On Thursday an unsatisfied Trump University student will go to federal court in San Diego to try to get herself excluded from one of the more generous class-action settlements one is apt to ever see.
The class members are poised to recover more than 80 cents on each dollar they allegedly lost on tuition at Trump’s real-estate “university,” and plaintiffs’ attorneys have agreed to forfeit fees and expenses for nearly seven years of work — a stupendous offer.
If she succeeds, the dissenter, Sherri B. Simpson—who complained about her Trump University experiences in an anti-Trump campaign ad campaign during the primaries in early 2016—could conceivably upend the whole deal. But if that’s her quest, she faces a steep, uphill battle.
A long-shot attempt to “have her day in court”
The settlement was reached on November 18, 10 days after lead defendant Donald J. Trump was elected President of the United States and just 10 more before he was scheduled to stand trial in the first of two class-actions concerning his now-notorious for-profit school. The negotiated resolution, under which Trump paid $25 million into a settlement fund three days before his inauguration, was supposed to put an end to both suits, as well as to an enforcement action that had been filed by New York State Attorney General Eric Schneiderman.
The cases all stemmed from live seminars the Trump Organization ran from 2007 to 2010—ranging in price from $1,495 to $34,995—and at which, according to print and video ads featuring Trump himself, the developer’s “hand-picked” instructors would teach students his secrets to getting rich through real-estate speculation. The plaintiffs, who alleged the courses were a worthless scam, sued for false advertising, consumer fraud, financial elder abuse (i.e., a swindle that targets older people), and civil racketeering (that is, a series of white-collar crimes, in this case mail and wire fraud allegations).
Trump denied wrongdoing, and his attorneys argued—in a refrain that, post-election, has taken on a familiar ring—that some his language in the ads was never meant to be taken literally.
So far, according to affidavits filed by class attorney Rachel Jensen of Robbins Geller Rudman & Dowd, 2,741 former Trump U. alumni have filed valid claims seeking to participate, while only two, including Simpson, have tried to get out of the deal. (The other dissenter, a Florida man who claims to have been left homeless after spending about $40,000 on seminars, wrote in a letter to the court that he wanted to be paid at least three times his losses.)
Though Simpson’s attorneys acknowledge in their filings that the class attorneys pursued the case “with vigor,” performed “excellent work,” and that the settlement they obtained is a “laudable result,” they say that Simpson nevertheless wishes to be excluded from the settlement—in legal terms, “to opt out” of it—and bring her own suit, so that she can have “her day in court” and seek even better terms.
Simpson, who is herself an attorney in Fort Lauderdale, Florida, claims she was led to believe she’d have a right to opt out at this stage of the case by language contained in a legal notice that was published in 2015, after the two San Diego cases had won formal judicial approval to go forward as class actions. The notice not only gave class members a right to opt out of the class at that point—which Simpson chose not do—but also guaranteed, she claims, that members would get a second opportunity to opt out if and when a settlement was announced.
The class attorneys and Trump’s attorneys argue that there was no such second opt-out right. Simpson’s motion matters because, if granted, it could conceivably imperil the whole settlement. A key reason the settlement is so generous to class members is that the Trump defendants were paying handsomely to put this messy dispute behind them. Theoretically, at least, if Simpson were permitted to opt out and file a new suit—forcing Trump to endure, once again, more distractions and negative publicity—the Trump defendants might seek to back out of the whole deal.
Such an unraveling is a long-shot, though. To begin with, it’s unclear whether Simpson ever even saw the language she claims misled her in the first place. In 2015, when all class members were sent a notice advising them to decide whether stay in or opt out of the class, most of them—including Simpson, according to an affidavit submitted by a settlement administrator—were sent a shorter form of notice. It unambiguously warned, “If you want to start . . . your own lawsuit against Trump University and Trump . . . you must exclude yourself” from the class.
Simpson’s motion implies that she was misled by language in a longer form notice, posted online at about the same time. But even that notice begins with the admonition that if the class member stays in the suit “you give up any rights to sue Trump or Trump University separately about the same legal claims in these lawsuits.”
But then, on page 6 of the longer notice, the following confusing passage appears:
“If you stay in [the class], and the Plaintiffs obtain money or benefits, either as a result of the trial or a settlement, you will be notified about how to obtain a share (or ask how to be excluded from the settlement).” [Emphasis added.]
