Cohen v. Trump, No. 3:2013cv02519 - Document 268 (S.D. Cal. 2016)
Court Description: ORDER Denying Defendant's 180 Motion For Summary Judgment Or, In The Alternative, Partial Summary Judgment. Signed by Judge Gonzalo P. Curiel on 8/2/16. (dlg)
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Cohen v. Trump Doc. 268 Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 1 of 17 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 ART COHEN, Individually and on Behalf of All Others Similarly Situated, 15 ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, PARTIAL SUMMARY JUDGMENT Plaintiff, 13 14 Case No.: 3:13-cv-2519-GPC-WVG v. DONALD J. TRUMP, Defendant. 16 [ECF No. 180] 17 18 Before the Court is Defendant Donald J. Trump’s (“Defendant”) motion for 19 summary judgment. Defendant’s Motion for Summary Judgment, or in the Alternative, 20 Partial Summary Judgment (“Def. Mot.”), ECF No. 180. The motion has been fully briefed. 21 See Plaintiff’s Response in Opposition to Defendant’s Motion for Summary Judgment, or 22 in the Alternative, Partial Summary Judgment (“Pl. Resp.”), ECF No. 220; Defendant’s 23 Reply in Support of Motion for Summary Judgment or, in the Alternative, Partial Summary 24 Judgment (“Def. Reply”), ECF No. 248. A hearing on the motion was conducted on July 25 22, 2016. ECF No. 263. 26 Upon consideration of the moving papers, oral argument, and the applicable law, 27 and for the following reasons, the Court DENIES Defendant’s motion. 28 // 1 3:13-cv-2519-GPC-WVG Dockets.Justia.com Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 2 of 17 1 FACTUAL BACKGROUND 2 A. 3 Defendant is a real estate magnate, television personality, and author. In 2004, 4 Defendant helped found Trump University (“TU”), a private, for-profit entity offering real 5 estate seminars and purporting to teach Defendant’s “master strategies” for real estate 6 success. Pl. Resp., Ex. E, at 242, 244–50; see also id. at 191–241. TU began with web-only 7 content in 2005, and shifted to live events in 2007. Plaintiff’s Response to Defendant’s 8 Separate Statement of Undisputed Facts ¶ 13 (“Pl. SSUF”), ECF No. 220-10; Trump Dep. 9 193:12–18, Def. Mot., Ex. 2.1 Defendant Donald J. Trump 10 For TU’s live events, consumers were first invited to a ninety-minute Free Preview, 11 which was preceded by an orchestrated marketing campaign using mailed invitations and 12 TU website, radio, and newspaper advertising. See Pl. Resp., Exs. E–F. For example, 13 consumers were sent “Special Invitation[s] from Donald J. Trump” which included a letter 14 signed by Defendant that stated “[m]y hand-picked instructors and mentors will show you 15 how to use real estate strategies.” Pl. Resp., Ex. F. Newspaper advertisements displayed a 16 large photograph of Mr. Trump, stating “[l]earn from Donald Trump’s handpicked expert,” 17 and quoted Mr. Trump as saying: “I can turn anyone into a successful real estate investor, 18 including you.” Pl. Resp., Ex. E, at 191–207. Similarly, other advertisements displayed 19 large photographs of Mr. Trump and included statements such as “Learn from the Master,” 20 “The next best thing to being his Apprentice,” and “Nobody on the planet can teach you 21 how to make money in real estate better than I can.” Pl. Resp., Ex. E, at 242, 244–50; Ex. 22 T, at 321–22. Further, TU advertisements utilized various forms of recognizable signs 23 associated with accredited academic institutions, such as a “school crest” used on TU 24 letterhead, presentations, promotional materials and advertisements, see Pl. Resp., Exs. E, 25 26 In 2005, the New York State Education Department directed TU to remove the word “University” from its title. Pl. Resp., Ex. Q. However, although TU officially changed its name to Trump Entrepreneur Initiative, LLC, marketing and promotional materials continued to refer to “Trump University.” 1 27 28 2 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 3 of 17 1 F, I, L, P, as well as language comparing TU with such institutions, see Main Promotion 2 Video, Pl. Resp., Ex. L (“We’re going to teach you better than the business schools are 3 going to teach you and I went to the best business school.”); TU Marketing Guidelines, Pl. 4 Resp., Ex. P, TU-DONNELLY0000016–17 (describing the “Trump University 5 Community” as including “Staff,” “Faculty,” “Instructors,” and “Program Directors 6 (Trump University’s Admissions Department)”; including under “Catch Phrases/Buzz 7 Words” “Ivy League Quality,” and under “Tone” “Thinking of Trump University as a real 8 University, with a real Admissions process—i.e., not everyone who applies, is accepted”; 9 and encouraging TU employees to “[u]se terminology such as” “Enroll,” “Register,” and 10 “Apply”). 