//  4/27/17  //  In-Depth Analysis

Yesterday I briefly explained the affirmative argument for standing in CREW v. Trump and noted my favorite new plaintiff in the lawsuit. Today I wanted to address some of the counter-arguments that have been raised. Although the new plaintiffs are the kind of “competitor plaintiffs” that frequently have standing, there continues to be some skepticism about whether these plaintiffs have standing, at least in certain circles.

There’s a lot to say so I’ll do it in two posts—the next one will address the ways that the standing skeptics have distinguished cases that suggest the new plaintiffs have standing. Today, I’ll address how the standing skeptics are arguing the new plaintiffs don’t have standing by defining the injury in the wrong way.

I think part of what has divided the standing defenders from the standing skeptics is how the plaintiffs’ injury should be defined. Is the plaintiff’s injury the actual loss of money from the gigs they would book but for Trump’s violations of the Emoluments Clause? Or is the plaintiff’s injury the competitive boost that Trump’s violations of the Emoluments Clause give to the plaintiffs’ competitors? In my view, the injury is and should be the competitive boost that Trump’s violations of the Emoluments Clause provide the plaintiffs’ competitors.

The reason the injury has to be the competitive boost—i.e., the increased competition—rather than the actual loss of sales is because of the “competitor” standing cases I noted above. In competitor standing cases (be it Investment Company Institute v. Camp or National Credit Union Administration v. First National Bank & Trust Co. or any of the other cases), the plaintiffs’ argument is that they were harmed because of some increased competition. Accordingly, the right way to characterize the plaintiffs’ injury in those cases has to be the increased competition, not whatever actual losses the plaintiffs’ business(es) might suffer. Why? Because none of the plaintiffs in the competitor standing cases could have shown (or were required to show) that their revenues had actually decreased from the competition, or that their revenues would actually increase if a court enjoined the competition. Because the “competitor” plaintiffs in those cases had standing, courts necessarily had to conclude that the competitor plaintiffs’ injury was redressable by a judicial decision that enjoined whatever competitive boost the government had given to the plaintiffs’ competitors.

Distinguishing The Injury?

Jonathan Adler’s post over at the Volokh Conspiracy argues the new plaintiffs don’t have standing because they can’t show their injuries are redressable. That is, he maintains that even if plaintiffs are injured by foreign governments making bookings at the Trump hotel, they haven’t shown that an order that prohibits Trump himself from receiving benefits from these bookings will affect foreign governments’ booking choices.

That concern, however, would disappear if the remedy the court ordered was to prohibit the Trump hotels from accepting bookings from foreign governments unless or until Trump fully divests. That remedy would remove any doubt about whether a remedy would affect foreign governments’ booking choices.

But putting that remedy aside, Adler distinguishes the other competitor standing cases on the ground that this case doesn’t involve the government’s treatment of the Trump hotel, but rather where the Trump hotel’s profits go. He argues that in most competitor injury cases, redressability is less of a concern “because a successful suit would prohibit the competition” by prohibiting additional entities from entering a market.

I’m not clear why that matters, or why that is a distinction with a difference. If the harm to the plaintiff in the competitor standing cases is the additional competition, why does it matter whether that additional competition comes from new market entrants or from an unfair boost to existing market participants? Either way, it’s not clear that a favorable court decision will actually boost the plaintiff’s business. If a court enjoins new market participants, who is to say those market participants would have taken any of the plaintiff’s business in the first place? Who is to say the third party customers that might frequent the plaintiff’s business won’t opt out of the market entirely?

In competitor standing cases, it doesn’t matter where the additional competition comes from (new market participants or a competitive boost to existing market participants). In either case, the plaintiff’s alleged injury is related to the actions of a third party—the plaintiff’s potential customers. But that’s not a bar to standing in cases of competitor standing.

The D.C. Circuit Court of Appeals appears to share this view of standing doctrine—namely, that it does not matter whether the increased competition comes from “new” participants in a market, or from a competitive boost to existing market participants. In Mendoza v. Perez, the D.C. Circuit (in an opinion written by Judge Brown) wrote that “parties suffer constitutional injury in fact when agencies lift regulatory restrictions on their competitors.” A plaintiff has standing to challenge the government’s treatment of a third-party competitor, the court explained, whenever the plaintiff is a “direct and current competitor whose bottom line may be adversely affected.” Note the emphasized words—a competitor has standing if the competitor’s bottom line may be, but need not actually be, adversely affected. A plaintiff need only establish that he or she is a “direct and current competitor” in the market to establish standing. The new plaintiffs in CREW have done that.

On this point, it may also be helpful to consider how the Court described the standing analysis in Barlow v. Collins. In Barlow, a group of tenant farmers challenged a regulation about how they could use payments issued under the program. The farmers argued the regulation injured them because it improved their landlords’ negotiating position with respect to their leases. The Court later explained that the farmers had standing because they claimed that the government’s regulations “adversely affected their economic position vis-à-vis their landlords.”

