Trumps' Latest 'Stall Tactic' Should Be Rejected, Investors Say

Published on:
April 22, 2020

The plaintiffs in a putative class action accusing President Donald Trump and three of his children of widespread fraud said Monday that the Trumps' recent bid for a midcase appeal is yet another attempt to stall the case.

The Trumps are seeking a stay in the case while they appeal a New York federal judge's order earlier this month that rejected their motion to send the suit, which claims the family conned thousands into investing in worthless business ventures using the Trump name, to arbitration.

The anonymous plaintiffs behind the case told U.S. District Judge Lorna Schofield on Monday that the stay request is "just the latest of defendants' efforts to impede any and all progress in this litigation."

"The court has repeatedly rejected defendants' stall tactics, and should do so again here, as all the factors that courts consider in evaluating a request for a stay pending appeal weigh strongly against the imposition of a stay," the plaintiffs said in a letter.

Judge Schofield has thus far allowed the plaintiffs to proceed anonymously to protect them from threats from the president, who was sued in his personal capacity alongside Donald Trump Jr., Eric Trump and Ivanka Trump in October 2018 for allegedly plotting 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.

In January 2019, the plaintiffs filed an amended complaint with additional examples of Trump's allegedly misleading statements regarding ACN, claiming he knew it was a bad investment when he was hawking the company to consumers on his reality show "The Apprentice" and elsewhere. The plaintiffs also claim 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, the plaintiffs claim.

The plaintiffs say they lost everything by buying into ACN and said endorsements by Trump and his associates were the decisive factors in their decisions to pay $499 to get started with the company.

Last July, Judge Schofield nixed racketeering claims but kept various common law fraud and state law claims intact.

The Trumps have argued in their bid to force arbitration that because the plaintiffs signed arbitration agreements with ACN, which is not a party to the case, the plaintiffs should be held to those agreements in this suit. Judge Schofield, however, ruled earlier this month that the plaintiffs never agreed to arbitrate with the Trumps.

On top of that, arbitration agreements can only apply to nonsignatory agents who are "disclosed," and the plaintiffs didn't realize there was a financial relationship between ACN and the Trumps, the judge said. And even if the agreements could apply to the claims against the Trumps, they waited eight months after the suit was launched to pursue arbitration and thereby waived any right to it, according to Judge Schofield.

The Trumps requested a stay of the proceedings on April 13 so that they could launch an interlocutory appeal of the arbitration ruling, but the plaintiffs responded Monday that the Trumps have made no effort to show that the appeal would actually succeed, likely because it is "plainly meritless."

"Defendants do not bother to explain how the court erred, much less identify any 'serious questions' bearing on the court's analysis likely to result in reversal," the plaintiff said.

The plaintiffs asked Judge Schofield for a full rejection of the Trumps' request, saying the case needs to move forwards so that investors can be made whole for the Trumps' decade of "using their vast influence and celebrity to defraud working-class Americans."

"In short, issuing a stay would only reward defendants' foot-dragging and exacerbate the prejudice plaintiffs have already suffered as a result," the plaintiffs said. "That result is not just unfair; it is contrary to law."

Counsel for the plaintiffs declined to comment further. Counsel for the Trumps did not immediately respond to a request for comment Tuesday.

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.

More news from our Newsroom

Published on: May 20, 2020

Sean Hecker Moderates NYCBA’s Webinar on Conducting Cross-Border Investigations During the Pandemic and in a Post-COVID-19 World

NEW YORK, NY, May 20, 2020 – Kaplan Hecker & Fink partner Sean Hecker today moderated a virtual panel hosted by the New York City Bar Association.
Published on: May 19, 2020

Ransomware Attacks Compound Covid-19 Business Worries

Kaplan Hecker & Fink partner Marshall Miller writes in Bloomberg Law about the increasing threat posed by ransomware attacks amid the COVID-19 pandemic -- and the preventive steps every business... Read More
Published on: May 18, 2020

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

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... Read More