WHO HAS STANDING TO SUE THE PRESIDENT OVER ALLEGEDLY UNCONSTITUTIONAL EMOLUMENTS?

Author:Hall, Matthew
 
FREE EXCERPT

Introduction

Two provisions of the U.S. Constitution that have received comparatively little public attention over the past 227 years are suddenly all over the news, having provided the basis for three pending lawsuits against the president of the United States. The Foreign and Domestic Emoluments Clauses arose out of the Founders' concern with corruption--in particular with the corrupting effects of gifts, payments, or benefits conferred on federal office holders either by foreign governments or their agents, or by any of the states constituting the United States. (1) The founders viewed the risk of corruption stemming from such payments as so serious that they included in the text of the Constitution itself two clauses prohibiting the receipt of such benefits. The Foreign Emoluments Clause prohibits the receipt of gifts or other benefits from any foreign power, by any officer of the United States, without Congress's express consent. (2) The Domestic Emoluments Clause provides that the president's salary shall remain fixed during his term, and that the president cannot receive any emolument other than his statutory salary, from any state government or any part of the federal government, during his term of office. (3)

The question the three new lawsuits raise is whether President Trump's continued ownership of a business empire that receives significant--and growing--payments from foreign government entities violates the Foreign Emoluments Clause. (4) Each of the pending lawsuits asks a federal court to declare that the president's continued ownership of his businesses--together with the receipt of foreign government funds by those businesses without Congress's consent--violates the Foreign Emoluments Clause. (5) They thus ask the courts either to order the president to divest ownership of his businesses, or to enjoin those businesses from accepting foreign emoluments without Congress's consent, so long as the president retains his ownership stake. Two of the pending actions also assert that the president is unlawfully receiving domestic emoluments through his businesses, in the form of direct payments to, and waiver of zoning, environmental, or other legal requirements for, Trump Organization enterprises, and ask the courts to enjoin the president from accepting those emoluments as well.

The pending actions raise interesting and important merits questions in a little-discussed area of constitutional law. (6) But before a federal court can reach those questions, it must first address the threshold question of whether the plaintiffs that initiated these lawsuits are proper parties to raise these claims--whether, that is, they have Article III standing. The Supreme Court has never had occasion to address the question of who may enforce the emoluments clauses. (7) It has not come up, because most presidents have had relatively simple asset portfolios, and, in recent decades, because all presidents have employed blind trusts or other mechanisms to ensure that their decisions as president could not be influenced by the possible impact on their own investments. (8) But President Trump has departed from those practices, and the standing questions now require resolution. The plaintiffs' claims and personal stakes in these matters differ in significant ways, but the Court's jurisprudence on competitor standing, state standing, and legislative standing dictates that the plaintiffs in each action have alleged sufficient facts to establish Article III standing.

  1. Competitor Standing In CREW v. Trump

    The first of the three pending emoluments actions was filed on President Trump's first full day in office, January 24, 2017, by the nonprofit organization Citizens for Responsibility and Ethics in Washington (CREW). It was later amended to add claims by two individual plaintiffs--Eric Goode and Jill Phaneuf--and a restaurant industry organization, Restaurant Opportunities Council, Inc. (ROC). Plaintiffs in the CREW action allege that the president has violated the Foreign Emoluments Clause by accepting, without the consent of Congress, various emoluments--in particular, profits from the use of Trump Organization hotels and restaurants by foreign officials. Plaintiffs seek two forms of relief: a declaratory judgment that President Trump's acceptance of these benefits without congressional consent "violates or will violate the Foreign Emoluments Clause," and an injunction ordering Trump to refrain "from violating the Foreign and Domestic Emoluments Clauses." (9)

    Plaintiffs allege that the Founders saw the Foreign Emoluments Clause as necessary to protect every American's interest in avoiding official corruption. But that widely-shared interest alone would not support Article III standing, because it is a "generalized grievance" that afflicts the plaintiffs no more than every other American. (10) Mere allegations that the defendant has violated the law do not suffice to establish standing to sue. Rather, in seeking to establish Article III standing, the plaintiffs must allege that they "personally [have] suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant," and that the requested relief would likely redress their injuries. (11)

