Jonathan Taylor  //  4/19/17  //  In-Depth Analysis


On January 24—his first working day as president—Donald Trump was sued for violating the Constitution’s Foreign Emoluments Clause. That clause (as most readers now know) prohibits any federal officeholder from accepting payments or benefits—known in 18th-century language as “emoluments” and “presents”—from any foreign state or its agents, unless Congress explicitly approves.

Since then, much of the public discussion (too much of it, really, especially from conservative and libertarian bloggers) has centered on whether the plaintiff in the case, an ethics watchdog called Citizens for Responsibility and Ethics in Washington (or CREW), has “standing” to bring suit. There has not been nearly enough attention on whether Trump is actually violating the Constitution and imperiling U.S. interests. (Spoiler alert: he is.)

Some commentators, like Mike Dorf, have argued in favor of CREW’s standing under the Supreme Court’s unanimous 1982 decision in Havens Realty v. Coleman. Others, like Josh Blackman, have opposed CREW’s standing on the ground that the organization’s injuries—the diversion of resources away from its other projects—are “self-inflicted.” (For an explanation of why Blackman is wrong, check out this piece that I wrote with Take Care contributors Larry Tribe, Joshua Matz, and Deepak Gupta.)

In attacking CREW’s standing, Blackman and others pointedly contrasted the organization’s asserted injuries with someone who, they claimed, “would have a stronger case for standing”: a business that competes with Trump-owned properties for sales to foreign governments. “So who would have standing?,” asked Andy Hessick. “One answer is an individual who was hurt because of the foreign payments—for example, a competitor hotel chain that lost business.”

Yesterday, CREW filed an amended complaint to add two new plaintiffs alleging exactly this kind of competitive harm, as well as new factual allegations about Trump’s ongoing constitutional violations. The first new plaintiff is Restaurant Opportunities Center United (or ROC United), an association representing hundreds of restaurants and thousands of restaurant workers, many of whom directly compete with Trump’s businesses. The other is Jill Phaneuf, who works in the hospitality industry to book events for certain hotels in Washington, D.C.—including a hotel across the street from the Russian Embassy—and whose compensation depends on her ability to schedule events for foreign diplomats and officials at these hotels.

In this piece, I explain why these new plaintiffs have standing under two well-established doctrines: associational standing and competitor standing. Apart from the already compelling argument for why CREW itself has standing, the case now presents multiple strong and independent grounds for concluding that at least one of the plaintiffs (if not all of them) has standing to bring their claims. This means that the court has both the authority and the obligation to hear those claims on their merits, and to put an end to Trump’s ongoing violations of the Constitution that directly cause harm to the plaintiffs.

What is associational standing?

You might wonder why ROC, as an association, can sue in its own right. The answer is the doctrine of associational standing, which the Supreme Court has endorsed for decades.

The basic idea is that “an organization may sue to redress its members’ injuries, even without a showing of injury to the association itself.” An association may do so if three conditions are met: (1) at least one member has standing on its own, (2) the interests the suit seeks to protect relate to the association’s purpose, and (3) participation by the individual members isn’t necessary.

Each of these conditions is met here. As to the first: ROC United represents many restaurants that directly compete with Trump’s businesses and thus have standing as competitors. (More on why in a minute.) As to the second: Preventing competitive harm of this type would “reasonably tend to further” ROC’s mission of improving wages and working conditions for its members. And as to the third: Individual participation is unnecessary because the suit seeks “injunctive relief only” and the “primary subject of inquiry” will be the legality of Trump’s conduct.

What is competitor standing?

But why, you might ask, would any of Trump’s competitors—including ROC’s members—have standing to challenge his constitutional violations?

In answering this question, it’s helpful first to zoom out. As a general matter, standing requires a plaintiff to show that it has suffered a real injury caused by the defendant’s conduct that would likely be redressed by a favorable decision. This requirement, as Justice Alito has put it, is “not Mount Everest.” At the beginning of a suit, the plaintiff need only provide “general factual allegations of injury resulting from the defendant’s conduct,” to use the words of one seminal Supreme Court case, which (if plausible) will be enough to defeat a motion to dismiss.

Competitor standing is a specific application of this general principle. It follows from simple “economic logic”: When one company is given a competitive advantage—a government benefit, say, or because the company’s actions “illegally structure a competitive environment” to increase its sales (as in the antitrust context)—a business that competes with that company suffers an economic injury that can be remedied by a court. And so long as the business is a true competitor in the relevant market, it need not identify a specific revenue stream that has been denied as a result of the defendant’s conduct. Instead, the plaintiff may rely on a “basic law of economics”—that tipping the scales of competition in favor of one business will harm its competitors—to supply the “actual economic injury” necessary to confer standing.

For this reason, the Supreme Court “routinely recognizes probable economic injury resulting from [governmental actions] that alter competitive conditions as sufficient to satisfy the [Article III ‘injury-in-fact’ requirement].” (Need examples? Try here, here, here, here, and here.) And any party “who is likely to suffer economic injury as a result of [the challenged action] that changes market conditions satisfies this part of the standing test.”

Both ROC United and Ms. Phaneuf have standing under this line of cases.

