Tarla Makaeff v. Trump University, Llc
41 Media L. Rep. (BNA) 1637, 2013 WL 1633097, 715 F. 3d 254 (2013)
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Rule of Law:
A business entity becomes a limited-purpose public figure for defamation purposes when it engages in an aggressive advertising campaign that generates a public controversy regarding the subject of its advertising, thereby requiring the entity to prove actual malice to prevail on a defamation claim.
Facts:
- Donald Trump founded Trump University, LLC, a for-profit company offering real estate seminars and training programs.
- Trump University launched an aggressive, large-scale advertising campaign that heavily featured Donald Trump's name, image, and connection to his television show, 'The Apprentice,' promising to teach his 'insider success secrets.'
- Through its marketing and published books, the company made controversial claims about its own legitimacy and contrasted itself with competitors who allegedly "hook you on promises and never deliver."
- By 2007, a public controversy had developed regarding Trump University's practices, which included satirical comic strips, critical online posts from former customers, and an investigative newspaper article in the Los Angeles Times questioning its business model.
- In August 2008, Tarla Makaeff attended a three-day Trump University workshop for approximately $1,495.
- During the workshop, Makaeff was persuaded to enroll in the 'Trump Gold Elite Program' for an additional $34,995.
- After becoming dissatisfied with the program and being denied a refund, Makaeff wrote letters to her bank and the Better Business Bureau, and posted comments online.
- In her communications, Makaeff accused Trump University of engaging in 'fraudulent business practices,' being a 'scam,' and using 'predatory high pressure closing tactics.'
Procedural Posture:
- Tarla Makaeff filed a class action complaint against Trump University, LLC in U.S. District Court, alleging deceptive business practices.
- Trump University filed a counterclaim against Makaeff for defamation based on her critical statements.
- Makaeff filed a special motion to strike the defamation counterclaim under California's anti-SLAPP statute.
- The district court denied Makaeff's motion, ruling that Trump University was a private figure and had demonstrated a reasonable probability of success on its claim.
- Makaeff, as the appellant, appealed the district court's denial of her motion to the U.S. Court of Appeals for the Ninth Circuit, with Trump University as the appellee.
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Issue:
Does a private, for-profit entity that aggressively advertises its services, thereby generating a public controversy over its business practices, become a limited-purpose public figure for defamation law purposes, requiring it to prove actual malice?
Opinions:
Majority - Judge Wardlaw
Yes. A business entity becomes a limited-purpose public figure when it thrusts itself to the forefront of a public controversy to influence the resolution of the issues involved. Trump University did so through its aggressive advertising campaign. To determine if an entity is a limited-purpose public figure, the court applies a three-part test: (1) a public controversy existed, (2) the defamation is related to the plaintiff's participation in it, and (3) the plaintiff voluntarily injected itself into the controversy. Here, a public controversy over Trump University's business practices existed due to media coverage and customer complaints. Makaeff's statements were directly related to this controversy. Critically, Trump University voluntarily injected itself into this controversy through its 'aggressive advertising campaign' which 'invited public attention, comment, and criticism.' By making controversial claims about its educational value, it could not later claim to be a private figure when that very value was debated. Therefore, as a limited-purpose public figure, Trump University must prove by clear and convincing evidence that Makaeff acted with 'actual malice'—that is, with knowledge of the statements' falsity or with reckless disregard for the truth.
Concurring - Chief Judge Kozinski
The concurring opinion agrees with the majority's outcome because it is bound by circuit precedent, but argues that California's anti-SLAPP statute should not apply in federal court at all. Under the Erie doctrine, federal courts apply state substantive law and federal procedural law. The anti-SLAPP statute is a 'quintessentially procedural' mechanism, creating a 'special motion to strike' and altering rules for discovery and appeals. Its application in federal court disrupts the comprehensive and integrated scheme of the Federal Rules of Civil Procedure, creating a 'hybrid' procedure that undermines both the state and federal systems. The precedent allowing its application, United States ex rel. Newsham v. Lockheed Missiles & Space Co., was wrongly decided and should be reconsidered en banc.
Concurring - Judge Paez
This opinion concurs fully with the majority and joins Chief Judge Kozinski's concurrence, adding another reason to reconsider the application of state anti-SLAPP laws in federal court. The application of various state anti-SLAPP statutes from different states within the Ninth Circuit (e.g., California, Oregon, Nevada) has led to inconsistent federal procedural outcomes, particularly regarding the availability of an immediate appeal. This state-by-state variation in federal procedure further demonstrates that these are procedural laws, not substantive rights, and their application in federal court is improper under the Erie doctrine.
Analysis:
This decision establishes that aggressive, large-scale commercial advertising can be sufficient to 'voluntarily inject' a business into a public controversy, thereby making it a limited-purpose public figure. This significantly raises the burden of proof for such companies in defamation cases, from negligence to the much harder-to-prove 'actual malice' standard established in New York Times v. Sullivan. The ruling provides greater protection for consumers, critics, and journalists who comment on heavily marketed products and services, as it makes it more difficult for businesses that have sought the public spotlight to silence criticism through defamation lawsuits.
