People v. Trump
| Decision Date | 21 November 2018 |
| Docket Number | 451130/2018 |
| Citation | 88 N.Y.S.3d 830,62 Misc.3d 500 |
| Parties | The PEOPLE of the State of New York, BY Barbara D. UNDERWOOD, Attorney General of the State of New York, Petitioner, v. Donald TRUMP, Donald Trump, Jr., Ivanka Trump, Eric Trump, The Donald J. Trump Foundation, Respondents. |
| Court | New York Supreme Court |
Attorneys for Petitioner: Barbara D. Underwood, Attorney General, and Matthew Colangelo; James Sheehan; Laura Wood, New York; Yael Fuchs ; Steven Shiffman ; and Peggy Farber
Attorneys for Respondents: Alan S. Futerfas of the Law Offices of Alan S. Futerfas, New York.
This judicial dissolution proceeding was commenced by the Attorney General of the State of New York on behalf of the People of the State of New York ("Petitioner") against The Donald J. Trump Foundation (the "Foundation"), and the Foundation's officers, directors, and board members: Donald J. Trump ("Mr. Trump"), Donald J. Trump Jr.; Ivanka Trump; and Eric F. Trump (collectively, the "Individual Respondents" and together with the Foundation, "Respondents").
The Foundation was incorporated in 1987 in New York as a private not-for-profit corporation as defined under Section 509(a) of the Internal Revenue Code. Its mission is to "receive and maintain a fund ... to [be] use[d] ... exclusively for charitable, religious, scientific, literary or educational purposes either directly or by contributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code." Mr. Trump was the founder and president of the Foundation. The remaining Individual Respondents were board members of the Foundation.
In its petition, Petitioner alleges that the Foundation and its board members have transacted business illegally and abusively over a number of years. The allegations focus on Respondents' failure to operate and manage the Foundation in accordance with corporate and statutory rules and their fiduciary obligations, resulting in the misuse of charitable assets and self-dealing. Petitioner also alleges that charitable assets, primarily consisting of money donated by outside sources, were used to promote Mr. Trump's properties, purchase personal items, advance Mr. Trump's presidential election campaign, Donald J. Trump for President, Inc. ("Campaign"), and settle certain personal legal obligations.
Based on the foregoing allegations, Petitioner pleads causes of action for: (1) breach of fiduciary duty and waste under New York's Not-For Profit Corporation Law ("N-PCL") against the Individual Respondents; (2) failure properly to administer Foundation assets and waste under New York's New York Estates, Powers and Trusts Law ("EPTL") against the Individual Respondents; (3) wrongful related party transactions against Mr. Trump as defined in the N-PCL and EPTL; (4) dissolution of the Foundation under the N-PCL §§ 112 and 1101 ; (5) dissolution of the Foundation under the N-PCL §§ 112 and 1102 ; and (6) an injunction pending resolution of the proceeding.
Instead of answering the petition, Respondents move to dismiss pursuant to CPLR 3211(a)(5) and (a)(7) arguing that: the court lacks jurisdiction over Mr. Trump; most of the transactions supporting the claims in the petition are barred by the Statute of Limitations; Mr. Trump's televised fundraiser in Des Moines, Iowa on January 28, 2016 ("Fundraiser") cited in the petition was not a wrongful related party transaction; the Fundraiser and subsequent disbursement of money raised at the Fundraiser did not constitute prohibited political activity; Petitioner has failed sufficiently to allege breach of fiduciary duty and failure properly to administer charitable assets; Petitioner has failed adequately to allege damages; the Petitioner's "pervasive bias" against Respondents disqualifies it from maintaining this proceeding; and there is no basis for the injunctive relief sought.
Many of the defenses Respondents allege have broad application and pertain to more than one of Petitioner's causes of action. To the extent possible, I have first addressed these defenses.
