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Litigators of the Week: How Kaplan Hecker Duo One-Upped the Trumps in Fraud Suit
April 17, 2020
'At its core our case is straightforward: The Trumps deliberately made false and misleading statements in exchange for millions of dollars in payments that were not disclosed to investors who relied on what the Trumps said and lost hundreds or thousands of dollars as a result. That is called fraud, and the victims are entitled to damages as a result. '
Our Litigators of the Week are Roberta Kaplan and John C. Quinn of Kaplan Hecker & Fink, who notched a series of crucial victories in a putative class action against President Donald Trump and his family.
The suit is on behalf of plaintiffs who invested in a multi-level marketing company called ACN, which on its website bills itself as “a remarkable business opportunity for you offering people you already know an alternative on the essential services they are using anyway.”
But the case isn’t against ACN. The plaintiffs are suing the Trumps for fraud in the Southern District of New York, alleging the family used its name and perceived business success, bolstered by “The Celebrity Apprentice,” to defraud vulnerable consumers looking to start their own businesses.
Last week, U.S. District Judge Lorna Schofield refused to send the case to arbitration and ordered MGM to make certain unaired footage from “The Celebrity Apprentice” available to plaintiffs—the first time that’s happened in a suit against Trump.
Kaplan and Quinn discussed the case with Lit Daily.
Lit Daily: I know that your clients are using pseudonyms in the litigation—but what can you tell us about them and the relief that they’re seeking?
Robbie Kaplan: We represent four working-class Americans—a hospice worker, a self-employed formerly homeless man, a food delivery driver, and a mother of three who works at a national retail store. They, and thousands of others like them, were defrauded by the Trumps into investing in the business opportunity offered by a multi-level marketing company called ACN, which turned out to be not at all what the Trumps pitched. We are seeking to certify a class and recover damages, among other relief.
What exactly is the alleged connection between the Trumps and ACN?
John C. Quinn: For about ten years, from 2005 to at least 2015, The Trump Organization was secretly paid millions of dollars to promote and endorse the business opportunity offered by ACN. The Trumps facilitated ACN’s appearance on two episodes of “The Celebrity Apprentice,” and Donald Trump appeared in numerous recruiting videos and print and online materials, and on stage at ACN rallies and events.
Everywhere he appeared, he delivered a consistently false message, telling recruits that “[y]ou have a great opportunity before you at ACN without any of the risks most entrepreneurs have to take,” and that ACN’s flagship videophone was doing “half-a-billion dollars’ worth of sales a year.” Trump also told potential recruits that he had “experienced the opportunity” and “done a lot of research,” and that his endorsement was “not for any money.” Not a word of this was true.
Tell us about what happened to your clients.
Robbie Kaplan: Our clients and thousands of others like them had a consistent experience. The Trump endorsement was typically the first thing they learned about the ACN business opportunity, the reason they took an interest, and the determining factor in their decision to invest.
Take Jane Doe for example. She is a hospice worker in California. She went to a meeting for prospective ACN recruits, and as she listened to the presentations, she was skeptical and unpersuaded. But then she was shown a promotional video featuring Donald Trump, and she watched clips of ACN appearing on “The Celebrity Apprentice,” where Trump, along with Donald Trump Jr. and Ivanka Trump, stood alongside ACN’s founders and praised the company.
She heard Donald Trump say, “You have a great opportunity before you at ACN without any of the risk most entrepreneurs have to take.” She believed it, and she had no idea the Trumps were being paid—the video didn’t mention that. That video was the turning point for her. And after she signed up and paid the registration fee, she spent thousands of dollars in fees and expenses trying to pursue the ACN business opportunity, but in two years she received only a single check for $38.
Why did you take on the case? Who is your co-counsel?
John C. Quinn: We took the case on because it was an opportunity to hold the powerful to account for wrongdoing and deliver justice for our clients.
We are thrilled to be working with our friends at the Emery Celli firm as co-counsel in this case. We also have a terrific team of lawyers working on this at Kaplan Hecker, including our partner Joshua Matz and our colleagues Alexander Rodney and Emily Cole, who have been working on this case from the beginning.
Did you hesitate to take a position adverse to the president of the United States? Have you experienced any harassment as a result?
Robbie Kaplan: Bringing important cases to do justice is a core part of who we are and what we do at Kaplan Hecker & Fink. In addition to this case, we’ve sued two dozen white supremacists who organized the violence in Charlottesville, and we are representing or have represented a woman who was sued for defamation by a famous Hollywood producer after sharing her #MeToo story; a victim of Jeffery Epstein’s abuse; LGBTQ organizations in Mississippi; and E. Jean Carroll, a journalist suing President Trump for having defamed her after she publicly recounted her experience of being raped by him several decades ago.
In many of these cases, there is harassment, and we have received violent threats, but our job is to represent our clients and obtain justice for them no matter what.
What has been your overarching theme in litigating this case?
John C. Quinn: Despite all the surrounding circumstances, and all the efforts by the defendants and others to force the case into arbitration or to halt the discovery process, at its core our case is straightforward: The Trumps deliberately made false and misleading statements in exchange for millions of dollars in payments that were not disclosed to investors who relied on what the Trumps said and lost hundreds or thousands of dollars as a result. That is called fraud, and the victims are entitled to damages as a result.
