Trump Can't Sway 2nd Circuit On Emoluments Suit Revival

Published on:
August 17, 2020

President Donald Trump must face claims he violated the U.S. Constitution's emoluments clauses by catering to government officials at his hotels and restaurants, as a split Second Circuit denied his bid Monday to reconsider the case's revival and dissenters argued that the plaintiffs haven't shown injury.

In September, a panel majority revived the case, concluding that restaurateur and hotelier Eric Goode had sufficiently shown that statements by Trump may have lured dignitaries to Trump-branded establishments, hurting Goode's and other high-end hospitality businesses. Eight Second Circuit judges backed this finding Monday.

But four judges disagreed, with three signing on to a dissent related to the argument about a lack of evidence as to Goode's injury. This trio, led by U.S. Circuit Judge Steven Menashi, a Trump nominee, argued that jurisdiction comes down to a question of whether officials are actually abandoning Goode's establishments in favor of Trump properties.

"If the jurisdiction of the court hinges on the answer to that question, one might think the court would require the plaintiffs to identify some evidence that at least one official has actually chosen a Trump-located restaurant over one of the plaintiffs' restaurants for an emoluments-based reason," they said. "But the plaintiffs have no such evidence, and the majority opinion does not think it is necessary."

Menashi was joined by U.S Circuit Judge Richard J. Sullivan, another Trump nominee, and U.S. Circuit Judge Debra Ann Livingston, who was appointed by George W. Bush.

U.S. Circuit Judge José A. Cabranes dissented for a different reason, penning a solo argument.

"We have missed an opportunity to address en banc a 'question of exceptional importance,' regarding the limits of the judicial power under Article III of the Constitution in addressing a constitutional claim against a president," he said.

U.S. District Judge George B. Daniels had thrown out the case in late 2017 after finding that, while Goode and trade group Restaurant Opportunities Center United had shown they were injured when government patrons hoping to curry favor with the president chose Trump-held businesses over others, the plaintiffs had failed to tie those injuries directly to actions by the nation's chief executive.

But a panel majority held in September that statements in newspapers by foreign diplomats — who said, for example, that it might be rude to visit Washington, D.C., and stay at a hotel that competes with Trump's businesses — were enough to support a connection between the president and the alleged harms, at least in the early stages of the litigation.

"The president's statements to the effect that he favors governments that spend money at his establishments increase the likelihood that government patrons will choose Trump establishments in the hopes of winning influence," Circuit Judge Pierre N. Leval wrote for the majority. "Without the benefit of discovery, the plaintiffs need not go further to establish causation."

Circuit Judge John M. Walker dissented, saying that the domestic and foreign emoluments clauses in the Constitution have never been litigated and may not necessarily mean a president can't compete with other business owners.

The Reagan appointee also found that Goode and the trade group hadn't shown how other factors may have affected competition at their businesses.

"The plaintiffs' and the president's establishments exist in a virtual sea of luxury hotels and restaurants in which many different factors influence decision making and freely affect competition," Judge Walker wrote. "There are simply too many variables at play to allow the plaintiffs to rest solely on the bare assertion that the president's acceptance of emoluments has caused them competitive injury."

The emoluments clauses bar officers of the federal government from accepting payments from foreign and domestic government officials in exchange for actions in their official capacity.

Ethics and constitutional lawyers planning to raise precisely the question that Judge Walker noted about how the emoluments clause should be applied filed the suit Jan. 23, 2017, just days after Trump took office.

But after nearly a year of fighting over whether Trump was even connected closely enough to his businesses, particularly a Manhattan hotel he was taking a buyout on, Judge Daniels tossed the case, finding the plaintiffs, which include watchdog group Citizens for Responsibility and Ethics in Washington, hadn't established standing.

Trump urged the Second Circuit in May 2018 to affirm the New York federal court's dismissal, calling Goode and the trade group's emoluments case a "manufactured" suit and contending they failed to support their claims that Trump's hotels and restaurants hurt them competitively by drawing away the business of government patrons.

Trump argued that even if there was any weight to their contention that they were injured as a result of losing business to the president's hospitality holdings, they can't show the customers are patronizing his hotels and restaurants because of his financial interests in them rather than their price and location.

The plaintiffs are represented by Stuart C. McPhail and Adam J. Rappaport of the Citizens for Responsibility and Ethics in Washington, Laurence H. Tribe of Harvard Law School, Joshua Matz of Kaplan Hecker & Fink LLP, Deepak Gupta, Jonathan E. Taylor, and Daniel Townsend of Gupta Wessler PLLC and Joseph M. Sellers and Daniel A. Small of Cohen Milstein Sellers & Toll PLLC.

Trump is represented by Hashim M. Mooppan, Mark R. Freeman, Michael S. Raab, Martin Totaro and Joshua Revesz of the U.S. Department of Justice.

The case is Citizens for Responsibility and Ethics in Washington et al. v. Trump, case number 18-474, in the U.S. Court of Appeals for the Second Circuit.

Read this article at Law360.

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