Originally published on Feb 27, 2017
The Issue of Reliance in Consumer Class Actions
Irrespective of your political leanings, the Trump University consumer class actions are an interesting and unique case. It is also a good learning tool for one issue that comes up in nearly every consumer protection class action – reliance. In this article, we will explore the lawsuit and the issue of reliance, cutting through the political noise that surrounded it.
Trump University – Broken Promises?
The plaintiffs in the Trump University case alleged that they did not get what they were promised by the company. Despite very specific marketing representations and promises, Donald Trump was not actively involved in Trump University’s live events and did not select or interview Trump University’s instructors or mentors. Trump offered no input into the actual instruction provided to Trump University’s consumers, a ghostwriter wrote the Donald Trump blogs and wrote most or all of the answers to “Ask Donald Trump” forum questions, and Trump University did not have a faculty of professors and adjunct professors, but rather independent contractors who were paid commissions for sales.
In other words, the company promised Trump University but delivered neither Donald Trump nor a university. That was the plaintiffs’ position. Of course, this characterization was vehemently opposed.
Consumer Protection Statutes
Consumer protection statutes were originally codified into law in order to relieve a misled consumer from having to plead and prove the elements of common law fraud – historically, a pretty high burden.
Fraud required a plaintiff to prove their reliance on, and the materiality of, a false representation. And even though the element of reliance was taken out of most causes of action under consumer protection statutes, courts have consistently required a “causal connection” between the allegedly deceptive conduct and the resulting harm.
Some conservative courts have said that this requires full-on reliance, effectively gutting one of the purposes of the consumer protection statute – to lower the pleading standard. These courts have said if reliance is required, after all, each harmed individual must provide evidence that he or she relied on the representation, effectively making a class action impossible.
Other courts have left a door open, stating that reliance is not the only way to evidence this causal connection. However, what this evidence could be is amorphous and has not really been fleshed out in a definitive way.
Reliance is a Necessary Element of the Cause of Action
The most common way that consumer-friendly courts have approached reliance is actually something of an express lane to this “causal connection”. These courts actually take the more stringent route on the first issue, stating that reliance is a necessary element of the cause of action – a death knell in the more conservative jurisdictions.
However, in these more open-minded courts, if the alleged deception a.) reaches the entire class and b.) is objectively material, reliance can be presumed, even on a class-wide basis.
Interestingly, this is the line the Ohio Supreme Court has taken. On a gut level, this makes sense. If everyone sees the same lie, and it’s a material representation, why shouldn’t reliance be presumed? If the only function of a product is to do X, the company says it can do X, but it, in fact, cannot do X… X is the only reason any consumer would ever buy this product. That is the prototypical presumed reliance circumstance.
This line of reasoning obviates the need for an individualized inquiry of each class member’s reliance, the end result being that class actions are possible even if reliance is an element of the cause of action.
So, these courts have actually certified classes under common law fraud – the very cause of action the legislatures thought was too difficult to plead and prove.
The Value of a Consumer-Friendly Jurisdiction
So how did this issue come up in the Trump University litigation? Well, this case is a good example of creative lawyering and the value of a consumer-friendly jurisdiction.
The plaintiffs argued that the marketing representations were universal and consistent – that there was a common thread among all the marketing – and that this common thread was objectively material to consumers. This is not a given, especially since the marketing campaign for Trump University was varied, published in different media, and had evolved over time. However, at least up until it finally settled, the plaintiffs were able to plead a plausible case to the judge so as to survive dispositive motions.
The company marketed and promised that Donald Trump himself would be integrally involved in every aspect of Trump University, through which he would sell his personal investment strategies. This was exactly what consumers paid to learn, and the company held their product out as such. Donald J. Trump’s involvement was objectively material to the consumers. The product was supposed to be X, the company said it was X, but it, in fact, was not X.
The Trump University case gives insight into how courts treat the ubiquitous issue of reliance – an issue that is forcefully litigated in nearly every case. Reliance, no matter how it is framed, anchors the causation element of a claim. It is of utmost importance in consumer class actions, and fully understanding its contours can result in a litigant winning “Big League.”
To learn more about the issue of reliance in consumer class actions, feel free to call the award-winning class action attorneys of Dworken & Bernstein
In Lake County, call 440.946.7656
In Cuyahoga County, call 216.861.4211