11 Plaintiffs have provided evidence that Defendant reviewed and approved all 12 advertisements. Trump Dep. 279:18–280:16, Pl. Resp., Ex. D; Bloom Dep. 73:3–74:2, Pl. 13 Resp., Ex. H. 14 15 16 17 18 19 20 21 22 At the beginning of each Free Preview, a promotional video was played in which Defendant stated: We’re going to have professors and adjunct professors that are absolutely terrific. Terrific people, terrific brains, successful. . . . The best. We are going to have the best of the best and honestly if you don’t learn from them, if you don’t learn from me, if you don’t learn from the people that we’re going to be putting forward—and these are all people that are handpicked by me—then you’re just not going to make in terms of the world of success. . . . we’re going to teach you better than the business schools are going to teach you and I went to the best business school. Main Promotion Video, Pl. Resp., Ex. L. 23 Individuals were then invited to attend a $1,495 Fulfillment Seminar. Compl. 15, 24 ECF No. 1. Those who paid for the Fulfillment Seminar were allegedly promised a three- 25 day seminar and one year of expert interactive support. Id. at 20. 26 After the Fulfillment Seminar, individuals were invited to sign up for the Trump 27 Elite Program for up to $34,995. Id. Elite Program participants were allegedly promised 28 unlimited mentoring for an entire year. Id. at 21. 3 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 4 of 17 1 B. 2 Plaintiff Art Cohen (“Plaintiff”) is a businessman and resident of the state of 3 California. Compl. 4. Plaintiff alleges learning about Trump University from a 2009 San 4 Jose Mercury News advertisement. Id. Plaintiff alleges receiving a “special invitation” by 5 mail to attend a Trump University seminar. Id. Drawn in by Defendant’s name and 6 reputation as a real estate expert, Plaintiff attended a free preview event. Id. Plaintiff then 7 paid $1,495 to Trump University to attend a three-day real estate retreat, where he 8 subsequently purchased a “Gold Elite” program for $34,995. Id. at 5. Plaintiff Art Cohen 9 Plaintiff avers that he would not have paid for any of the TU programs had he known 10 that Defendant had not handpicked the TU instructors, and/or that TU was not a 11 “university.” Id.; see also Cohen Dep., 150:9–151:17, 151:20–152:9, Def. Mot., Ex. 10. 12 PROCEDURAL BACKGROUND 13 On October 18, 2013, Plaintiff filed a complaint alleging a single cause of action for 14 mail and wire fraud in violation of the Racketeer Influenced and Corrupt Organizations 15 Act (“RICO”), 18 U.S.C. § 1962(c). Compl. On the same day, Plaintiff filed a “notice of 16 related case” requesting that the case be transferred to the undersigned Judge because the 17 present action is related to Low v. Trump University, LLC, No. 10-cv-940-GPC-WVG. ECF 18 No. 3.2 19 On February 21, 2014, the Court denied Defendant’s motion to dismiss. ECF No. 20 21. On November 27, 2014, the Court granted Plaintiff’s motion for class certification. 21 ECF No. 53. The Court noted that Plaintiff’s “theory of recovery under RICO is that 22 Defendant committed ‘fraud and racketeering’ by marketing Trump University ‘Live 23 Events’ as an institution with which he was integrally involved as well as ‘an actual 24 university with a faculty of professors and adjunct professors.’” Id. at 5–6 (citation 25 26 27 28 2 Filed on April 30, 2010, the initial complaint in Low alleged ten causes of action under state consumer protection statutes and common law. Low, ECF No. 1. On October 7, 2013, the Court denied Low plaintiffs’ motion to modify the scheduling order in that case to file a fourth amended complaint to include a RICO cause of action. Low, ECF No. 248. Low is currently set for trial on November 28, 2016. Low, ECF No. 478. 4 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 5 of 17 1 omitted). The Court certified the following class: 2 All persons who purchased Live Events from Trump University throughout the United States from January 1, 2007 to the present.3 3 4 Id. at 22–23. 5 On September 21, 2015, the Court granted in part and denied in part Plaintiff’s 6 motion for approval of class notice and directing class notice procedures. ECF No. 130; 7 Low, ECF No. 419. On November 15, 2015, the opt-out period expired. See id. at 11. 8 On April 22, 2016, Defendant filed the instant motion. Def. Mot., ECF No. 180.4 On 9 June 3, 2016, Plaintiff responded. Pl. Resp., ECF No. 220. On June 17, 2016, Defendant 10 replied. Def. Reply, ECF No. 248. A hearing on the motion was held on July 22, 2016. 11 ECF No. 263. 