File photo: Former U.S. President Donald Trump. REUTERS/Shannon Stapleton

(Reuters) - Tenants who live in rent-regulated apartments once owned by Donald Trump’s father have just filed an amended class action complaint accusing the former president and several of his relatives of fraud and racketeering in connection with an alleged scheme to hike tenants' rents by charging inflated prices for major appliances.

And according to the tenants' lawyers from Parker Waichman, some of the best evidence in their case came directly from Trump defendants as they try to win the dismissal of a separate lawsuit brought by Donald Trump’s niece Mary Trump.

A caveat: Trump lawyers from Kiley, Kiley & Kiley said in an email statement that there’s no validity to claims by Mary Trump or by the tenants, whose buildings haven’t been owned by the Trump family for 20 years.

The tenants’ case “is based entirely on a false premise,” said Trump counsel James Kiley, who disputed the central allegation that Trump family members operated a sham purchasing agent called All County Building Supply and Maintenance. “All County was, at all times, a lawful company with a legitimate business purpose and the defendants, at all times, followed applicable law in determining the amount of rent,” Kiley said. “We look forward to having the court finally address the merits of these claims based upon documentary evidence and the law in effect at that time.”

The docket in the tenants’ case, filed in New York State Supreme Court in Brooklyn, is not publicly accessible through New York’s electronic court filing system but Parker Waichman name partner Jerrold Parker told me there has been no substantive motions practice in the case. The tenants’ claims, in other words, remain entirely untested.

Nevertheless, the tenants’ co-opting of defense evidence from the parallel Mary Trump case is a good example of the complexities of multifront litigation, in which your best defense in one case can have unintended consequences in another.

The Mary Trump suit and the tenants’ class action are both rooted in business practices first described in The New York Times’ 2018 investigation of Donald Trump’s tax history. Mary Trump’s complaint alleges, among other things, that Donald Trump, his siblings and a cousin named John Walter used All County to divert millions of dollars into their own pockets, siphoning money away from her and other stakeholders in Trump operating companies.

The tenants, meanwhile, contend that the Trumps used All County to negotiate wholesale purchase prices for major appliances and apartment supplies but charged higher prices when the equipment was installed in tenants’ apartments. New York’s rent regulations allow landlords to raise rents based on the cost of capital improvements, including major appliances. The tenants allege that the Trumps and a network of additional defendants fraudulently demanded higher rents based on inflated charges for supplies that All County obtained at a discount.

Last year, Trump family defendants filed two motions to dismiss Mary Trump’s case in Manhattan State Supreme Court. Maryanne Trump Barry’s counsel at Greenfield Stein & Senior filed one motion. Kiley, Kiley & Kiley filed the other on behalf of Donald Trump and the executor of his brother Robert Trump’s estate.

Both motions argued primarily that Mary Trump waited far too long to sue. The New York Times' reporting on All County, the motions said, was based on information that Mary Trump first acquired 20 years ago in litigation over her share of her grandfather’s estate and then gave to Times reporters. Mary Trump could have raised allegations about All County decades before the Times series, the motions said, but she didn’t.

To show the significance of the information that Mary Trump obtained in that long-ago litigation, the defense motions attached deposition testimony about All County that Robert Trump and John Walter gave way back in 2000. In his deposition, Robert Trump said flatly that one of the reasons that the Trumps used All County to buy apartment supplies was so “we could increase the cost of items and then get higher rents.”

Walter was even more expansive in his deposition, describing how family patriarch Fred Trump was bothered by the idea of tenants benefiting from his ability to negotiate wholesale prices. Fred Trump set up All County, Walter said, to assure that his family, and not tenants, received whatever savings Fred obtained from the discounted prices he negotiated.

Defense counsel in Mary Trump's case said those depositions should have put Mary on notice about All County’s activities more than 20 years ago.(Justice Robert Reed in Manhattan heard oral arguments last month on defendants' dismissal motions but has not yet ruled.)

Tenants’ lawyers from Parker Waichman were monitoring filings in the Mary Trump case – and they did not view the deposition testimony quoted in dismissal motions as proof that Mary Trump waited too long to sue. Instead, they pounced on the old testimony as evidence that the Trumps used All County to impose fraudulent rent hikes.

The tenants' amended complaint quoted extensively from both the Walter and Robert Trump depositions, which were attached as exhibits. The true victims of the All County pass-through, the amended complaint argued, were the tenants “who were unknowingly defrauded into paying unlawful rent increases based on the fraudulent and inflated costs of the purported improvements.”

I asked James and Kevin Kiley by email whether their dismissal motion for Donald Trump in the Mary Trump case had provided evidence for the tenants. James Kiley did not address that question in his response to my query. I did not hear back from Gary Friedman of Greenfield Stein & Senior, who argued for Maryanne Trump Barry in the Mary Trump case, or Susan Baumel-Cornicello of Cornicello, Tendler & Baumel-Cornicello, who represents Trump Barry in the tenants’ class action.

Our Standards: The Thomson Reuters Trust Principles.

Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.

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