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Makaeff v. Trump University

October 12, 2010

TARLA MAKAEFF, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
TRUMP UNIVERSITY, LLC, A NEW YORK LIMITED LIABILITY COMPANY, AND DOES 1 THROUGH 50, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS [Doc. No. 16]

Presently before the Court is Defendant Trump University's motion to dismiss Plaintiffs Tarla Makaeff, Brandon Keller, Ed Oberkrom, Patricia Murphy, and Sheri Winkelmann's First Amended Complaint. Plaintiffs filed an opposition, and Defendant filed a reply. Defendant's motion is suitable for disposition without oral argument pursuant to Local Civil Rule 7.1(d)(1). For the reasons stated herein, the Court GRANTS IN PART and DENIES IN PART the motion to dismiss.

BACKGROUND

This case stems from Plaintiffs' participation in Defendant's real estate investment seminars and related programs. The following facts are drawn from the First Amended Complaint ("FAC"). Defendant markets itself as a "University" driven by the mission to "train, educate and mentor entrepreneurs on achieving financial independence through real estate investing." Plaintiffs allege Defendant's real estate seminars and programs, for which they paid up to $34,995, are more like infomercials designed to sell products instead of provide training in real estate. Plaintiffs allege the purpose of the free introductory seminar is to get people to sign up for the $1,495 seminar; the purpose of the $1,495 seminar is to get people to sign up for the $35,000 Trump Gold Program; and the purpose of Trump Gold Program is to get people to sign up for additional seminars, products, and books.

On April 30, 2010, Plaintiff Tarla Makaeff filed a class action complaint against Defendant, alleging deceptive business practices. (Doc. No. 1.) On May 26, 2010, Defendant filed a counterclaim against Makeaff for defamation per se. (Doc. No. 4.) Makaeff later filed an amended complaint, adding Plaintiffs Brandon Keller, Ed Oberkrom, Patricia Murphy, and Sheri Winkelmann.*fn1 (Doc. No. 10.) On August 23, 2010, the Court denied Plaintiff's anti-SLAPP motion to strike Defendant's counterclaim for defamation. (Doc. No. 24.)

The FAC asserts eleven causes of action: (1) violation of California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq.; (2) violation of the Consumer Legal Remedies Act, Cal. Civ. Code § 1750 et seq.; (3) violation of the False Advertising Law, Cal. Bus & Prof. Code § 17500 et seq.; (4) Breach of Contract; (5) Breach of the Covenant of Good Faith and Fair Dealing; (6) Money Had and Received; (7) Negligent Misrepresentation; (8) Fraud; (9) False Promises, (10) Financial Elder Abuse in violation of California Welfare & Inst. Code § 15600 et seq.; and (11) violation of § 39 of New York General Business Law.

On July 21, 2010, Defendant filed the instant motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), 9(b), and 8(a)(2).

LEGAL STANDARD

A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a) (2009). A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pled in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556).

However, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citation omitted). A court need not accept "legal conclusions" as true. Iqbal, 129 S.Ct. at 1949. In spite of the deference the court is bound to pay to the plaintiff's allegations, it is not proper for the court to assume that "the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated the . . . laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

DISCUSSION

I. Educational Malpractice

Defendant contends that virtually all of Plaintiffs' claims are, in essence, for educational malpractice, and should be dismissed. Defendant, however, cites no cases applying the educational malpractice doctrine to private, unaccredited, and for-profit companies selling educational seminars such as Defendant.

Educational malpractice is a negligence theory of liability struck down by the California Court of Appeal in Peter W. v. San Francisco USD, 60 Cal. App. 3d 814, 825 (1976). In Peter W., an 18-year-old former public school student, who graduated high school with a fifth grade reading level, sued his school district for failure to provide an adequate education. The California Court of Appeal concluded that the complaint failed to allege a breach of a duty the law would recognize, noting that "classroom methodology affords no readily acceptable standards of care, or cause, or injury." Id. at 824. The court recognized the difficulties of assessing the wrongs and injuries involved, the lack of a workable rule of care against which a school district's conduct may be measured, and the incalculable burden which would be imposed on public school systems.