12 LEGAL STANDARD 13 Federal Rule of Civil Procedure 56 empowers the Court to enter summary judgment 14 on factually unsupported claims or defenses, and thereby “secure the just, speedy and 15 inexpensive determination of every action.” Celotex Corp. v. Catrett, 477 U.S. 317, 325, 16 327 (1986). Summary judgment is appropriate if the “pleadings, depositions, answers to 17 interrogatories, and admissions on file, together with the affidavits, if any, show that there 18 is no genuine issue as to any material fact and that the moving party is entitled to judgment 19 as a matter of law.” Fed. R. Civ. P. 56(c). A fact is material when it affects the outcome of 20 the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 21 The moving party bears the initial burden of demonstrating the absence of any 22 genuine issues of material fact. Celotex, 477 U.S. at 323. The moving party can satisfy this 23 burden by demonstrating that the nonmoving party failed to make a showing sufficient to 24 25 26 27 28 3 Excluded from the Class are Trump University, its affiliates, employees, officers and directors, persons or entities that distribute or sell Trump University products or programs, the Judge(s) assigned to this case, and the attorneys of record in the case. ECF No. 53, at 23. 4 On the same day, Defendant also filed a motion for decertification, ECF No. 192, and parties filed a number of motions seeking to exclude various experts, ECF Nos. 181, 184, 187, 188, 189. These motions are currently pending before the Court. 5 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 6 of 17 1 establish an element of his or her claim on which that party will bear the burden of proof 2 at trial. Id. at 322–23. If the moving party fails to bear the initial burden, summary judgment 3 must be denied and the court need not consider the nonmoving party’s evidence. Adickes 4 v. S.H. Kress & Co., 398 U.S. 144, 159–60 (1970). 5 Once the moving party has satisfied this burden, the nonmoving party cannot rest on 6 the mere allegations or denials of his pleading, but must “go beyond the pleadings and by 7 her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on 8 file’ designate ‘specific facts showing that there is a genuine issue for trial.’” Celotex, 477 9 U.S. at 324. If the non-moving party fails to make a sufficient showing of an element of its 10 case, the moving party is entitled to judgment as a matter of law. Id. at 325. “Where the 11 record taken as a whole could not lead a rational trier of fact to find for the nonmoving 12 party, there is no ‘genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio 13 Corp., 475 U.S. 574, 587 (1986) (quoting First National Bank of Arizona v. Cities Service 14 Co., 391 U.S. 253, 289 (1968)). In making this determination, the court must “view[] the 15 evidence in the light most favorable to the nonmoving party.” Fontana v. Haskin, 262 F.3d 16 871, 876 (9th Cir. 2001). The Court does not engage in credibility determinations, weighing 17 of evidence, or drawing of legitimate inferences from the facts; these functions are for the 18 trier of fact. Anderson, 477 U.S. at 255. 19 DISCUSSION 20 RICO’s civil action provision states that “[a]ny person injured in his business or 21 property by reason of a violation of section 1962 of this chapter may sue therefor in any 22 appropriate United States district court and shall recover threefold the damages he sustains 23 and the cost of the suit, including a reasonable attorney’s fee.” 18 U.S.C. § 1964(c). In turn, 24 section 1962(c) renders it unlawful “for any person employed by or associated with any 25 enterprise . . . to conduct or participate, directly or indirectly, in the conduct of such 26 enterprise’s affairs through a pattern of racketeering activity . . . .” Liability under § 1962(c) 27 thus requires (1) the conduct (2) of an enterprise (3) through a pattern (4) of racketeering 28 activity. Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985). In addition, a 6 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 7 of 17 1 plaintiff may only recover “to the extent that, he has been injured in his business or property 2 by the conduct constituting the violation.” Id. 3 “‘Racketeering activity’ is any act indictable under several provisions of Title 18 of 4 the United States Code, see 18 U.S.C. § 1961, and includes the predicate act[s] of mail 5 fraud under 18 U.S.C. § 1341” and wire fraud under 18 U.S.C. § 1343. Sun Sav. & Loan 6 Ass’n v. Dierdorff, 825 F.2d 187, 191 (9th Cir. 1987); see also United States v. Woods, 335 7 F.3d 993, 997 (9th Cir. 2003). In order to establish liability for mail and wire fraud, 8 plaintiffs must prove four elements: “(1) that the defendant knowingly devised or 9 knowingly participated in a scheme or plan to defraud, or a scheme or plan for obtaining 10 money or property by means of false or fraudulent pretenses, representations or promises; 11 (2) that the statements made or the facts omitted as part of the scheme were material; (3) 12 that the defendant acted with the intent to defraud; and (4) that in advancing or furthering 13 or carrying out the scheme, the defendant used the mails/wires or caused the mails/wires 14 to be used.” Woods, 335 F.3d at 997. 