"There is always a philosophy for lack of courage."—Albert Camus

Sunday, March 19, 2017

Business Transactions for Value Are Not “Emoluments”

Addendum: Accepted Paper: Seth Barrett Tillman, Essay, Business Transactions and President Trump’s “Emoluments” Problem, 40(3) Harv. J.L. & Pub. Pol’y (forthcoming circa 2017–2018), https://ssrn.com/abstract=2957162

Recently, it has been argued that the term “emoluments” (as used in the Constitution’s Foreign Emoluments Clause[1] and Domestic Emoluments Clause[2]**) reaches any pecuniary advantage, benefit, or profit arising in connection with business transactions for value.[3] This position is incorrect. The Domestic Emoluments Clause states:

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.[4]

If the emoluments-are-any-pecuniary-advantage position were correct, if “emoluments” as used in the Constitution extended to any pecuniary advantage, then presidents are and would have been precluded from doing business with the United States government.

However, George Washington (who had previously been president of the Federal Convention which drafted the Constitution[5]), while he was President of the United States, did business on more than one occasion with the Federal Government. He purchased several lots of land in the new federal capital at public auction. One such set of purchases took place on or about September 18, 1793.[6] Three commissioners ran the public auction: David Stuart, Daniel Carroll, and Thomas Johnson. Who were they?

·    David Stuart was a member of the Virginia convention which ratified the Federal Constitution.[7]
·  Daniel Carroll was a member of the Federal Convention which drafted the Constitution and later a member of the First Congress.[8]
·   Thomas Johnson was the first Governor of Maryland following independence, a member of the Maryland convention which ratified the Federal Constitution, and afterwards he served as a Justice of the Supreme Court of the United States.[9]

So among the four participants (i.e., Washington and the three commissioners) were:




  •       three members of the Continental Congress;[10]
  •       two members of state ratification conventions;
  •       two members of the Federal Convention (including the Convention’s president);
  •       a member of the First Congress;
  •       a Justice of the Supreme Court of the United States;
  •       a Governor; and,
  •       our first President.
An undoubtedly accomplished group. Are we really to believe that not only did all four participants willingly, openly, and notoriously participate in a conspiracy to aid and abet the President in violating the Constitution’s Domestic Emoluments Clause, but that they also left—for themselves and their posterity—a complete and signed documentary trail of their wrongdoing?[11]

The emoluments-are-any-pecuniary-advantage position amounts to: (1) President Washington was at best an idiot, if not a crook; (2) Washington’s allies openly supported obvious and profound constitutional lawlessness; and (3) Washington’s political opponents[12] were altogether and unaccountably silent—silent in Congress, silent in newspapers, and silent in their private correspondence. The emoluments-are-any-pecuniary-advantage position amounts to a naked assertion by twenty-first century legal academics that they understand the Constitution’s original public meaning better than those who drafted it, and better than those who ratified it, and better than those who put it into effect in the First Congress.

The alternative view is that linguistic and historical humility compel reasonable minds to recognize that much of the language within our more than two-century old Constitution is opaque. It follows that—in order for twenty-first century citizens to understand what the Constitution’s opaque language meant when ratified (and what it continues to mean now) in regard to a specific (but otherwise wholly obscure) legal term (e.g., “emoluments”)—reasonable persons must look to the actual conduct of the Framers, the Ratifiers, and the original practice of the three branches when they were squarely confronted with the need to determine the meaning of a particular legal term on concrete facts.

It is incontrovertible that President George Washington, in a private capacity, engaged in business transactions with the Federal Government, notwithstanding that he received or intended to receive a pecuniary advantage. Given Washington’s very public conduct,[13] a modern interpreter should be reluctant to conclude that such advantages, benefits, and profits amount to a constitutionally proscribed “emolument.” It stands to reason that if the benefits flowing from business transactions for value (with the Federal Government) are not constitutionally proscribed “emoluments” for the purposes of the Domestic Emoluments Clause, then the benefits flowing from similar transactions for value—with foreign states or foreign state owned or controlled commercial entities[14]—are not constitutionally proscribed “emoluments” for the purposes of any other clause, including the Foreign Emoluments Clause. Both the Domestic Emoluments Clause and the Foreign Emoluments Clause use the same “emoluments” language.[15]