Who is opposing counsel?
John C. Quinn: The defendants are represented by Joanna Hendon at Spears & Imes.
On July 24, Judge Schofield granted the motion to dismiss in part and denied it in part, permitting the plaintiffs’ state law consumer fraud claims to go forward. What to you were the most significant aspects of this decision?
John C. Quinn: The decision denied defendants’ motion to dismiss as to a range of state law fraud and consumer protection claims, and rejected defendants’ challenge to the court’s jurisdiction over those claims. So the decision allowed those claims to proceed into discovery, including a common law fraud claim for which we are seeking to certify a nationwide class.
The Trumps sought to stay discovery in anticipation of filing a motion to compel arbitration based on arbitration provisions in the contracts between ACN and the plaintiffs. Tell us a little about the hearing on September 5, 2019.
Robbie Kaplan: These were contracts to which the Trumps were not parties, and which didn’t say a word about them. And the Trumps had not made any mention of potentially trying to compel arbitration for more than eight months, during which they served a raft of preservation subpoenas and filed a motion to dismiss. As we put it in one letter to the court, they seemed to have a “tails-we-win, heads-we-seek-arbitration strategy.”
At the conference on September 5, the court pressed them on this tactical delay and defendants did not really have an answer. The court allowed them to file their motion, but lifted the discovery stay that had been in place while the court was considering the motion to dismiss.
On April 8, the court issued a written opinion denying the Trump family’s motion to compel arbitration. What were the key holdings?
John C. Quinn: The court’s decision rested on two independent bases. First, the court held that defendants could not rely on the doctrines of agency or equitable estoppel to take advantage of arbitration provisions in contracts between the plaintiffs and ACN.
As to equitable estoppel, in light of the allegations that ACN and the Trumps did not disclose the nature and extent of their relationship, there was no basis to conclude that, from the plaintiffs’ perspective, ACN and the Trumps were so closely related that an agreement to arbitrate with one should fairly extend to the other.
Second, the court held that, even if the Trumps had a right to arbitrate, they waived any such right by litigating aggressively in the judicial forum for eight months before saying anything about arbitration. As the court put it, “Now that defendants have extracted what they can from the judicial proceedings, they seek to move to a different forum. This conduct is both substantively prejudicial towards plaintiffs and seeks to use the FAA as a vehicle to manipulate the rules of procedure to defendants’ benefit and plaintiffs’ harm.”
The next day, the court held a two-hour hearing by telephone. What was that like? What was the focus?
John C. Quinn: Because defendants and ACN have made so many different efforts to force the case into arbitration or to halt discovery, there were four motions and at least one additional request for relief before the court during that hearing.
MGM was involved in the hearing too, because MGM is in possession of unaired “Celebrity Apprentice” footage from the episodes in which ACN was featured, and we filed a motion to compel MGM to make that footage available to us. So there were a lot of issues to work through. And because of the COVID-19 pandemic, of course we were on the phone. The court was very methodical in working through the issues, and had specific questions for all involved. Frankly, the two hours flew by.
The court granted a motion to compel unaired “Celebrity Apprentice” footage from MGM. Why is this significant?
Robbie Kaplan: This appears to be the first time a court has ordered unaired footage from the show to be made available to a litigant suing President Trump. It is significant because evidence of what people said behind closed doors, evidence about what was held back from the public and left on the cutting room floor, can be so hard to uncover and so revealing when it finally sees the light of day.
The case isn’t over. But what do you think are the most important things you’ve accomplished so far?
Robbie Kaplan: One of the important things we accomplished right at the outset of the case was a ruling that the plaintiffs could proceed under pseudonym. The court found that the plaintiffs had met their burden to show a well-founded fear of retaliation, explaining that “the manner in which the president has used his position and platform to affect the course of pending court cases” was “really without precedent” and that the harms involved were “real, significant, and present an unwarranted obstacle to those who would seek to vindicate their rights in federal court.”
The court also found that there was no reason to think that making the names of the hospice worker, or the food delivery driver, or other plaintiffs public would have any effect on the course of the litigation. So we worked out a protective order that permits the plaintiffs’ identities to be provided in a safe way in connection with discovery, while keeping the plaintiffs and their families safe. That was a really important ruling.
Overall, I think the other principal accomplishments relate to overcoming obstacles that defendants and non-parties have put in our way, whether it’s efforts to avoid discovery, or force arbitration, or get the case dismissed altogether. One by one by one, we have defeated each effort to stop the case, and have forged ahead gathering the evidence necessary to obtain justice for our clients.
John C. Quinn: Our plan is to push through the remainder of document discovery and get into depositions. We’ve served deposition notices on all of the defendants, as well as a non-party consultant who helped facilitate the relationship between The Trump Organization and ACN.
Once we complete depositions, we’ll proceed into expert discovery and ultimately toward summary judgment and trial. In the meantime, the defendants have appealed the court’s denial of their motion to compel arbitration based on the ACN contracts, so we’ll be before the Second Circuit on that issue.
Read this article at The American Lawyer here.
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