15 Defendant makes four arguments as to why summary judgment should be granted in 16 his favor. Specifically, Defendant argues that (1) Plaintiff seeks “an unprecedented 17 expansion of RICO law”; (2) Plaintiff fails to establish that Defendant conducted the affairs 18 of TU; (3) Plaintiff fails to establish that the statements made or the facts omitted as part 19 of the scheme to defraud were material; and (4) Plaintiff fails to establish that Defendant 20 “knowingly participated” in a scheme to defraud. Def. Mot. 8–24. Because the Court finds 21 none of Defendant’s arguments persuasive, the Court DENIES Defendant’s motion for 22 summary judgment. 23 I. 24 Defendant argues that “[t]his case epitomizes the pervasive abuse of civil RICO.” 25 Def. Mot. 1. Defendant contends that “RICO was never intended to provide a ‘federal cause 26 of action and treble damages’ for every plaintiff,” Def. Mot. 1 (citation omitted), and that 27 “garden-variety business disputes” should not be “squeeze[ed]” into civil RICO actions, 28 id. at 8 (citing Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1025 (7th Cir. 1992)). The Scope of Civil RICO 7 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 8 of 17 1 Essentially, Defendant makes a policy argument that the civil RICO provision 2 should be read narrowly so as to avoid providing plaintiffs with “an unusually potent 3 weapon” in the form of RICO’s treble damages remedy. Def. Mot. 9 (quoting Miranda v. 4 Ponce Fed. Bank, 948 F.2d 41, 44 (1st Cir. 1991)). And indeed, an examination of the 5 caselaw reveals that a number of courts have previously struggled with the ultimate scope 6 of RICO’s civil action provision. See, e.g., Odom v. Microsoft Corp., 486 F.3d 541, 545– 7 47 (9th Cir. 2007). However, as the Ninth Circuit has recognized, the Supreme Court has 8 ruled in favor of an expansive interpretation of civil RICO in a series of cases. See id. 9 (discussing cases). 10 For instance, in Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 481 (1985), the 11 Supreme Court rejected the Second Circuit’s attempt to read RICO to impose liability only 12 against defendants who had been criminally convicted, and only for what the court called 13 “racketeering injury.” The Court noted that the Second Circuit’s decision was motivated 14 by the view that a narrow construction of RICO’s civil action provision was necessary to 15 avoid “intolerable practical consequences.” Id. at 490. The Court found, however, that a 16 “less restrictive reading” was required. It wrote: 17 18 19 20 21 22 23 24 25 26 27 28 RICO is to be read broadly. This is the lesson not only of Congress’ selfconsciously expansive language and overall approach, but also of its express admonition that RICO is to “be liberally construed to effectuate its remedial purposes . . . .” ... Underlying the Court of Appeals’ holding was its distress at the “extraordinary, if not outrageous,” uses to which civil RICO has been put. Instead of being used against mobsters and organized criminals, it has become a tool for everyday fraud cases brought against “respected and legitimate ‘enterprises.’” Yet Congress wanted to reach both “legitimate” and “illegitimate” enterprises. The former enjoy neither an inherent incapacity for criminal activity nor immunity from its consequences. ... It is true that private civil actions under the statute are being brought almost solely against such defendants, rather than against the archetypal, intimidating mobster. Yet this defect—if defect it is—is inherent in the statute as written, and its correction must lie with Congress. 8 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 9 of 17 1 2 3 4 Id. at 497–99 (citations omitted). The Court “recognize[d] that, in its private civil version, RICO is evolving into something quite different from the original conception of its enactors.” Id. at 500. However, the Court found that, Though sharing the doubts of the Court of Appeals about th[e] increasing divergence [in the prevalence of the use of civil RICO against “respected and legitimate ‘enterprises’” as opposed to “mobsters and organized criminals”], we cannot agree with either its diagnosis or its remedy. The “extraordinary” uses to which civil RICO has been put appear to be primarily the result of the breadth of the predicate offenses, in particular the inclusion of wire, mail, and securities fraud, and the failure of Congress and the courts to develop a meaningful concept of “pattern.” We do not believe that the amorphous standing requirement imposed by the Second Circuit effectively responds to these problems, or that it is a form of statutory amendment appropriately undertaken by the courts. 