Trump University Settlement: $25M Payout, Three Cases, and Claims

The Trump University settlement resolved three fraud cases for $25 million in November 2016, ten days after Donald Trump won the presidential election. The agreement covered two federal class actions in California and a civil fraud suit brought by the New York Attorney General, included no admission of wrongdoing, and was projected to return roughly 90 percent of tuition to eligible students who filed claims.¹²

Who the Students Were and What They Paid

Trump University launched in 2005 and shifted quickly from online courses to in-person real estate seminars in hotel ballrooms. It was not accredited and granted no degrees. The New York State Education Department warned Trump in 2005 that using “university” without a license was illegal, but the name stayed until the business renamed itself the Trump Entrepreneur Initiative on June 2, 2010.³

Free introductory sessions funneled attendees toward a $1,495 three-day workshop, and salespeople then pushed “Trump Elite Packages” ranging from $9,995 at the Bronze level to $34,995 at the Gold level, which included a year-long mentorship.⁴⁵⁶⁷ The business stopped operating in 2010.

Advertisements told students they would learn “Donald Trump’s secrets to success in real estate” from instructors “handpicked by Trump,” and marketing described the program as an “accredited university.”² Court filings alleged that Gold Elite mentors were unresponsive, promised financing help and counseling databases never materialized, and the techniques taught were freely available online.⁸ Internal “playbooks” released by Judge Gonzalo Curiel in May 2016 instructed staff to collect financial details on attendees and to steer prospects toward credit cards or new lines of credit to cover tuition.⁷

The Three Cases the Settlement Resolved

Three separate actions were folded into the $25 million deal.

Low v. Trump University, originally filed as Makaeff v. Trump University on April 30, 2010, in the Southern District of California, alleged violations of state consumer protection, false advertising, and elder financial abuse laws. The court certified a class on February 21, 2014, covering students who purchased live events in California, Florida, and New York.³⁹

Cohen v. Donald J. Trump, filed October 18, 2013, in the same San Diego federal court, was a single-count civil RICO action alleging a pattern of mail and wire fraud. A nationwide class covering all purchasers of Trump University live events from January 2007 onward was certified on October 27, 2014. RICO claims carry the possibility of triple damages.¹⁰¹¹

The New York Attorney General’s civil fraud suit, filed August 24, 2013, by Eric Schneiderman, accused Trump University, president Michael Sexton, and the Trump Organization of running an unlicensed educational institution and an “elaborate bait-and-switch.” The state sought at least $40 million in restitution.³

Trump had said repeatedly during the campaign that he would not settle. In March 2016 he told reporters, “I don’t settle lawsuits… I don’t do it,” and at an Arkansas rally he said, “Probably should have settled it, but I just can’t do that. Mentally I can’t do it.”¹²¹³ On November 18, 2016, ten days after the election, he agreed to the $25 million payment, which removed the prospect of testifying during his transition.¹⁴ Schneiderman called it “a stunning reversal by Donald Trump and a major victory for the over 6,000 victims of his fraudulent university.”¹⁵

How the $25 Million Was Divided

The settlement fund was split three ways: $21 million for class members in the two California federal cases, $3 million for New York students not covered by those classes, and up to $1 million in penalties to the state of New York for violating state education laws.¹³ Trump admitted no wrongdoing.²

The law firm Robbins Geller Rudman and Dowd, which had litigated the case for six and a half years, represented the class pro bono and waived what it described as “many millions of dollars in attorneys’ fees” so the full fund would flow to class members. The Better Business Bureau of Metropolitan New York administered the settlement.¹⁶¹⁷

Claims, Appeal, and Payment

The global settlement was reached on December 19, 2016, and the district court granted preliminary approval the next day. Notices went to class members on January 4, 2017. By the March 6 claims deadline, more than 3,700 of roughly 7,000 eligible students had filed claims, and attorneys projected recoveries of at least 90 percent of what claimants had paid.⁸¹⁷¹

Judge Curiel granted final approval on March 31, 2017.¹⁸ Distribution was then delayed by an appeal from Sherri Simpson, a Florida bankruptcy lawyer who had paid about $19,000 and wanted to opt out and pursue her own trial against Trump. She argued that class notices had promised her a second chance to leave the class once a settlement was proposed.¹⁹

The Ninth Circuit unanimously rejected her challenge on February 6, 2018, holding that the notice had provided only one opt-out window, which closed on November 16, 2015, and that due process did not require a second one at the settlement stage.⁸ Simpson declined to seek further review to avoid delaying payments to the roughly 4,000 other claimants.¹⁹ Judge Curiel formally finalized the settlement on April 9, 2018, clearing the way for checks to be mailed.²

What the Settlement Did Not Do

The agreement was a civil resolution. Trump did not admit wrongdoing, and no individual was found personally liable in a judgment.²¹³¹⁷

1
NPR. Judge Approves $25 Million Settlement of Trump University Lawsuit
2
ABC News. Judge Finalizes $25 Million Settlement for Victims of Donald Trumps University
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NPR. Trump University Playbooks Released by Court
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Washington Post. Trump Nearing Settlement in Trump University Fraud Cases
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KUT. New York Attorney General Says Trump Agrees to Trump University Settlement
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Robbins Geller Rudman and Dowd LLP. Pro Bono Representation Yields Historic Recovery for Trump University Students
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Robbins Geller Rudman and Dowd LLP. Approval of $25 Million Settlement in Trump University Case
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Politico. Trump University Settlement Appeal