(CN) - Trump University faces a higher burden in pursuing defamation counterclaims against a former student who called its real estate seminars a money grab, the 9th Circuit ruled Wednesday.
Tarla Makaeff filed a deceptive business practices class action against the for-profit school in 2010, claiming that Trump University, now called the The Trump Entrepreneur Initiative, took her for nearly $60,000 based on promises never delivered.
Makaeff claimed that she paid $1,495 for the "free" three-day seminar, which turned out to be an infomercial. Trump University representatives allegedly induced her and others to spend $35,000 for the Trump University "Gold Program," and convinced them to increase their credit card limits to finance risky real estate deals.
With the "guarantee" that her first real estate deal would earn her $35,000, Makaeff said she signed up for the Gold Program "so she could immediately pay off her Trump University debt, leaving only profits for the future," the complaint stated.
Makaeff said she attempted before filing suit to get her money back from the school, and that she launched a campaign to warn others when that failed.
She said contacted the attorney general of New York, the Federal Trade Commission, Federal Bureau of Investigation, New York State Board of Education and the Better Business Bureau, and posted messages online "to alert other consumers of my opinions and experience with Trump University," and to "inform other consumers of my opinion that Trump University did not deliver what it promised."
Other former students and various media have levied and reported similar claims against the school since at least 2005.
After being hit with the class action, Trump University shot back with a counterclaim for defamation based on Makaeff's online postings and other comments. Makaeff then moved to strike the counterclaim under California's anti-SLAPP (Strategic Lawsuits Against Public Participation) law.
U.S. District Judge Irma Gonzalez in San Diego declined to strike the counterclaims, leading Makaeff to bring an appeal in the 9th Circuit.
Though a three-judge panel reversed Wednesday, they voiced some serious questions about the very existence of the anti-SLAPP law.
Gonzalez had failed to set the appropriately high standard that Trump University must meet to prove defamation as a "limited public figure," according to the ruling.
The U.S. Supreme Court has identified "limited public figures" as those "who achieve their status by 'thrust[ing] themselves to the forefront of particular public controversies in order to influence the resolution of the issues involved.'"
This is exactly what Trump University has done, sometimes through its famous namesake, since it began "aggressively" advertising its services and fighting back against negative press.
"To be clear: Trump University is not a public figure because Donald Trump is famous and controversial," Judge Kim McLane Wardlaw wrote for the panel. "Nor is Trump University a public figure because it utilized Donald Trump as a celebrity pitchman. Trump University is a limited public figure because a public debate existed regarding its aggressively advertised educational practices. Did Trump's famous moniker draw public attention when Trump University's business practices proved worthy of debate? Perhaps. However, having traded heavily on the name and fame of its founder and chairman, Trump University was in no position to complain if the public's interest in Trump fueled the flames of the legitimate controversy that its business practices engendered."
To win its defamation counterclaim, Trump University must now show that Makaeff "made her statements with 'actual malice,' i.e., knowledge of their falsity or reckless disregard of their truth."
"If, upon remand, Trump University cannot make such a showing, it has no possibility of success on the merits and the district court should grant Makaeff's special motion to strike," Wardlaw wrote.
Trump University assistant general counsel Jill Martin said she will petition for an en banc rehearing.
"We will not be dropping the counterclaim, as Ms. Makaeff, who repeatedly praised Trump University, must be held accountable for her defamatory statements," Martin said.
Martin discussed Makaeff's early praise of the program in a 2011 brief.
That changed only after "Makaeff found herself in financial trouble completely unrelated to her transaction with Trump University" upon completion of the programs, according to the brief.
"Makaeff's allegations of crimes are indisputably defamatory per se," the brief also stated. "She admitted in her letters that her sole goal was to obtain a refund of the money she paid to Trump University."
In two concurrences, Chief Judge Alex Kozinski and Judge Richard Paez agreed with the majority ruling but showed little love for California's Anti-SLAPP law, which is intended to discourage lawsuits that are designed "to deter ordinary people 'from exercising their political or legal rights or to punish them for doing so."
The 9th Circuit's 1999 ruling in United States ex rel. Newsham v. Lockheed Missiles & Space Co. found that the statute could peacefully coexist with federal rules of procedure. Writing that California's statute "cuts an ugly gash" across an otherwise orderly federal process, Kozinski said that the present case, if reheard before a full 11-judge panel, could provide a "fresh look at the question."
He added a long list of the statute's apparent shortcomings.
"Designed to extricate certain defendants from the spiderweb of litigation, it enables them to test the factual sufficiency of a plaintiff's case prior to any discovery; it changes the standard for surviving summary judgment by requiring a plaintiff to show a 'reasonable probability" that he will prevail, rather than merely a triable issue of fact; it authorizes attorneys' fees against a plaintiff who loses the special motion by a standard far different from that applicable under Federal Rule of Civil Procedure 11; and it gives a defendant who loses the motion to strike the right to an interlocutory appeal, in clear contravention of Supreme Court admonitions that such appeals are to be entertained only very sparingly because they are so disruptive of the litigation process."
Judge Paez agreed in a separate concurrence, writing the statute's "application in federal court has created a hybrid mess that now resembles neither the Federal Rules nor the original state statute."