K&D LLC T/A Cork v. Trump Old Post Office LLC ( 2018 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
K&D, LLC t/a CORK,
Plaintiff,
v.
Civil Case No. 17-731 (RJL)
TRUMP OLD POST OFFICE, LLC,
FILED
N0v262018
Clerk, U.S. District & Bankruptcy
Courts for the District of Co|umbia
and
DONALD J. TRUMP, individually, and
in his personal capacity,
VV\/\./\/V\-/\/\-/V\-/V\/V
Defendants.
-¢1..
MEMoRANDUM oPINIoN
(November‘gt, 2018) [Dkr. ## 31, 32]
Plaintiff K&D, LLC is the owner and operator of Cork Wine Bar (hereinafter,
“plaintiff’ or “Cork”), a restaurant and bar located in the downtown Washington, D.C.
area. Am. Compl. 2 [Dkt. # 30]. On l\/larch 9, 2017, Cork brought this action against
defendants Trump Old Post Office, LLC (“OPO”) and President Donald J. Trump
(“President Trump” or “the President”), alleging that defendants are liable in tort for unfair
competition under D.C. common law and seeking injunctive relief. Id. at 1111 30-42; see
D.C. Sup. Ct. Compl. ll [Dkt. # l-l].l OPO, which is owned by a revocable trust that acts
' Cork filed suit initially in D.C. Superior Court, but defendants timely removed the
action to federal court, see Notices of Removal [Dkt. ## l, 4], and on January 2, 2018, I
denied Cork’s motion to remand. l allowed Cork to file an amended complaint, which it
did on February 12, 2018.
for the sole benefit of President Trump, operates a hotel and restaurants under the name
Trump lnternational Hotel (“Hotel”). Am. Compl. W 2, 5, 12_13. The Hotel is located
within the historic Old Post Office Pavilion at 1100 Pennsylvania Avenue, N.W., which
OPO leases from the General Services Administration (“GSA”). Id at W 7-8.
Pending before the Court are OPO’s and the President’s motions to dismiss. See
Def. Trump Old Post Office LLC’s l\/lot. to Dismiss and Stmt. of Points and Authorities in
Support (“OPO l\/lot. to Dismiss”) [Dkt. ## 31, 31-1]; Def. Donald J. Trump’s l\/lot. to
Dismiss (“Pres. Trump Mot. to Dismiss”) [Dkt. # 32]. Upon consideration of the pleadings
and the relevant law, and for the reasons stated below, defendants’ motions to dismiss are
GRANTED and this case is DISMISSED.
BACKGROUND
The crux of Cork’s complaint is that since President Trump took office on January
20, 2017, Cork has been damaged by unfair competition resulting from the President’s
ownership, through OPO, of the Hotel. Cork alleges that it “competes with the restaurants
in the Hotel by providing the same or similar services that are provided by them in the same
marketplace.” Am. Compl. 11 32. Specifically, Cork asserts that a large portion of its
business involves hosting and catering “receptions and dinners for large groups of
lobbyists, as well as for political fundraisers and conventions” attended by individuals and
organizations who have business before and/or seek to influence federal officials and
United States policy. Ia’. at 11 4, 19, 24-28.
Since the President’s election, Cork claims, “many organizations and individuals,
including citizens of nations other than the United States, [have] substantially increased
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their use of the Hotel and its various facilities to the detriment of Cork.” Ia’. at 11 l7. Cork
attributes this upswing to an intentional effort by the Hotel, President Trump, and Trump
family members and associates “to promote the Hotel to maximize its exposure and
income-producing potential.” Id. at 11 20. The Amended Complaint provides several
examples of these so-called “promotional activities,” including the use of “Trump” name
branding as well as former White House Press Secretary Sean Spicer’s televised
encouragement to visit the Hotel, which he described as “absolutely stunning.” Id. at
1120(a)-(b). Cork also references press reports documenting the Hotel’s patronage by
foreign diplomats and lobbyists, purportedly demonstrating the Hotel’s unfair advantage
Ia'. at W 21-23.