California cases have applied the educational malpractice bar to claims by students against public schools, private universities, and charter schools. See Wells v. One2One Learning Found., 48 Cal. Rptr. 3d 108 (Cal. 2006) (publicly-funded charter school); Chevlin v. Los Angeles College Dist., 212 Cal. App.3d 382 (Ct. App. 1989) (community college); Smith v. Alameda Cty. Soc. Servs. Agency, 153 Cal. Rptr. 712 (Ct. App. 1979) (public school district); Peter W. v. San Francisco Unified Sch. Dist., 60 Cal. App. 3d 814 (Ct. App. 1976) (public school district); Zumbrun v. Univ. of So. Cal., 25 Cal. App. 3d 1 (Ct. App. 1972) (private university). The out-of-district cases Defendant cites involve private colleges and vocational schools. Thus, the Court is not persuaded that Defendant is an educational institution to which this doctrine applies.

Even if the educational malpractice bar were to apply, reading the FAC in the light most favorable to Plaintiffs, Plaintiffs' contract, tort, and consumer claims do not implicate this doctrine. The considerations identified in Peter W. do not apply to claims where resolution "does not require judgments about pedagogical methods or the quality of the school's classes, instructors, curriculum, textbooks, or learning aids," nor "require evaluation of individual students' educational progress or achievement, or the reasons for their success or failure." Wells, 48 Cal. Rptr. 3d at 139 (permitting California False Claims Act claim that charter school did nothing more than collect students' attendance forms); Zumbrun, 25 Cal. App. 3d 1 (Ct. App. 1972) (permitting breach of contract claim where university gave plaintiff a "B" for the course but did not provide instruction for the last month of class).

Here, Plaintiffs assert their claims are not based on failure to adequately instruct, but stem from Defendant's failure to provide specific services. (Pls.' Opp'n to Mot. to Dismiss, at 12-13.) Indeed, the FAC states: "Plaintiffs are not bringing this action because they did not succeed in real estate -they are bringing this action because Trump University misrepresented what it was providing. It claimed it was providing a year-long real estate education and mentorship, when in actuality, it was providing only a 3-day long infomercial, designed to confuse, rather than educate, its students, and to persuade them to purchase even more seminars." (FAC ¶ 8.) Thus, construing the FAC in the light most favorable to Plaintiffs, their claim is not that Defendant failed to provide them an adequate education, but that it did not provide an education in real estate investment at all. In addition, Plaintiffs allege Defendant failed to provide certain services as promised.

For example, the FAC contains allegations that Defendant falsely represented it would provide instructors and mentors "hand-picked by Donald Trump." Plaintiff alleges, however, that in most cases Donald Trump did not even know who the instructors and mentors were and had never even met them. (FAC ¶¶ 37, 45.) Plaintiffs also allege Defendant promised for $1,495 a one-year "apprenticeship" which would provide a "comprehensive real estate education." Instead, Plaintiffs received a "three-day infomercial to sell more Trump products," and Defendant failed to "teach students actual real estate techniques and how to fill out the necessary contracts and forms." (FAC ¶¶ 35, 38.) Plaintiffs allege Defendant also failed to instruct Plaintiffs how to use the contracts in the $34,995 Trump Gold Program. (FAC ¶ 53.) In addition, the FAC alleges Defendant promised a one-year mentorship worth $25,000, but they received "no mentorship." (FAC ¶¶ 5, 16, 50.) Ruling on these issues would not require an inquiry into pedagogical methods, the quality of Defendant's instructors and curriculum, or an evaluation of Plaintiffs' "progress or achievement, or the reasons for their success or failure." See Wells, 48 Cal. Rptr. 3d at 139.

Therefore, the Court declines to dismiss Plaintiffs' claims as barred under the ...


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