Judge's ruling on the disclaimer clause:
The “Worthless Clause”
Defendants rely on what they call a “worthless clause” set forth in the SFCs under the section entitled “Basis of Presentation” that reads, as here pertinent, as follows:
Assets are stated at their estimated current values and liabilities at their estimated current amounts using various valuation methods. Such valuation methods include, but are not limited to, the use of appraisals, capitalization of anticipated earnings, recent sales and offers, and estimates of current values as determined by Mr. Trump in conjunction with his associates and, in some instances, outside professionals. Considerable judgment is necessary to interpret market data and develop the related estimates of current value. Accordingly, the estimates presented herein are not necessarily indicative of the amount that could be realized upon the disposition of the assets or payment of the related liabilities. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated current value amounts.
NYSCEF Doc. Nos. 769 at 7; 770 at 7; 771 at 7; 772 at 7; 773 at 7.
In his sworn deposition, Donald Trump spent a lot of time invoking this clause: “Well, they call it a ‘disclaimer.’ They call it ‘worthless clause’ too, because it makes the statement ‘worthless.’” NYSCEF Doc. No. 859 at 67. Donald Trump goes on to say that “I have a clause in there that says, don’t believe the statement, go out and do your own work. This statement is ‘worthless.’ It means nothing.” Id at 68. Furthermore, Donald Trump implies that he did not consider it important to review the SFCs for accuracy because of the existence of this purported “worthless clause”:
OAG: Does this refresh your recollection of the process whereby you would get final review of the Statement of Financial Condition?
DJT: Yeah, I think generally. It’s interesting. I would say as years went by, I got less and less and then once I became President, I would - if I saw it at all, I’d see it, you know, after it was already done.
OAG: So in the period -
DJT: Again, you know, I hate to be boring and tell you this. When you have the worthless clause on a piece of paper and the first - literally the first page you’re reading about how this is a worthless statement from the standpoint of your using it as a bank or whatever -whoever may be using it, you tend not to get overly excited about it. I think it had very little impact, if any impact on the banks.
OAG: So am I understanding that you didn’t particularly care about what was in the Statement of Financial Condition?
DJT: I didn’t get involved in it very much. I felt it was a meaningless document, other than it was almost a list of my properties, with good faith effort of people trying to put some value down. It was a good faith effort.
Id. at 107-108. Defendants further submit the affidavit and deposition transcript of Robert Unell,
who purports to be an expert in commercial real estate, for the proposition that because of “the
worthless clause” in the SFC, “no lender relies on these for what it is.” NYSCEF Doc. Nos. 1030 at 183-184; 1031.
However, defendants’ reliance on these “worthless” disclaimers is worthless. The clause does not use the words “worthless” or “useless” or “ignore” or “disregard” or any similar words. It does not say, “the values herein are what I think the properties will be worth in ten or more years.” Indeed, the quoted language uses the word “current” no less than five times, and the word “future” zero times.
Additionally, as discussed supra, a defendant may not rely on a disclaimer for misrepresentation of facts peculiarly within the defendant’s knowledge. Basis Yield Alpha Fund at 136. Here, as the valuations of the subject properties are, obviously, peculiarly within defendants’ knowledge, their reliance on them is to no avail.
Furthermore, “[t]his ‘special facts doctrine’ applies regardless o f the level o f sophistication o f the parties.” TIAA Glob. Invs. LLC v One Astoria Square LLC. 127 AD3d 75, 87 (1st Dept 2015) (emphasis added) (holding disclaimer does not bar liability for fraud where facts were peculiarly within disclaiming party’s knowledge).
Thus, the “worthless clause” does not say what defendants say it says, does not rise to the level of an enforceable disclaimer, and cannot be used to insulate fraud as to facts peculiarly within defendants’ knowledge, even vis-a-vis sophisticated recipients.
