Nicolai Haugsted
1. Trump wanted immediate relief from sanctions but the appeals court’s answer could hardly have been clearer.
Donald Trump’s fight with the IRS began as a demand for at least $10 billion over leaked tax records.
Eight months later, the money is no longer the strangest part of the story, RADAR can report.
Trump and his co-plaintiffs have been sanctioned after a federal judge concluded that their lawsuit against agencies controlled by his own administration was collusive, lacked genuinely opposing parties and had been filed in bad faith to provide cover for an extraordinary settlement arrangement.
Trump wanted those sanctions partially frozen while he appeals.
The Eleventh Circuit delivered its answer Tuesday with admirable brevity.
“STAY DENIED.”
A three-judge panel rejected the emergency request from Trump, Donald Trump Jr., Eric Trump, the Trump Organization and two of their attorneys, leaving key portions of the lower court’s sanctions in place while their broader appeal continues.
A $10 billion lawsuit produced a very unusual settlement
Trump and his family originally sued the IRS and Treasury Department in January, alleging that former IRS contractor Charles Littlejohn had illegally obtained and disclosed their confidential tax information.
Their complaint demanded damages of “at least $10,000,000,000.00.”
Trump’s side later voluntarily dismissed the lawsuit with prejudice.
Nothing on the court docket identified a settlement when the case disappeared. The Justice Department subsequently announced an agreement that included a $1.776 billion Treasury-funded program for people who were not plaintiffs in Trump’s lawsuit.
The agreement also purported to release “any and all claims” the federal government had or could have brought against Trump and the other plaintiffs, along with members of Trump’s family and associated businesses, through May 18.
Thirty-five former federal judges took notice.
They asked the district court to reopen the case and alleged that the agreement was “a product of collusion and is itself a fraud on the court.”
The judge found there was nobody genuinely fighting Trump
US District Judge Kathleen Williams subsequently examined whether Trump could maintain a genuine legal dispute against executive agencies ultimately controlled by Trump himself.
Her conclusion was devastating for the plaintiffs.
Williams found that the parties were not genuinely adverse, pointing to Trump’s constitutional authority over the executive branch and his supervisory relationship with officials at Treasury and the IRS.
Government lawyers had also never appeared to challenge Trump’s lawsuit before its dismissal.
Williams concluded that the parties’ interests were effectively aligned and described the jurisdictional problem as “so obvious and so insurmountable” that the circumstances supported finding an improper motive behind the lawsuit.
The judge went further.
According to her ruling, Trump and his co-plaintiffs had “acted in bad faith and for an improper purpose” by “collusively filing a lawsuit with claims subject to multiple dispositive defenses solely to provide cover for a collusive settlement.”
Those are findings by the district court that Trump and the other appellants are challenging, rather than allegations independently established by the appeals court.
Trump cannot use the deal quite the way he wants
Williams imposed non-monetary sanctions on the parties and two Trump attorneys, Alejandro Brito and Daniel Epstein.
One restriction has become particularly contentious.
Trump and the other sanctioned parties cannot use or cite provisions from the purported agreement in an official proceeding as evidence that a settlement was actually reached in the IRS lawsuit.
Trump’s side attacked that restriction as an unconstitutional “gag order” and prior restraint violating the First Amendment.
The Eleventh Circuit was not persuaded.
Appeals judges noted that Williams had already clarified the scope of her order. It does not prohibit Trump and the others from talking about the agreement altogether.
Instead, the sanction applies when they attempt to present it as evidence of a settlement reached in the IRS case during judicial, administrative, regulatory, arbitration or other official proceedings.
Trump’s lawyers therefore remain free to discuss the agreement outside those circumstances.
The First Amendment argument fails to win a pause
Appeals judges also rejected the argument that Trump had shown a sufficiently strong likelihood of winning his First Amendment challenge to justify temporarily suspending the restriction.
“The speech-related sanction is not, as the appellants say, a prior restraint,” the court wrote, explaining that it followed findings of collusion and bad faith rather than preventing speech before any determination had been made.
Trump’s side had characterized the sanction as much broader.
The Eleventh Circuit disagreed with that interpretation, pointing to Williams’ clarification that the order was “not a categorical restriction prohibiting any reference to any agreement of the Parties.”
Appeals judges ultimately found that the appellants had failed to make the strong showing needed to prevail at this preliminary stage.
Hence the unusually economical conclusion.
“STAY DENIED.”
The $1.776 billion fund has had problems of its own
The proposed Treasury-funded arrangement has attracted controversy well beyond Trump’s sanctions dispute.
Former federal judges argued that the fund would distribute taxpayer money to unidentified people who were never parties to the underlying lawsuit. Separate litigation also temporarily blocked payouts, while critics questioned whether Congress had authorized the arrangement.
The Justice Department defended the proposed fund as a mechanism for compensating people who had suffered from what the administration describes as government “weaponization.”
Acting Attorney General Todd Blanche later told Congress that the fund would not move forward.
Williams nevertheless found that the broader agreement and the unusual behavior surrounding Trump’s IRS lawsuit supported sanctions.
Her ruling noted that the settlement contemplated benefits unrelated to the original tax-disclosure claims and that the government’s lawyers had failed to defend the United States in the manner normally expected from opposing litigants.
