Trump Loses First Skirmish in Suit Over D.C. Hotel Profits

  • U.S. judge says joint Maryland-D.C. case goes forward for now
  • Justice Department argument seeking complete dismissal fails

President Donald Trump will have to contend for now with a lawsuit brought by the District of Columbia and Maryland claiming he’s improperly profiting from his posh downtown Washington hotel.

The ruling is only preliminary. U.S. District Judge Peter Messitte said Maryland and D.C. have the right to pursue their lawsuit as it relates to how Trump’s hotel has harmed other businesses in Washington, while he also considers the government’s other dismissal requests. Messitte granted Trump’s request to throw out a part of the suit that focused on profits from his company, The Trump Organization, that come from outside Washington, including the Florida resort Mar-a-Lago.

The U.S. Constitution’s emoluments clauses generally prohibit a president from receiving gifts from a foreign government without the permission of Congress and from being similarly enriched domestically. Trump, the founder of the Trump Organization, is worth $2.9 billion, according to the Bloomberg Billionaires Index.

Messitte’s order shows Trump isn’t above the law, said the attorneys general for D.C. and Maryland.

"He has to abide by the nation’s original anti-corruption law,” Maryland Attorney General Brian Frosh said in an interview. “That’s the most significant thing one can glean from the decision."

Noah Bookbinder, executive director at watchdog group Citizens for Responsibility and Ethics in Washington, which is serving as outside counsel for the plaintiffs, said if the president wants the lawsuit to go away he should sell his businesses.

“We need to know that the president is acting in the best interest of the country, not his companies," Bookbinder said.

Why the Emoluments-Clause Lawsuits Matter

The Trump Organization, which is not a party to the suit, said in an email the decision significantly narrows the scope of the case. "The court has yet to rule on several additional arguments, which we believe should result in a complete dismissal," it said.

In the ruling, Messitte, a 1993 Bill Clinton appointee, expressed skepticism with the president’s argument that the harm claimed by Maryland and D.C. was "speculative." The judge agreed Trump has skewed the hospitality market in favor of his hotel, noting that the Trump International Hotel has raised its starting rate to $500 on most nights and made a $1.97 million profit during the first four months of 2017 after having predicted a loss of $2.1 million for that same period.

Various foreign countries, including the Kingdom of Saudi Arabia, Bahrain and Kuwait have spent thousands of dollars staying at the Trump International Hotel, which began marketing itself to diplomats by hiring a "director of diplomatic sales."

Why ‘Emoluments’ Might Mean Headaches for Trump: QuickTake Q&A

Messitte also noted that immediately after Trump took office, federal regulations were changed to allow those with connections with the federal government to lease the former U.S. Post Office, the site of the Trump International Hotel. The judge called it an “abrupt administrative about-face.”

Frosh and Lindsay Harrison, a Washington-based partner at Jenner & Block LLP who isn’t involved in the lawsuit, expect the Trump administration to appeal Messitte’s order to avoid potentially having to turn over documents in discovery.

Frosh wants Trump’s tax returns and various financial records to determine how much money the president received from foreign governments. Hotel guest lists, itemized receipts and various books and records are the most likely documents that Trump could be forced to turn over if the courts allow the lawsuit to progress, Harrison said.

"For the first time, all of the questions people have been raising since [Trump] was the nominee potentially will get serious consideration and undergo an investigation," Harrison said.

The D.C.-Maryland case is one of three filed against the president over the emoluments clauses. A New York federal court judge rejected one pursued by CREW in December, concluding the group didn’t sufficiently show it’s been harmed. Trump is trying to have the third, lodged in a Washington trial court by dozens of Democratic lawmakers led by U.S. Senator Richard Blumenthal of Connecticut, also thrown out. That request is scheduled to be heard June 7.

The case is District of Columbia v. Trump, 17-cv-1596, U.S. District Court, District of Maryland (Greenbelt).

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