State-Level Responses to Trump’s Business Conflicts: A More Promising Line of Attack?

It is genuinely alarming how much Donald Trump seems intent—in true kleptocratic/crony capitalist style—on using his position as President to advance the commercial and financial interests of himself, his immediate family members, and their various business enterprises. As I’ve written before, this approach to governance (if you can call it that) has plenty of precedents elsewhere in the world, but it’s a new experience for Americans. One hopes the U.S. electorate will come to its senses and throw the bum out in four years, but that’s a long way away. In the meantime, the hope that the President might be impeached over his possibly unconstitutional conflicts of interest seems profoundly unrealistic: Republicans control both the House and the Senate, and most Republicans actually seem quite happy to accommodate themselves to a Trump Administration if it enables them to advance their policy goals. Even those Republicans who find Trump’s conduct inexcusable are far more worried about a primary challenge supported by Trump’s rabid supporters than they are about the general electorate. For the same reason, proposals for new federal legislation that would strengthen ethical restraints on the President, whatever their symbolic value, are likely dead-on-arrival as practical proposals. Perhaps understandably, some anticorruption advocates have placed their hopes in the federal courts, most notably through lawsuits alleging that the Trump Organization’s business dealings with foreign governments violate the U.S. Constitution’s Foreign Emoluments Clause, though for reasons I have explained in previous posts (see here and here), I’m doubtful that such lawsuits have much chance of success.

This is all very depressing, and I acknowledge that in the short term there’s relatively little that can be done; the ultimate remedy will have to be through the electoral process. Nonetheless, I do think that the ideas of enacting new legislation and pursuing certain forms of litigation do hold some promise as means to impose significant constraints on Trumpian corruption. The problem with the proposals I noted above is that they involve proposed responses at the federal level, and for the most part they target the President himself. There’s an alternative, though: Litigation and legislation at the state level, targeting Trump’s business interests and their potential commercial partners. Though hardly a complete solution, there may be a number of things to do at the state level to constrain at least some of the abuses associated with politically-connected business interests that seek to leverage those political connections for commercial advantage, or to facilitate corrupt or otherwise unlawful conduct. To illustrate, let me note a couple of ideas that other experts have floated about how aggressive state attorneys general (or perhaps private litigants) might make use of existing state laws to target Trumpian corruption:

  • First, Norm Eisen, the co-founder of Citizens for Responsibility and Ethics in Washington (CREW)—the same organization that brought the Foreign Emoluments Clause lawsuit against Trump—suggested that Trump’s Tweet criticizing Nordstrom’s department store chain for dropping Ivanka Trump’s clothing line might have violated California’s unfair competition law (UCL) (California Business & Professional Code §17200), which prohibits “any unlawful, unfair or fraudulent business act or practice.” I confess I’m unsure of how viable a response this would be, not only because it’s not obvious that Trump’s critical Tweet could constitute an “unfair” business practice (and it’s even harder to argue that the Tweet is otherwise “unlawful” or “fraudulent”). Nordstrom would only be able to bring the suit if it could show that it lost money or property as a result of Trump’s Tweet, and would only be entitled to restitution. True, the state Attorney General or a state district attorney could bring an action even if Nordstrom doesn’t or can’t, and violations of the California UCL can result in civil penalties. But those penalties are relatively mild—$2,500 per violation. The best remedy would be an injunction against future violations, but I’m not sure how much good that would do. Still, I like the idea. Lots of states have robust unfair competition laws on the books, and some of these may be worded broadly enough to cover at least some attempts by Trump and his family to use his political power to advance their commercial interests.
  • Oh, and before I leave this topic, one more thought: It’s at least possible that the California UCL (and equivalent laws in other states) might provide a more viable mechanism for challenging Trump’s alleged violations of the Foreign Emoluments Clause: §17200 prohibits any business act or practice that is unlawful—which could well be read to cover acts that are violations of federal (as opposed to state) law, including the U.S. Constitution. As noted above, California’s State Attorney General, a district attorney, or a city attorney (with the consent of the district attorney) can commence an action to enforce California’s UCL (and the usual standing rules that apply to private litigants don’t apply to a state enforcement action seeking to protect the state’s interest in enforcing its laws on behalf of its citizens). So, one could imagine the California Attorney General (and, perhaps other state attorneys general in states with similarly-worded UCLs) bringing suit against the Trump Organization on the theory that the Trump Organization’s dealings with foreign states are unlawful because they violate the U.S. Constitution’s Foreign Emoluments Clause, and are therefore violations of the state UCLs that prohibit any unlawful business act or practice. The standing issues that threaten to tank the federal lawsuits would not apply, and the remedies might include injunctions, issued by state courts, prohibiting the Trump Organization from doing business with foreign governments. I haven’t fully worked this through, so there may be some legal or practical obstacles I haven’t considered, and I haven’t yet looked into which states have UCLs with language similar to California’s. Just a thought.
  • Second, Professor Jed Shugerman of Fordham Law School recently published a lengthy, creative, and insightful blog post emphasizing that corporations (and limited liability companies (LLCs)) are creatures of state law, which gives state officials—including state attorneys general—important forms of authority over these entities. Professor Shugerman emphasizes in particular a particular form of legal action (the ”quo warranto” writ) through which the state AGs can seek information about the corporation’s activities and potentially enjoin the corporation (or even dissolve it) for corporate activities beyond the scope of the corporate charter, which would include any acts that are illegal. Thus, Professor Shugerman maintains, if indeed various Trump businesses are violating the Constitution’s Foreign Emoluments Clause when they do business with foreign states, it follows that these corporations are acting in violation of their state corporate charters, which in turn gives state attorneys the power to commence a suit against the corporations and potentially impose on them a range of remedies, from a financial penalty to an injunction to the revocation of the corporate charter. I’m simplifying quite a bit, and glossing over a lot of the questions and nuances that Professor Shugerman’s post goes into in much more depth. The larger point here is that the fact that corporations (and LLCs) are creatures of state law may mean that, even without any legislative changes, state attorneys general may already have considerable power to go after these businesses, even if the ultimate substantive law those businesses are alleged to have violated is federal law (including, in this example, the U.S. Constitution) rather than state law. Here again, I haven’t really had time to think through the issues yet, but I think that Professor Shugerman is very much on the right track.

The above proposals involve state attorneys general (or possibly private parties) bringing suit under existing state laws. Another possibility would be to amend state laws—either through the state legislature or through the ballot initiative process that exists in many states—to impose clearer and more rigid constraints on the ability of politically-connected businesses to take advantage of those connections in ways that are unfair and may distort the policies and priorities of the executive branch of government. I’ll return to some of those proposals in a future post.

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