Almost immediately after President Trump's inauguration, Citizens for Responsibility and Ethics in Washington ("CREW") filed a lawsuit against him alleging multiple violations of the Emoluments Clause occasioned by Trump's continuing to profit from his opaque business empire. The complaint alleged that CREW has standing because, as a government ethics watchdog agency, it would incur very substantial additional costs monitoring and otherwise responding to Trump's activities.

Some commentators objected that such costs ought not to suffice as an "injury" sufficient to confer standing under the Constitution's Article III because, they said, if it did, then any self-appointed do-gooder could manufacture standing simply by asserting an interest in monitoring and responding to alleged wrongdoing. These commentators typically cited Clapper v. Amnesty Int'l USA for the proposition that CREW suffered from a mere "self-inflicted injury." Yet, as I argued in response, the skeptics were falsely assuming that Clapper and other recent cases sub silentio overruled the chief standing case on which CREW relied: Havens Realty Corp. v. Coleman, which articulated the monitoring/response cost theory of standing.

That said, although Havens remains good law to support CREW's standing in the lower courts, the current Supreme Court might either overrule Havens or (mis)construe it as inapplicable to CREW, if and when the case arrives there. Although lower courts are forbidden from anticipatorily overruling SCOTUS cases on the ground that subsequent doctrinal developments have weakened them, the SCOTUS can of course overrule its prior decisions. Accordingly--and prudently--the CREW complaint has now been amended to add claims by parties that stand to lose money as a consequence of Trump's Emoluments Clause violations: a restaurant association suing on behalf of itself, its member restaurants, and restaurant workers; and Jill Phaneuf, a Washington, D.C.-based events booker who works with non-Trump hotels. The addition of these plaintiffs should make the lawsuit bulletproof on standing grounds.

The amended complaint includes new post-inauguration details about how Trump is profiting from the presidency through the receipt of foreign and domestic emoluments. More importantly for standing purposes, it adds the parties that are losing business to Trump's hotels, restaurants, and third-party hotels located in Trump facilities because Trump's Emoluments Clause violations give him an unfair advantage in the marketplace.

How so? Suppose that the New York managing director of a Chinese state bank wants to host a gala dinner at a fancy restaurant in New York City or Washington, DC. Such a gala at a non-Trump restaurant will result in the dinner guests enjoying fine food and excellent service, but a fancy dinner at a restaurant in a Trump hotel comes with food and service plus the added bonus of an opportunity to curry favor with the administration--which could in turn lead to regulatory approvals or foreign policy concessions from the administration for the Chinese government. The Emoluments Clause violation steers business towards the Trump and Trump-associated businesses and away from their competitors. That's a classic "pocketbook" injury that easily satisfies Article III.

But wait. Might it be objected that there's a mismatch here? The intended beneficiaries of the Emoluments Clause are the American People in their collective capacity. Its prophylactic rule protects the People against corrupt foreign and other influence by eliminating one avenue by which the president might be induced to serve a foreign power or private actor rather than the public good. However, the objection goes, persons and firms that compete with the president's unconstitutional emoluments-generating businesses are mere incidental or third-party beneficiaries of the Emoluments Clause.

Here's an analogy to explain how the objection works: Suppose that my neighbor plans to erect an amusement park on his beachfront property but that the government forbids him from doing so. My neighbor would have standing to bring a regulatory Takings Claim alleging that the regulation destroys all economically viable use of his property, but I would lack standing to complain that without the amusement park, my business--a nearby parking lot--will lose out on customers. The Takings Clause protects persons whose property is taken, not everyone who might incidentally suffer therefrom. Thus, the objection goes by analogy, compliance with the Emoluments Clause confers mere incidental benefits on competitors of prospective Emoluments Clause violators.

How persuasive is that objection? Not very. Upon inspection, it is not about Article III standing at all. In my hypothetical example, assuming that I can show that the loss of business for the parking lot is not too speculative, there is a clear Article III injury. How do I know? Because the cases say as much.

Consider Craig v. Boren, in which the SCOTUS acknowledged that there was no Article III obstacle to a lawsuit by a beer vendor who was not an 18-21-year-old male to vindicate the claim that an Oklahoma statute discriminated on the basis of sex against 18-21-year-old males. The controversial question in Craig was whether the Court ought to set aside the general presumption against third-party standing claims--a mere prudential limit. The Court did set aside the presumption, allowing the case to go forward.

