement. After attending a free preview event in 2009, he paid $1,495 to Trump University to attend a real estate retreat and purchased a “Gold Elite” program for $34,995. Cohen filed a class action suit against Donald Trump, founder, chairman, and principal of Trump University, alleging mail and wire fraud in violation of the RICO Act. Specifically, Cohen alleged the following misrepresentations: (1) the programs would give access to Trump’s real estate investing secrets; (2) Trump would have a meaningful role in selecting program instructors; and (3) Trump University was an accredited university. Trump moved to dismiss the complaint.

Statute of limitations. The court determined that Cohen’s RICO claims were not barred by the four-year statute of limitations set forth in the Clayton Act, since it was a question for the jury to determine when the plaintiff had actual or constructive knowledge of the alleged fraud. To state a claim under RICO, a plaintiff must allege conduct of an enterprise through a pattern of racketeering activity. Cohen alleged there was a uniform deceptive portrayal of Trump University and the misrepresentations made in the offending advertisements continued throughout the Trump University programs. In rejecting Trump’s argument that Cohen knew or should have known about any alleged fraudulent misrepresentations when he purchased his final Trump product in 2009, the question of whether a plaintiff knew or should have become aware of a fraud should be left to the jury, the court noted.

Non-actionable puffery. Cohen’s fraudulent advertising claims focus on the lack of relationship between Trump and Trump University rather than Trump’s claims of general program quality, according to the court. Trump’s contention that “Trump” was a brand and that Trump’s statements constituted mere puffery was a factual matter to be determined by the jury. While many of the advertisements in the complaint contain sales puffery, the gravamen of Cohen’s allegations is that Trump falsely marketed Trump University as an accredited institution with a faculty of professors and in which Trump was integrally involved. Moreover, the complaint includes extensive allegations that Trump made representations as to his participation in Trump University beyond lending his name to the institution. Taken as true, Cohen sufficiently alleged a relationship between Trump and Trump University to state a claim for the predicate act or mail or wire fraud under RICO, the court determined.

Specificity. Cohen’s complaint also specified the statements he relied upon, who made them, the content of the statements, when the statements were made, and in what format they were made. The complaint included detailed allegations of the letter, invitation, and email sent from Trump University to Cohen and the promotional video he viewed containing the misrepresentations that are sufficient to the defendant notice of the alleged misconduct, the court found.

Motion to strike. Finally, the court denied Trump’s motion to strike allegations from the complaint regarding advertising marketing as sales puffery and descriptions of government agency investigations into Trump University and Trump University’s Better Business Bureau (BBB) rating as immaterial. Whether the challenged statements contain non-actionable sales puffery or make absolute claims about Trump’s involvement with Trump University are questions of fact and their inclusion in the complaint do not create serious risk of prejudice, delay, or confusion of the issues. Further, the government investigations and BBB rating are related to and potentially probative of Trump’s knowledge and intent to defraud, the court concluded.

The case is No. 13-cv-2519-GPC-WVG. Related case is No. 10-cv-0940-GPC-WVG.

Attorneys: Aaron M. Olsen (Zeldes Haeggquist & Eck, LLP) for Art Cohen. Betty M. Shumener (Shumener, Odson & Oh LLP) for Donald J. Trump

Companies: Trump University, LLC

Cases: Advertising RICO CaliforniaNews