D.C. Circuit Affirms Dismissal Of Wine Bar’s Unfair Competition Action Against Trump Hotel
On February 28, 2020, the United States Court of Appeals for the D.C. Circuit affirmed a district court’s decision to dismiss a D.C. based restaurant’s unfair competition action against President Donald J. Trump and his Washington, D.C. hotel. K&D LLC v. Trump Old Post Office LLC and Donald J. Trump, No. 18-7185 (D.C. Circuit Feb. 28, 2020). The restaurant, Cork Wine Bar (“Cork”), brought suit in the Superior Court of the District of Columbia asserting claims for violation of D.C.’s common law of unfair competition. Cork principally alleged that the Trump International Hotel exploits an unfair competitive advantage by virtue of its association with the President’s name. Cork asserted that, following the 2016 election, Trump International Hotel began attracting a significant portion of Cork’s previous customer base including lobbyists, advocacy groups, and diplomats because of the customers’ perception that patronizing Trump’s establishment would help them curry favor with the Trump Administration.
Defendants timely removed the action to federal court, and the District Court denied Cork’s subsequent motion to remand. Thereafter, defendants moved to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The District Court granted the motion and dismissed the complaint, reasoning that it essentially amounted to a claim that famous proprietors cannot compete fairly, a claim which is not cognizable under D.C.’s common law of unfair competition. Cork appealed.
On February 28, 2020, the U.S. Court of Appeals for the D.C. Circuit issued an opinion affirming the District Court’s order. Circuit Judge Thomas Griffith wrote for the three judge panel, which included Judges Stephen Williams and Merrick Garland.
The panel affirmed the District Court’s order denying Cork’s motion to remand. The panel explained that the federal officer removal statute, 28 U.S.C. § 1442(a)(1), constitutes an exception to the well-pleaded complaint rule (which recognizes federal question jurisdiction only if a federal question is apparent on the face of the plaintiff’s complaint). The federal officer removal statute, by contrast, permits removal if the officer satisfies two requirements: he must raise a colorable federal defense, and the suit must relate to any act under color of his office.
The panel found that defendants raised a colorable federal defense, namely that the District of Columbia may not impose legal conditions on the lawful performance of presidential duties, such as prohibiting the President from operating a business while in office. As to the second requirement, the panel rejected Cork’s argument that the officer removal provision applies only where a plaintiff challenges the officer’s official act. The panel reasoned that Cork’s claim against the President necessarily relates to an act done under color of the President’s office, as the very conduct Cork challenged was the President operating a competing business while in office.
The panel also affirmed the District Court’s dismissal on the merits under rule 12(b)(6). The panel explained that the District of Columbia’s case law does not define unfair competition in terms of specific elements, but rather by example. Prohibited acts include “passing off one’s goods as those of another, engaging in activities designed solely to destroy a rival[,] and using methods themselves independently illegal.” Id. at 9 (quoting Ray v. Proxmire, 581 F.2d 998, 1002 (D.C. Cir. 1978)). More recently, D.C. courts have expanded the scope of unfair competition to cover acts such as defamation, disparagement of a competitor’s goods 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.” Id. at 9–10 (quoting B & W Mgmt., Inc. v. Tasea Inv. Co., 451 A.2d 879, 881 n.3 (D.C. 1982)).
The panel found that Cork made no meaningful attempt to square its theory with the prevailing case law. Despite characterizing defendants’ conduct using active verbs like “interfere” and “impair,” it was apparent that Cork alleged no conduct by defendants that interfered with their business. Rather, Cork simply alleged that the Trump International Hotel was experiencing success aided by the prominence associated with its name. The panel relied on the well-established principal that “financial success does not become unlawful simply because it is aided by prominence.” Cork conceded that it had identified no case law supporting its theory of actionable competitive activity, a novel theory that Cork hoped would garner the support of the judiciary in its chosen forum, the Superior Court of the District of Columbia. The panel noted that it is not permitted to expand the existing law of that jurisdiction but must take the law as it finds it. The panel also declined to certify the legal question to the District of Columbia Court of Appeals for resolution, noting that in order to do so there must be genuine uncertainty as to the proper resolution under existing law, and there was no such uncertainty.