Indeed, from the perspective of modern (as opposed to eighteenth century) governance norms, President Washington’s business transactions posed a nonfrivolous risk of moral hazard, conflicts, and corruption. Unlike bargains struck between genuinely adverse parties, President Washington was speculating on land in public auctions—that is, public auctions managed by commissioners whom he personally appointed.[16] As a result, Washington was on both sides of each and every one of these transactions;[17] yet, no one then or since has ever impugned the propriety of his conduct, much less the legal validity or constitutionality of his purchases.

Second, as the President’s lawyers, at Morgan, Lewis & Bockius LLP (“MLB”), explained the presents-language and the emoluments-language in the original Constitution’s Foreign Emoluments Clause were imported into a proposed federal constitutional amendment in 1810, the so-called Titles of Nobility Amendment.

In 1810, Congress voted by overwhelming margins to extend the Foreign Emoluments Clause to all citizens, not just federal officials. The proposed amendment would have prohibited private citizens’ acceptance of “any present, pension, office, or emolument, of any kind whatever, from any Emperor, King, Prince, or foreign Power,” stripping violators of their citizenship and barring them from state or federal office. The amendment came within two states of ratification—indeed, because of a publishing mistake, several generations believed it was part of the Constitution.

Yet there is no evidence anyone at the time thought the proposed amendment restricted citizens’ ability to engage in commerce with foreign nations, their governments, their representatives, or their [commercial] instrumentalities [or agents]. That suggests that the public did not understand the prohibition on accepting [foreign presents or] foreign emoluments to prohibit commerce with foreign states or their representatives through fair-market-value exchanges—and, by implication, that the Foreign Emoluments Clause does not reach these transactions.[18]

MLB’s argument remains wholly unrebutted by those suggesting that the Constitution’s presents-language and emoluments-language extend to business transactions for value.[19]

Finally, if there were any doubt that business transactions for value are not “emoluments” for the purposes of the Domestic Emoluments Clause and the Foreign Emoluments Clause, the Supreme Court laid that issue to rest in 1840. In Hoyt v. United States, the Court explained:

These terms [“fees” and “commissions”] denote a compensation for a particular kind of service to be performed by the officer, and are distinguishable from each other … they are also distinguishable from the term emoluments, that [term] being more comprehensive, and embracing every species of compensation or pecuniary profit derived from a discharge of the duties of the office.[20]

President Washington may very well have derived pecuniary advantages, benefits, and profits from his business transactions with the Federal Government, but the benefits flowing from those transactions were not “derived from [his] discharg[ing] the duties of [his] office.”[21] Hence, no constitutionally proscribed “emoluments” were involved.[22]

For all the reasons elaborated above, one must conclude that business transactions for value are not encompassed by the term “emoluments” as used in the Constitution.

Seth Barrett Tillman***



Seth Barrett Tillman, Business Transactions for Value Are Not “Emoluments”, The New Reform Club (Mar. 19, 2017, 3:15 AM), http://tinyurl.com/kos696z 

Addendum: Accepted Paper: Seth Barrett Tillman, Essay, Business Transactions and President Trump’s “Emoluments” Problem, 40(3) Harv. J.L. & Pub. Pol’y (forthcoming circa 2017–2018), https://ssrn.com/abstract=2957162



** I am following the odd naming convention for the clause used by the Plaintiff in CREW v. President Trump, Civ. A. No. 1:17-cv-00458-RA (S.D.N.Y. Jan. 23, 2017) (Abrams, J.). See note [2].
  

