(Bloomberg) -- Donald Trump escaped for now a constitutional showdown over the operation of his far-flung business empire while serving as president.
A federal judge on Thursday dismissed a lawsuit alleging that Trump has flouted constitutional limits on benefits presidents are allowed from their financial dealings with foreign and domestic governments. Trump, for example, hosts diplomats at his Washington hotel and collects overseas licensing fees for “The Apprentice.”
Trump’s refusal to divest his sprawling web of international real estate holdings and other business interests has fueled criticism that he’s miring the White House in conflicts of interest. The lawsuit -- brought by an ethics watchdog group and a few Trump competitors in the hospitality industry -- is one of several accusing Trump of violating the U.S. Constitution’s Foreign Emoluments Clause, a rarely invoked provision barring U.S. officeholders from taking gifts and payments from other governments without Congress’s consent, and the domestic emoluments clause. The latter blocks him from getting paid by state or federal governments beyond his official compensation.
U.S. District Judge George Daniels in Manhattan, ruling for the first time in U.S. history on an emoluments complaint over a president’s business dealings, said the plaintiffs couldn’t sue because they hadn’t been harmed by Trump’s actions and that it was up to Congress to take action.
"If Congress wishes to confront defendant over a perceived violation of the Foreign Emoluments Clause, it can take action," Daniels said. "This court will not tell Congress how it should or should not assert its power in responding to defendant’s alleged violations of the Foreign Emoluments Clause.”
Congress, the judge noted, is "not a potted plant" and has the power to act.
Citizens for Responsibility and Ethics in Washington, known as CREW, sued Trump shortly after his inauguration in January. CREW, joined by other plaintiffs, asked Daniels to order Trump to divest himself of properties that put him in violation of the emoluments provision.
The emoluments clauses are "core protections" against domestic and foreign corruption that can destabilize the U.S. government, and CREW had hoped that Trump would take the necessary steps to avoid violating them before taking office, Executive Director Noah Bookbinder said Thursday in a statement.
"He did not, and we were forced to bring our landmark emoluments case because the plaintiffs in this case -- and the American people -- have been directly harmed by the president’s violations," Bookbinder said. Thursday’s ruling is a setback but the group won’t drop the case, he said. CREW’s lawyers are weighing their options, he added.
CREW says Trump’s emoluments violations include a China-owned bank renting office space at Trump Tower, diplomats throwing parties at the Trump International Hotel, just blocks from the White House, and the BBC’s licensing in the U.K. of “The Apprentice,” the reality TV show he hosted for 14 seasons on NBC.
Trump, represented by the U.S. Justice Department, claimed CREW and the other plaintiffs can’t claim the kind of injury from his alleged violation that would get them past the courthouse door. He also argued that the Foreign Emoluments Clause was never intended to apply to commercial transactions such as restaurant bills, hotel charges, office rent or golf course fees.
The clause says that no one "holding any office of profit or trust" in the federal government may "accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state," without the consent of Congress.
At a hearing in October, Daniels was skeptical of the government’s narrow definition of “emoluments." CREW considers an emolument to be any benefit from a foreign nation, while the U.S. says an emolument is a payment derived from a government position only.
In a friend-of-the-court brief, Seth Barrett Tillman, a legal scholar and lecturer at Maynooth University in Ireland, argued that the Foreign Emoluments Clause doesn’t apply to presidents. In support he cited a document, written in 1793 by then-Treasury Secretary Alexander Hamilton, that excluded the president, vice president and other elected officials from a 90-page list of “every person holding any civil office or employment under the United States.”
Tillman also pointed to the practice of early presidents, including George Washington and Thomas Jefferson, who received diplomatic gifts without asking Congress for permission.
Trump also faces Foreign Emoluments claims in a suit by Congressional Democrats in federal court in Washington. The Maryland and District of Columbia attorneys general also sued Trump in Maryland federal court over alleged violations of both the Foreign and Domestic Emoluments clauses.
Joining CREW as plaintiffs in the New York case are Restaurant Opportunities Centers United, an association representing 200 restaurants and 25,000 workers; Jill Phaneuf, a Washington based luxury hotel event booker; and New York hotel and restaurant owner Eric Goode. They alleged Trump is costing them money by illegally competing with them for the business of foreign officials.
Daniels was appointed in 1999 by President Bill Clinton.
The case is Citizens for Responsibility and Ethics in Washington v. Trump, 17-cv-00458, U.S. District Court, Southern District of New York (Manhattan).
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