The U.S. Court of Appeals for the Second Circuit on Friday brought back to life an emoluments-related lawsuit against President Donald Trump. The lawsuit filed by Citizens for Responsibility and Ethics in Washington (CREW) had previously been dismissed for lack of standing. The lawsuit is revived at a time when “potential violations of the Foreign and Domestic Emoluments Clauses of the Constitution ” are under the microscope.
The case at hand was argued before and decided by Circuit Judges Christopher Droney, Pierre Leval and John Walker. The Court decided, with Walker dissenting separately, that U.S. District Judge George B. Daniels’ dismissal of the suit was vacated and sent back to the lower court.
The lawsuit, filed on behalf of high-end hospitality business plaintiffs, alleged that the plaintiffs have been harmed by the president unlawfully profiting off of his office, as “foreign and domestic government clientele” keep patronizing Trump properties.
“The Plaintiff establishments cater to foreign and domestic government clientele, and allege that they are direct competitors of hospitality properties owned by the President in Washington D.C. and New York City. The complaint alleges that President Trump, operating through corporations, limited‐liability companies, limited partnerships, and other business structures, is effectively the sole owner of restaurants, hotels, and event spaces, which are patronized by foreign and domestic government clientele,” read the appellate court’s recounting of the background in this case. “The President has announced that, since assuming office, he has turned over day‐to‐day management of his business empire to his children and established a trust to hold his business assets. However, he maintains sole ownership, receives business updates at least quarterly, and has the ability to obtain distributions from the trust at any time.”
As Law&Crime noted before of Daniels’ 29-page dismissal order, Daniels said the case presented a “non-justiciable political question“– that is, a question not for the judiciary to decide. He mostly reasoned that the plaintiffs did not have standing to sue, but he had other things to say as well:
Here, the issue presented under the Foreign Emoluments Clause is whether [President Trump] can continue to receive income from his business with foreign governments without the consent of Congress. As the explicit language of the Foreign Emoluments Clause makes clear, this is an issue committed exclusively to Congress. As the only political branch with the power to consent to violations of the Foreign Emoluments Clause, Congress is the appropriate body to determine whether, and to what extent, [President Trump]’s conduct unlawfully infringes on that power. If Congress determines that an infringement has occurred, it is up to Congress to decide whether to challenge or acquiesce to [President Trump]’s conduct. As such, this case presents a non-justiciable political question.
Much of the appellate court decision focused on the three-part standing test, which requires that the plaintiff plausibly allege the following:
1) The plaintiff must have suffered an “injury in fact,” meaning that the injury is of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent
2) There must be a causal connection between the injury and the conduct brought before the court
3) It must be likely, rather than speculative, that a favorable decision by the court will redress the injury
When the appellate court disagreed on Friday with Daniels, it said it found that the plaintiffs “satisf[ied] all three prongs of Article III standing.”
On “injury in fact”
Plaintiffs’ alleged injury meets the well‐established Article III threshold for economic competitors who allege that, because of unlawful conduct, their rivals enjoy a competitive advantage in the marketplace.
The Complaint sufficiently alleges that Plaintiffs compete directly with Trump establishments and that the President’s allegedly illegal acts favor Plaintiffs’ competitors. Specifically, it alleges that Plaintiffs’ establishments are harmed in their competition with Trump establishments because, despite being comparable in other relevant respects, the President’s establishments offer government patrons something that Plaintiffs cannot: the opportunity, by enriching the President, to obtain favorable governmental treatment from the President and the Executive branch. It alleges that the marketplace is thus skewed in favor of Trump businesses because of his unlawful receipt of payments from government patrons. The Complaint, supported by expert declarations, alleges that this unlawful market skew has caused Plaintiffs economic harm in the form of lost patronage from government entities, and that such harm will continue in the future. For competitor standing, that is sufficient.
On causal connection
Our precedents, and those of the Supreme Court, make clear that Plaintiffs’ allegations are sufficient to plausibly assert a substantial likelihood that their injury is the consequence of the challenged conduct.
The complaint adequately pleads a competitive injury of lost patronage directly traceable to the fact that the President’s allegedly illegal conduct induces government patrons of the hospitality industry in Washington, D.C. and New York City to patronize Trump establishments in preference to Plaintiffs’ establishments.
On the non-speculative issue of redressability of the alleged harm
The Complaint seeks injunctive relief requiring that the President cease the conduct that allegedly violates the Foreign and Domestic Emoluments Clauses. Plaintiffs have plausibly pleaded that the President’s ownership of hospitality businesses that compete with them will induce government patrons of the hospitality industry to favor Trump businesses over those of the Plaintiffs so as to secure favorable governmental action from the President and Executive branch. This plausibly alleges that his cessation of the violation would eliminate the inducement to those patrons to favor his businesses, and would therefore eliminate, or at least diminish, the competitive injury that Plaintiffs suffer. These plausible allegations are sufficient to satisfy Article III’s requirement of redressability.
You can read the rest of the decision below.
CREW Executive Director Noah Bookbinder reacted to the decision by saying “now would be a good time” for Trump to “divest from his businesses.”
“We thank and applaud the judges of the Second Circuit for their decision today. We never wanted to be in a position where it would be necessary to go to court to compel the President of the United States to follow the Constitution,” Bookbinder said in a statement obtained by Law&Crime. “However, President Trump left us no choice, and we will proudly fight as long as needed to ensure Americans are represented by an ethical government under the rule of law.”
“If President Trump would like to avoid the case going further and curtail the serious harms caused by his unconstitutional conduct, now would be a good time to divest from his businesses and end his violations of the Emoluments Clauses of the Constitution,” Bookbinder continued. “It has been an honor to work with courageous plaintiffs and an all-star legal team to fight for the Constitution, and we look forward to moving this case forward to victory.”
Editor’s note: this article was updated post-publication to add a statement from CREW.
[Image via ROBERTO SCHMIDT/AFP/Getty Images]