In addition, Cork emphasizes Section 37.19 of OPO’s lease with the GSA, which
prohibits any elected United States or D.C. official from being “admitted to any share or
part of this Lease, or to any benefit that may arise therefrom,” unless the official is “a
shareholder or other beneficial owner of any publicly held corporation or other entity, if
this Lease is for the general benefit of such” entity. Id. at 11 10. According to Cork,
President Trump’s beneficial ownership of the Hotel through OPO violates Section 37.19,
placing OPO in default. Id. at 1111 35, 38. The parties dispute the importance ofthis alleged
breach; defendants contend that it is fundamental to Cork’s unfair competition claim, see
OPO Mot. to Dismiss 9-13; Pres. Trump l\/lot. to Dismiss 12-13, while Cork describes it
as an ancillary illustration of D.C.’s “understanding of fair competition norms,” see Pl.’s
l\/lem. of Points and Authorities in Opp’n to February 2018 l\/lots. of Defs. to Dismiss
(“Pl.’s Opp’n”) 24 [Dkt. # 34]. In either case, after President Trump took office, the GSA
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determined that his assumption of the Presidency does not constitute a breach of Section
37.19 and that GPO remains in compliance with the lease. See OPO l\/lot. to Dismiss 4-5.
On February 26, 2018, defendants moved to dismiss Cork’s Amended Complaint
under Federal Rule of Civil Procedure 12(b)(6). Defendants contend that Cork has failed
to state an unfair competition claim under D.C. common law because: (l) the allegedly
tortious conduct does not constitute an “unlawful act” under D.C.’s narrow unfair
competition law; (2) our Circuit Court precedent forecloses unfair competition claims
predicated on the competitive advantage derived from a public figure’s prominence; and
(3) Cork cannot sue in tort to enforce a contract (the GSA lease) to which it is not a party.
OPO Mot. to Dismiss 7-15; Pres. Trump Mot. to Dismiss 9-14. President Trump’s defense
rests on the additional federal law grounds that, as President, he is entitled to absolute
immunity from Cork’s lawsuit, and that Cork’s claim is preempted under the Constitution’s
Supremacy Clause, which precludes D.C. from directly regulating federal officials Pres.
Trump Mot. to Dismiss 4-9. Cork opposed defendants’ motions to dismiss on l\/larch 12,
2018, see [Dl556 U.S. 662, 678 (2009) (quoting BeZZAtl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). A complaint “does not need detailed factual allegations,” but it does
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need “more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Twombly, 550 U.S. at 555 (alteration in original) (citations
and internal quotations marks omitted). A facially plausible claim requires “factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal_, 556 U.S. at 678. “The Court assumes the truth of all well-
pleaded factual allegations in the complaint and construes reasonable inferences from those
allegations in the plaintiffs favor[.]” Sissel v. U.S. Dep ’t of Health & Human Servs., 760
F.3d 1, 4 (D.C. Cir. 2014). The Court “need not, however, accept inferences drawn by a
plaintiff if such inferences are unsupported by the facts set out in the complaint.” Nurrl.`a’a’z`n
v. Bolden, 818 F.3d 751, 756 (D.C. Cir. 2016) (per curiam) (alterations and internal
quotation marks omitted). Nor must it “accept legal conclusions couched as factual
allegations.” Id. (citing Iqbal, 556 U.S. at 678). In deciding a Rule 12(b)(6) motion to
dismiss, the Court may consider not only the factual allegations in the complaint, but also
any “documents attached to or incorporated in the complaint, matters of which courts may
take judicial notice, and documents appended to a motion to dismiss whose authenticity is
not disputed, if they are referred to in the complaint and integral to a claim.” Harrz`s v.
Amalgamated Transl't Unl`on Local 689, 825 F. Supp. 2d 82, 85 (D.D.C. 2011).
