WASHINGTON — A federal appeals court on Friday revived a lawsuit brought by hotel and restaurant owners against President Donald Trump over his refusal to divest from his business empire, putting a third case back in play that accuses the president of constitutional violations related to his companies.
The decision from the US Court of Appeals for the 2nd Circuit marks the latest setback for Trump in trying to shake claims that he’s unconstitutionally profiting from his business interests while he’s in the White House. The president finally scored a win in July, when the US Court of Appeals for the 4th Circuit dismissed one of the other cases. But Friday’s ruling from the 2nd Circuit restores another front in the legal fight.
Restaurant and hotel owners brought the case in federal court in Manhattan under the Foreign and Domestic Emoluments clauses of the Constitution, which broadly state that an elected official can’t accept gifts or other things of value from foreign or domestic governments. Trump turned over day-to-day management of the Trump Organization to his adult children when he took office, but he kept his financial stake. The challengers argued that because foreign, US, and state government actors were patronizing Trump’s hotels and other businesses, and he was continuing to profit, he was in violation of both anti-corruption clauses.
The judge in Manhattan dismissed the case in December 2017. He didn’t reach the merits of the constitutional claims, but rather found that the challengers lacked standing to sue at all. The 2nd Circuit heard arguments in August 2018, and then the case sat in limbo for more than a year. In Friday’s 2–1 decision, the appeals court concluded that the Manhattan judge was wrong about standing.
The restaurant and hotel owners argued that because they competed with Trump’s businesses, including for government clients, they had standing to sue. They cited evidence that Trump made favorable comments about foreign governments that did business at his properties, and that foreign diplomats had been quoted in media reports saying they were staying at Trump’s hotels in order to gain favor from the president.
When he dismissed the case nearly two years ago, US District Judge George Daniels found that any arguments that other businesses had lost money or suffered competitively because of Trump’s interest in his companies were too speculative. He also disagreed that the emoluments clauses were meant to protect private businesses from competition, and wrote that the case waded into political issues the court lacked authority to rule on.
The 2nd Circuit majority found that the challengers did, in fact, have standing to sue Trump. The restaurant and hotel owners didn’t have to prove that all foreign and domestic government actors chose to patronize Trump’s companies because of his position as president, the court held, but rather just that some did.
Other “bona fide competitive reasons do not bar a plaintiff from demanding that a court enjoin illegal conduct that skews the marketplace by inserting an additional unlawful competitive advantage,” 2nd Circuit Judge Pierre Leval wrote.
Leval also wrote: “The Complaint plainly asserts that the Plaintiff establishments are losing, and will continue to lose, business from government patrons based on the patrons’ belief that they can obtain official Presidential favor by spending their money in a manner that enriches the President.”
Leval addressed the fact that the 4th Circuit dismissed a similar case brought by the attorneys general of Maryland the District of Columbia based on the standing issue. He noted that the 4th Circuit, as well as the 2nd Circuit judge who dissented from Friday’s decision, Judge John Walker Jr., suggested the cases were politically motivated. Leval wrote that even if they were, “we do not understand the significance of that fact,” since it wouldn’t defeat an otherwise legitimate argument for standing.
As for the political issues raised by the case, the 2nd Circuit found that just because the Foreign Emoluments Clause barred an official from accepting things of value without approval from Congress, that didn’t mean that Congress alone could decide when the clause had been violated.
Friday’s ruling means the challengers can move ahead with the substance of their constitutional claims back before the district court, although Trump could also ask the full 2nd Circuit to reconsider the case or petition the US Supreme Court to step in.
The case in New York was brought by government watchdog group Citizens for Responsibility and Ethics in Washington on behalf of the restaurant and hotel owners.
“We never wanted to be in a position where it would be necessary to go to court to compel the President of the United States to follow the Constitution. However, President Trump left us no choice, and we will proudly fight as long as needed to ensure Americans are represented by an ethical government under the rule of law,” Noah Bookbinder, the group’s executive director, said in a statement.
Justice Department spokesperson Kelly Laco declined to comment.
Meanwhile, the other two emoluments clause cases are pending before other appeals courts. Maryland and the District of Columbia have asked the full 4th Circuit to reconsider the three-judge panel’s July decision dismissing their case. Trump is also before the DC Circuit, challenging a series of rulings from a federal judge in DC allowing a lawsuit brought by Democratic members of Congress to go forward.