*** Maynooth University Department of Law, New House (#53), Maynooth University, Maynooth, County Kildare, Ireland. sbarretttillman(at)yahoo.com. I received helpful comments, particularly in regard to finding sources, from several legal academics, historians (in academia and elsewhere), and listserv participants while developing this short paper. I thank them all; all errors remain mine. This short paper is cross-posted. See Seth Barrett Tillman, Business Transactions For Value Are Not “Emoluments” (Mar. 19, 2017), https://ssrn.com/abstract=2937186; Seth Barrett Tillman, Business Transactions For Value Are Not “Emoluments,” The New Reform Club (Mar. 19, 2017, 3:15 AM), http://tinyurl.com/lxash3w; see also Seth Barrett Tillman, Novel Questions of Pure Law and Discovery, The New Reform Club (Mar. 27, 2017, 6:58 AM), http://tinyurl.com/lpjudfk

[1] U.S. Const. art. I, § 9, cl. 8 (the Foreign Emoluments Clause, a/k/a Foreign Gifts (or Titles) Clause, or Emoluments Clause) (“[N]o Person holding any Office of Profit or Trust under the[] [United States], shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.”).
[2] U.S. Const. art. II, § 1. cl. 7 (the so-called Domestic Emoluments Clause, a/k/a Presidential Compensation (or Emoluments) Clause).
[3] If the subject matter of our inquiry were something other than an exchange for value, we would be discussing either: (1) a present, or (2) a bribe. Textually, the Domestic Emoluments Clause does not extend to presents. Likewise, bribery is expressly dealt with by the Impeachment Clause, U.S. Const. art. II, § 4, not by either the Foreign Emoluments Clause or the Domestic Emoluments Clause.
[4] U.S. Const. art. II, § 1. cl. 7 (emphasis added).
[5] See Washington, George (1732–1799), Biographical Directory of the United States Congress (last visited Feb. 14, 2017), http://tinyurl.com/l5vpnzk (also reporting that Washington was a member of the Continental Congress).
[6] See Certificate for Lots Purchased in the District of Columbia, 18 September 1793, Founders Online (last visited Feb. 14, 2017), http://tinyurl.com/gtpw5mm.
[7] See 3 The Debates in the Several State Conventions on the Adoption of the Federal Constitution as Recommended by the General Convention at Philadelphia in 1787, at 654 & 662 (Jonathan Elliot ed., Washington 2d ed. 1836) (recording Stuart’s votes on June 25 and 27, 1788), http://tinyurl.com/l6ypss2. Stuart was also a federal elector for Virginia in the first federal election. See 3 The Documentary History of the First Federal Elections 1788–1790, at xvi (Gordon DenBoer ed., 1986), http://tinyurl.com/kvbwrou.
[8] See Carroll, Daniel (1730–1796), Biographical Directory of the United States Congress (last visited Feb. 14, 2017), http://tinyurl.com/hxf9dyx (also reporting that Carroll was a member of the Continental Congress and signed the Articles of Confederation).
[9] See Johnson, Thomas (1732–1819), Biographical Directory of the United States Congress (last visited Feb. 14, 2017), http://tinyurl.com/lwxw22r (also reporting that Johnson was a member of the Continental Congress and first Governor of Maryland following independence).
[10] See supra notes 5, 8–9.
[11] See, e.g., Certificate for Lots Purchased in the District of Columbia, 18 September 1793, Founders Online (last visited Feb. 14, 2017) (reproducing a certificate of purchase signed by Commissioners David Stuart and Daniel Carroll which stated: “At a Public Sale of Lots in the City of Washington, George Washington, President of the United States of America became purchaser of Lots No. twelve, No. thirteen & No. fourteen in Square No. six hundred & sixty seven . . . .” (emphasis added)), http://tinyurl.com/gtpw5mm. In addition to lots nos. 12, 13, and 14, Washington also purchased lot no. 5, and he received a separate certificate confirming this additional purchase. See id. (editors’ notes). See generally, e.g., Letter from President George Washington to the Commissioners (Mar. 14, 1794), in The Writings of George Washington Relating to the National Capital, 17 Records of the Columbia Hist. Soc. 3, 97 (1914) (indicating that Washington believed and intended that his purchases of public land were known to the public), http://www.jstor.org.jproxy.nuim.ie/stable/pdf/40067048.pdf.
[12] In 1793, during the Third Congress, the year President Washington made these land purchases at public auctions, there were some 13 anti-administration Senators and some 40 anti-administration Representatives. See Biographical Directory of the United States Congress (last visited Feb. 14, 2017), http://bioguide.congress.gov/biosearch/biosearch.asp (enter “Representative” or “Senator” for “Position:” and enter “1793” for “Year or Congress:”); see also, e.g., Letter from President George Washington to Bushrod Washington (July 27, 1789), in 30 The Papers of George Washington 366, 366 (John C. Fitzpatrick ed., 1939) (“My political conduct . . . must be exceedingly circumspect and proof against just criticism, for the Eyes of Argus are upon me, and no slip will pass unnoticed that can be improved into a supposed partiality for friends or relatives.”), https://www.loc.gov/resource/mgw2.017/?sp=26; infra note 13.
[13] See Akhil Reed Amar, America’s Unwritten Constitution: The Precedents and Principles We Live By 309 (2012) (“Over the centuries, the constitutional understandings that crystallized during the Washington administration have enjoyed special authority on a wide range of issues . . . .”); see also Seth Barrett Tillman, Who Can Be President of the United States?: Candidate Hillary Clinton and the Problem of Statutory Qualifications, 5(1) Br. J. Am. Leg. Studies 95 (2016) (peer reviewed), https://ssrn.com/abstract=2679512:

Evidence arising in connection with the Washington administration is generally considered superior to that of later administrations. Why? First, Washington’s administration was contemporaneous with the Constitution’s ratification. Second, the President was a Framer and his cabinet (and administration) contained other prominent Framers and ratifiers. Indeed, between the President and his nine cabinet members (over the course of two terms), half of the group were either Framers or ratifiers or both. Third, the President saw himself above party or faction; indeed, active partisan federal electoral politics did not arise until after Washington announced that he would not run for a third term. Fourth, Washington both valued his reputation for probity and acted under the assumption that his conduct was closely monitored by political opponents and opportunists. Fifth, Washington understood that his personal and his administration’s conduct were precedent-setting in regard not only to significant deeds, but even in regard to what might appear to be minor events and conduct.

Id. at 105–08 (emphasis added) (footnotes with supporting sources omitted); supra note 12.
[14] In regard to the Domestic Emoluments Clause, where the federal government or a state government engages in a business transaction with a private commercial entity owned (in whole or in significant part) or controlled (in whole or in significant part) by the President of the United States (in his private capacity), but not with the President, it is not clear that such a transaction falls under the aegis of the Domestic Emoluments Clause. See supra note 2. Indeed, no court of the United States (of which the Author is aware) has had occasion to resolve this novel threshold question of pure law. This issue must be resolved in any litigation seeking to assert that the Domestic Emoluments Clause applies to such business transactions with the President. As a question of pure law, this issue ought to be judicially resolved prior to any court ordered discovery.
Much the same can be said in regard to the Foreign Emoluments Clause. No court of the United States (of which the Author is aware) has had occasion to determine whether a foreign state owned or foreign state controlled commercial entity is a “foreign state” for the purposes of the Foreign Emoluments Clause. See supra note 1. This is a novel threshold question of pure law which must be resolved in any litigation seeking to assert that the Foreign Emoluments Clause applies to business transactions between a constitutionally proscribed federal officeholder (i.e., an “officer … under the United States”) and a foreign state owned or foreign state controlled commercial entity. As a question of pure law, this issue ought to be judicially resolved prior to any court ordered discovery. Similarly, where a foreign state engages in a business transaction with a private commercial entity owned (in whole or in significant part) or controlled (in whole or in significant part) by a constitutionally proscribed federal officeholder (in his private capacity), but not with the officeholder, it is not clear that such a transaction falls under the aegis of the Foreign Emoluments Clause. Indeed, no court of the United States (of which the Author is aware) has had occasion to resolve this novel threshold question of pure law. This issue, too, must be resolved in any litigation seeking to assert that the Foreign Emoluments Clause applies to business transactions between private commercial entities owned or controlled by a constitutionally proscribed federal officeholder and a foreign state. And, here too, as a question of pure law, this issue ought to be judicially resolved prior to any court ordered discovery. Where a transaction has a commercial entity on both sides, as opposed to an actual foreign state and an actual constitutionally proscribed federal officeholder, the policy concerns animating the Foreign Emoluments Clause must be much attenuated.