ANALYSIS
While appearing at first blush to be just another unfair competition action, there are
constitutional questions of profound weight and import lurking within the contours of this
case. Fortunately, however, the pending motions can be resolved without opening that
Pandora’s box of novel issues. Thus, for the reasons set forth below, l have concluded on
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the merits that Cork has failed to state a claim of unfair competition under D.C. law and
that defendants OPO’s and President Trump’s motions to dismiss must be GRANTED.2
I. Unfair Competition
Reflecting “our society’s encouragement of ‘aggressive economic competition,”’
the tort of unfair competition is actionable at D.C. common law only in “limited”
circumstances Econ. Research Servs., Inc. v. Resolution Ecorzs., LLC, 208 F. Supp. 3d 219,
231 (2016) (quoting Ray v. Proxmire, 581 F.2d 998, 1002 (D.C. Cir. 1978)); see also
Sccmwell Labs., Inc. v. Thomas, 521 F.2d 941, 949 (D.C. Cir. 1975) (tort of unfair
competition must be “limited in scope in a free market economy based on free and open
competition for business”). The law does not enumerate “specific elements” which, if
established, make out a cause of action for unfair competition. Camara’a v. Certz'fzea’ Fz'n.
Planner Ba’. ofStandards, Inc., 672 Fed.Appx. 28, 30 (l\/lem) (D.C. Cir. 2016) (quoting
Furash & Co., lnc. v. McCla\/e, 130 F. Supp. 2d 48, 57 (D.D.C. 2001)). Instead, the claim
is defined “by the description of various acts that would constitute the tort ifthey resulted
in damage.” Id. These acts include “defamation, disparagement of a competitor’s goods
2 l therefore need not reach the federal immunity and preemption defenses that
President Trump raises in his motion to dismiss. 1 note, however, that during the oral
argument the parties agreed that neither absolute presidential immunity nor federal
preemption are threshold issues that must be decided before reaching the merits. See, e.g.,
In re Sealed Case No. 99-309[, 192 F.3d 995, 1000 (D.C. Cir. 1999) (issue of first
impression need not be decided when “there is another ground upon which [the court] can
dispose of th[e] case that does not raise constitutional concerns”); United States ex rel.
Long v. SCS Bus. & Tech. lnst., lnc., 173 F.3d 890, 894 (D.C. Cir. 1999) (“a less than pure
jurisdictional question need not be decided before a merits question”); Horne v. Coughlz'n,
191 F.3d 244, 246 (2d Cir. 1999) (“[T]he Supreme Court has for generations warned
against reaching out to adjudicate constitutional matters unnecessarily.”).
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or business methods, intimidation of customers or employees, interference with access to
the business, threats of groundless suits, commercial bribery, inducing employees to
sabotage, [and] false advertising or deceptive packaging likely to mislead customers into
believing goods are those of a competitor.”’ B & W Mgmt., Inc. v. Tasea lnv. C0., 451
A.2d 879, 881 n.3 (D.C. 1982) (citing William Prosser, Handbook of the Law of Torts
956~57 (4th ed. 1971)).
The Amended Complaint, as defendants amply point out in their papers, does not
identify any of the foregoing wrongful acts. Instead, Cork alleges that “it has been
damaged by the unfair advantage that the Hotel has exploited because of its ownership by
President Trump.” Am. Compl. 11 31 (emphasis added). According to Cork, when the
President took office, it and the Hotel ceased to compete “on a level playing field” due to
President Trump’s elevated official profile, an imbalance exacerbated by the deliberate
efforts of White House personnel and others to promote and market the Hotel in order “to
maximize its exposure and income-producing potential.” Ia’. at 1111 20, 33. After defendants
moved to dismiss, however, Cork apparently recognized that while it may view President
Trump’s “failure to divest his ownership interest in the Hotel” as the “heart” of its
complaint, it had to identify “a sufficiently discrete course of [wrongful] conduct” to
support its theory oflegal liability. Pl.’s Opp’n 16-17. To that end, Cork now emphasizes
the Amended Complaint’s passing characterization of defendants’ alleged wrongdoing as
“interfer[ence] with Cork’s access to business.” [a’. at 17, 20 (citing Am. Compl. 11 33,
which, in fact, alleges only that President Trump’s ownership of the Hotel while President
has “impair[ed]” Cork’s “ability to compete with the Hotel”). Neither the allegations in
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the Amended Complaint, nor the quasi-revisionist gloss placed on them in Cork’s briefing,
are sufficient, however, to state a claim for unfair competition. How so?
