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District of Columbia v. Trump

United States District Court, D. Maryland

March 28, 2018

THE DISTRICT OF COLUMBIA and THE STATE OF MARYLAND, Plaintiffs,
v.
DONALD J. TRUMP, individually and in his official capacity as President of the United States, Defendant.

          OPINION

          PETER J. MESSITTE UNITED STATES DISTRICT JUDGE.

         This suit alleges that President Donald J. Trump has violated the Foreign and Domestic Emoluments Clauses of the U.S. Constitution.[1] Plaintiffs, the District of Columbia and the State of Maryland, submit that the President is violating these Clauses because the Trump Organization, in which he has an ownership interest and from which he derives financial benefits, owns and operates a global business empire, including hotels, restaurants, and event spaces. The President's receipt of these benefits is said to offend the sovereign, quasi-sovereign, proprietary, and parens patriae interests of the State of Maryland and the District of Columbia. Plaintiffs seek declaratory relief establishing their rights vis-à-vis the President's actions as well as injunctive relief prohibiting him from further violating the Clauses.

         The President has filed a Motion to Dismiss, arguing, inter alia, that Plaintiffs lack standing to pursue the litigation, i.e., that they have shown no injury-in-fact, fairly traceable to his acts, or likely to be redressed by any court order. Plaintiffs reject all these propositions. Although the parties have briefed other arguments pertaining to the viability vel non of Plaintiffs' suit, [2] the Court held oral argument limited to the issue of standing and advised the parties that it would address that issue in a stand-alone Opinion and Order. This is that Opinion and Order.

         For the reasons that follow, the Court DENIES-IN-PART the Motion to Dismiss and finds that Plaintiffs do have standing to challenge the actions of the President with respect to the Trump International Hotel and its appurtenances in Washington, D.C., as well as the operations in the Trump Organization with respect to them. It GRANTS-IN-PART WITHOUT PREJUDICE the Motion to Dismiss as to Plaintiffs' standing with respect to the operations of the Trump Organization and the President's involvement in the same outside the District of Columbia. The Court DEFERS ruling on other arguments in the Motion to Dismiss pending further oral argument.[3]

         I. FACTUAL BACKGROUND

         The basic facts are not in dispute.

         A. The Parties

         Plaintiffs are the District of Columbia and the State of Maryland. The District of Columbia is a municipal corporation and the local government for the territory constituting the seat of the Federal Government. Am. Compl. ¶ 18. The State of Maryland is a sovereign State of the United States. Id. ¶ 19.

         Donald J. Trump is the President of the United States, originally sued in his official capacity, subsequently added as a Defendant in his individual capacity.[4] Am. Compl. ¶ 20. He is the sole owner of both the Trump Organization LLC and The Trump Organization, Inc. (collectively, the Trump Organization), an umbrella organization under which many, if not all, of his corporations, limited-liability companies, limited partnerships, and other entities are loosely organized. Id. ¶ 29. Through these various business entities, the President owns and receives payments from a number of properties, hotels, restaurants, and event spaces in the United States and abroad. Id. Of particular importance in the present suit is the President's ownership, through the Trump Organization, of the Trump International Hotel in Washington, D.C. (the Hotel).

         The Hotel is a five-star, luxury hotel located on Pennsylvania Avenue, N.W., in Washington, near the White House. Id. ¶ 34. While the President does not actively manage the Hotel, through the Trump Organization, he owns and purportedly controls the Hotel as well as the bar and restaurant, BLT Prime, and the event spaces located within the establishment. Id. ¶¶ 29, 34-36. Directly or indirectly, the President shares in the revenues that the Hotel and its appurtenant restaurant, bar, and event spaces generate. Id.

         B. The Alleged Violations

         On January 11, 2017, shortly before his inauguration, the President announced that he would be turning over the “leadership and management” of the Trump Organization to his sons, Eric Trump and Donald Trump, Jr. Id. ¶ 30. Prior to taking office, he also announced that all profits earned from foreign governments would be donated to the U.S. Treasury. Id. ¶ 46. The Trump Organization stated that it would not be tracking all payments it might receive from foreign governments and only planned to make an estimate with regard to such payments. Id. As of the date of the filing of this action, the President had made no such “donations” to the U.S. Treasury.[5]See Am. Compl. ¶¶ 46, 138. Despite these announcements, Plaintiffs allege that the President continues to own and know about the activities of the Trump Organization. Id. ¶ 31. Indeed, according to Plaintiffs, one of the President's sons has stated that he would be providing business updates to the President regarding the Organization on a quarterly basis and, although the President has formed a trust to hold his business assets, it appears that he remains able to obtain distributions from this trust at anytime. Id. ¶¶ 31-32.

