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The Trump Hotel Isn’t Unconstitutional

by Andy Grewal — Tuesday, Nov. 22, 2016

Commentators have argued that President-Elect Trump’s various business interests, including in the D.C.-based Trump Hotel, may create constitutional problems under the Emoluments Clause. See, e.g., “Trump’s Hotel Lodges a Constitutional Problem,” Bloomberg View (Nov. 21, 2016). As relevant here, the Emoluments Clause prevents a person holding a federal office from accepting any “present”  or “emolument” of any kind from any foreign country, unless Congress consents. Foreign diplomats have recently stayed at the Trump Hotel and this raises questions about whether, if this practice continues after inauguration, any lodging fees collected in connection with their stays would constitute the acceptance of a present (gift) or emolument by Trump.

Though historical materials on the Emoluments Clause are sparse, the available authorities make it doubtful that income from a diplomatic stay will automatically create a constitutional problem under the Emoluments Clause. As discussed below, the hotel income from diplomatic stays likely does not reflect (1) a present/gift or (2) an emolument.*  (UPDATE 1/30/17: For a comprehensive analysis of all relevant legal authorities, see my full-length law review article, The Foreign Emoluments Clause and the Chief Executive.) 

(1) Present/Gift. Regarding the gift issue, there are no indications that the diplomats will pay other than the going market rate for their hotel rooms (that is, the the diplomats will pay the same rate charged to any member of the public, including U.S. persons). In these circumstances, it’s difficult to see how the hotel reservation fees constitute the payment of a gift under the Emoluments Clause. Generally speaking, a gift is a voluntary transfer of property to another without compensation, see Black’s Law Dictionary (10th Ed.), although sometimes a narrower definition applies, which takes into account the subjective motivations of the transferor. See, e.g., Commissioner v. Duberstein, 363 U.S. 278, 285 (1960) (adopting definition of gift under income tax law that focuses on the transferor’s donative intent, rather than relying on common law definitions). But though a precise, universal definition of gift may remain elusive, that term does not include the purchase of a good or service at the market price. In fact, a quid pro quo market exchange is the precise opposite of a gift transaction. 

However, there is some confused commentary about this. A Think Progress article posits that foreign diplomats stay in the Trump Hotel not because the hotel charges a reasonable rate, but because of “the added value that comes from doing business with the President of the United States,” thereby suggesting that the payment of their hotel fees constitutes the payment of a gift. Yet it’s hard to see how the subjective feelings of a customer can transform an arm’s-length purchase of services into a voluntary gift. Are we really to believe that a U.S. citizen who stays at the Trump Hotel because he enjoys its accommodations has simply paid for lodging services, while the diplomat sleeping in the room next door, who paid the same price for the same services, has made a “gift” because she subjectively hopes that the President-Elect will favor her in business dealings? Surely not. Even if one abandons the common law definition of a gift (which requires a transfer without consideration) and somehow believes that the federal income tax law’s subjective approach controls the interpretation of the Emoluments Clause, the presence of a quid pro quo (the provision of a hotel room) negates the “gift” characterization. See Restatement (Third) of Property (Wills & Don. Trans.) § 6.1(a) Comment b (2003) (“The relevant criterion [for a gift] is intent to transfer an ownership interest gratuitously, as opposed to engaging in an exchange transaction or making an involuntary transfer.”).  

Of course, the analysis would become more complicated if, for example, the Trump Hotel charged diplomats a higher price than that ordinarily paid by members of the general public. In these circumstances, we may properly analyze the facts to determine whether the amount paid in excess of the standard rate reflects an indirect gift to Trump. But absent facts like these, or other facts suggesting the diplomats are paying an above-market rate, the diplomats have not made gifts to Trump.  

2. Emolument. Unlike a gift, an “emolument” can reflect a quid pro quo transaction. For example, if Russia offered a $100,000 salary to the Secretary of the Treasury in exchange for a consultation on economic matters, that would very likely reflect an emolument. See Office of Legal Counsel, Memorandum from Deputy Assistant Attorney General Samuel Alito, 1986 WL 1239553  (May 23, 1986) (“[A] stipend or consulting fee from a foreign government would ordinarily be considered an ‘emolument’ within the meaning of the constitutional prohibition.”).

But the facts are more difficult for the Trump Hotel because the amounts paid by diplomats do not relate to the provision of services by Trump in his capacity as President, or even from him personally.** Rather, the amounts are paid in exchange for lodging services provided by the Trump Hotel, a separate legal entity, part of the Trump Organization, involved in an activity distinct from Donald Trump’s services as an individual. Thus, a question arises: Does a holder of a federal office receive an “emolument” when he indirectly receives an amount from a foreign government through the provision of services not personally provided by him and of a character unrelated to his government position?