Respondents argue that this proceeding should be dismissed against Mr. Trump because, pursuant to the Supremacy Clause, U.S. Const. art. VI, § 2, a sitting president may not be sued. In opposition, Petitioner argues that, in Clinton v. Jones , 520 U.S. 681, 117 S.Ct. 1636, 137 L.Ed.2d 945 (1997), the Supreme Court of the United States specifically rejected Mr. Trump's argument. Petitioner notes that Respondents have failed to cite a single case in which any court has dismissed a civil action against a sitting president on Supremacy Clause grounds, where, as here, the action is based on the president's unofficial acts. In an Amicus Curiae brief submitted in this proceeding, several professors also argue that Mr. Trump is not immune from civil suit in state court for actions he takes in his unofficial capacity.1
In Clinton v. Jones , the Supreme Court held that the doctrine of separation of powers does not bar a federal suit (including state law claims) against a sitting president. 520 U.S. 681, 117 S.Ct. 1636, 137 L.Ed.2d 945 (1997). Specifically, the Supreme Court held that the president does not have immunity and is "subject to the laws" for unofficial acts. Id. at 695-696, 117 S.Ct. 1636 ().
Although the Supreme Court noted that the Supremacy Clause prohibits state courts from exercising "direct control" over federal officers in a way that interferes with their federal responsibilities, this concern is only relevant in cases relating to the execution of federal law. Id. at 691 n.13, 117 S.Ct. 1636. Here, the allegations raised in the Petition do not involve any action taken by Mr. Trump as president and any potential remedy would not affect Mr. Trump's official federal duties.
Respondents raise three other points in support of their argument that this court lacks jurisdiction over Mr. Trump. First, Respondents argue that state court proceedings should not be permitted against sitting presidents because they can reflect "local prejudice" against "unpopular" federal officials. State courts, however, possess the same ability as federal courts to dismiss vexatious lawsuits. As the Supreme Court stated in Clinton v. Jones , "the availability of sanctions provides a significant deterrent to litigation directed at the President in his unofficial capacity for purposes of political gain or harassment." 520 U.S. at 708-709, 117 S.Ct. 1636 ().
Second, Respondents argue that federal courts are better able to manage cases against a sitting president to avoid interfering with official duties. This argument is meritless. A state court action does not impose any greater burden on a sitting president than a federal court action. State courts are equally capable of "accommodat[ing] the President's needs" and "of giving ‘the utmost deference to Presidential responsibilities.’ " Clinton , 520 U.S. at 709, 117 S.Ct. 1636citing United States v. Nixon , 418 U.S. 683, 710-711, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974) ; see also Zervos v. Trump , 59 Misc. 3d 790, 797, 74 N.Y.S.3d 442 (Sup. Ct. N.Y. Co. 2018).
Finally, Respondents argue that federal courts are better suited to address legal issues that arise in cases against federal officials. The dissenting opinion that Respondents cite for this proposition simply noted that federal courts have greater expertise than state courts in applying federal law. See Preiser v. Rodriguez , 411 U.S. 475, 514, 93 S.Ct. 1827, 36 L.Ed.2d 439 (1973) (Brennan, J., dissenting). Here, resolution of the petition is governed entirely by New York law, thus a federal court's alleged superior knowledge of federal law is inapposite.
Allowing this action to proceed is entirely consistent with the Supreme Court's holding in Clinton v. Jones that the President of the United States is "subject to the laws for his purely private acts." Clinton , 520 U.S. at 696, 117 S.Ct. 1636. Judge Schecter of the New York Supreme Court reached the same determination and rejected Mr. Trump's jurisdiction-based dismissal arguments in Zervos , 59 Misc. 3d at 797, 74 N.Y.S.3d 442 ().2
In accordance with Clinton v. Jones and Zervos v. Trump , I find that I have jurisdiction over Mr. Trump and deny Respondents' motion to dismiss the petition against him on jurisdictional grounds.
Respondents argue that the transactions in the petition that occurred more than six years before the petition was filed must be excluded as time-barred. Specifically, allegations concerning the 2007 donation of $100,000 to the Fisher House Foundation (the "Fisher House Transaction"), and allegations concerning the February 14, 2012 donation of $158,000 to the Martin B. Greenberg Charitable Foundation (the "Greenberg Transaction") are barred by the six-year statute of limitations.
Respondents further maintain that the transactions that occurred more than three years before the petition was filed must also be excluded because the relief sought for those transactions is primarily monetary damages, and therefore, the three-year statute of limitations bars consideration of those transactions.
In response, Petitioner argues that, because most of the relief it seeks is equitable and most of its allegations relate to misconduct that occurred within the six-year time period before the petition was filed, the statute of limitations does not bar consideration of those transactions. It further contends that the...
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