Appeals court: Arbitration won't shield Trump from lawsuit

U.S. President Donald Trump delivers remarks on supporting small businesses through the Paycheck Protection Program while flanked by White House advisor Ivanka Trump in the East Room of the White House April 28, 2020 in Washington, DC. The president

Former President Donald Trump and his three eldest children can’t force a lawsuit into arbitration that was brought by people who felt cheated by a business he promoted, an appeals court ruled Wednesday.

The 2nd U.S. Circuit Court of Appeals issued a written decision pertaining to a 2018 lawsuit in Manhattan federal court brought by salespeople who lost money in a marketing company that Trump endorsed in speeches and on "The Celebrity Apprentice." The effort to force arbitration had delayed the lawsuit from proceeding.

The lawsuit alleged Trump and family members secretly received millions of dollars between 2005 and 2015 in exchange for reassuring potential salespeople for telephone company ACN Opportunity LLC there was little risk if they started selling its phone service.

Lawyers for the plaintiffs argued that the Trumps misled them to believe they were endorsing the company based on an independent assessment of the company rather than in return for large payments.

The 2nd Circuit noted that investigations by regulatory agencies have demonstrated that ACN's business was high-risk and that investors had minimal chance of commercial success.

The appeals court, citing the lawsuit's claims, said statements by the Trumps that they had conducted extensive due diligence and research concerning the business opportunity and had inside information and personal experience with ACN were untrue.

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""The defendants had, in fact, conducted no such due diligence. They were instead endorsing ACN’s business opportunity because they were being paid millions of dollars to do so — a fact that they deliberately failed to disclose," the appeals court said the lawsuit alleged.

The appeals court said the Trumps were not entitled to take advantage of agreements between the plaintiffs and ACN that disputes would be resolved by arbitration. ACN is not a defendant in the lawsuit.

In a statement, ACN said it has been in business for 28 years and operates in 27 countries, earning an A+ rating from the Better Business Bureau.

"ACN is not a political organization and is proud to welcome individuals from all walks of life. ACN’s business relationship with Mr. Trump started and ended before his run for national office," the statement added. "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."

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Lawyers for the Trump Corp., Trump, Donald J. Trump Jr., Eric Trump and Ivanka Trump did not immediately return a message seeking comment.

Attorney Roberta Kaplan, who represents plaintiffs in the case, said in a statement that the appeals ruling will enable lawyers to schedule depositions and obtain documents through subpoenas "as soon as possible."

Kaplan called it an "important case about a years-long consumer fraud on hard working Americans perpetrated by Donald Trump and three of his adult children."

The gathering of evidence had been delayed while both sides waited for the 2nd Circuit's decision.