In CREW v. Trump, some private parties have alleged that President Trump has violated the Constitution’s emoluments clauses through his continued business activities. They believe that the Constitution forbids a President from transacting with foreign or domestic governments, and that President Trump’s doing so harms them. They claim that their businesses compete with the President’s and that they suffer competitive injuries when foreign and domestic governments unlawfully patronize Trump Organization properties. They have thus requested various forms of declaratory and injunctive relief with the district court.

The Department of Justice has responded, however, that the plaintiffs’ complaint must be dismissed, under either Federal Rule of Civil Procedure 12(b)(1) (relating to subject matter jurisdiction) or Rule 12(b)(6) (related to causes of action). The district court agreed with the DOJ that the plaintiffs lacked standing and that the court thus lacked subject matter jurisdiction. The court consequently dismissed the plaintiffs’ complaint under Rule 12(b)(1) and did not need to address issues under Rule 12(b)(6). See CREW v. Trump, 276 F. Supp. 3d 174, 179 n.1 (S.D.N.Y. 2017) (“[T]his Court does not reach the issue of whether Plaintiffs’ allegations state a cause of action under either the Domestic or Foreign Emoluments Clauses.”)

The Second Circuit has now reversed the district court’s determination under Rule 12(b)(1). See CREW v. Trump, — F.3d –, 2019 WL 4383205 (2d Cir. 2019). The appellate court accepted the plaintiffs’ “competitor standing” theory, such that the district court properly enjoyed subject matter jurisdiction. The Fourth Circuit had previously rejected the competitor standing theory in a case brought by Maryland and the District of Columbia. See CREW v. Trump, 2019 WL 4383205, *9 (recognizing that the Fourth Circuit has “reached the opposite conclusion in a closely analogous case,” In re Trump, 928 F.3d 360 (4th Cir. 2019)). The Second Circuit ordered the case returned to the district court, for proceedings consistent with its opinion.

The district court might now directly resolve issues under Rule 12(b)(6). Under that rule, a complaint must be dismissed if the plaintiffs have failed to state a claim upon which relief can be granted, that is, whether they have stated a proper cause of action. That analysis is intertwined with whether a plaintiff comes within the “zone of interests” of the statute through which it seeks relief. See Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 129 (2014) (“[W]e presume that a statutory cause of action extends only to plaintiffs whose interests ‘fall within the zone of interests protected by the law invoked.’”) (internal citation omitted). Whether and how the zone of interests test applies to constitutional claims reflects a source of uncertainty. See Sierra Club v. Trump, 929 F.3d 670, 700-703 (9th Cir. 2019) (discussing case law).

In its order under Rule 12(b)(1), the district court had already concluded that the plaintiffs did not come within the zones of interests protected by the emoluments clauses. But the Second Circuit found that the district court erred by merely addressing that issue. “[T]he zone of interests test does not … implicate the court’s subject matter jurisdiction,” the court wrote. 2019 WL 4383205, *13. Additionally, the Second Circuit concluded that the district court analysis was wrong on the merits: “[T]he Supreme Court’s precedents make clear that Plaintiffs’ injuries are not outside the zone of interests of the Emoluments Clauses.” Id. See also id. at *15 (stating that there was “no reason” that zone of interests principles that have been applied in statutory cases should not apply in constitutional cases). The Second Circuit may have thus effectively decided that the government’s Rule 12(b)(6) motion must fail.

This approach suffers from flaws because the Second Circuit never determined, as a threshold matter, what “emolument” means. And without a definition of “emolument,” a court cannot sensibly determine the zones of interests that are protected by the foreign and domestic emoluments clauses.[FN1]

Under the view embraced by the plaintiffs, “emolument” means anything of value, such that the two emoluments clauses reach even ordinary business transactions between governments and the President. By contrast, “emolument” may be defined such that it reaches only compensation paid for services provided by the President. See Grewal, The Foreign Emoluments Clause and the Chief Executive, 102 Minn. L. Rev. 639 (2017). The zones of interests protected by the clauses will necessarily differ, depending on which interpretation applies. After all, if the emoluments clauses really prohibit all business transactions between the President and governments, then the plaintiffs would have a (relatively) stronger zone of interests argument. But if the emoluments clauses apply more narrowly, to only transactions involving services personally performed by the President, then the plaintiffs’ claims become tenuous. In other words, under the government’s theory, there are narrow potential zones of interests. Under the plaintiffs’ theory, broad zones potentially arise.

The Second Circuit should have defined “emolument” before it defined the zones of interests protected by the emoluments clauses. Instead, the court flatly accepted the plaintiffs’ contention that they were “injured by the defendant’s alleged violation of a limiting law [and] may sue to enforce the limitation.” 2019 WL 4383205, *16. The court never undertook to interpret the “limiting law,” that is, the two emoluments clauses, nor did it decide what “limitations” were imposed by those clauses. It instead focused on whether a competitor injury approach could apply to the clauses. See 2019 WL 4383205, *13-*15. It thus implicitly accepted, without discussion, the plaintiffs’ view about the scope and purpose of the emoluments clauses.

Supreme Court precedent contradicts this sort of blind deference. In Lexmark v. Static Control, for example, the Court itself determined the interests protected by the relevant law. See 572 U.S. at 131-32. It did not simply assume that the statute protected whatever interests that the plaintiffs said were protected. If the Second Circuit’s approach were correct, the zone of interests test would be meaningless. Plaintiffs could always establish that they were within a law’s zone of interests just by announcing that the law was intended to protect their interests.

Given the Second Circuit’s analytical error and given that the court expressly acknowledged that it had split from the Fourth Circuit, the Supreme Court will be interested in deciding the procedural questions raised by the emoluments lawsuits. However, it remains unclear whether and when any such review will take place. The district court in CREW has not formally decided the government’s 12(b)(6) motion, and the case may return to it for further proceedings. Also, the Fourth Circuit is currently considering whether to hear the MD/DC case en banc. If it does so, any Supreme Court review would be further delayed. We thus remain a long way from any of the emoluments lawsuits proceeding to the merits.

Follow me on Twitter: @AndyGrewal

Comments welcome. This post may be updated.

[FN1] Josh Blackman and Seth Tillman have raised further issues with the emoluments litigation. They have argued that the foreign emoluments clause does not reach the President. They have also questioned whether some of the plaintiffs in CREW v. Trump were the relevant parties to bring suit. The Second Circuit did not address these significant issues.