    The two individual plaintiffs and ROC allege standing under a "competitor standing" theory, and rely on a long line of Supreme Court cases holding that market participants have standing to challenge government action that gives their competitors an advantage in the marketplace. The Court "routinely recognizes probable economic injury resulting from [defendants' actions] that alter competitive conditions as sufficient to satisfy the [Article III 'injury-in-fact' requirement]." (12) And where the altered competitive conditions were caused by the defendant's conduct, and could be eliminated by a favorable court decision, the causation and redressability elements of standing are satisfied as well. (13) Thus, a plaintiffs business that faces a more difficult competitive environment due to the defendant's allegedly unlawful actions has standing to challenge those actions. (14)

    The individual plaintiffs and ROC easily satisfy the requirements for standing under this line of Supreme Court cases. Plaintiff Eric Goode alleges that he owns and operates several high-end hotels and restaurants in New York City, and that he competes with Trump properties for diplomatic and other foreign government business. (15) Plaintiff Jill Phaneuf alleges that she works as a hospitality booker for two luxury hotels in Washington D.C., and that her job includes booking "embassy functions and political functions involving foreign governments" and "functions for organizations that are connected to foreign governments." (16) She also alleges that her compensation is directly related to the number and size of bookings that she makes, such that if her hotels lose business to Trump hotels her compensation will be reduced. (17) Plaintiff ROC alleges that it operates several restaurants in Washington, D.C. that compete with Trump properties for foreign government business. (18)

    In sum, the plaintiffs each allege all the requisites of a competitor standing theory: that they compete with President Trump's hotels and restaurants for diplomatic and other foreign government business "by providing the same or similar service in the same marketplace," (19) and that his unlawful acceptance of foreign government business has altered the competitive landscape by creating an incentive for foreign governments and their agents to shift business to Trump Organization properties, thereby depriving plaintiffs of the opportunity to compete for that business on a level playing field. The Plaintiffs' allegations are not merely speculative: they allege facts showing that foreign states have already shifted business to President Trump's hotels and restaurants from competing hotels and restaurants, including those owned and operated by the plaintiffs. (20) Plaintiffs' allegations are sufficient to satisfy Article III standing.

    The Department of Justice (DOJ), on behalf of President Trump, moved to dismiss CREW's Complaint on June 9, 2017, arguing that the plaintiffs lack standing. The DOJ brief argues that Goode and Phaneuf s asserted competitive injuries depend on speculation about how third parties not before the Court--namely, foreign governments and their agents--will allocate their hotel and restaurant spending. (21) But this misreads the competitor standing case law. The Court has held that the intervening cause of potential customers' choices is no bar to standing in competitor standing cases. (22) The altered competitive landscape alone is a sufficient injury to support standing because when the competitive environment is altered to favor a particular business, that conduct "almost surely injures" competing businesses "in one form or another." (23)

    Discovery and perhaps summary judgment practice will reveal the extent to which the individual plaintiffs can back up their various allegations with evidence. However, at the motion to dismiss stage, plaintiffs' allegations must be taken as true, (24) and plaintiffs have sufficiently alleged facts that, if proved, would establish injury, causation, and redressability with respect to the president's acceptance of bookings by foreign governments and their agents at Trump Organization hotels and restaurants. (25)

  2. State Standing

    Maryland and the District of Columbia sued President Trump on June 12, 2017, alleging that he is violating both the Foreign and Domestic Emoluments Clauses, and seeking a judicial declaration to that effect, as well as an order enjoining further violations. The state plaintiffs' complaint presents several independent bases for standing, all but one of which would appear to be sufficient under Supreme Court precedent.

    1. Foreign Emoluments Clause

    The state plaintiffs allege that they have been, and will continue to be...

To continue reading

FREE SIGN UP