         Since the President's election, a number of foreign governments have patronized or expressed a definite intention to patronize the Hotel, some of which have indicated that they are doing so precisely because of the President's association with it. Id. ¶¶ 39-43. For example, the Amended Complaint alleges that the Kingdom of Saudi Arabia spent thousands of dollars at the Hotel between October 1, 2016, and March 31, 2017. Id. ¶ 41. Plaintiffs also cite a statement from a Middle Eastern diplomat who told the Washington Post, “Believe me, all the delegations will go there.” Id. ¶ 39. An Asian diplomat allegedly agreed, explaining “Isn't it rude to come to [the President's] city and say, ‘I'm staying at your competitor?'” Id.

         Plaintiffs further allege that at least some foreign governments have withdrawn their business from other hotels in the area not affiliated with the President and have transferred it to the Hotel. As an example, they assert that the Embassy of Kuwait held its National Day celebration at the Hotel on February 22, 2017, despite having made a prior “save the date reservation with the Four Seasons hotel.” Id. ¶ 40.

         Plaintiffs also contend that the President has been more than a passive actor with respect to the Hotel. Since his election, the Hotel has specifically sought to market itself to diplomats by hiring a “director of diplomatic sales” and by hosting an event where it pitched the Hotel to approximately 100 foreign diplomats. Id. ¶ 37. The President himself has appeared at the Hotel on several occasions, while a number of members of his administration continue to live there. Id. ¶ 38. As a result, Plaintiffs allege that goods and services at the Hotel have been marketed at a premium level since the election. Id. ¶ 100. A portion of benefits, particularly expenditures by foreign governments, is said to have been passed along to the President through the Trump Organization. Id. ¶ 29.

         In addition, at least one State-the State of Maine-patronized the Hotel when its Governor, Paul LePage, visited Washington to discuss official business with the Federal Government, including discussions with the President. Pls.' Opp'n. at 8, ECF No. 46. Indeed, on one of those trips, the President and Governor LePage appeared together at a news conference at which the President signed an executive order to review orders of the prior administration that established national monuments within the National Park Service, which could apply to a park and national monument in Maine, which President Obama had established over LePage's objections in 2016. Id.

         Plaintiffs submit that the President's receipt of benefits from these sources violates both the Foreign and Domestic Emoluments Clauses.

         C. Plaintiffs' Alleged Injuries

         The District of Columbia and Maryland claim they have been harmed by the President's alleged violations in several ways.

         First, Maryland alleges injuries to its sovereign interests.[6] It claims a special interest in “enforcing the terms on which it agreed to enter the Union, ” Am. Compl. ¶ 104, stating that the Emoluments Clauses were “material inducements” to its decision to enter the Union and that it retains the power to enforce those provisions today. Id. ¶ 106. Maryland also claims injury to its sovereign interests in that it receives tax revenues from comparable hotels, bars, restaurants and event spaces within the State of Maryland located nearby the Hotel, which it has lost and will continue to lose because patrons choose to avail themselves of the Hotel as opposed to comparable establishments in Maryland. Id. ¶¶ 116-118.

         Second, both Plaintiffs submit that their quasi-sovereign interests are harmed in that the President's violations have placed them in an “intolerable dilemma.” Id. ¶ 110. In particular, they claim a governmental interest in the enforcement of their respective laws pertaining to taxation, zoning, and land use involving real property that the President may own or seek to acquire. Id. ¶ 108. They allege that the President's receipt of emoluments from other States of the United States, in violation of the Domestic Emoluments Clause, forces them, on the one hand, to choose between granting requests for exemptions or waivers by the Trump Organization for activities conducted within Maryland and the District of Columbia and losing revenue or, on the other hand, denying such requests by the President's organization and risk being placed at a disadvantage vis-à-vis other States that have agreed to grant the Organization such concessions. Id. ¶ 110.[7]

         Third, Plaintiffs assert injuries to their own proprietary interests. The District of Columbia states that it directly owns building and land interests in properties in the District of Columbia that directly compete with the Hotel, and which are either losing business to the Hotel or which face the imminent prospect of losing such business by virtue of the President's continuing involvement in the Hotel. Am. Compl. ¶¶ 119-129. Specifically, the District of Columbia claims it possess an ownership or financial interest in the Walter E. Washington Convention Center (Washington Convention Center), the Washington Convention Center and Sports Authority (also known as Events D.C.), and the Carnegie Library. Id. ¶¶ 120-122.

