Deceptive Marketing Class Actions: Trump University

June 10, 2016

The most talked about class action in Canada of late is not a Canadian class action at all, but rather one commenced in a U.S. District Court in the Southern District of California. Low v. Trump University, already certified and scheduled for a jury trial in November of this year, involves various claims against Trump University and against Donald Trump personally for allegedly over-promising and under-delivering on a series of "Trump University" real estate investment education programs and seminars.

This post will briefly review what the case is about and provide a Canadian legal perspective on two key issues: (1) the amenability of the deceptive marketing claims to class treatment; and (2) the exposure of "brand ambassadors" to personal liability for misrepresentations.

The Trump University class action: What is it about?

The Trump University case currently being discussed in the news (there is also a second, less advanced class action) relates to claims made in the promotion and advertising of certain Trump University real estate investment educational programs and seminars. Trump University offered various such programs from 2005 to 2010, ranging from a free introductory "workshop", to a $35,000 "elite" program. Some promotional materials quoted Donald Trump as saying "I can turn anyone into a successful real estate investor, including you."

At issue is the accuracy of the representations made to the customers who purchased Trump University programs. The plaintiffs' claims revolve mainly around three alleged misrepresentations: (1) that Trump University was an accredited university; (2) that students would be taught by real estate experts, professors and mentors hand-selected by Mr. Trump; and (3) that students would receive one year of expert support and mentoring. The plaintiffs originally advanced fourteen different causes of action, and sought certification of a national class, but certification was ultimately only granted in respect of certain statutory claims under the competition and consumer protection laws of California, New York and Florida, on behalf of persons who purchased certain Trump University programs in those three states. The other claims were not certified because of state-to-state differences in the laws governing the claims.

Amenability of deceptive marketing claims to class proceedings

Misrepresentation class actions are common in Canada, but may face difficulty at the certification stage with defining common issues. Defendants may make a variety of different representations, which are communicated to potential class members in a variety of different ways and at different times, and that may be understood and acted upon differently by different class members. At common law, a claim of negligent misrepresentation requires proof not only that the plaintiff was exposed to a misrepresentation, but also that the plaintiff relied on it and suffered damages as a result. This creates individual issues that may overwhelm the common issues, and lead a court to conclude that a class proceeding is not the preferable procedure for resolving the class members' claims.

To be amenable to certification, misrepresentation claims usually need to: (1) be focused on certain specific representations that were made consistently across the entire class; and (2) include a statutory claim or breach of contract claim with fewer required elements than the tort of negligent misrepresentation. The Ontario Securities Act and Consumer Protection Act, for example, establish misrepresentation causes of action that (where available) eliminate the requirement to prove actual reliance or damages. Individual variability in the calculation of damages will not be fatal to certification if liability per se can be established on a class-wide basis.

There are two interesting points of contrast between Ramdath and the Trump University case. The first is that damages in the Trump University case will be (if the defendants are found liable) determined on an entirely individual basis, rather than using a common formula, as in Ramdath. The defendants will be entitled to claim that the class members received some value from attending the Trump University seminars, and that this value should be offset against class members' recovery of program fees. The evidence suggested that this would need to be an individualized inquiry, rather than one that could be addressed on a class-wide basis. This was not grounds for de-certifying the class proceeding (nor would it be Canada), but as a practical matter it may make it significantly more difficult for the class members to recover money.

Exposure to Personal Liability

Trump University is a limited liability corporation. In Canada, it would be unusual to name a brand spokesperson as an individual defendant in connection with his or her promotion of a corporation's services. In the typical case, the brand spokesperson would be acting as agent for the company, and suing him or her personally would require piercing the corporate veil. The Trump University claim is unique in two key respects, however.

First, the case involves Donald Trump. Some of the alleged misrepresentations were not just said by Donald Trump, but explicitly attributed to Donald Trump as things that he personally claimed and believed. Therefore it is not clear that Donald Trump was acting as an agent of for the corporation, rather than speaking for himself. Second, it is alleged that the misrepresentations were intentional, and made for personal gain, which is an arguable basis for piercing the corporate veil.

Donald Trump moved for summary judgment to dismiss the claims against him personally. In declining to remove Mr. Trump from the proceeding, the court found that there was evidence that he had personally participated in the alleged misrepresentations and misconduct, and that there was a genuine dispute of material fact as to whether he could be personally liable.

Conclusion

The types of claims at issue in the Trump University case are ones that Canadian courts can and frequently do tackle in the class proceedings context. The approach being taken by the U.S. court is interesting as an illustration of the similarities and differences of U.S. and Canadian class proceedings. Of particular interest going forward will be the jury selection process (exceedingly rare in Canada, and likely to be contentious), and the procedure adopted to make the individual damages phase economically feasible for individual class members, if the proceeding gets that far.

The Trump University trial is scheduled to begin on November 28, 2016, and to last for a month or longer. Jury selection will begin sometime shortly before then. The trial will very likely include personal testimony from Mr. Trump. Whether he has other significant time commitments at that time remains to be seen.

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