The Trump University lawsuit “thorns,” long festering in the side of the Trump transition team, have now been excised in an out-of-court settlement. Both sides have reason to claim at least a partial victory in the final resolution of this class action litigation drama.
The suits asserted fraud claims on behalf of approximately 6,000 former students who had enrolled in the President-elect’s seminar and what many would label a faux on-line “university.”
In a defensive tweet, Mr. Trump suggested that he quite reluctantly ordered the suits settled only because of the potential that they would interfere with his presidential responsibilities. His incoming chief of staff, RNC chair Reince Priebus, reinforced this claim.
Trump also repeated a prior assertion that the suits lacked merit and that he would have preferred to litigate and win:
“The only BAD thing about winning the presidency” is he doesn’t have time to sit for a trial he says he would have won, he tweeted. “Too bad!”
Trump also said the $25 million settlement was much less than his potential financial exposure in the cases, which alleged Trump defrauded people who enrolled in real estate seminars he started in 2005.
“I settled the Trump University lawsuit for a small fraction of the potential award because as President I have to focus on our country.”
In fact, the settlement looks to be a good deal for the students. Most will recover at least 50% of the tuition they paid for taking the Trump courses. The plaintiffs get some significant compensation that publicly affirms the common-sense validity of their accusations of fraud. Try to picture legitimate universities like Trump’s alma maters Fordham and Penn issuing 50% tuition refunds to students in response to class action lawsuits alleging fraud.
Mr. Trump, though, also had sound reasons to act. Class actions almost always settle if they have been “certified” by the court as non-frivolous matters. The students might even have won at trial if supported by credible evidence. The Trump University matters were not only “certified” but had also survived motions to dismiss. All of this means that these cases were destined to go to trial if not resolved out of court.
The vast majority of “certified” class actions settle with good reason. Legal defense costs are exorbitant and if the defendants lose the case, the verdict can be catastrophically high.
Let’s say the jurors agree to the kind of number customarily awarded for only a minor injury, say $25,000 as restitution for the tuition and a “punitive damage” award to “send a message” that reprehensible conduct of this sort will not be tolerated. Multiply $25,000 times 6,000 students and the figure award adds up to $150 million. But wait…those expensive Trump defense lawyers at O’Melveny and Meyers including Dan Petrocelli (the victims’ lead counsel on the OJ Simpson civil case) and other defense lawyers and experts have to be paid for their work on the cases in New York and California. Let’s throw in at least $5 million for them, bringing the total award to at least $155 million. Would the number get reduced on appeal? Probably not, but that process would be a long, costly and embarrassing effort — all taking place in the middle of the Trump presidency.
Although both sides made sensible decisions in settling before trial, Mr. Trump will still have to worry that potential litigants will be emboldened by these settlements to pursue cases of their own against the new Commander-in-Chief. There are by all accounts several dozens of lawsuits pending against Mr. Trump and his businesses, with more in the wings.
Ironically, the Supreme Court has previously ruled in the case of William Jefferson Clinton vs Paula Jones (the latter being one of Mr. Trump’s invited guests at one of the presidential debates) that even the president of the United States has to appear in civil cases regarding matters that occurred prior to his election. It really wouldn’t take much of the president’s time, opined the unanimous court. The justices obviously never considered a Trump presidency, ruling that the matter of a president having to appear in court had only come up three times in American history. These were single, inconsequential matters involving Theodore Roosevelt, Harry Truman and John F. Kennedy.
Compared with his less litigious predecessors, then, Mr. Trump faces, even if only considering a conservative estimate of potential suits, an historic number of legal matters that will hover over him like a dark cloud on Inauguration Day. Unless the Supreme Court carves out a new rule deferring personal lawsuits against the president until his term is complete, President Trump will be coughing up substantial coin to make these lawsuits go away so he can get around to building that wall.