McKoy v. The Trump Corporation and Donald J. Trump

Background

The case concerns Donald J. Trump’s promotion of ACN Opportunity, LLC, a multilevel marketing company. The plaintiffs—Catherine McKoy, Markus Frazier, and Lynn Chadwick—participated in ACN as Independent Business Owners. The opinion states that McKoy was a California resident when she enrolled, Frazier was a Maryland resident, and Chadwick was a Pennsylvania resident. Each plaintiff alleged reliance on Trump’s endorsement when deciding to enroll.

ACN required Independent Business Owners to pay sign-up and annual renewal fees. Participants could earn commissions from selling ACN products and recruiting other participants. Between February 6, 2006, and June 20, 2015, Trump and ACN had endorsement agreements under which Trump received payments. Trump appeared in ACN videos, interviews, event appearances, and recruitment materials, and ACN agreed in 2015 to stop using his name and likeness.

The plaintiffs asserted claims under the consumer-protection laws of California, Maryland, and Pennsylvania. They also asserted common-law fraud and negligent-misrepresentation claims for a proposed nationwide class. The proposed classes included people who paid ACN to participate in the opportunity but did not recover at least the amount they paid.

Motions

The plaintiffs moved to certify three state-wide classes and one nationwide class under Rule 23(b)(3) of the Federal Rules of Civil Procedure. That rule permits a class action when common legal or factual questions predominate over individual questions and a class action is the best available method for resolving the dispute. Alternatively, the plaintiffs sought certification under Rule 23(c)(4) of a narrower issue class concerning whether Trump’s statements were false and material. The plaintiffs also moved to bar testimony from two defense experts, Dr. Peterson and Dr. Hair.

Rule 23(b)(3) Classes

The court denied certification of all four proposed classes because the plaintiffs did not show that common issues predominated over individual issues. The proposed common questions included whether Trump’s statements were false or misleading, whether they violated the applicable laws, whether they injured class members, and whether the defendants were responsible for the class members’ financial losses.

The court identified several individual questions. The proposed class definitions had no time limit, so they could include people who joined ACN before or after Trump’s involvement and never saw or heard his statements. Even limiting the classes to the endorsement period would not solve the problem because Trump’s endorsement appeared in different forms, through different media, and over almost ten years. Determining each person’s exposure would therefore require individual inquiry.

Reliance was another central obstacle. The court explained that it would need to determine whether each person saw a particular statement, was misled by it, believed it, and joined ACN because of it. ACN’s recruitment process relied heavily on personal contacts, small meetings, testimonials, and other ACN marketing materials. Participants could have joined because of factors unrelated to Trump, such as flexibility, product information, testimonials, or other inducements. The court concluded that individualized evidence about what caused each person to enroll would outweigh generalized evidence about Trump’s statements.

The court reached the same conclusion for the proposed California class. Although California law can provide absent class members with a presumption that they relied on certain advertising, the court found that the proposed class lacked the necessary cohesion because members were exposed to different information from Trump, ACN materials, and personal contacts. The presumption therefore did not eliminate the need for individualized reliance inquiries.

The court also held that the proposed nationwide common-law class failed for an additional reason: potentially different laws from all 50 states could apply. The plaintiffs did not identify which state’s law they sought to apply or perform a choice-of-law analysis. The court found that variations in the laws governing fraud and negligent misrepresentation defeated the requirement that common legal questions predominate.

Rule 23(c)(4) Issue Class

The court also denied certification of an issue class concerning the falsity and materiality of Trump’s statements. Issue certification is appropriate only when deciding the selected issues would materially advance the case as a whole and reduce the issues remaining for individual litigation.

Here, even if a class-wide proceeding decided whether Trump’s statements were false or material, individual proceedings would still have to determine what each person saw or heard, whether that person was deceived, whether the person relied on the statements, and whether the statements caused the person’s losses. The court concluded that issue certification would not reduce the range of disputed issues or promote efficient resolution of the case.

Disposition and Further Proceedings

Judge Schofield denied the plaintiffs’ motion to certify a class. She denied as moot the plaintiffs’ motion to bar Dr. Peterson’s and Dr. Hair’s testimony because their testimony was unnecessary to decide class certification.

The court directed the parties to submit letter briefs by October 24, 2023, addressing whether each plaintiff’s claims should be separated from the others and transferred to the appropriate federal district court in California, Maryland, or Pennsylvania. The court also stated that a party seeking that relief could file a motion by that date, and it postponed the pretrial-submission deadlines pending a decision on the possible separation and transfer.