Does v. Trumps: Misleading MLM endorsements (with bonus delusional pro se intervenor)
Posted: Thu Jul 29, 2021 3:32 pm
Some activity in the Second Circuit on a case that I don't see previously mentioned here: an attempted class action by participants in "ACN", a multi-level marketing organization. According to the complaint, ACN is a multilevel marketing organization that suffers from the usual faults of multilevel marketing organizations: the great majority of participants (IBOs, "Independent Business Operators") lose money.
One might expect that the plaintiffs would be suing ACN itself. The interesting wrinkle is that they aren't doing that. Instead they've sued the Trump Corporation and Donald/Donald Jr./Erik/Ivanka. The theory of the case against the Trumps is that they promoted ACN in a variety of ways -- including on two episodes of "The Celebrity Apprentice" -- while creating the impression that Trump himself thought that ACN was a great business opportunity and that Trump was promoting it for that reason, when in fact Trump had performed no due diligence and was being paid millions to promote ACN. The plaintiffs allege that they joined ACN because of Trump's endorsement, and that they wound up losing money. Where have we heard these sorts of allegations before?
So the plaintiffs sued the Trumps, and eventually sent subpoenas to ACN itself demanding information on ACN's connections to Trump, among other things. (And a side note: the plaintiffs are suing under pseudonyms because they're afraid that Trump fans would retaliate against them, which seems like a completely reasonable fear.)
And that brings us to the focus of the Second Circuit's opinion: the nuances of arbitration law.
(Unfortunately, the Second Circuit's website doesn't create durable links to opinions, so you'll have to go to https://www.ca2.uscourts.gov/decisions and search for Doe V. The Trump Corporation, 20-1228 (L).)
As you would almost automatically expect these days, ACN required new participants to sign arbitration agreements covering 'a dispute between (the participant) and ACN as to our respective rights, duties and obligations arising out of or relating to this Agreement'. So the Trumps demanded that the participants arbitrate, on the theory that the suit was really about a dispute between the plaintiffs and ACN, and that 'principles of agency and estoppel' allowed the Trumps to invoke the arbitration agreements even though the Trumps weren't signatories to the agreements or even explicitly mentioned in them. And ACN insisted that the court could not enforce the subpoenas against ACN, because the document requests arose out of a dispute between the plaintiffs and ACN.
The district court refused to dismiss the suit, and granted the plaintiffs' motion to enforce the subpoenas against ACN.
The Second Circuit, after spending around 25 pages wading into the depths of briefing standards and federal arbitration law, agreed on both counts.
So now the dispute continues in district court, and ACN has to produce the documents. It'll be interesting to see what happens.
One might expect that the plaintiffs would be suing ACN itself. The interesting wrinkle is that they aren't doing that. Instead they've sued the Trump Corporation and Donald/Donald Jr./Erik/Ivanka. The theory of the case against the Trumps is that they promoted ACN in a variety of ways -- including on two episodes of "The Celebrity Apprentice" -- while creating the impression that Trump himself thought that ACN was a great business opportunity and that Trump was promoting it for that reason, when in fact Trump had performed no due diligence and was being paid millions to promote ACN. The plaintiffs allege that they joined ACN because of Trump's endorsement, and that they wound up losing money. Where have we heard these sorts of allegations before?
So the plaintiffs sued the Trumps, and eventually sent subpoenas to ACN itself demanding information on ACN's connections to Trump, among other things. (And a side note: the plaintiffs are suing under pseudonyms because they're afraid that Trump fans would retaliate against them, which seems like a completely reasonable fear.)
And that brings us to the focus of the Second Circuit's opinion: the nuances of arbitration law.
(Unfortunately, the Second Circuit's website doesn't create durable links to opinions, so you'll have to go to https://www.ca2.uscourts.gov/decisions and search for Doe V. The Trump Corporation, 20-1228 (L).)
As you would almost automatically expect these days, ACN required new participants to sign arbitration agreements covering 'a dispute between (the participant) and ACN as to our respective rights, duties and obligations arising out of or relating to this Agreement'. So the Trumps demanded that the participants arbitrate, on the theory that the suit was really about a dispute between the plaintiffs and ACN, and that 'principles of agency and estoppel' allowed the Trumps to invoke the arbitration agreements even though the Trumps weren't signatories to the agreements or even explicitly mentioned in them. And ACN insisted that the court could not enforce the subpoenas against ACN, because the document requests arose out of a dispute between the plaintiffs and ACN.
The district court refused to dismiss the suit, and granted the plaintiffs' motion to enforce the subpoenas against ACN.
The Second Circuit, after spending around 25 pages wading into the depths of briefing standards and federal arbitration law, agreed on both counts.
So now the dispute continues in district court, and ACN has to produce the documents. It'll be interesting to see what happens.