[15] See supra notes 1–2 and accompanying text; Akhil Reed Amar, Intratextualism, 112 Harv. L. Rev. 747, 748 (1999).
[16] See Letter from George Washington, President of the United States of America, to All Who Shall See These Presents (Jan. 22, 1791), in The Writings of George Washington Relating to the National Capital, supra note 11, at 3 (appointing Johnson, Carroll, and Stuart commissioners), http://www.jstor.org.jproxy.nuim.ie/stable/pdf/40067048.pdf.
[17] Oliver Evans held U.S. Patent #3: a patent for an automated grain milling system. This patent was issued by Executive Branch officers responsible to President Washington during his first term in office. Indeed, President Washington personally reviewed and signed the patent application. See George Washington upgraded his milling operation by installing improvements invented by Oliver Evans, George Washington’s Mount Vernon (last visited Mar. 20, 2017), http://www.mountvernon.org/the-estate-gardens/gristmill/oliver-evans/. Subsequently, in 1791, “Washington purchased a license for the patent and had the milling system installed in his [Mount Vernon] gristmill.” See George Washington constructed a large, extremely profitable gristmill at Mount Vernon using cutting-edge technology of the time, George Washington’s Mount Vernon (last visited Mar. 20, 2017), http://www.mountvernon.org/the-estate-gardens/gristmill/. Here too, President Washington was on both sides of the transaction at issue. This another good example indicating that modern fiduciary governance standards are wholly unrelated to the original public meaning of the Constitution’s Domestic Emoluments Clause and Foreign Emoluments Clause. See, e.g., Martin H. Redish & Elana Nightingale Dawson, “Worse than the Disease”: The Anti-Corruption Principle, Free Expression, and the Democratic Process, 20 Wm. & Mary Bill Rts. J. 1053, 1068 (2012) (distinguishing the “Framers’ limited prophylactic approach” from Professor Teachout’s position); Adrian Vermeule, The Constitutional Law of Official Compensation, 102 Colum. L. Rev. 501, 510 (2001) (denominating the Domestic Emoluments Clause and the Foreign Emoluments Clause “limited anticorruption provisions”). See generally Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) (issuing a decision by Chief Justice Marshall, notwithstanding his having previously been a key federal official who was in part responsible for the facts giving rise to the litigation).
[18] Sheri Dillon et al., Moran, Lewis & Bockius LLP White Paper, Conflicts of Interest and the President, 4–5 (Jan. 11, 2017), https://assets.documentcloud.org/documents/3280261/MLB-White-Paper-1-10-Pm.pdf (footnotes omitted).
[19] Id.
[20] 51 U.S. (10 How.) 109, 135 (1850) (Nelson, J.) (emphasis added). Justice Nelson’s definition of “emolument” has been cited approvingly by the Executive Branch. See, e.g., Memorandum from Samuel A. Alito, Jr., Dep’y Asst. Att’y Gen., Office of Legal Counsel, for H. Gerald Staub, Office of Chief Counsel, National Aeronautics and Space Administration, Re: Emoluments Clause Questions Raised by NASA Scientist’s Proposed Consulting Arrangement with the University of New South Wales, 1986 WL 1239553, at *1 n.4 (May 23, 1986), https://www.justice.gov/olc/page/file/936146/download.
[21] Hoyt, 51 U.S. (10 How.) at 135.
[22] See generally Andy Grewal, The Foreign Emoluments Clause and the Chief Executive, 102 Minn. L. Rev. (forthcoming 2017), https://ssrn.com/abstract=2902391; Robert G. Natelson, The Original Meaning of ‘Emoluments’ in the Constitution (Feb. 21, 2017), https://ssrn.com/abstract=2911871

3 comments:

Tom Van Dyke said...

Hoyt v. United States

seems completely on point, but Laurence Tribe, et al, are still nattering at Trump on this

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