Tuesday, August 30, 2016

both sides do it: court in Trump Univ. case resolves some expert squabbles

Cohen v. Trump, No.: 3:13-cv-2519, 2016 WL 4487172 (S.D. Cal. Aug. 25, 2016)

Colorful personalities can produce colorful cases; first, Pom Wonderful, now Trump.  The court certified a class action under RICO for people who bought Trump University real estate investing seminars, including the three-day fulfillment seminar and the Trump Elite programs, based on allegedly material misrepresentations in advertisements, mailings, promotions, and free previews.  TU customers paid anywhere from $1,495 for a three-day fulfillment seminar up to $35,000 for the “Trump Gold Elite Program.”

Here, the court deals with various objections to expert testimony.  Plaintiff’s marketing expert, Michael Kamins, studies how consumers interpret advertising.  His expert report made four main claims: (1) TU’s advertising and promotional campaign focused almost exclusively on Defendant and targeted his biggest fans. (2) TU’s marketing and sales strategies incorporated a variety of strategies to encourage prospective customers to make decisions using emotions, rather than rational deliberation.  (3)  TU’s 98% approval rating was not the product of reliable questions or methodology.  (4) A survey Kamins conducted showed the importance to consumers of TU’s representations that they’d learn Trump’s strategies from his “handpicked” instructors.”

The survey was conducted online.  Kamins found that “overall, 87% reported that the opportunity to learn Trump’s real-estate strategies positively impacted their decision to purchase a TU Live Event, and 83% reported that the offer of being taught by Trump’s hand-picked professors positively impacted their purchase decision.” Kamins also found a larger impact for those with more intention to attend live events.

The court found that Trump’s objections to the survey went to weight rather than admissibility.  Trump argued that the universe was too broad, because it targeted those 21 and over (with certain exclusions), whereas “potential TU customers must have some basic interest in entrepreneurship, continuing education, real estate, or business generally.” TU used direct mail to target people who had purchased similar programs in the past.  But TU also used print media, online, and radio advertising in mainstream outlets to achieve the “widest distribution” possible. TU’s internet advertising was geotargeted, but not targeted by demographics.  The court also pointed out that “many of TU’s advertising slogans appear to be designed to appeal to everyday consumers who do not have a background in real estate,” such as “I can turn anyone into a successful real-estate investor, including you.”  Where a company uses “broad marketing techniques ... the general adult population may well be a sufficient proxy for the relevant market.”

Trump also objected to the absence of a control group.  Cohen responded that the survey went to materiality, not to causation, and thus didn’t need a control group.  I’ve got to cite the precedent, because the question is amazing: Fahmy v. Jay Z, 2015 U.S. Dist. LEXIS 129446 (C.D. Cal. Sept. 24, 2015) (the survey asked respondents “whether they would be ‘less likely’ to attend a Jay-Z concert had they known Big Pimpin’ would not be performed,” and didn’t require a control because materiality was a distinct question from causation).  [I wonder what an appropriate control here would look like; arguably the Trump name for a real estate seminar already communicated so much that consumers would make inferences about his expertise/involvement; see also the details of the pitches below.  Could you remove Trump references and leave only nameless bluster?]

The court mostly agreed with Trump, because Kamins drew causation-based conclusions in his report.  But many courts have found that the absence of a control group goes to weight, not admissibility.  Moreover, Cohen argued that other features of the survey, such as including “don’t know” or “no opinion” responses to close-ended questions, and comparing the response rates for the two dependent measures, compensated for the lack of controls.  However, other courts have found controls to be essential in the false advertising context.  The court wanted to hear more argument about the issue.

Trump also argued  that the survey was distorted from the actual market because it presented only several pieces of TU advertising, “rather than replicating the entire TU experience, including the 90-minute free preview and, in the case of those who purchased TU ‘Elite’ programs, the impact of the three-day fulfillment seminars.” But no survey can perfectly replicate an actual purchase decision.  Also, by showing representative print ads and the 2-minute “Main Promotional Video” played at the beginning of the 90-minute free preview, the survey showed ads substantially similar to those which would have been encountered by prospective TU customers, and which initially encouraged prospective TU customers to attend the 90-minute free preview.

Trump also argued that the survey had an unwarranted demand effect by asking if the claims in the ads had an impact on respondents’ interest in TU.  But the survey specifically asked whether the Trump-based opportunities had “a positive impact, a negative impact, or no impact on your decision to enroll in the live class,” which was neutral.