5 6 7 8 9 10 11 12 13 Id. 14 Subsequently, some scholars have questioned the accuracy of the Supreme Court’s 15 reading of RICO’s legislative history. See, e.g., Paul Batista, Civil RICO Practice Manual, 16 § 2.04. But while the Court has narrowed the reach of civil RICO in specific ways, such as 17 by imposing a causation requirement, Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258 18 (1992), it has not deviated from its general admonition that “RICO is to be read broadly,” 19 see Odom, 486 F.3d at 547 (quoting Sedima, 473 U.S. at 497) (citing Cedric Kushner 20 Promotions v. King, 533 U.S. 158 (2001); Nat’l Org. for Women v. Scheidler, 510 U.S. 249 21 (1994)). 22 Defendant argues that courts have often reiterated that “allegations of routine 23 commercial relationships [are in]sufficient to support a RICO claim.” Def. Mot. 9 (quoting 24 Gomez v. Guthy-Renker, LLC, No. EDCV1401425JGBKKX, 2015 WL 4270042, at *8 25 (C.D. Cal. July 13, 2015)). However, closer examination reveals that in cases employing 26 such language, plaintiffs have failed to establish a required element in their RICO claim. 27 See, e.g., id. at *9 (finding that a routine contract for services did not constitute a distinct 28 enterprise); Turner v. New York Rosbruch/Harnik, Inc., 84 F. Supp. 3d 161, 170 (E.D.N.Y. 9 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 10 of 17 1 2015) (finding that plaintiffs had failed to allege defendant’s knowing participation); see 2 also Oscar v. Univ. Students Co-op. Ass’n, 965 F.2d 783, 786 (9th Cir. 1992), abrogated 3 on other grounds by Diaz v. Gates, 420 F.3d 897 (9th Cir. 2005) (finding that plaintiff 4 tenant had failed to allege financial loss which would be compensable under RICO). In 5 other words, in such cases, courts have characterized the activity at issue as a “routine 6 commercial relationship[]” precisely because the plaintiff has failed to meet a required 7 element in their RICO claim. 8 Ultimately, while Defendant may believe that, as a policy matter, civil RICO ought 9 not be extended to consumer class action cases, see Hr’g Tr. at 18, ECF No. 264, it is not 10 for this Court to effectuate Defendant’s policy preferences in contravention of the settled 11 approach of the higher courts. The Court declines to “[undertake] a form of statutory 12 amendment” of the RICO statute by imposing an “amorphous . . . requirement” that civil 13 RICO not be extended to the specific category of consumer class action cases. 14 II. 15 Defendant argues that he did not “conduct” the affairs of the alleged enterprise of 16 TU. Def. Mot. 10. Defendant contends that under Reves v. Ernst & Young, 507 U.S. 170, 17 183 (1993), the “conduct” element requires that a defendant have “participated in the 18 operation or management of the enterprise itself,” and that Defendant’s involvement in TU 19 did not rise to level of “direct[ing] the operations or management of TU.” Def. Mot. 10– 20 11. Whether Defendant Conducted the Enterprise of TU 21 Specifically, Defendant argues that Defendant’s role in “planning and launching 22 TU,” “invest[ing] his own money,” “control[ling] a majority ownership stake in TU,” 23 “review[ing] financial documents,” conducting “status meetings with [TU President 24 Michael] Sexton,” and “review[ing] advertisements ‘very quickly’” constituted only 25 “ordinary business conduct by a principal investor and top executive,” not Defendant 26 “direct[ing] the operations or management of TU.” Def. Mot. 11–12. 27 Plaintiff responds that Defendant exercised substantial control over various aspects 28 of TU, including most notably the marketing scheme at issue in this case. Plaintiff points 10 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 11 of 17 1 to Defendant’s deposition testimony, where he testified that he was “not aware” of any 2 marketing materials for TU bearing his name, likeness, or signature that he did not approve, 3 Trump Dep. 279:18–280:16, Pl. Resp., Ex. D,5 as well as the testimony of Michael Bloom, 4 TU’s Chief Marketing Officer, as to the “very hands-on” nature of Defendant’s 5 involvement with TU’s marketing materials, Bloom Dep. 73:3–74:2, Pl. Resp., Ex. H.6 6 The Court agrees with Plaintiff that the evidence in the record raises a genuine issue 7 of material fact as to whether Defendant participated in the operation or management of 8 the enterprise. Defendant’s argument that “Defendant did not direct the operations or 9 management of TU” misstates the holding of Reves. Def. Mot. 11. In order to satisfy the 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 See Trump Dep. 279:18–280:16 (“Q. Are you aware of any marketing materials for Trump University bearing your name that you