SAN DIEGO (CN) – A federal judge on Thursday delayed approving a $25 million class action settlement of the case against Trump University while he considers arguments made by a Florida attorney who wants to opt out and file her own fraud case against President Donald Trump.
Sherri Simpson’s objection to the agreement leaves the entire settlement vulnerable to being scrapped, attorneys for the class members said Thursday.
The $25 million settlement announced days after Trump was elected president and a week before the first trial against his real estate school was set to begin in San Diego will resolve two class actions brought in the Southern District of California and a third brought by New York Attorney General Eric Schneiderman, pending approval by Judge Curiel.
Former Trump University students sued the business mogul-turned-world leader in 2010 and again in 2013, saying Trump defrauded them when they paid thousands to learn how to invest in the real estate market. Some students paid up to $35,000 for an education they said provided little more insight than an infomercial.
Class attorney Rachel Jensen told Curiel at Thursday’s hearing about 3,700 students were expected to recover more than 90 cents on the dollar for what they paid to learn insider real estate secrets from Trump – a huge jump from the 50 percent refund the November settlement guaranteed, and 10 percent more than was confirmed in a trial brief filed by Jensen last week.
The settlement class included up to 7,000 eligible class members who could have filed claims to recover their Trump University investment. Since not all those eligible to do so filed claims, those who did will see a bigger paycheck if the settlement is approved.
Jensen said a 90 percent recovery for each class member is “conservative” and that it may be even higher. She said the recovery rate was raised because Schneiderman will contribute at least $1.6 million of the $4 million he received as part of the global settlement toward boosting the recovery rate for the two class actions filed in San Diego.
But one dissatisfied class member threw a wrench into what was expected to be a smooth settlement hearing. Simpson filed an objection to the settlement on March 6, saying students were not given a second opt-out opportunity after the settlement was reached. She said students were promised the second opt-out period in the 2015 class notices that were mailed to them.
Simpson’s attorney Gary Friedman told Curiel his client’s due-process rights were violated when the attorneys who negotiated the settlement reneged on their promise to give class members a second opportunity to opt out.
Friedman said the class notice force Simpson to forfeit her right to file an objection to the settlement as a pre-condition for her to cash in on any potential settlement agreement.
Simpson wants to file her own fraud case against Trump under the Racketeer Influenced and Corrupt Organizations Act, which could potentially triple damages if a jury finds in her favor.
The attorney also said he didn’t believe the fact he called Simpson to offer his legal services in filing an objection on her behalf – essentially soliciting her as a client – violated attorney ethics rules.
“It’s not relevant,” Friedman said.
“She was unhappy with the settlement and had expected she would be able to opt out. In terms of me calling her representing an ethical breach – I believe that’s false.”
Class attorney Patrick Coughlin jumped on what he called an “admission” by Friedman, who said Simpson did not know the exact clause in the class notice which guaranteed a second opt-out opportunity but believed she had read something that said as much.
“I think we just had an admission she didn’t have this parenthetical but had a vague understanding she would be able to opt out,” Coughlin said.
Trump’s attorney Daniel Petrocelli did not comment during the hearing.
Curiel did indicate he believed the settlement was fair, saying an “extraordinary amount” would be recovered by the class members when compared with other class actions where a recovery rate as low as 3 percent had been approved by district courts.
“A recovery of 80 percent is not spectacular but it is a significant amount,” Curiel said before Jensen informed him the expected class recovery rate had been upped to at least 90 percent.
He noted the high recovery rate was also thanks to the class attorneys litigating the nearly seven-year long lawsuit for free, giving up their attorney’s fees.
The judge said the case is the second oldest on his docket and involved 65 depositions and millions of pages of documents.
Curiel has been presiding over the case for four years.
Outside the courthouse, Jensen told reporters one of the lead plaintiffs, John Brown, will turn 66 Friday. He told his attorneys when the settlement is approved he will be able to pay off his credit cards and retire debt-free.
Jensen said the settlement will allow people to “replenish retirement funds, send kids to college and put a down payment on a house.”
Class attorney Jason Forge said the settlement is being met with skepticism by Simpson and seems “too good to be true” because it “was even better than we thought it was going to be.”
But the attorney also said it is “outrageous” Simpson would want to potentially derail the settlement because she wants an apology from Trump.
“You can’t do better than getting money back,” Forge said.
“If you get back 90 cents on the dollar, isn’t that better than someone saying, “Hey I’m sorry?”
Forge called the case the “first of its kind” in terms of its recovery rate for class members, who on average will get checks for $7,000.
If the judge approves the settlement there is the potential Simpson could appeal it, which Forge called a “vulnerability” of the case.
“If this selfishness persists there is no question some people would die before getting their money back,” Forge said, referring to some of the elderly class members.
Curiel is expected to issue a written ruling on the matter.