The ruling resurrects the first lawsuit President Donald Trump faced over claims that his business dealings violated the Constitution’s emoluments clause.
A federal appeals court has resurrected the first lawsuit President Donald Trump faced over claims that his business dealings violated the Constitution’s foreign emoluments clause, which bars federal officials receiving payments from foreign governments.
On Friday, a panel of the New York-based 2nd Circuit Court of Appeals ruled, 2-1, that a district court judge erred in 2017 when he dismissed a lawsuit challenging profits Trump has received from foreign officials doing business with his Washington, D.C., luxury hotel and other Trump-branded properties. The suit also took issue with Trump Organization licensing arrangements approved by foreign governments.
The new 2nd Circuit decision sharply rejected a ruling two months ago from another federal appeals court, the Richmond-based 4th Circuit, which tossed out a similar emoluments suit filed in Maryland.
Second Circuit Judge Pierre Leval said the 4th Circuit and his dissenting 2nd Circuit College Judge John Walker regarded the suits with too much skepticism because they appeared to be politically motivated.
“While it is certainly possible that these lawsuits are fueled in part by political motivations, we do not understand the significance of that fact,” wrote Leval, joined by Judge Christopher Droney. “While the existence of a political motivation for a lawsuit does not supply standing, nor does it defeat standing. … Whether a lawsuit has political motivations is irrelevant to these determinative issues.”
The New York-based suit was filed by the liberal watchdog group Citizens for Responsibility and Ethics in Washington on its own behalf, as well as on behalf of hotel and restaurant owners and workers who contended that they were suffering competitive harm from potential customers diverting their business to curry favor with Trump.
The judge who originally dismissed the CREW suit, George Daniels, said the plaintiffs’ claims of harm were too speculative and remote to let the suit go forward.
However, Leval and Droney disagreed, ruling that the case was a viable one on the grounds of so-called competitor standing.
“It is eminently plausible that if two establishments provide otherwise comparable services, but one establishment offers an inducement that the other cannot offer, then the inducement will attract at least some patronage that might otherwise have gone to the other establishment,” Leval wrote. “Plaintiffs have plausibly pleaded 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.”
In a dissenting opinion, Judge John Walker said there were “simply too many variables at play” to conclude that any of the hospitality industry plaintiffs were actually suffering harm from foreign governments choosing to take their business to Trump-linked properties.
Walker also said the purpose of the Constitution’s foreign emoluments clause was not to restrain private “marketplace” activity by presidents or other officials, but to ban receipt of gifts or foreign titles by Americans serving in the U.S. government.
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