While there is no question that “interference with access to the business” is conduct
that may support an unfair competition claim under D.C. law, see B & WMgmt., lnc., 451
A.2d at 881 n.3, “interference” in this context does not simply mean conduct that redounds
to the detriment of the business of another; it means to interpose and hinder or impede
one’s access to business in a manner that is tortious. See Pl.’s Opp’n 17-18 (“a party may
state a viable claim for unfair competition by alleging tortious interference with
advantageous business relations" (emphasis added)); Intelsat USA Sales Corp. v. Jach~
Tech, Inc., 935 F. Supp. 2d 101, 120 (D.D.C. 2013) (same). Here, Cork does not allege that
defendants interfered with or hindered its business in a tortious or otherwise independently
wrongful way. Cork does not, for example, accuse OPO or President Trump of acting to
dissuade potential customers from patronizing Cork or somehow obstructing entry to
Cork’s location. See Complaint jj 70-78, Hanley-Wooa’ LLC v. Han[ey Wooa’ LLC, 783
F. Supp. 2d 147, 153 (D.D.C. 2011) (1:10-cv-01167-JEB) (unfair competition claim stated
where plaintiff alleged, inter alia, that defendant disparaged plaintiffs business methods
to third parties and intimidated plaintiffs employees and business partners); Prosser,
Handbook of the Law of Torts, at 956 (“interference with access to the business” means
"obstruct[ing] . . . the means of access to the place of business”).
Instead, Cork’s complaint, at its core, is that defendants are acting to realize and
maximize the competitive advantage and financial benefits available to them as a result of
President Trump’s heightened notoriety since taking office. To Cork, these efforts are
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distasteful and unseemly, if not unethical. 1ndeed, they may even have cost Cork some
money (although causation is far from clear on the face of the Amended Complaint). But
even if Cork’s offense is well taken, its objection is not to a legally redressable wrong. 1ts
objection is to “the process known as competition, which though painful, fierce, frequently
ruthless, sometimes Darwinian in its pitilessness, is the cornerstone of our highly
successful economic system.” Speakers of Sport, Inc. v. ProServ, Inc., 178 F.3d 862, 865
(7th Cir. 1999).
Unfortunately for Cork, “[c]ompetition is not a tort.” Id. Nor should it be. To hold
actionable Cork’s allegations in this case, 1 would be condemning a broad swath of
legitimate business conduct. See Econ. Research Servs., 208 F. Supp. 3d at 231 (the
presence of “legitimate business motives” relieves a defendant of unfair competition
liability for “engaging in activities designed solely to destroy a rival”). 1 would be
foreclosing all manner of prominent people_from pop singers to celebrity chefs to
professional athletes_-from taking equity in the companies they promote.3 1ndeed, 1 would
be reading the “unfair” right out of “unfair competition.” This 1 cannot dol
Moreover, even if1 were inclined in Cork’s favor, 1 would still be bound by our
Circuit Court’s decision in Ray v. Proxmire, 581 F.2d 998 (D.C. Cir. 1978). 1n that case,
Ray alleged, inter alia, that Proxmire’s tour and hospitality service unfairly competed with
Ray’s similar business by trading on the prestige and contacts that Proxmire had as the wife
3 See, e.g., The Telegraph, Saperstars don ’t just endorse a brand . . . now they want
to own the business too, July 9, 2016,
available at https://www.telegraph.co.uk/business/2016/07/09/superstars-dont-just-
endorse-a-brand-now-they-want-to-own-the-bu/.