Or consider National Credit Union Admin. v. First Bank & Trust Co. There, the Court held, in an opinion by Justice Thomas, that banks could challenge the relaxation of regulations on credit unions because banks compete with credit unions. Thus, the banks were sufficiently within the "zone of interest" protected by the statute under which they sued. Although Justice O'Connor dissented for herself and three colleagues from the majority's ruling on the statutory question, no one dissented from the majority's observation--in footnote 6--that the potential loss of customers by the banks amounted to an Article III injury.

Accordingly, it is beyond question that the private plaintiffs in the Emoluments Clause case have Article III standing. Should they nonetheless be denied standing on prudential grounds? The short answer is no.

Courts purport to disfavor third-party challenges even when the plaintiff has Article III standing. However, there is an important exception. As Craig itself shows, the basic reason for denying third-party claims is that first-party claims are preferred. There was an 18-21-year-old male plaintiff in the case but he turned 21 before the litigation was over, so his claim for injunctive relief was mooted, leaving only the beer vendor. In those circumstances--where there is no obvious first-party plaintiff--the Court lifts the prudential limit on third-party claims. Likewise here, if we view the American People as the first-party beneficiary of the Emoluments Clause, then third-party claims by individuals and firms that suffer Article III injuries to their businesses should not be denied standing on third-party grounds, because the American People as a whole cannot bring a first-party lawsuit on their own behalf.

Indeed, it is not even clear that the competitors' claim under the Emoluments Clause should be characterized as a "third-party" claim at all. Unlike the Equal Protection Clause at issue in Craig--which protects individual rights--the Emoluments Clause is structural in much the same way that constitutional principles of separation of powers and federalism are structural. Just as the SCOTUS ruled (unanimously) in Bond v. United States that individuals who suffer Article III injury as a result of the enforcement of a statute said to exceed Congress's affirmative powers have standing to sue, so individuals and firms that suffer Article III injury as a result of the president's Emoluments Clause violations should have first-party standing to sue.

To be sure, in Bond the Court observed that the point of federalism is to provide structural protection for individual liberty, while that is not exactly the point of the Emoluments Clause. But so what? If we step back, we see a clear parallel. The enumeration of powers and the Tenth Amendment limit federal power, giving first-party claims to anyone who suffers an injury as a consequence of breaches of the limits. The Emoluments Clause limits corruption, giving first-party claims to anyone who suffers an injury as a consequence of a breach of its limits.

None of the foregoing contradicts anything in the case law involving competitor standing, which mostly concerns statutory claims. For one thing, as National Credit Union confirms, those cases acknowledge that competitors suffer Article III injury. To the extent that some of the statutory cases construing the so-called zone-of-interest test limit competitor standing on sub-constitutional grounds, they do not have any direct bearing on constitutional claims, where, as we have seen, the test is readily met.

The distinction between statutory and constitutional claims might not have been crystal clear a few years back it is now. In the 2014 case of Lexmark International, Inc. v. Static Control Components, Inc. the SCOTUS considered whether a firm has standing to sue a competitor on the ground that the competitor violated the Lanham Act through false advertising. The claim was that the defendant engaging in false advertising unlawfully poaches customers from the plaintiff. Article III standing was taken for granted because losing customers is an Article III injury. The issue in Lexmark was whether a competitor whose business is adversely affected is within the zone of interest protected by the Lanham Act. The Court unanimously held that it is.

Lexmark reconceptualized the zone-of-interest analysis as a matter of statutory interpretation rather than prudential standing. That bespeaks a divergence between statutory cases--where the zone-of-interest test applies--and constitutional cases--where third-party standing limits continue to be seen as prudential. Accordingly, even if Lexmark were to be read to limit the zone of interest that allows competitor standing in statutory cases, it does not undermine third-party standing in constitutional cases.

Consider how far we have come. In response to the initial complaint, critics argued that CREW lacked Article III standing. Given the continuing vitality of Havens, the critics were wrong, but put that aside. As the foregoing analysis shows, Article III standing is now clearly established. The only standing question is whether the complaint should be dismissed on the ground that, although the plaintiffs have suffered an Article III injury, they are seeking a species of third-party standing that should be denied on prudential grounds. As I have explained, the answer to that question is no.

Tags: