Litigation involving the Emoluments Clauses is revisited

Michael R. Wolford, BridgeTower Media Newswires

In September 2019, I wrote an article regarding the Emoluments Clauses and the three separate federal cases that had recently addressed them. For those of you who are not intimately familiar with the Emoluments Clauses, let me set them forth for future reference.

There are two Emoluments Clauses in the U.S. Constitution and they are referred to as the Foreign and Domestic Clauses.

The Foreign Emoluments Clause contained in Article I, Section 9, Clause 8 of the Constitution provides:

“No Person holding any Office of Profit or Trust under them, shall, without the Consent of Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.”
The Domestic Emoluments Clause contained in Article II, Section 1, Clause 7 of the Constitution provides:

“The President shall, at stated Times, receive for his Services, a Compensation, which shall neither be increased nor diminished during the Period for which he shall have been elected, and he shall not receive within that Period any other Emolument from the United States, or any of them.”

The Merriam-Webster dictionary defines emoluments as “returns arising from office or employment usually in the form of compensation or perquisites.”

At the time the article was written in September 2019, two of the three federal court cases had reached the Court of Appeals stage.

The first case dealt with a complaint filed in the Southern District of New York, which was ultimately reviewed by the Second Circuit Court of Appeals. The plaintiffs in that litigation alleged that President Trump had violated the Emoluments Clause by accepting monetary benefits from foreign governments without congressional consent. Specifically, it claimed that the president had violated the Foreign Emoluments Clause by being involved with the following:

• Leases held by foreign government-owned entities in New York Trump’s Tower;

• Room reservations and the use of venues and other services and goods by foreign governments and diplomats at Defendant’s Washington, D.C. hotel; and

• Hotel stays, property leases and other business transactions tied to foreign governments and other domestic and international establishments owned, operated or licensed by Defendant.

The District Court in the Southern District of New York granted the president’s motion to dismiss and concluded that it was wholly speculative that any lost business was fairly traceable to defendant’s activities or for government officials’ independent desire to patronize defendant’s businesses. The District Court furthermore concluded that plaintiffs lacked standing to sue under the Emoluments Clause since the clauses were not meant to protect parties such as plaintiffs in this litigation.

Plaintiffs appealed and in a two to one decision issued on September 13, 2019, the Second Circuit reversed the District Court and remanded the case for further proceedings.

That case is now before the District Court and discovery is underway.

The significant change that occurred since the article was published in September 2019 is that the Fourth Circuit Court of Appeals, located in Richmond, issued a new decision. The Appeals Court had initially reversed the District Court for the District of Maryland on July 10, 2019, and it concluded that plaintiffs who allege claims under the Emoluments Clauses lacked standing to pursue these claims.

The petitioners in the Fourth Circuit case sought a hearing en banc before the entire Circuit Court and in a decision dated May 14, 2020, the en banc panel reversed the prior decision and in a nine to six breakdown it authorized Plaintiffs to proceed with discovery before the District Court.

The acrimony between the majority and dissenting judges was quite striking. The dissent claimed that the court was being used as a political tool to harass the president. The majority fired back by stating: “The public’s confidence and trust in the integrity of the judiciary suffer greatly when judges who disagree with their colleagues’ view of the law accuse those colleagues of abandoning their constitutional oath of office.”
The president’s lawyer, Jay Sekulo, was quoted as saying the following:

“We disagree with the decision of the Fourth Circuit. This case is another example of presidential harassment. We will be seeking review at the Supreme Court.”

However, there is no guarantee that the Supreme Court will hear Trump’s appeal to block discovery because it now appears that the only two Circuit Courts that have reviewed these claims have both found in favor of petitioners and have ruled against the president.

Ironically, on the very day the Court of Appeals for the Fourth Circuit issued its decision, The Washington Post published an article reflecting an investigation of the monies paid by the federal government to President Trump’s company since he has taken office. It appears that during the three years that President Trump has been in office, the federal government has paid over $1.3 million for the lodging of the president’s staffers and secret service agents who have accompanied him to these various properties and there is no evidence that these payments were at cost as claimed by one of the president’s sons.

There have been over 1,600 room rentals that were examined by The Washington Post and the lowest rate paid for these rooms was $142 per night and the highest rate was $650 per night for rooms at Mar-a-Lago.

When the first article was written in September 2019, there was a theory that if President Trump left office in January 2021, the injunctive relief sought by Petitioners would become moot. However, since there is also a declaratory judgment action against the president, it is very possible that when the cases proceed to an ultimate decision there may well be the possibility of disgorgement of the funds paid to the Trump organization by the government regardless of whether Donald Trump is still president. Although there are considerable defenses raised to these claims including those of standing and the fact that these clauses were never intended to protect competitors, it is evident that these claims are far from settled and there may be more surprises in store for those of us who have followed this saga from the beginning.

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Michael R. Wolford is a partner with The Wolford Law Firm LLP, which concentrates its practice in the area of litigation, with a special emphasis in commercial/business litigation, personal injury matters, employment litigation and white collar criminal defense.