Various sources suggest a negative answer to this question, indicating that the common definition of emolument refers to amounts received in connection with the performance of services as an officer or employee. Black’s Law Dictionary, for example, defines an emolument as “[a]ny advantage, profit, or gain received as a result of one’s employment or one’s holding of office.” (emphasis added). The U.S. Supreme Court has similarly characterized emoluments, stating that they “embrac[e] every species of compensation or pecuniary profit derived from a discharge of the duties of the office.” Hoyt v. United States, 51 U.S. (10 How.) 109, 135 (1850) (emphasis added). See also Office of Legal Counsel, Memorandum of Assistant Attorney General J. Lee Rankin (Oct. 4, 1955) (“[T]he term ‘emolument’… was intended to cover compensation of any sort arising out of an employment relationship with a foreign state.”) (emphasis added) (as cited in Office of Legal Counsel Opinion (May 24, 2001));  Cf. Hamilton, Federalist No. 73 (referring to Congress’s power to set the “salary and emoluments of the [President]”).

If foreign diplomats are paying a market rate to the Trump Hotel, then any profit or gain would not be a “result of” or “derived from” from the provision of services by Trump personally, but would rather reflect profit or gain to the Trump Hotel from the provision of lodging services. Thus, these payments, arising in the ordinary course of business, do not constitute emoluments under the Constitution.

The meaning of “emolument,” as used elsewhere in the Constitution, supports this interpretation. Article II, Sec. 1, Clause 7 states that the President, during his time in office, shall receive a fixed compensation but not “any other Emolument from . . . any of [the States].” This language probably discourages any particular state from trying to buy special treatment from the President through, for example, offering him additional compensation.

However, we can easily imagine circumstances where the President receives payments from one of the several states while he is President. For example, if the President lives in a state that offers a generally applicable, refundable, per-child tax credit, and the President claims the credit on his state tax return, he would have received a clear financial benefit from a state. But it would be surprising if the receipt of such a tax credit established a Constitutional violation. The term “emoluments” in Article II seems directed towards payments made by a state to the President in his capacity as such, and not literally to any payment made by a state to him. See Office of Legal Counsel Opinion (June 23, 1981) (“[T]he receipt by President Reagan of his California retirement benefits does not violate [the Emoluments Clause] because those benefits are not emoluments in the constitutional sense.”). See also Should Congress Impeach Obama for His Emoluments Clause Violations?, Yale J. on Reg.: Notice & Comment (Dec. 13, 2016).

It is thus doubtful that the receipt of payments by the Trump Hotel from foreign diplomats automatically establishes the acceptance of a gift or emolument by Trump. If the Trump Hotel has a range of guests and charges foreign government guests the prevailing market rates, the Emoluments Clause shouldn’t apply.  Also, as discussed on the Volokh Conspiracy blog, there are various other obstacles to establishing an Emoluments Clause violation with respect to Trump. And Seth Barrett Tillman argues that the Emoluments Clause does not even reach the President or any other elected officials, and that it refers only to appointees. But see Office of Legal Counsel Opinion (December 7, 2009) (concluding, without analysis, that the President is “surely” covered by clause).

Of course, one could make some strong policy arguments against a President having significant financial relationships with a foreign government, whether or not any financial benefits he received arose from his provision of services for that government.  Cf. Office of Legal Counsel Opinion (March 1, 1994) (noting that officers may be biased or have divided loyalties if they receive financial benefits from a foreign government, even if their office and duties do not relate to the performance of political, military, or diplomatic functions). However, the text of the Emoluments Clause does not generally prohibit any arrangement which could potentially lead to a conflict. It instead describes specific types of prohibited arrangements. If the Trump Hotel provides lodging services to foreign diplomats at a market rate, that economic arrangement would not come within the situations reached by the Emoluments Clause.

Follow me on twitter (@AndyGrewal).

*N.B. I do not doubt the many potential conflicts of interest questions raised by Trump’s business activities. My analysis here focuses solely on the textual interpretation of the Foreign Emoluments Clause under a stylized set of facts.

**As detailed in my full-length article, the Foreign Emoluments Clause reaches compensation paid by a foreign government to a federal official, whether or not the services provided relate to his official position. However, the analysis differs for the Domestic Emoluments Clause, which refers only to compensation received in connection with the President’s “services” as such.

This post will be occasionally updated with additional authorities.  Last updated 8/8/17, to include a link to my full-length article, The Foreign Emoluments Clause and the Chief Executive, and to make some conforming editsPlease see the article for complete analysis.

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About Andy Grewal

Law Professor, University of Iowa

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7 thoughts on “The Trump Hotel Isn’t Unconstitutional

  1. Pseudonymous McGee

    This is the best analysis of the issue I’ve seen, but I don’t agree that “it’s hard to see how the subjective feelings of a customer can transform an arm’s-length purchase of services into a voluntary gift.” Consider the following hypothetical:

    In my spare time I make jewelry and sell it on Etsy. One day I’m diagnosed with a terminal illness, forcing me to quit my day job and putting me in dire financial straits. My wealth friend has never liked my jewelry, but he wants to help me in this trying time without making me feel like a charity case, so he buys every single piece of jewelry he can.

    Now, there are *practical* reasons the law might not consider that a gift — there could be line-drawing problems and proving subjective intent might be more trouble than it’s worth. But I don’t think people would find it odd if my friend’s purchases were considered gifts under the law.

