K&D LLC v. Trump Old Post Office LLC

• Decision Date: 28 February 2020
• Docket Number: No. 18-7185,18-7185
• Parties: K&D LLC, Trading as Cork, Appellant v. TRUMP OLD POST OFFICE LLC and Donald J. Trump, Appellees
• Court: U.S. Court of Appeals — District of Columbia Circuit

951 F.3d 503

K&D LLC, Trading as Cork, Appellant

v.TRUMP OLD POST OFFICE LLC and Donald J. Trump, Appellees

No. 18-7185

United States Court of Appeals, District of Columbia Circuit.

Argued November 22, 2019

Decided February 28, 2020

Alan B. Morrison argued the cause for appellant. With him on the briefs were Mark S. Zaid and Bradley P. Moss, Washington, DC.

Michael E. Kenneally, Washington, DC, argued the cause for appellees. With him on the brief were Eric W. Sitarchuk, Philadelphia, PA, Fred F. Fielding, Washington, DC, and Rebecca Woods, Washington, DC. Allyson N. Ho, Dallas, TX, entered an appearance.

Before: Garland and Griffith, Circuit Judges, and Williams, Senior Circuit Judge.

Griffith, Circuit Judge:

Cork Wine Bar, a restaurant on the edge of the District of Columbia’s U Street corridor, competes with President Donald Trump’s eponymous Pennsylvania Avenue hotel. Cork brought suit in the Superior Court of the District of Columbia alleging violations of the District’s common law of unfair competition. President Trump removed the suit to federal court under the federal officer removal statute, 28 U.S.C. § 1442(a)(1). The district court denied Cork’s motion to remand the case, then dismissed its complaint for failure to state a claim. We affirm.

I

At the motion-to-dismiss stage, "we accept as true all of the complaint’s factual allegations." Owens v. BNP Paribas, S.A. , 897 F.3d 266, 272 (D.C. Cir. 2018). K&D, LLC, owns Cork Wine Bar. The Trump International Hotel is a business held in trust for the sole benefit of President Trump. Trump Old Post Office, LLC, operates the Hotel and holds the lease to the historic Pennsylvania Avenue structure. The Hotel, which opened in September 2016, features event spaces, a restaurant, and a lounge, and competes with Cork to host private events for international delegations and domestic public-interest groups.

Cork noticed that the competitive balance shifted toward the Hotel after the 2016 election, when the Hotel began to attract more of the lobbyists, advocacy groups, and diplomats that Cork had relied on to fill its event calendar. Cork alleges that these customers chose the Hotel because of a "perception" that patronizing the Hotel "would be to their advantage in their dealings with" the Trump Administration. Compl. ¶ 18, J.A. 28. President Trump and his associates have encouraged and advanced this perception by, among other things, using the President’s surname as the Hotel’s logo and promoting the Hotel during press conferences and meetings with government officials. As a result, "foreign dignitaries have ... flocked to the Hotel," id. ¶ 21, J.A. 29, including the Ambassador of Azerbaijan, whom Cork hosted prior to the election, id. ¶¶ 27-28, J.A. 31.

On March 9, 2017, Cork filed suit in the District of Columbia Superior Court against President Trump and the Hotel. Cork raised a claim of unfair competition under District common law for "the unfair advantage that the [Hotel] ... has gained from Defendant Donald J. Trump being the President of the United States," id. ¶ 2, J.A. 25, and sought declaratory and injunctive relief. Cork did not raise any claim under the Constitution or laws of the United States.

Citing the federal officer removal statute, President Trump filed a timely notice of removal in federal court. See 28 U.S.C. § 1442(a)(1). Cork promptly moved to remand the case, but the district court denied that motion in a minute order. Once in federal court, President Trump and the Hotel moved to dismiss Cork’s complaint for failure to state a claim.

The district court granted their motion to dismiss, concluding that Cork’s allegations of unfair advantage caused by the Hotel’s association with President Trump did not amount to a cognizable unfair-competition claim under District law. Neither the President nor his Hotel had interfered with access to Cork’s business, the court held. Instead, Cork’s complaint boiled down to an assertion that businesses with famous proprietors cannot compete fairly—a proposition alien to unfair-competition law. Cork filed a timely appeal.

II

Cork first argues that the case was improperly removed from the District of Columbia court. We must resolve this jurisdictional issue before turning to the merits.

If removal was proper under the federal officer removal statute, the federal court had "jurisdiction over all the claims and parties in the case." District of Columbia v. Merit Sys. Prot. Bd. , 762 F.2d 129, 132 (D.C. Cir. 1985). That statute allows "any officer ... of the United States" to remove to federal court a state suit that is "for or relating to any act under color of such office." 28 U.S.C. § 1442(a)(1).