         The State of Maryland maintains that it has a direct financial interest in the Montgomery County Conference Center, which is part of the Bethesda North Marriott Hotel located in Bethesda, Maryland, (approximately thirteen miles from the Hotel)[8] as well as in the gambling proceeds it receives from the casino at the MGM Hotel in the National Harbor, located approximately ten miles from the Hotel across the Potomac River in lower Prince George's County, Maryland. Am. Compl. ¶¶ 117, 131-32; Pls.' Opp'n at 16, 23. Maryland argues that, like the District of Columbia, it is harmed because these entities compete with the Hotel for the business of both foreign and domestic governments and that the President's violations of the Emoluments Clauses have illegally skewed the hospitality market in his favor. Am. Compl. ¶ 130.

         Finally, the District of Columbia and the State of Maryland assert that they are entitled to pursue this litigation on behalf of their respective residents as parens patriae.[9] As parens patriae, they allege that the President's violations cause competing companies and their employees within the respective jurisdictions to lose business, wages, and tips, which in turn generate a range of market distortions that restrict and curtail opportunity, diminish revenues and earnings, and hamper competition. Am. Compl. ¶¶ 113-115.

         The President disputes all these purported injuries and seeks dismissal of the suit, inter alia, on the ground that Plaintiffs have not shown that they have standing to pursue it. ECF No. 21.

         II. LEGAL STANDARDS

         A. Motion to Dismiss

         A party may move for dismissal of a suit pursuant to Federal Rule of Civil Procedure 12(b)(1) where the court lacks subject matter jurisdiction over the claims alleged in the complaint. Fed.R.Civ.P. 12(b)(1). “Article III gives federal courts jurisdiction only over ‘cases and controversies, ' U.S. Const. art. III, § 2, cl. 1, and the doctrine of standing identifies disputes appropriate for judicial resolution.” Miller v. Brown, 462 F.3d 312, 316 (4th Cir. 2006) (citing Valley Forge Christian Coll. v. Ams. United for Separation of Church & State, Inc., 454 U.S. 464, 471-76 (1982)). As the party asserting jurisdiction, the plaintiff bears the burden of proving that the district court has subject matter jurisdiction. See Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991). In considering whether to dismiss for lack of jurisdiction, the court may consider “evidence outside of the pleadings without converting the proceeding into one for summary judgment.” White Tail Park, Inc. v. Stroube, 413 F.3d 451, 459 (4th Cir. 2005) (quoting Richmond, Fredericksburg & Potomac R.R. Co., 945 F.2d at 768).

         A motion to dismiss for failure to state a claim under Rule 12(b)(6) will be granted if the allegations in a complaint do not “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “[T]he purpose of Rule 12(b)(6) is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006) (citation and quotation marks omitted). “[I]n evaluating a Rule 12(b)(6) motion to dismiss, a court accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff in weighing the legal sufficiency of the complaint.” Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009).

         B. Article III Standing

         To establish “the irreducible constitutional minimum of standing, ” a plaintiff must “clearly . . . allege facts demonstrating” that it has “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992)). An “injury-in-fact” has been defined as ‘“an invasion of a legally protected interest' that is ‘concrete and particularized' and ‘actual or imminent, not conjectural or hypothetical.'” Id. at 1548 (quoting Lujan, 504 U.S. at 560). The injury must be “legally and judicially cognizable, ” and the dispute must be one that “is traditionally thought to be capable of resolution through the judicial process.” Raines v. Byrd, 521 U.S. 811, 819 (1997) (quoting Flast v. Cohen, 392 U.S. 83, 97 (1968)). “[T]he presence of one party with standing is sufficient to satisfy Article III's case-or-controversy requirement.” Bostic v. Schaefer, 760 F.3d 352, 370 (4th Cir. 2014) (quoting Rumsfeld v. Forum for Academic & Institutional Rights, Inc., 547 U.S. 47, 52 n.2 (2006)).

         Of particular relevance to this proceeding, States are not “normal litigants for the purposes of invoking federal jurisdiction” and are entitled to “special solicitude” in the standing analysis. Massachusetts v. EPA, 549 U.S. 497, 518, 520 (2007). Indeed, the invasion of three types of unique State interests justifying standing were identified by the Supreme Court in Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, being (a) sovereign interests; (b) nonsovereign interests; and (c) quasi-sovereign interests. 458 U.S. at 601-02 .

         Thus, States have a sovereign interest in “the power to create and enforce a legal code, both civil and criminal” as well as in the “demand of recognition from other sovereigns, ” such as in the recognition of borders. Id. at 601.

         However, “[n]ot all that a State does . . . is based on its sovereign character.” Id. Like private parties, a State may “have a [nonsovereign] variety of proprietary interests, ” which a State may pursue in court, including its ownership of land or participation in a business venture. Id. at 601-02.