Simpson says the parenthetical phrase guaranteed her a right to a second opt-out. Yet the passage then continues:
“Keep in mind that if you do nothing now, regardless of whether the Plaintiffs win or lose the trial, you will not be able to sue (by way of separate lawsuit) Trump University and Trump about the same legal claims that are the subject of these lawsuits. [Emphasis added.]
Class counsel claim the parenthetical Simpson relies upon was only meant to apprise class members of their right not to receive a share of a settlement, not of any supposed right to file their own suit.
If not for the ambiguous parenthetical phrase in the long-form notice, the law appears to be clear that in class actions like this one, class members have no general right or expectation to a second opt-out opportunity at the time of settlement. Such an opportunity is not thought necessary because the judge must approve the fairness of the settlement anyway, protecting the interests of class members. In the Trump University cases, the judge is U.S. District Judge Gavrilo Curiel, the Indiana-born judge whom candidate Trump once decried as “biased” because he was “Mexican.”
A generous settlement with a remarkable gesture
By any objective standard, the Trump University settlement looks to be a highly attractive one, as even Simpson’s attorneys admit. At the moment, settlement administrators say, class members stand to recover more than 80% of what they spent on seminars, with many likely to receive as much as $30,000.
Though there are no general statistics covering all types of class actions, this result appears to compare remarkably well to typical results in other contexts. In shareholder class actions, for instance, according to extensive data kept by the Stanford Class Action Clearinghouse and Cornerstone Research, the median settlement in cases of small size (under $50 million in alleged damages) came to about 7.3% of the total estimated damages in cases settled last year, and 10.8% of damages in settlements reached over the 10 years preceding that. For settlements in shareholder class actions of all sizes over the past 10 years, the median recovery has ranged from just 1.8% to 2.9% of damages.
One reason this recovery is so high is that the plaintiffs’ attorneys chose to waive their fees and all their out-of-pocket expenses—a remarkable gesture in litigation that lasted nearly seven years, involving more than 65 depositions, the briefing of 156 motions, and the production of a half million pages of documents. (Two attorneys and a spokesman for the class’s lead law firm, Robbins Geller Rudman & Dowd, did not respond to inquiries as to why they did so. One can speculate, however, that, because of the suit’s extraordinarily high visibility, they wished to defuse any suggestion that the suits or settlements were driven by contingent-fee attorneys.)
If Simpson were allowed to opt-out and file her own suit, she would have to start over from scratch, facing years of litigation with no guarantee of reaching trial while Trump was still in office. Unless her attorneys volunteered their services, their fees could easily consume 25% to 40% of any recovery she eventually received, so it’s hard to see how she could expect to do better than the bird-in-the-hand the settlement offers her right now.
A game of hardball
Even if Simpson’s opt-out motion might look like a long-shot, the class counsel are taking no chances—playing hardball in an attempt to get Simpson to drop her motion. On March 23 they wrote her a stiff letter, first reported by the National Law Journal, accusing her of “jeopardiz[ing] tens of millions of dollars in recoveries to thousands of Trump University victims who need relief now,” promising to grill her under oath about her accusations at the hearing, and suggesting that her attorneys violated federal court rules by “misrepresenting to the court” the circumstances surrounding her decision to opt-out.
In fact, class attorneys have suggested that Simpson’s opt-out is a politically motivated effort on the part of Simpson’s attorneys, rather than a spontaneous, financially motivated choice by Simpson herself. As recently as February 1, Simpson filed a claim form online, seeking to recover from the settlement and waiving any right to pursue any other legal remedy. (Simpson’s attorneys, in their papers, says Simpson was then simply protecting her rights in an “in the exercise of caution.”)
But the class attorneys suggest that it wasn’t until late February, when one of Simpson’s attorneys, Gary B. Friedman of New York, began soliciting class members from among those who had appeared in anti-Trump campaign ads, that she changed her mind. They infer this from the fact that on February 23 another such Trump University student, Robert Guillo, told them that he received a telephone solicitation to opt out of the settlement. The solicitation came from a male attorney, according to Guillo, who was calling from the number his caller ID identified as that of a professor at Cardozo Law School, who is Friedman’s wife.
Another of Simpson’s attorneys, the class attorneys add, Ilann Maazel of Emery Celli Brinckerhoff & Abady, was counsel to Green Party presidential candidate Jill Stein in December in her unsuccessful efforts to obtain recounts of presidential election results in Michigan, Wisconsin, and Pennsylvania.
Friedman and Maazel did not respond to emails seeking comment.
The hearing in San Diego will begin on Thursday at 1 p.m., local time.
Roger Parloff writes about law and business.
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