April 17 (Bloomberg) -- Trump University, which promises to teach developer Donald Trump’s “insider success secrets,” must show that an ex-student knew she was making false statements when she accused the school of unethical and deceptive practices, a court ruled.
The university’s “aggressive advertising campaign” making “controversial claims about its products and services” helped create a public controversy over its business practices, three judges of a federal appeals court in San Francisco said today.
The panel agreed with the ex-student that the school is a “public figure” and must show she acted with malice when she alleged in letters to the Better Business Bureau and other entities that it engaged in high-pressure sales tactics, trickery and “a gargantuan amount of misleading, fraudulent, and predatory behavior,” the judges said.
“Trump University is not a public figure because Donald Trump is famous and controversial,” the court said. “Trump University is a limited public figure because a public debate existed regarding its aggressively advertised educational practices.”
The ex-student, Tarla Makaeff, who paid $34,000 in enrollment fees, sued the school in 2010 on behalf of herself and other students alleging deceptive business practices. The school countersued, alleging defamation.
Makaeff sought dismissal of the school’s claims under a law that protects people from frivolous lawsuits meant to quell free speech over public issues. A federal judge denied her request, saying Trump University wasn’t a public figure and had a reasonable chance of success on its defamation claim.
The appeals court said that as a public figure the school must be held to a heightened standard of proof and show Makaeff acted with malice when she criticized Trump University.
The panel sent the case back to the trial judge and said that if Trump can’t make such a showing, “it has no possibility of success on the merits” and the defamation claim should be thrown out.
Jill Martin, an attorney for Trump, said the company will ask for a rehearing by the full appeals court and that Makaeff “must be held accountable for her defamatory statements.” Eric Issacson, a lawyer for Makaeff, didn’t immediately reply to e-mail and voice-mail messages seeking comment on the ruling.
Trump University, founded as an online school for business professionals, later became the Trump Entrepreneur Initiative.
The appeal is Makaeff v. Trump University, 11-55016, U.S. Circuit Court of Appeals for the Ninth Circuit (San Francisco). The original case is Makaeff v. Trump University LLC, 3:10-cv-00940, U.S. District Court, Southern District of California (San Diego).
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