Buried in the new Trump Foundation lawsuit is a road map to something much bigger

The Quo Warranto solution.

Trump International Hotel in Washington, D.C. CREDIT: Chip Somodevilla/Getty Images
Trump International Hotel in Washington, D.C. CREDIT: Chip Somodevilla/Getty Images

New York Attorney General Barbara Underwood announced a major new lawsuit against the Trump Foundation Thursday. The lawsuit alleges “a pattern of persistent illegal conduct,” including “extensive unlawful political coordination with the Trump presidential campaign” and “willful self-dealing transactions to benefit Mr. Trump’s personal and business interests.” Underwood found that Trump violated the basic legal requirements for non-profits.

“As our investigation reveals, the Trump Foundation was little more than a checkbook for payments from Mr. Trump or his businesses to nonprofits, regardless of their purpose or legality,” Underwood said.

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Underwood is seeking $2.8 million in restitution and a 10-year ban on Trump serving as a director of a New York not-for-profit.

But buried in the complaint, however, is the road map to something even more significant. On page 7 of the petition, Underwood cites her authority under section 1101(a) of New York nonprofit law. That provision gives Underwood the authority to dissolve an entity that transacts its business in an illegal manner.

This is where things get interesting. The exact same authority is conferred to the attorney general in the law governing for-profit corporations. The attorney general, in New York and many other states, is authorized to dissolve a for-profit corporation that is operating illegally.

The root of this authority is a legal concept called Quo Warranto. As law professor Jed Shugerman explained to me last year, Quo Warranto is based on the concept that “[i]ncorporation is a privilege afforded by the state, but to maintain corporate status, one must conduct business legally.” Quo Warranto authority grants the state the ability to dissolve corporations that are acting “ultra vires,” or beyond their legal authority.

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Right now, there are multiple lawsuits against Trump arguing that his decision to maintain ownership of the Trump Organization violates the Emoluments Clause of the Constitution. Article 1, Section 9 of the Constitution prohibits any federal office holder, including the president, from accepting “any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.”

By continuing to own his golf courses, condos, hotels, and other properties, Trump receives a steady stream of emoluments from foreign governments.

The difficulty with the existing lawsuits is finding someone who has the authority to sue.

While the case that Trump is violating the Constitution is relatively straightforward, the tricky issue is who has the authority to sue Trump over the issue. Someone with the right to sue, in legal terms, has “standing.”

To have standing, a private party must show it has a specific injury and not just a “generalized grievance.”

Citizens for Responsibility and Ethics in Washington (CREW), for example, tried unsuccessfully to file a lawsuit against Trump and his Washington, D.C. hotel, arguing that his violation of the emoluments clause caused the organization to “divert resources from other work to monitor and respond to Mr. Trump’s activities.”

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A separate lawsuit brought by the attorneys general of D.C. and Maryland, arguing that the Trump hotel is unfairly harming businesses in their states, is ongoing.

But a Quo Warranto action by the New York attorney general could avoid all of these issues. Underwood has authority over the Trump Organization and could use its illegal activity — serving as a conduit for emoluments — to enjoin it from doing business with foreign governments, require the divestment of certain assets, or dissolve it completely.

In her new lawsuit Thursday, Underwood revealed that she is well aware of her authority to do so under New York law. Now all she has to do is act.