We apply a two-step test in officer-removal cases. First, the officer must "raise a colorable federal defense." Jefferson Cty. v. Acker , 527 U.S. 423, 431, 119 S.Ct. 2069, 144 L.Ed.2d 408 (1999). Second, the officer must show that the suit is one "for or relating to any act under color of [his] office." 28 U.S.C. § 1442(a)(1). We must construe the statute liberally in favor of removal, Watson v. Philip Morris Cos. , 551 U.S. 142, 147, 127 S.Ct. 2301, 168 L.Ed.2d 42 (2007), and "we credit the [officer’s] theory of the case for purposes of both elements of" the removal inquiry, Acker , 527 U.S. at 432, 119 S.Ct. 2069.

A

Removal under section 1442(a) constitutes an exception to the well-pleaded-complaint rule. "[F]ederal jurisdiction generally exists only when a federal question is presented on the face of the plaintiff’s properly pleaded complaint." Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc. , 535 U.S. 826, 831, 122 S.Ct. 1889, 153 L.Ed.2d 13 (2002) (internal quotation marks omitted). But under section 1442(a), a suit may be removed "despite the nonfederal cast of the complaint" as long as the defendant presents a "colorable federal defense." Acker , 527 U.S. at 431, 119 S.Ct. 2069. The federal defense need only be "colorable," not "clearly sustainable." Willingham v. Morgan , 395 U.S. 402, 407, 89 S.Ct. 1813, 23 L.Ed.2d 396 (1969). We do not "require the officer virtually to win his case before he can have it removed." Acker , 527 U.S. at 431, 119 S.Ct. 2069 (internal quotation marks omitted).

President Trump raised two federal defenses in his notice of removal. First, he argued that the District may not impose legal conditions on the lawful performance of his presidential duties. J.A. 59. Second, he claimed absolute presidential immunity from personal liability. Because we find the first defense colorable, we need not address the President’s alternative argument based on presidential immunity.

The Supremacy Clause restricts the power of state and local governments to regulate federal offices and officeholders. See, e.g. , McCulloch v. Maryland , 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819). In Johnson v. Maryland , for instance, the Supreme Court held unconstitutional a licensing regime that barred federal postal workers from operating vehicles until they passed a state exam. 254 U.S. 51, 57, 41 S.Ct. 16, 65 L.Ed. 126 (1920). Although a federal officer "does not secure a general immunity from state law," a state cannot "control [the officer’s] conduct" when he or she is "acting under and in pursuance of [federal] laws." Id. at 56-57, 41 S.Ct. 16. Thus, Maryland could not impose a restriction beyond "those that the [federal] Government ha[d] pronounced sufficient." Id. at 57, 41 S.Ct. 16.

This principle is not boundless. In Acker , several federal judges refused to comply with a county ordinance that imposed a "license or privilege tax" on any occupation not already regulated by a licensing regime. 527 U.S. at 428, 119 S.Ct. 2069. Citing Johnson , the judges argued that the ordinance made it "unlawful" for them "to engage in" their federal office without paying. Id. at 440, 119 S.Ct. 2069. But the Court disagreed, distinguishing the "regulatory" law in Johnson , which is forbidden, from the mere "revenue-raising" provision in Acker , which is not. Id.

Claiming his defense relies upon Johnson , President Trump contends that Cork’s version of what District law requires works to regulate the "holding [of] federal office," Trump Br. 14, because it would "forbid[ ] federal officials from owning interests in a D.C. business," id. at 16. Any officer with a stake in such a business would face civil liability because of his official status, which amounts to conditioning the lawful exercise of federal power on compliance with "local legal requirements." J.A. 59.

We think the President’s theory is colorable. Acker tells us that the "practical impact" of the relevant restriction "is critical" in this context. 527 U.S. at 440, 119 S.Ct. 2069. And a state court’s decision to embrace Cork’s argument might impede federal officers. The Supremacy Clause might bar a state-law tort claim that applies only to federal officers or holds that ordinarily acceptable behavior—here, running a business—triggers liability when undertaken by a federal officer.

To be clear, we take no position on the merits of President Trump’s defense. We need only conclude that, under his "theory of the case," the defense is "colorable." Id. at 431-32, 119 S.Ct. 2069 ; see also id. at 431, 119 S.Ct. 2069 (holding that, "although we ultimately reject [the judges’ theory,] it ... presents a colorable federal defense").

B

At the second step of our removal inquiry, President Trump must show that Cork’s suit was "for or relating to any act under color of [his] office." 28 U.S.C. § 1442(a)(1). To satisfy this requirement, "the officer must show a nexus, a causal connection between the charged conduct and asserted official authority." Acker , 527 U.S. at 431, 119 S.Ct. 2069 (internal quotation marks omitted). Put differently, "[t]he circumstances that gave rise to the ... liability" must "encompass" the defendant’s conduct in office. Id. at 433, 119 S.Ct. 2069.¹

President Trump characterizes Cork’s suit as an action "for or relating to" the act of simply holding office. Trump...