ROC has alleged (to quote from one D.C. Circuit case) that Trump’s “illegal transactions” have “the clear and immediate potential to compete with [its members] own sales.” These members—which include businesses that frequently cater to “diplomats and other officials of foreign states”—“compete directly” with Trump’s businesses “by providing the same or similar services in the same marketplace,” and hence suffer economic harm because his ongoing constitutional violations skew the playing field in his favor. Those violations allow his businesses to sell not only dinner and event space to foreign governments, but also access to the White House and a chance to influence national policy—at the expense of his competitors and their workers (to say nothing of the American people). Why else would anyone buy a $100 cocktail?

As one “Asian diplomat” told the Washington Post, in a moment of admirable candor: “Why wouldn’t I stay at his hotel blocks from the White House, so I can tell the new president, ‘I love your new hotel!’ Isn’t it rude to come to his city and say, ‘I am staying at your competitor?’” (The same logic, of course, applies to Trump’s restaurants.) A “Middle Eastern Diplomat” echoed this sentiment, saying: “Believe me, all the delegations will go there.” That is not idle speculation about the effects of Trump’s unlawful competitive advantage; it’s straight from the horse’s mouth—and it appears to be coming true.

As a result of Trump’s myriad violations of the Foreign and Domestic Emoluments Clauses, his competitors have suffered traditional economic injury: They “may lose sales” to his businesses, or they may “be forced to lower [their] price or to expend more resources to achieve the same sales, all to the detriment of [their] bottom line.” Either way, they’ve been harmed.

Ms. Phaneuf, for her part, has suffered competitive injury of a similar sort. Consider some of her specific allegations, as set forth in the amended complaint:

  • She “works with a hospitality company to book events for two hotels, the Kimpton Carlyle Hotel and the Kimpton Glover Park Hotel.”
  • She “specifically seeks to book embassy functions and political functions involving foreign governments, in addition to other events.”
  • “Her compensation depends in large part on payment of a percentage of the gross receipts arising from events that she generates for the hotels.”
  • “The hotels for which Ms. Phaneuf seeks to book embassy and political functions and other events compete with [Trump’s] hotels.”

These add up to a ticket into federal court. Put simply: Ms. Phaneuf gets paid less if she loses foreign diplomatic business to the Trump Hotel, and this is likely to occur (if it is not occurring already) because diplomats know that staying at the Trump Hotel confers an (illegal) private financial benefit on the president. By accepting emoluments and thus turning his own hotel into an emolument magnet, Trump harms everyone competing for the same diplomatic business, including Ms. Phaneuf. She seeks an injunction that would remedy her competitive disadvantage. Standing requires no more—especially at the motion-to-dismiss stage.

That is all the more true in light of the theory animating the Emoluments Clauses. The Foreign Emoluments Clause, in particular, exists because the Framers recognized that, without it, foreign sovereigns and their agents would attempt to influence federal officials by giving them gifts, money, and other things of value—and that those officials would in turn be tempted to accept the emoluments, weakening their fidelity to the American people. As applied to Trump, this structural safeguard reflects an insight that dovetails nicely with competitor-standing doctrine: that violating the clause allows the president to reap a financial benefit at the expense of his competitors, because foreign governments will have an irresistible incentive to spend their money at Trump restaurants, Trump hotels, and all things Trump.

A few final points:

1. It does not matter if a plaintiff’s monetary injury is small or difficult to quantify with absolute precision. The loss of even a dollar is enough to create standing, and the plaintiffs in this case are not seeking money damages (which is why they have a cause of action, as explained here.)

2. Nor does it matter if “the competitive harm has [not] yet occurred,” for there is “no such requirement.” As the D.C. Circuit has recognized, in an opinion by Judge Ginsburg joined by Judges Brown and Kavanaugh (not a set judges known for their embrace of creative standing theories), when the challenged conduct alters the competitive environment to favor a particular business, that conduct “almost surely injures” businesses competing in the market “in one form or another.” So a competitor “need not wait until [the] allegedly illegal transactions” actually “hurt [it] competitively” before bringing suit. Again, that is particularly true here because the plaintiffs are not seeking damages requiring a quantifiable injury, but an injunction.

3. This leads to the last point. Some conservative and libertarian commentators have already begun to train their fire on the new plaintiffs’ standing—but this time by shifting their aim from injury to redressability. This is perplexing.

 The plaintiffs have brought a direct action for equitable relief under the Constitution, which has long been permitted in situations like this one: when a federal official engages in unconstitutional conduct that harms someone else, and that person asks a court to enjoin the conduct. As Justice Scalia explained in one of his final opinions for the Court, “[t]he ability to sue to enjoin unconstitutional actions by state and federal officers is the creation of courts of equity, and reflects a long history of judicial review of illegal executive action, tracing back to England.”

The plaintiffs’ requested injunction would redress their injury. Ms. Phaneuf’s injury, for instance, is directly traceable to Trump’s ownership stake in his Washington hotel and restaurant and the skewed competitive forces that this unleashes. She has asked the court for a declaration that Trump’s conduct violates the Foreign and Domestic Emoluments Clauses, and an order enjoining further violation. How Trump chooses to comply with the injunction is up to him. But there should be little doubt that the plaintiffs’ requested relief would remedy their competitive injuries.

The upshot? Trump won’t be able to wiggle out of this one. The plaintiffs have standing, and the case should proceed to discovery and be decided on the merits.

 

Full disclosure: I am among the counsel to CREW, ROC United, and Jill Phaneuf in this lawsuit against Donald Trump.


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