    Reply
  2. Philip Rhodes

    You lean heavily on the notion that if the diplomats are paying a fair market price for services then there is no emolument in this transaction. There are several problems with this: 1) there have many numerous stories related to how Trump’s Washington hotel charges more than several nearby, comparable hotels and 2) even if Trump’s hotel charges are exactly the same amount as these other hotels and one reasonably assumes these charges represent a fair market price, the fair market price then represents some amount of profit to Trump (or more indirectly the entity in which Trump has a financial interest). Furthermore, if by some ‘objective standards’ the prices and amenities of the various hotels were judged to be close to equal but a large majority of diplomats chose to stay at Trump’s hotel then I hope that this would give one pause as to whether this behavior was in any sense a ‘random choice’ among fair market alternatives as opposed to being part of some other less savory arrangement. One might, on rational economic grounds, find it hard to believe that furthering other (clearly inappropriate) economic transactions beneficial to Trump and some foreign government could hinge on such a comparatively trivial matter such as which hotel is chosen by diplomats. But having witnessed Trump’s behavior over the last year or so would you really be willing to claim that he is a ‘rational economic actor’?

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  3. Sharon

    It may not be illegal or unconstitutional, but it is unethical. Under the ethics rules for federal employees and/or officials, the employees or official is required to avoid even the appearance of a conflict of interest. That rule requires the president-elect to ; 1) place his business interests in a blind trust or 2) decline bookings from foreign officials and their representative and others who may seek to do business with his companies.

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  4. Tom Dibble

    How would one define “fair market rate” with luxury hotel suites, which most days of the year stand vacant, and where rates fluctuate by several fold from night to night with the prestige of the brand and demand? Are we to believe stories about Trump’s own hotel suite rates going from $1500+ per night to $450 per night when the Access Hollywood tape came out during the campaign as simply indications of a strong and fluid market fluctuation rather than a market with value specifically tied to the name on the masthead? This is not a classical economic market as for commodity items, but rather a specialized market as for art pieces.

    If Trump were instead a painter, and painted a work of art which a particular diplomat was willing to purchase for $1M and another particular diplomat was willing to purchase for $2M, what is the “fair market value” of that painting? Would it be “not an emolument” if the painting was sold to for $1M? The President would argue against valuing that painting according to the going rate of any street artist’s paintings because he would see his paintings as more valuable than the street-corner landscape artist’s work. And “what the market will bear” obviously de facto includes the potential influence or prestige of owning the President’s painting, which influence and prestige are directly relatable to policy influence.

    I don’t think that “standard market rate” and “arms-length deal” arguments can protect bespoke goods like luxury hotel suites from emoluments clause concerns. That said, does this not at least enter the realm of requiring a trial to resolve rather than something which will be resolved in a legal brief from one counsel or the other, which is why Articles of Impeachment would be the most likely recourse?

    Reply
  5. Victor Thuronyi

    The discussion suggests to me that:
    1. One cannot definitively say that there is no problem or exactly what the law is here.
    2. In addition to there being legal uncertainty, there is factual uncertainty which may require factual investigation to untangle.

    President-elect Trump has an easy remedy, namely divestment (or possibly a blind trust). If he chooses not to employ that remedy, he subjects himself to the legal uncertainty and possible factual investigation identified above.

    Reply
  6. SDK

    Since much of the value of POTUS Trump is the Trump brand which is shared with his children this seems even more complicated to resolve. Having said this, it seems speeches given for fee to foreign governments by a spouse of a US Cabinet Secretary would also come under the Emolument Clause. Unlike hotel rates which can be reflected by fair market comparison, how does one compare market value for speeches delivered by former office holders? Since Trump businesses are market driven it seems that their would have to be a significant cost difference realized to suggest a gift was given to benefit the POTUS. It would be easier to cap the rate for services and go from there.

    Reply
  7. Joe Leahy

    Here was my hypo. Look forward to your response!

    Prior to being elected President, George Washington begins to offer pony rides at Mount Vernon. He charges the market rate for pony rides, but few people make the long trek from Washington to Mount Vernon for the rides. Also, his operation is new, so it does not yet have an established clientele. His rates therefore fall below the rates charged by providers of pony rides near to him. Once he is elected President, however, the French government announces that it will require all of its diplomats to take daily pony rides at Mount Vernon—and they will gladly pay a premium to ride the President’s horses in hopes of promoting Presidential goodwill to France. Not to be outdone, the Spanish government follows suit with an announcement of its own. Other governments soon follow. Mount Vernon stables quickly is booked up, pushing up the price of its pony rides to above the prevailing market rate. This leads to rate increases at other nearby stables, as some of Washington’s non-diplomat customers are pushed out and look for pony rides elsewhere.

    Is this not an Emoluments clause violation, then the clause is useless to prevent foreign influence on the President. That cannot be the case.

    Further, it should not matter that, in this hypothetical, Washington owns Mount Vernon directly—rather than using a series of LLCs and shell corporations to avoid direct ownership of the entities that he controls and of which he is clearly the beneficial owner.

    Reply

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