Antitrust Law Daily Trump University settlement approval affirmed
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Wednesday, February 7, 2018

Trump University settlement approval affirmed

By Jody Coultas, J.D.

Approval of a $25 million class action settlement of RICO, false advertising, and state unfair trade practices claims brought on behalf of participants in Trump University workshops has been upheld. The lone objector, who sought to opt out of the class and bring her claims in a separate lawsuit, was unable to show that the lower court abused its discretion in approving the settlement over her objection or in not allowing her to opt out (Low v. Trump University, LLC, February 6, 2018, Nguyen, J.).

Sherri Simpson, the lone objector, attended a three-day seminar held by Trump University and enrolled in the Gold Elite mentorship program, which together cost $18,995. Trump University was a for-profit education venture that purported to offer consumers Donald J. Trump’s "secrets of success" in the real estate industry, as well as access to "financing, counseling, information databases, and numerous other resources" and a designated "mentor." Simpson, like most other enrollees believed that Trump University failed to provide her with the promised personal mentoring and real estate expertise. Her assigned mentor quickly disappeared and never returned her calls and emails.

Ultimately, two class actions were filed alleging violations of California, Florida, and New York law by the organization and its founder, and violations of federal law by Trump as an individual. The actions alleged that the Trump University made the following core misrepresentations: (1) Trump University was an accredited university; (2) students would be taught by real estate experts, professors, and mentors hand-selected by Trump; and (3) students would receive one year of expert support and mentoring.

In Low v. Trump University, LLC, the district court certified a class of plaintiffs who purchased Trump University programs in California, Florida, and New York, but later decertified the class as to damages. A nationwide class was certified in Cohen v. Donald J. Trump. In September 2015, the court approved a joint class certification notice to class members in both cases. The State of New York also filed suit against Trump and Trump University.

A successor entity of Trump University agreed to pay $21 million to class members, and $4 million to the New York Attorney General to settle the claims. In part due to class counsel’s admirable agreement to serve pro bono, the district court estimated that the settlement would provide class members with recovery of 80 to 90 percent of the monies they paid to Trump University. The settlement expressly prohibited any late opt outs.

Simpson submitted her claim on February 1, 2017. Then, on March 6, 2017, Simpson filed an objection to the settlement, arguing that she had a due process right to opt out of the settlement and alternatively requesting that the district court allow her to opt out pursuant to its discretionary authority under Rule 23(e)(4). The district court approved the settlement over Simpson’s objection and refused to allow her to opt out, and Simpson appealed.

Standing. The court dismissed the plaintiff’s argument that Simpson lacked Article III standing. Simpson claimed that the settlement’s approval improperly denied her a second, settlement-stage opportunity to remove herself from the class. The plaintiffs argued that Simpson lacked standing because she had not alleged an injury-in-fact traceable to the supposedly defective opt-out notice. Specifically, because Simpson decided to remain in the class after receiving the class action notice, the plaintiffs argued she failed to show reliance on any purported inadequacy in the notice’s description of her opt-out rights. However, Simpson was not arguing that the opt-out notice deprived her of the first opportunity to opt out, but rather that the settlement approval improperly denied her a second, settlement-stage opt-out opportunity. Simpson had an interest in the settlement that created a case or controversy, and thus had standing.

Class notice. The class notice did not allow Simpson a second opt-out opportunity, according to the court. Simpson argued that the class notice promised a second opt-out at the settlement stage, in addition to one at the class certification stage, based on a single sentence in the long-form notice stating "the Plaintiffs obtain money or benefits, either as a result of the trial or a settlement, [class members] will be notified about how to obtain a share (or how to ask to be excluded from any settlement)." However, the court found that by reading the mailed and long-form notices as a whole and in context, the notice only provided one opportunity to opt out. Class members were required to choose to stay in the lawsuit or to opt out by November 16, 2015. While some of the language could have been clearer, a notice need not be written to avoid every possibility of conceivable injury. Thus, class members had a single opt-out opportunity that expired if not exercised by the deadline.

Due process. Due process did not compel a second opt-out opportunity based on precedent, according to the court. In Officers for Justice v. Civil Service Commission of San Francisco, 688 F.2d 615, (9th Cir. 1982), the court rejected the argument that due process guaranteed a second opt-out opportunity at the settlement stage that would revive an objector’s ability to litigate separately. Intervening Supreme Court precedent has not implicitly overruled Officers for Justice, as Simpson argued. Rather, the court found that the cases cited by Simpson support the case’s holding that due process requires that class members be given a single opportunity to opt out of a Rule 23(b)(3) class.

Abuse of discretion. The district court did not abuse its discretion in approving the settlement, according to the court. The district court considered the "risks, expense, complexity, and likely duration of further litigation" and had ample reasons to approve the settlement despite its prohibition on additional opt-outs. Both classes would have faced significant hurdles had they proceeded to trial, including the difficulty of prevailing in a jury trial against either the President Elect (if the trial had proceeded as scheduled) or the sitting President (if the trial had been postponed, as Defendants requested). Also, the Low class would have had to litigate thousands of individual damage claims, while the Cohen class faced possible decertification. The settlement was fair and provided class members with almost a full recovery. Thus, the district court properly exercised its discretion by approving the settlement.

The case is No. 17-55635.

Attorneys: Deepak Gupta and Jonathan E. Taylor (Gupta Wessler PLLC) and Edward S. Zusman and Kevin K. Eng (Markun Zusman Freniere & Compton LLP) for Sherri B. Simpson. Steven Francis Hubacheck, Daniel J. Pfefferbaum, Rachel L. Jensen, Jason A. Forge, and Patrick J. Coughlin (Robbins Geller Rudman & Dowd LLP) for Sonny Low. Daniel M. Petrocelli and David L. Kirman (O'Melveny & Myers LLP) for Trump University, LLC a/k/a Trump Entrepreneur Initiative.

Companies: Trump University, LLC a/k/a Trump Entrepreneur Initiative

MainStory: TopStory Advertising RICO StateUnfairTradePractices AlaskaNews ArizonaNews CaliforniaNews HawaiiNews IdahoNews MontanaNews NevadaNews OregonNews WashingtonNews

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