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Judge: Trump Family Can’t Force Fraud Lawsuit into Private Arbitration

— July 29, 2021

Former President Donald Trump and his family stand accused of negligently sponsoring the American Communications Network, which has been likened to a pyramid scheme.

A federal appeals court found that former President Donald Trump and his adult children cannot force a fraud lawsuit into arbitration.

According to Reuters, the lawsuit alleges that Trump and children capitalized upon their family name to promote a marketing scheme that predominately targeted impoverished people and the working classes.

In its Wednesday ruling, the 2nd U.S. Circuit Court of Appeals in Manhattan said that, while the plaintiffs had signed contracts agreeing to take any legal claims against the American Communications Network to arbitration, these contracts do not protect the Trump family, who were never signatories.

The four plaintiffs have accused Donald Trump, as well as his adult children—Donald, Jr., Ivanka, and Eric Trump—as well as an affiliate of the Trump Organization of promoting the American Communications Network in exchange for millions of dollars.

At one point, Donald Trump went so far as to push the Network’s products on his reality television show, “The Celebrity Apprentice.”

Trump’s sponsorship, says the lawsuit, led clients to believe they could profit from investing in the ACN.

However, the American Communications Network was akin to a pyramid scam, charging clients up to $499 to sell videophones and other devices.

A 2014 image of Donald Trump. Image from Flickr via Wikimedia Commons/user:Gage Skidmore. (CCA-BY-2.0).

In his decision, Circuit Judge Robert Slack said the lack of a “close relationship” between the Network and the Trumps suggests that the plaintiffs had no reason to believe their arbitration agreement extended either to the former president or his family.

“Central to the plaintiffs’ theory of fraud is that the defendants misled the plaintiffs to believe that the defendants and ACN were independent of one another and that the defendants were endorsing and promoting ACN based on an objective outside assessment of the value of ACN’s business opportunity,” Judge Robert Sack wrote in the appeals panel’s 3-0 opinion. “Consistent with this understanding, there is no evidence to suggest that the plaintiffs treated the defendants as if they were effectively parties to the […] agreement.”

Slack further said that “there is no unfairness” in requiring the Trumps to defend accusations of wrongful business practices.

However, President Trump and his counsel have since claimed that the family had no control over the American Communications Network and its practices—and that the civil lawsuit is “politically motivated.”

The ACN, too, made similar claims, saying it is being sued simply because of its association with the controversial ex-president.

“ACN is not a political organization and is proud to welcome individuals from all walks of life,“ the firm‘s attorneys said in a statement. “ACN’s business relationship with Mr. Trump started and ended before his run for national office. It is unfortunate that ACN’s name and business have been impugned in connection with this politically-motivated and funded lawsuit. To be clear, ACN categorically denies the allegations made in the lawsuit against it and its business.“

Roberta Kaplan, who is representing the case’s four plaintiffs, praised the appeals court’s ruling, saying she and her clients look forward to continuing their complaint against both the CAN and President Trump.

“We … are excited to resume discovery in this important case about a years-long consumer fraud on hard working Americans perpetrated by Donald Trump and three of his adult children,” Kaplan said in a statement. “We have pending subpoenas out to ACN and MGM and look forward to receiving the documents and Celebrity Apprentice tapes responsive to those subpoenas. And we similarly intend to press the Trumps to complete their document production so that we can begin taking depositions as soon as possible.”


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