As for other opinions, Trump challenged Kamins’ criticisms of TU’s purported 98% approval rating; if Trump didn’t put that purported rating at issue at trial, the court would be inclined to exclude Kamins’ testimony on that issue.

Trump also challenged Kamins’ opinions about TU’s marketing scheme as “unreliable, irrelevant, and overtly prejudicial.” For example, Kamins cited academic research that “demonstrates how techniques such as using the ‘University’ moniker, playing the ‘Money, Money, Money’ song at the beginning of the 90-minute free preview, and setting the room temperature for the free preview at 68 degrees, were designed to induce a more emotive decision making approach on the part of prospective TU customers.”  The court found these opinions relevant to materiality, and reliable in being supported by Kamins’ experience in marketing and academic studies.

Cohen’s real estate education expert, Paul Habibi, was a lecturer at the UCLA Anderson Graduate School of Management and the UCLA School of Law, as well as a real estate investor. Habibi also taught real estate investment and development seminar courses at UCLA Extension.  His report contained a detailed comparison of the content taught at TU live events with that offered by leading schools in real estate education. Habibi concluded that TU’s live program materials didn’t “provide students with the analytical tools to systematically make sound real estate investment decisions; sometimes promoted illegal, unethical, and/or risky investment strategies; and did not provide any strategies or techniques unique to Defendant.”  He also reviewed the resumes of twenty-seven TU instructors, and found that TU’s instructors and mentors primarily had experience in sales and motivational speaking rather than real estate investment or education.

Trump argued that the comparison was unfair, and that TU should have been compared to “other business seminars” such as “Rich Dad Poor Dad,” given that TU differed dramatically from academic programs in its  price, length of time, focus on practical instruction, provision of part-time education, accessibility, and the objectives of TU students.  But, if Habibi was doing that, TU invited the comparison.  In the main promo video played at the beginning of each 90-minute free preview, Trump said:

We’re going to have professors and adjunct professors that are absolutely terrific. Terrific people, terrific brains, successful....The best. We are going to have the best of the best and honestly if you don’t learn from them, if you don’t learn from me, if you don’t learn from the people that we’re going to be putting forward –– and these are all people that are handpicked by me ––then you’re just not going to make in terms of the world of success. And that’s ok, but you’re not going to make it in terms of success. I think the biggest step towards success is going to be: sign up for Trump University. We’re going to teach you about business, we’re going to teach you better than the business schools are going to teach you and I went to the best business school.

Many other components of TU’s marketing scheme and live events reinforced this comparison.
TU’s “[l]ecturer[s]” were directed to call themselves “a member of the faculty at Trump University” and to tell customers that

Mr. Trump went to the Wharton School at the University of Pennsylvania, and he knew that most people couldn’t afford the time or tuition to do that. So he decided to create an organization that would provide a world-class education, coupled with a year long apprenticeship resulting in personal development and wealth building. He saw the opportunity to give a Wharton School education in 3 days followed by an Apprenticeship[,]

They were also directed to promise that “Trump University will be your Wharton!”   Moreover, TU ads used “various forms of recognizable signs associated with accredited academic institutions, such as a ‘school crest.’”  The “Trump University Community,” TU advertised, included “Staff,” “Faculty,” “Instructors,” and “Program Directors (Trump University’s Admissions Department.”  Approved marketing “Catch Phrases/Buzz Words” included “Ivy League Quality,” and marketers were told to set a “tone”: “Thinking of Trump University as a real University, with a real Admissions process—i.e., not everyone who applies, is accepted”; and to “[u]se terminology such as” “Enroll,” “Register,” and “Apply.”  By contrast, there was no evidence that TU ever compared itself with for-profit entrepreneurship seminars such as “Rich Dad Poor Dad.”

If that weren’t enough, Habibi also did have experience teaching shorter, entry-level seminars at UCLA’s Extension school, and also based his opinions on that.  His opinion about the illegal/unethical nature of certain TU investment strategies was based on his extensive experience in real estate investment; he didn’t need to be a lawyer to  have relevant knowledge of the legality of different real estate investment strategies.

The court ended by concluding that Trump’s rebuttal experts could critique Cohen’s expert testimony, though if they became cumulative at trial the court would exclude the cumulative testimony.

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