didn't approve? A. I think they show them to me very quickly. I didn’t spend a lot of time on it. But I think they showed them to me quickly. Yes, I see these ads. Q. That’s a no, you’re not aware of any that you didn’t approve; correct? A. I don’t know. I mean, I don’t know what the—I can’t answer that question. I think I looked at these two. Q. Are you aware of any marketing materials for Trump University bearing your name that you didn’t approve? A. I’m not aware. Q. Any marketing materials for Trump University bearing your picture that you did not approve? A. I’m not aware of any, no. Q. Any marketing materials for Trump University bearing your signature that you did not approve? A. I’m not aware of any, no.”). 6 See Bloom Dep. 73:3–74:2 (“It was the morning, the morning when we had the first newspaper advertisement that I was involved with appearing in one of the New York newspapers, so it was coming out on that particular day, and I remember being at my desk very early in the morning and getting a call from Mr. Trump very early in the morning saying that he—this is, you know, 7 o’clock or thereabout in the morning and I remember him saying that he had seen the advertisement and was wondering who placed the advertisement. He liked the advertisement, but who placed the advertisement, and I said: Well, why do you ask? He said: Because it’s on an even numbered page, and when you open a newspaper in the beginning, you want to be on an odd numbered page so because it’s a better position, and at that point—and I said: You know, Mr. Trump, you are absolutely correct and that will never happen again, and at that point I realized that, you know, when it actually comes to placing of a newspaper, that’s probably one of the most important questions you need to ask, and, you know, I remember coming off of that phone call saying to myself that he was, you know, very, very astute and very hands-on to be able to look at that himself and be interested in knowing, you know, where that ad is placed because that is one of the most important factors, you know, in a newspaper ad.”). 5 11 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 12 of 17 1 conduct element, Reves did not require that a defendant was the exclusive director of the 2 operations or management of the enterprise, but that a defendant have “participated in the 3 operation or management of the enterprise.” 507 U.S. at 183 (emphasis added). As the 4 Supreme Court observed in construing the statutory language, 5 6 7 8 9 Of course, the word ‘participate’ makes clear that RICO liability is not limited to those with primary responsibility for the enterprise’s affairs, just as the phrase ‘directly or indirectly’ makes clear that RICO liability is not limited to those with a formal position in the enterprise, but some part in directing the enterprise’s affairs is required. See id. at 179 (emphasis added). 10 In United States v. Shryock, 342 F.3d 948, 986 (9th Cir. 2003), the Ninth Circuit 11 found that a district court’s failure to clarify the conduct element by specifying that a 12 defendant had to be involved in the operation or management of the enterprise was 13 harmless error where it was beyond any reasonable doubt that defendant had met Reves’ 14 operation or management test by “serv[ing] as a messenger between incarcerated members 15 and members on the street, and help[ing to] organize criminal activities on behalf of the 16 organization.” 17 The cases cited by Defendant to support the proposition that the activity pointed to 18 by Plaintiff does not amount to “some part” in the operation or management of the 19 enterprise are unpersuasive. For instance, in Taylor v. Bob O’Connor Ford Inc., 1999 U.S. 20 Dist. LEXIS 4028, at *8 n.4 (N.D. Ill. Mar. 25, 1999), the court found that there were 21 insufficient allegations in the complaint as to how the defendant president and principal 22 shareholder participated in the scheme to defraud, as opposed to the management of the 23 companies at issue in general. In In re Toyota Motor Corp. Unintended Acceleration Mktg., 24 Sales Practices, & Products Liab. Litig., 826 F. Supp. 2d 1180, 1202 (C.D. Cal. 2011), the 25 court found that plaintiffs had failed to plead their RICO claim with sufficient particularity. 26 And in Andreo v. Friedlander, 660 F. Supp. 1362, 1370 (D. Conn. 1987), the court found 27 that the defendant’s participation was unknowing. 