Matter of People of the State of N.Y. by Eric T. Schneiderman v. Trump Entrepreneur Initiative LLC
137 A.D.3d 409
| N.Y. App. Div. | 2016Background
- Attorney General sues Trump and affiliated entities for alleged unlicensed educational program conduct in New York related to Trump University/TEI.
- SED warned in 2005 that using 'University' without a charter and licensing violated Education Law; later no license and live NY programs persisted.
- Allegations describe misleading marketing, handpicked instructors, and bait-and-switch from $1,495 seminars to higher-cost mentorship packages.
- Allegations explicitly tie Donald Trump and Michael Sexton to founding, operation, and approval of ads; Trump’s image featured in advertising.
- Causes of action asserted: fraud under Executive Law § 63(12); deceptive practices (GBL § 349); false advertising (GBL § 350); education-law violations; and a consumer right-to-cancel provision claim.
- IAS court granted some defenses, dismissed specific claims, allowed limited discovery, and the First Department modified the dismissal and affirmed rest with caveats.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 63(12) creates a standalone fraud claim | Schneiderman: §63(12) authorizes independent fraud action. | Schwab Schwab line or Schwab limitation argued §63(12) does not create independent claims. | AG authorized to bring independent §63(12) fraud claim. |
| What statute of limitations governs §63(12) fraud claims | §63(12) action not subject to CPLR 214(2) three-year limit. | Some view §63(12) as within 'liability created by statute' under CPLR 214(2). | Fraud under §63(12) is governed by CPLR 213(1) six-year limit, not CPLR 214(2). |
| Whether §63(12) fraud claims are adequately pleaded | Pleading alleged repeated fraudulent/improper conduct by respondents. | Defendants argued insufficiency or scope issues under standards for §63(12) claims. | Material issues of fact exist; summary determination denied. |
| Appropriate handling of other causes and discovery | AG sought summary relief on multiple statutory claims and discovery on remaining actions. | Defendants urged dismissal/conversion and limited discovery. | IAS court correctly denied plenary-conversion; discovery rulings and denial of certain defenses affirmed. |
Key Cases Cited
- People v Charles Schwab & Co., Inc., 109 AD3d 445 (1st Dept 2013) (addressed standalone §63(12) claim limitations; ultimately disagreed with Schwab reasoning)
- Cortelle Corp., 38 NY2d 83 (1975) (statute of limitations for §63(12) claims; foundational for CPLR 214(2) analysis)
- People v Greenberg, 21 NY3d 439 (2013) (affirms independent §63(12) fraud claims in appropriate contexts)
- Wells Fargo Ins. Servs., Inc., 62 AD3d 404 (1st Dept 2009) (authority recognizing §63(12) fraud claims independent of common-law fraud)
- Coventry First LLC, 52 AD3d 345 (1st Dept 2008) (recognized §63(12) fraud claim without requiring common-law fraud elements)
- Apple Health & Sports Clubs, 206 AD2d 266 (1st Dept 1994) (early approvals of §63(12) independent fraud claims)
- Grecco, 21 AD3d 470 (2d Dept 2005) (context for related fraud/deception jurisprudence)
- JAG NY, LLC, 18 AD3d 950 (3d Dept 2005) (fraud theory under §63(12) considerations)
- Daicel Chem. Indus., Ltd., 42 AD3d 301 (1st Dept 2007) (comparative authority on statutory fraud actions)
- Morelli v Weider Nutrition Group, 275 AD2d 607 (1st Dept 2000) (six-year residual statute applicable in fraud-like actions)