Trumps Can't Delay Fraud Suit Any Longer, Judge Rules

Published on:
May 18, 2020

President Donald Trump and three of his children can't push off facing a putative class action accusing them of widespread fraud, a New York federal judge ruled Monday, rejecting the Trumps' recent bid to pause the case for a midcase appeal.

The anonymous plaintiffs behind the case claim that the Trump family conned thousands of people into investing in worthless business ventures using the Trump name. The Trumps had asked for a stay in the case while they appeal U.S. District Judge Lorna Schofield's order earlier this month denying their motion to send the suit to arbitration.

But Judge Schofield on Monday said the Trumps weren't likely to prevail on appeal and haven't demonstrated that they would be "irreparably harmed" without a stay. The judge added that the plaintiffs had argued they would suffer substantial injury from another delay.

"While delay alone has not typically been found to be substantial injury for the purpose of this analysis, defendants sought and were granted a stay of discovery for eight months before bringing their motion to compel arbitration," she said.

When taking all of those factors into consideration, a stay isn't warranted, Judge Schofield said.

"Weighing the two 'most critical' factors — likelihood of success on the merits and irreparable harm — against each other, any prejudice that defendants ... may suffer from proceeding with the litigation during the pendency of the appeal does not outweigh the strong likelihood that defendants ... will not succeed on appeal," the judge said.

According to the 2018 suit, the president, Donald Trump Jr., Eric Trump and Ivanka Trump plotted for more than a decade to endorse schemes that ultimately held little to no value for people who bought into them, such as Trump University and multilevel marketing company American Communications Network.

Thus far, the judge has permitted the plaintiffs to proceed anonymously.

In January 2019, the plaintiffs filed an amended complaint with more examples of the Trump family's allegedly misleading statements regarding ACN. In particular, they claimed Trump knew it was a bad investment when he was promoting the company on his reality show "The Apprentice" and elsewhere. The plaintiffs also alleged that Trump failed to disclose that he was being paid to promote ACN, meaning he can be held liable for his statements on the company's behalf, they said.

The plaintiffs said they lost everything by buying into ACN, which they did because of statements made by Trump and his associates.

Last summer, Judge Schofield trimmed the suit and nixed racketeering claims. She left intact various common law fraud and state law claims.

In April, the judge ruled that the plaintiffs had never agreed to arbitrate with the Trumps, shooting down the defendants' arbitration bid. And later that month, the Trumps requested a stay so they could launch an interlocutory appeal of that ruling.

The plaintiffs fought the motion for a stay, arguing that it was "just the latest of defendants' efforts to impede any and all progress in this litigation."

Roberta Kaplan, counsel for the plaintiffs, told Law360 on Monday that the judge's decision "clears away yet another meritless obstacle used by defendants and non-party ACN to avoid discovery in this case."

"We will continue to do our job getting the evidence necessary to obtain justice for our brave clients, and thousands of others like them, who were defrauded by the Trumps," Kaplan said.

Counsel for the Trumps didn't immediately return a request for comment late Monday.

The plaintiffs are represented by John Quinn, Roberta Kaplan and Alexander Rodney of Kaplan Hecker & Fink LLP and Andrew Celli and Andrew Wilson of Emery Celli Brinckerhoff & Abady LLP.

The Trumps are represented by Joanna Hendon, Cynthia Chen and Andrew Kincaid of Spears & Imes LLP.

The case is Doe et al. v. The Trump Corp. et al., case number 1:18-cv-09936, in the U.S. District Court for the Southern District of New York.

Read this article at Law360 here.


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