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of the very senior sitting United States Senator from Wisconsin: William Proxmire. Id. at
1002-03. Ray claimed that Proxmire secured customers by using her influence and
prominence to provide tourists with access and opportunities-“special tours” to “places
normally inaccessible to other groups” like the vice-presidential mansion and Senate office
buildings-that Ray’s company simply could not offer. Ia’. The district court dismissed
Ray’s unfair competition claim with prejudice, and our Circuit Court affirmed. 1n our
Circuit Court’s view, Ray’s claim ran headlong into “the insuperable difficulty . . . that
simple use of one’s status in society is not itself illegal.” Ia’. at 1003. Thus, while as a
normative matter “personal gain should flow from individual ability and effort not merely
from perceived rank,” the judicial role “is limited to redress of legally-cognizable
wrongdoing, and financial success does not become unlawful simply because it is aided by
prominence; nor could it be, without locking the famous out of the economy.” Ia’. This
case is no different. “[H]owever reprehensible it might be through political infiuence to
use public [office] for private gain, that evil cannot provide a basis for” Cork’s unfair
competition claim here. Ia’.
Faced with the foregoing precedential roadblocks, Cork responds that the common-
law tort of unfair competition is “constantly evolving” and “has evolved considerably
since” 1978, when our Circuit decided Ray. Pl.’s Opp’n 18, 24. That the doctrine is
“evolving” in a broad sense is not terribly illuminating, as the common law by its very
nature changes over time. See, e.g., Hamdan v. Ranisfela’, 548 U.S. 557, 691 (2006)
(Thomas, J., dissenting) (“the nature of the common law” is “by definition, evolv[ing] and
develop[ing] over time”); Al Bahlal v. United States, 767 F.3d 1, 57 (D.C. Cir. 2014)
10
(Brown, J., concurring in part and dissenting in part) (describing “all common law” as “an
evolving process”). To be sure, the tort of unfair competition in D.C. is somewhat unique
in that it is defined not by “specific elements” but by reference to a non-exhaustive list of
wrongful conduct. See Ca)nara’a, 672 Fed. Appx. at 30; B & WMg)nt., Inc., 451 A.2d at
881 n.3. But, while the contours of D.C.’s unfair competition law may not be strictly and
finally settled, it is plain that they do not extend to the allegations in the Amended
Complaint. Ray says as much, and its reasoning is sound. Cork cites no authorities
suggesting that Ray is no longer good law, and its attempts to distinguish Ray on the facts
fall short. See Pl.’s Opp’n 24-26. “Where the District of Columbia Court of Appeals has
not addressed the issue, [the Court] will not expand the scope of the tort
of unfair competition recognized in existing case law.” Unia’isco, Inc. v. Schattner, 824
F.2d 965, 968-69 (Fed. Cir. 1987).
Finally, the parties spill a great deal of ink over the significance vel non of Section
37.19 of OPO’s lease with GSA. Depending on who you ask, OPO’s alleged breach of
Section 37.19 is either an indispensable component of Cork’s claim, see OPO Mot. to
Dismiss 9-13; Pres. Trump Mot. to Dismiss 12-13, or a nonessential yet illustrative
example ofD.C.’s “understanding of fair competition norms,” Pl.’s Opp’n 24. There is no
need, however, to resolve this issue under these circumstances Even assuming Cork’s
complaint does not turn on OPO’s alleged breach of the lease, 1 still find that Cork has
failed to state a claim for unfair competition under D.C. law.
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CONCLUSION
Thus, for all of the foregoing reasons, defendants’ motions to dismiss are
GRANTED and this case is DISMISSED. An order consistent with this Memorandum
Opinion is separately and contemporaneously issued herewith.
m
RICHARI§.L)EON
United States District Judge
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