Trump Finances Closer to Scrutiny as U.S. Court Revives Suit
Trump Must Face Suit by Ethics Watchdog, Appeals Court Says
(Bloomberg) -- President Donald Trump was ordered by a federal appeals court to defend a lawsuit accusing him of profiting from his presidency in violation of the U.S. Constitution, a potential blow to his efforts to keep his finances secret.
The U.S. Court of Appeals in New York on Friday reinstated the case brought by a restaurant group that accuses the president of violating the Constitution’s emoluments clauses.
The decision intensifies a legal threat to Trump over the mixing of his business interests with his authority as president. Unless an expanded panel of judges or the Supreme Court reverses the decision, Trump may be forced to defend his actions and open his business and personal finances to scrutiny.
Trump has been accused of a range of conflicts, including encouraging foreign dignitaries and U.S. service members to stay at his hotels. He attracted fresh criticism last month when he suggested that next year’s meeting of Group of Seven leaders, to be hosted by the U.S., should be held at his resort in southern Florida.
Earlier this year, the president won another federal appeals court’s dismissal of an emoluments suit by the Democratic attorneys general of Maryland and the District of Columbia. The split decisions by courts in New York and Virginia and the constitutional questions involved make it likely the Supreme Court will eventually weigh in.
In Friday’s ruling, the appeals court, by a 2-1 vote, didn’t decide on the merits of the case but said the plaintiffs had alleged sufficient facts for the suit to move forward, at least as it relates to legal standing. The judges rejected Trump’s claim that the plaintiffs were not the proper parties to bring the case, which was initiated by a government-ethics group. A lower-court judge had dismissed the lawsuit in December 2017.
Trump has said that he turned over daily management of his business empire to his children and set up a trust to hold his business assets. But he maintains ownership, gets updates on the businesses at least quarterly and can get distributions from the trust at any time, the appeals court said in its ruling. Jay Sekulow, a personal lawyer to Trump, referred questions about the decision to the Justice Department, which declined to comment.
“The complaint sufficiently alleges that plaintiffs compete directly with Trump establishments and that the president’s allegedly illegal acts favor plaintiffs’ competitors,” the appeals court said in its decision.
The U.S. Constitution contains two separate emoluments clauses. One, the so-called Foreign Emoluments clause, bars a president from accepting benefits from another nation’s government without congressional consent. The second, the Domestic Emoluments clause, dispenses with the consent provision entirely and simply bans outright a president’s receipt of any benefit from the U.S. government or any state beyond his mandated salary.
Plausible Claim
In its 64-page ruling, the court said the plaintiffs, Restaurant Opportunities Centers United, and Eric Goode, a New York owner of high-end hotels and restaurants, have made a plausible claim that “the president’s ownership of hospitality businesses that compete with them will induce government patrons of the hospitality industry to favor Trump businesses over those of the plaintiffs so as to secure favorable governmental action from the president and executive branch.”
The judges turned back Trump’s claims that the plaintiffs lack the legal standing to bring a claim and that the issue is one to be determined by Congress and the president, not by the courts.
“We’re obviously thrilled,” said Deepak Gupta, a lawyer for the plaintiffs suing Trump. “This is a huge step forward in the fight against Donald Trump’s corruption and conflicts of interest.”
In a dissent, U.S. Circuit Court Judge John M. Walker Jr. agreed with Trump that the plaintiffs lack standing and that the case was properly dismissed.
“This case is deeply political and thus finds itself in an area where federal courts ought to tread lightly,” Walker wrote in his dissent. “President Trump was democratically elected by the American people -- and he was elected with his business holdings and brand prominence in full view.”
Democrats’ Suit
Separately, Trump is appealing a pair of Washington federal court rulings denying his request to dismiss a lawsuit by more than 200 congressional Democrats who are seeking to force his compliance with the Foreign Emoluments Clause.
The New York case was originally filed by Citizens for Responsibility and Ethics in Washington, a group known as CREW, during the week of Trump’s inauguration in January 2017. CREW wasn’t involved as a party in the appeal but remains a part of the legal effort to try to force Trump to divest himself of his business holdings.
“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,” CREW’s executive director, Noah Bookbinder, said in a written statement. “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.”
Joshua Blackman, a professor at the South Texas College of Law who filed a friend-of-the-court brief supporting Trump’s position in the case, said the Justice Department would probably seek to have the case reheard by the full New York-based appeals court and that the next stop would be the U.S. Supreme Court.
“At this pace we may not get a final judgment till after the election,” he said.
The case is Citizens for Responsibility and Ethics in Washington v. Trump, 81-474, U.S. Court of Appeals, Second Circuit (Manhattan).
To contact the reporters on this story: Chris Dolmetsch in Federal Court in Manhattan at cdolmetsch@bloomberg.net;Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, David S. Joachim
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