Defining The Injury (Again)

Citing a post by Andy Hessick, Adler acknowledges that the new plaintiffs in CREW could argue “there is at least some probability that prohibiting Trump from receiving unlawful emoluments will reduce the degree of competition.” But Adler quickly dismisses that argument because “courts are generally skeptical of such arguments absent a statutorily granted procedural right.”

I don’t think that’s the right way to characterize the competitor standing cases. In competitor standing cases (at least the ones I’ve linked to) the plaintiffs were not arguing they were injured because they had been denied some procedure (such as a hearing) to which they were entitled by statute, or that they were denied some other process the government had to abide by before the government increased competition in the plaintiff’s market. Rather, the plaintiffs’ argument was that they faced increased competition because of some action the government had taken. And the increased competition was why they had Article III standing.

It is also not just statutory cases where courts define an injury in terms of a loss of opportunity. Consider the affirmative action cases. In Regents of University of California v. Bakke, the Court addressed and rejected the argument that the plaintiff did not have standing to challenge the University’s affirmative action program because the plaintiff had “never showed that his injury—exclusion from the Medical School—will be redressed by a favorable decision.” The Court reasoned that the plaintiff did not have to show he would be admitted to the school, because the plaintiff’s injury was the loss of the opportunity “to compete.”

Bakke involved a “quota” system (i.e., the plaintiff was not allowed to compete for a certain number of slots in the medical school class). But in Gratz v. Bollinger, the Court invoked the same loss-of-opportunity reasoning to conclude that the plaintiff had standing to challenge the numerical “boost” that the University afforded to students who were members of historically disadvantaged groups—the injury, in the Court’s words, was “the inability to compete on an equal footing.”

The Court did the same in Northeastern Florida Chapter of Associated General Contractors v. City of Jacksonville, when it concluded that a company had standing to challenge the City’s affirmative action program for minority business enterprises. The Court reiterated that “the ‘injury in fact’ is the inability to compete on an equal footing in the bidding process, not the loss of a contract.” “To establish standing,” the Court continued, a plaintiff “need only demonstrate that it is able and ready to bid on contracts and that a discriminatory policy prevents it from doing so on an equal basis.” In a footnote the Court explained that “[i]t follows from our definition of ‘injury in fact’ that petitioner has sufficiently alleged both that the city's ordinance is the ‘cause’ of its injury and that a judicial decree directing the city to discontinue its program would ‘redress’ the injury.”

The affirmative action cases thus establish the following—an “inability to compete on an equal footing” with others (because of something the government has done) is an injury that suffices for standing. And, since the standing skeptics are now focusing on redressability: That injury—the competitive disadvantage a plaintiff faces because of something the government has done—is redressable by a judicial decision that removes the “competitive boost” the government has given to those with whom a plaintiff competes.

To my mind, the injury in the affirmative action cases—whether framed as a competitive disadvantage, or an inability to compete on an equal footing—is an injury that the additional plaintiffs in CREW clearly have. And that injury is redressable by a judicial decision that takes away the unequal competitive advantage that Trump’s businesses currently enjoy, which is what the new plaintiffs are challenging.

That point may also explain why I disagree with Adler that the new plaintiffs in CREW are required to show that foreign officials “are more likely to stay at the hotel because this will result in Trump’s receipt of an emolument, as opposed to a generalized desire to do things that may curry favor with the president.” The plaintiffs don’t have to show that foreign officials are actually more likely to stay at the President’s hotels because the President receives money from those transactions; the plaintiffs just have to show that the President’s obvious financial stake and interest in his hotels and restaurants (i.e., the alleged violations of the emoluments clauses) give the President’s businesses a competitive boost by providing an incentive to foreign and domestic officials to frequent the President’s businesses.

Consider it from this angle: The Court has described causation (and thus redressability) in these terms: “[T]here must be a causal connection between the injury and the conduct complained of—the injury has to be ‘fairly ... trace[able] to the challenged action of the defendant.’” (Emphasis mine.)

Judged by these metrics, the new plaintiffs’ injury, properly defined, would be redressable by a favorable judicial decision. A favorable decision would force the President to actually divest from his companies and be removed from their business dealings. In that event, there may still be some lingering possibility that foreign and domestic officials would think that they could curry favor with the President by frequenting a business that shares the President’s name, but in which he has no financial stake or oversight role. But the President’s businesses would have a much less significant competitive advantage over the plaintiffs under those circumstances—that is, if the President were truly shielded and insulated from, and had no stake in, those businesses and foreign and domestic officials’ frequenting his businesses. A judicial decision that forced the President to abandon a financial stake in his businesses would substantially reduce the competitive advantage that Trump’s businesses now hold over their competitors. Accordingly, the plaintiffs’ injury—the competitive disadvantage they face—is “fairly traceable” to the President retaining an obvious financial stake and oversight role in his businesses.

More tomorrow…..

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