28 Here, however, as Plaintiff points out, it is precisely the marketing materials 12 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 13 of 17 1 reviewed and approved by Defendant that form the basis of the fraud alleged by Plaintiff; 2 particularity is not at issue; and as discussed infra in Part IV, Plaintiff raises a genuine issue 3 of material fact as to whether Defendant’s participation was knowing. Thus, the Court finds 4 that based on the evidence in the record, whether Defendant played “some part” in directing 5 the affairs of TU is a genuine issue of material fact. 6 7 III. Whether the Statements Made or Facts Omitted as Part of the Scheme Were Material 8 Defendant argues that Plaintiff cannot establish that Defendant engaged in 9 racketeering activity, because in order to establish liability for the predicate acts of mail 10 fraud and wire fraud, Plaintiff must prove “that the statements made or the facts omitted as 11 part of the scheme [to defraud] were material.” Def. Mot. 13–14 (citing Woods, 335 F.3d 12 at 997). Defendant contends that Plaintiff cannot make this showing because (1) the 13 representations made were non-actionable puffery; and (2) even if the representations made 14 were not puffery, they were not false or misleading. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Neither of Defendant’s arguments are persuasive. First, as stated in this Court’s Order Denying Defendant’s Motion to Dismiss, A statement is considered “mere puffery” when the statement is general rather than specific and thus “extremely unlikely to induce consumer reliance.” Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1052–54 (9th Cir. 2008) (finding a statement that a company would deliver flexibility and lower costs was “mere puffery,” while finding actionable a statement that contracts intended to be for a fixed term of sixty months would expire after that term). In other words, “misdescriptions of specific or absolute characteristics” are actionable while advertising “which merely states in general terms that one product is superior is not actionable.” Cook, Perkis & Liehe v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 246 (9th Cir. 1990) (internal quotations and citation marks omitted). ECF No. 21, at 10. In that Order, this Court found that, [A]lthough many of Plaintiff’s allegations challenged by Defendant as “mere puffery” contain classic “seller’s talk,” . . . the gravamen of Plaintiff’s allegations is that Trump’s advertising falsely marketed Trump University as both an institution with which Donald Trump was integrally involved as well 13 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 14 of 17 1 2 3 4 5 as “an actual university with a faculty of professors and adjunct professors.” Rather than challenging Trump’s subjective and general claims as to quality, Plaintiff challenges whether Trump University delivered the specific or absolute characteristics of (1) Donald Trump involvement; and (2) an “actual university.” Id. at 10–11 (citations omitted). 6 Defendant provides no rationale why the Court should revisit this decision, except 7 for the contention that “university” can have varying meanings, including the use of the 8 term for so-called corporate “universities” such as Disney University and Hamburger 9 University (McDonald’s). Def. Mot. 17–19. Defendant points to evidence in the record that 10 students testified to varying understandings of what “university” meant. Def. Mot. 17 11 (citing testimony). However, Plaintiff points to evidence in the record that Defendant’s 12 statements in the Main Promotional Video, as well as TU’s “Marketing Guidelines,” 13 encouraged TU students to associate TU with accredited universities rather than so-called 14 corporate “universities.” See Main Promotion Video, Pl. Resp., Ex. L (“We’re going to 15 teach you better than the business schools are going to teach you and I went to the best 16 business school.”); TU Marketing Guidelines, Pl. Resp., Ex. P, TU-DONNELLY0000016– 17 17 (describing the “Trump University Community” as including “Staff,” “Faculty,” 18 “Instructors,” and “Program Directors (Trump University’s Admissions Department)”; 19 including under “Catch Phrases/Buzz Words” “Ivy League Quality,” and under “Tone” 20 “Thinking of Trump University as a real University, with a real Admissions process—i.e., 21 not everyone who applies, is accepted”; and encouraging TU employees to “[u]se 22 terminology such as” “Enroll,” “Register,” and “Apply”). 23 The Court finds that Plaintiff has raised a genuine issue of material fact as to the 24 materiality of the “university” representation. At best, Defendant’s evidence as to the 25 “university” representation demonstrates that whether the representation of TU as a 26 “university” was material is a question of fact best decided by the jury. Cf. Williams v. 27 Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (finding, in the context of 28 California’s consumer laws, that whether a business practice is deceptive generally 14 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 15 of 17 1 presents a question of fact). 