Thursday, April 18, 2013
Panel Orders New Hearing on ‘Trump University’ Defamation Suit
Court Says Controversy Over Marketing of Real Estate Courses Made ‘School’ a Public Figure
By KENNETH OFGANG, Staff Writer
A federal district judge must reconsider her decision allowing a company that ran real estate investment seminars, marketed using the star power of Donald Trump, to sue a former customer who claimed she was defrauded out of thousands of dollars she paid for worthless courses.
Judge Kim Wardlaw said Chief Judge Irma Gonzalez of the Southern District of California erred in ruling that Trump University, LLC was not a public figure and thus did not have to prove that Tarla Makaeff’s charges were made with actual malice. The panel-which also included Chief Judge Alex Kozinski and Judge Richard A. Paez—remanded so that the judge may reconsider her denial of Makaeff’s motion to strike Trump University’s cross-complaint under California’s anti-SLAPP law.
Donald Trump, who holds the title of chairman, launched “Trump U.”—the name was later changed to the Trump Entrepreneur Initiative after New York education officials objected to the use of the word “university”— in 2005. News accounts said the undertaking was designed to cash in on the publicity generated by his television shows “The Apprentice” and “Celebrity Apprentice.”
The venture was controversial from the beginning, Wardlaw explained, because of concerns that—while promising assistance that would be “the next best thing” to actually working with Trump himself—it was encouraging neophyte investors to take imprudent risks in speculative markets.
Among its customers was Makaeff, who alleged in a class-action complaint that Trump University employees steered students towards deals in which the employees had personal financial stakes, so that the employees would profit even if the students did not, and promised services it did not deliver.
In its cross-complaint, Trump University alleged that it was defamed in letters to the Better Business Bureau and in web postings, in which Makaeff accused it of, among other things, “fraudulent business practices,” “illegal predatory high pressure closing tactics,” “grand larceny,” “identity theft,” “high pressure sales tactics based on the psychology of scarcity,” and “a gargantuan amount of misleading, fraudulent, and predatory behavior.”
Gonzalez, in denying the motion to strike, agreed that the cross-complaint arose from protected activity, but concluded that Trump University was not a public figure because it was not particularly well-known. She also concluded that the controversy between Makaeff and Trump University did not make the business venture a limited-purpose public figure because it was an unwilling participant in the controversy.
Wardlaw agreed that its association with its ultra-controversial chairman did not make Trump University an all-purpose public figure. But the district judge was wrong to conclude that it was not a public figure for the limited purpose set forth in the lawsuit, Wardlaw said.
The appellate judge explained:
“Trump University conducted an aggressive advertising campaign in which it made controversial claims about its products and services. This campaign included online, social media, local and national newspaper, and radio advertisements for free introductory seminars….This entire advertising campaign makes Trump University a limited public figure for purposes of the controversy that arose about the legitimacy of its educational practices….”
Wardlaw agreed with the district judge, however, that the defamation claims are not barred by California’s litigation privilege. The letters and web postings were not part of any litigation, the jurist explained, and the mere suggestion that Makaeff might sue if she did not receive satisfaction from Trump University was insufficient to fall under the privilege.
Kozinski and Paez concurred separately, saying Wardlaw was correct based on the current state of the law, but that the application of the anti-SLAPP statute to federal cases had unnecessarily complicated litigation and should be reconsidered by the court en banc.
The case is Makaeff v. Trump University, LLC, 11-55016.
Copyright 2013, Metropolitan News Company