         The Snapp Court recognized two distinct categories of quasi-sovereign interests held by States. First, “a State has a quasi-sovereign-interest in not being discriminatorily denied its rightful status within the federal system.” Id. at 607. Second, a State has an interest in the “health and well-being-both physical and economic-of its residents.” Id. In these actions, the State is said to sue in its capacity as parens patriae. When suing in that particular capacity, the State must be more than a nominal party and must allege more than an “injury to an identifiable group of individual residents.” Id. The injury must be of the type “that the State, if it could, would likely attempt to address through its sovereign lawmaking power.” Id. If so, the State likely is deemed to have standing as parens patriae to bring the suit. Id.

         III. STANDING

         A. Injury-in-Fact

         The first requirement for Article III standing is that the plaintiff articulate an injury-in-fact, “which helps to ensure the plaintiff has a ‘personal stake in the outcome of the controversy.'” Susan B. Anthony List v. Driehaus, 134 S.Ct. 2334, 2341 (2014) (quoting Warth v. Seldin, 422 U.S. 490, 498 (1975)). While hypothetical or conjectural injuries will not suffice, an allegation of future injury may be sufficient if the threatened injury is “certainly impending.” Clapper v. Amnesty Int'l USA, 568 U.S. 398, 401, 409 (2013). “At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, [since] on a motion to dismiss [the court] presum[es] that general allegations embrace those specific facts that are necessary to support the claim.” Lujan, 504 U.S. at 561 (citation and quotation marks omitted). At the same time, it has been said that “[i]njury-in-fact is not Mount Everest.” Danvers Motor Co. v. Ford Motor Co., 432 F.3d 286, 294 (3d Cir. 2005) (Alito, J.).

         Plaintiffs submit that their injuries are sufficiently concrete and imminent to satisfy the requirement of injury-in-fact. It should be noted, however, that, during oral argument, Plaintiffs clarified that their alleged competitive injuries-namely, Maryland's claimed injuries to its sovereign interest in taxes, to both parties' proprietary interests, and, to some extent, to both parties' parens patriae interests-centered almost exclusively around the District of Columbia-based Trump International Hotel and its appurtenant restaurant, bar, and event space, whereas the alleged injuries to their sovereign and certain of their quasi-sovereign interests were said to have “no boundaries.” Hr'g Tr. at 62-63.

         The President disputes that any of Plaintiffs' alleged injuries, bounded or not, in fact exist much less that they satisfy the standard for injury-in-fact.

         The Court finds that Maryland has suffered no injury to its sovereign interests[10] but that both Plaintiffs have stated cognizable injuries to their quasi-sovereign, proprietary, and parens patriae interests. 1) Maryland's Sovereign Interests.

         The State of Maryland asserts two distinct sovereign interests.

         i. Detrimental Reliance in Joining the Union.

         First, Maryland claims a sovereign interest in enforcing the terms upon which it entered the Union. Am. Compl. ¶¶ 104-106. It argues that because its 1776 Declaration of Rights contained a precursor to the United States Constitution's Emoluments Clauses, the Court should infer that Maryland felt strongly about preventing corruption when it joined the Union and therefore has standing to enforce these terms. Pls.' Opp'n at 14.

         The President counters that this injury is not judicially cognizable because Maryland is essentially asking the Court to adjudicate “abstract questions of political power, ” which is beyond its authority under Article III. Def.'s Mot. Dismiss at 10, ECF No. 21-1 (citing Massachusetts v. Mellon, 262 U.S. 447, 484-84 (1923)); Hr'g Tr. at 69. In any event, says the President, even if Maryland's alleged detrimental reliance were cognizable, the Amended Complaint contains no plausible allegation to support a claim that Maryland's present-day interpretation of “emolument” induced it to join the Union. Def.'s Mot. Dismiss at 11-12.

         The Court is unaware of any legal support for the proposition that a State may establish injuries to its sovereign interest, by alleging reliance on the expectation that one of its own constitutional provisions pre-dating the federal Constitution would be carried forward to the federal Constitution when it joined the Union, when a comparable provision was in fact carried forward but is not at some later time being enforced to that State's satisfaction. As the President suggests, States may not serve as “roving constitutional watchdog[s]” raising any issue “no matter how generalized or quintessentially political.” Virginia ex rel. Cuccinelli v. Sebelius, 656 F.3d 253, 272 (4th Cir. 2011). Lack of legal precedent aside, more fatal to Maryland's argument is the highly doubtful historical proposition that a causal connection existed between the inclusion of the Emoluments Clauses in the federal Constitution and Maryland's decision to ratify it. Even the most casual student of American history would likely conclude that Maryland would have ratified the federal Constitution for a myriad of reasons with or without inclusion of the Clauses and, if carried forward, without regard to the strictness with which over time they would be enforced. The inclusion of a “precursor” to the Emoluments Clauses in Maryland's pre-Union Declaration of Rights and the State's alleged frustration that the Clauses are not being appropriately enforced today establishes no injury-in-fact to Maryland's sovereign interests for standing purposes.

         ii. T ...


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