2 Second, Defendant argues that even if the representations were not puffery, they 3 were not false or misleading. Defendant asserts, with no reference to the record, that he 4 was “integrally involved in the instructor and mentor selection process.” Def. Mot. 20. 5 However, Plaintiff points to extensive evidence in the record of Defendant’s unfamiliarity 6 with the names, faces, and voices of TU instructors and the content of TU seminars, as well 7 as to Defendant’s explicit admissions that he did not personally meet, interview, or select 8 TU instructors and mentors. See, e.g., Trump Dep. 100:23–125:5; id. at 228:15–24; id. at 9 413:21–414:1; id. 429:23–430:1 (“Q. . . . Before you say my handpicked instructor is going 10 to be there, you could have sat down and personally interviewed the person, right? A. I 11 guess I could have.”); id. at 477:6–478:8 (“Q. You didn’t personally select these 12 instructors, correct? A. No. Q. That’s correct? A. That is correct.” Id. at 477:6–10.). The 13 Court thus finds that Plaintiff has raised a genuine issue of material fact as to whether 14 Defendant’s representation of “integral involvement” was false or misleading.7 15 IV. 16 Finally, Defendant argues that Plaintiff cannot establish that he “knowingly devised 17 or knowingly participated in a scheme or plan to defraud.” Woods, 335 F.3d at 997. 18 Defendant argues that this element requires Plaintiff to present evidence that Defendant 19 had a “specific intent to deceive or defraud.” Def. Mot. 22–23 (citing United States v. 20 Harkonen, 510 F. App’x 633, 636 (9th Cir. 2013)). Defendant argues that Plaintiff cannot 21 make this showing, because the evidence in the record establishes that Defendant invested 22 in TU because he “loved the educational aspect of the business,” “TU was not a large 23 investment for Defendant,” “Defendant vigilantly protected the reputation of the Trump Whether Defendant Knowingly Participated in a Scheme to Defraud 24 25 26 27 28 7 Defendant also argues that the use of the university moniker was not false or misleading because by using the term “university,” Defendant was not representing that TU was a university “equivalent to a four-year, degree-granting institution.” Def. Mot. 20. Essentially, Defendant is again arguing that the term “university” can have varying meanings. But again, at best, Defendant’s argument demonstrates that whether the representation of TU as a “university” was material is a question of fact best decided by the jury. 15 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 16 of 17 1 ‘Brand,’” “Defendant believed TU was providing a good program because he was informed 2 about the many positive student reviews,” and “Defendant knew and relied on TU’s hired 3 counsel and compliance team to review marketing materials for legal compliance.” Def. 4 Mot. 23 (citations omitted). 5 However, because “[d]irect proof of knowledge and fraudulent intent—of what a 6 person is thinking—is almost never available . . . [the Ninth Circuit] ha[s] repeatedly held 7 that the intent to defraud may be proven through reckless indifference to the truth or falsity 8 of statements” in the context of federal fraud statutes. United States v. Dearing, 504 F.3d 9 897, 902–03 (9th Cir. 2007) (first alteration in original) (citing United States v. Munoz, 233 10 F.3d 1117, 1136 (9th Cir. 2000) (mail fraud); United States v. Ely, 142 F.3d 1113, 1121 11 (9th Cir. 1997) (bank fraud)). Here, as discussed supra in Part III, Plaintiff has pointed to 12 extensive evidence in the record that Defendant did not personally meet, interview, or 13 select TU instructors or mentors, see, e.g., Trump Dep. 100:23–125:5; id. at 228:15–24; id. 14 at 413:21–414:1; id. at 429:23–430:1; id. at 477:6–478:8, even while the representation 15 that TU instructors or mentors were “handpicked” by Defendant was made both by 16 Defendant himself in the Main Promotional Video, as well as in marketing materials 17 approved by Defendant, see, e.g., Main Promotional Video, Pl. Resp., Ex. L (“[T]hese are 18 all people that are handpicked by me.”); Special Invitation From Donald. J. Trump, Pl. 19 Resp., Ex. F (“[M]y hand-picked instructors will share my techniques, which took my 20 entire career to develop.”). 21 22 Thus, the Court finds that Plaintiff has raised a genuine issue of material fact as to whether Defendant knowingly participated in the scheme to defraud. 23 24 25 26 CONCLUSION For the foregoing reasons, IT IS HEREBY ORDERED that Defendant’s motion for summary judgment, ECF No. 180, is DENIED. IT IS SO ORDERED. 27 28 16 3:13-cv-2519-GPC-WVG Case 3:13-cv-02519-GPC-WVG Document 268 Filed 08/02/16 Page 17 of 17 1 Dated: August 2, 2016 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 17 3:13-cv-2519-GPC-WVG
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