Use the IRAC Method to breifly identify the Issue, the Legal Rule (Legal Test),
ID: 351103 • Letter: U
Question
Use the IRAC Method to breifly identify the Issue, the Legal Rule (Legal Test), the Facts Applied to the Test (Analysis), and the Conclusion/ Holding of the following case:
Schneiderman v. Trump Entrepreneur Initiative, LLC
New York Supreme Court, Appellate Division, First Department, 137 A.D.3d 409, 26 N.Y.S.3d 66 (2016).
Background and Facts Donald Trump and Michael Sexton formed Trump University, LLC—later known as Trump Entrepreneur Initiative, LLC (TEl)—to sell courses in real estate investing. To attract students. Trump made a promotional video. In it, he said, "We're going to have professors that are absolutely terrific—terrific people, terrific brains, successful, the best.... All people that are handpicked by me."
New York Attorney General Eric Schneiderman brought a proceeding in a New York state court against TEl, Trump, and Sexton, alleging that they had operated an illegal educational institution between 2005 and 2011. The attorney general sought an injunction, damages, penalties, and restitution under a state statute that provided for these remedies in cases of "persistent fraud." TEl was charged with intentionally misleading more than 5,000 students, including over 600 New York residents, into paying as much as $35,000 each to participate in its programs. Among other things, according to the attorney general. Trump did not handpick the instructors as he claimed.
The court dismissed the claim on the ground that it exceeded a three-year limit imposed on all statutory causes of action. The court also held that the specific statute did not provide the state with an independent cause of action for fraud. The attorney general appealed.
In the Language of the Court
MAZZARELLI,]. P. [Justice Presiding], RENWICK, SAXE, MOSKOWITZ,].]. [justices]
* * [New York] Executive Law Section 63(12) states, in relevant part:
Whenever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply
* * to the supreme court of the state of New York * * * for an order enjoining the continuance of such business activity or of any fraudulent or illegal aas and directing restitution and damages * * * and the court may award [such] relief * * * as it may deem proper. [In its ruling, the lower court cited People v. Charles Schwab <& Co., Inc., 109 A.D.3d 445, 971 N.Y.S.2d 267 (1 Dept. 2013).] In Charles Schwab, the Attorney General had brought an enforcement action asserting claims under Section 63(12) * * *. The court dismissed the Section 63(12) claim.
On appeal to this Court, * * * we found that the court had properly dismissed that claim, stating that the section does not create independent claims, but merely authorizes the Attorney General to seek injunctive and other relief* * * in cases involving persistent fraud.
Although the holding of Charles Schwab purported to be based on the [New York] Court of Appeals’ ruling in State v. Cortelle Corp., 38 N.Y.2d 83, 378 N.Y.S.2d 654, 341 N.E.2d 223 (1975), Cortell does not, in fact, hold that the Attorney General cannot bring a standalone cause of action for fraud under Executive Law Section 63(12).
* * * *
In Cortelle, the Court of Appeals [found] that * * * causes of action [under Section 63(12)] addressing * * * allegedly fraudulent practices did not rely on liabilities, penalties, or forfeitures created or imposed by statute. Specifically, Section 63(12) did not make unlawful the alleged fraudulent practices, but only provided standing in the Attorney General to seek redress and additional remedies for recognized wrongs which pre-existed the statute. [Emphasis added.]
* * Other New York courts addressing that issue * * * have generally allowed for independent causes of action for fraud under Section 63(12).
* * *
Thus, Charles Schwab does not comport with prevailing authority.
* * * Hence, we hold that the Attorney General is, in fact, authorized to bring a cause of action for fraud under Section 63(12).
Decision and Remedy A state intermediate appellate court reversed the lower court's dismissal of the fraud claim, holding that the three-year limit on statutory causes of action did not apply. Because material issues of fact still existed as to that claim, however, the court remanded the case for further proceeding
Explanation / Answer
Issue: Trump Entrepreneur Initiative LLC (TEI) a university sold Real estate courses. It was promoted by Donald Trump and Michael Sexton. They enrolled 5000 plus students from 2005-2011 and charged a fee of $35,000. TEI created a professional video stating that the university would have the best teachers handpicked by Donald Trump Himself. They were charged with persistent fraud from 2005-2011 and misleading student especially the professional video which stated handpicking of the professors which were never done. The case was filed by Attorney General in the New York state court against TEI, Donald Trump, and Michael Sexton.
Rule: The case was dismissed by the New York state court as it had exceeded the three years limit for filing a case on all statutory causes of action.
Analysis: The case was dismissed in the New York state court for having exceeded the three years limit for filing a case on all statutory causes of action. The court held that the special statute did not provide with an independent cause of action for fraud. The Attorney General appealed to the Supreme Court of the court of New York. The court was again dismissed under Section 63 (12) stating that section does not create independent claims, the attorney general can seek injunctive and other reliefs in case of persistent frauds. The court stated that the Attorney General cannot bring a standalone cause of action of fraud under section 63 (12). The case was further appealed to court of appeals which stated that the attorney general cannot file for fraud under section 63(12) but can seek redress and remedies for wrongdoing and can be allowed to take independent action under fraud under section 63(12), intermediate appellate court reversed the lower court's dismissal of the fraud claim, allowing the Attorney General to file under section 63(12) as the three year limit does not hold good in this case as material issues of the fact still existed.
Conclusion: A state intermediate appellate court reversed the dismissal of the lower court by allowing the appeal under section 63(12) filed by the attorney general stating that the three years limit on statutory claims under the statutory cause of action does not hold because material issues of the fact of the claim still existed. Still, the court remanded the case for further proceeding.
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