By Jonathan Stempel
NEW YORK (Reuters) - A federal appeals court said former U.S. President Donald Trump and his adult children cannot move into arbitration a fraud lawsuit accusing them of exploiting their family name to promote a marketing scam targeting the poor and working class.
The 2nd U.S. Circuit Court of Appeals in Manhattan said the plaintiffs' agreements to arbitrate claims against the multi-level marketing company American Communications Network did not extend to the Trumps, who had not signed those agreements.
Lawyers for the Trump family did not immediately respond to requests for comment on Wednesday's 3-0 decision.
Four plaintiffs in the proposed class action accused Trump, his children Donald Jr., Eric and Ivanka, and an affiliate of the Trump Organization of promoting ACN in exchange for millions of dollars in secret payments from 2005 to 2015.
The plaintiffs said Donald's Trump's endorsement, including on episodes of his TV show "The Celebrity Apprentice," conned them into thinking their investments would pay off.
ACN would charge $499 to clients to sell videophones and other goods, the plaintiffs alleged.
In Wednesday's decision, Circuit Judge Robert Sack said the lack of a "close relationship" between ACN and the Trumps meant the plaintiffs had no reason to believe they agreed to arbitrate with the Trumps.
He also said "there is no unfairness" in requiring the Trumps to litigate over alleged wrongful business practices, given the plaintiffs' claim they were defrauded into thinking Donald Trump told the truth by endorsing ACN.
The Trumps claimed they had no control over ACN, that Trump's endorsement was simply his opinion and that the civil lawsuit - one of many they face - was politically motivated.
Some defendants prefer arbitration to litigation because arbitration can cost less and remain confidential, and obtaining evidence can be more difficult.
Roberta Kaplan, a lawyer for the plaintiffs, said her clients were pleased, and looked forward to gathering more evidence and beginning depositions.
The decision upheld an April 2020 ruling by U.S. District Judge Lorna Schofield in Manhattan.
The case is Doe et al v Trump Corp et al, 2nd U.S. Circuit Court of Appeals, Nos. 20-1228, 20-1278.