Federal Appeals Court Upholds Sanctions in Trump’s IRS Lawsuit Collusion Case
The 11th Circuit refuses to pause sanctions on Trump’s lawyers in $10B IRS lawsuit ruled collusive with his own administration.
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A federal appeals court on Tuesday declined to pause sanctions against President Donald Trump’s lawyers tied to his $10 billion IRS lawsuit, affirming a Florida judge’s finding that the case was a collusive effort between Trump and his own administration. The ruling keeps in place penalties and restrictions while the ongoing appeal proceeds.
A Lawsuit Against His Own Government
The lawsuit began in January, when Trump, his sons Donald Trump Jr. and Eric Trump, and the Trump Organization sued the IRS and Treasury Department in Miami federal court. They sought $10 billion in damages over the leak of their tax returns, accusing the agencies of failing to protect “confidential, personal financial information.”
The leak originated from Charles “Chaz” Littlejohn, a former IRS contractor now serving a five-year prison sentence for disclosing the records to the media. The returns revealed that Trump paid just $750 in federal income tax in the year he won the presidency and no federal income tax in 10 of the previous 15 years. Trump had initially refused to release his returns, citing audits, before publishing them himself in 2022. The lawsuit was filed years after the leak and only after Trump returned to office with the power to remove officials he was suing.
The Settlement That Raised Red Flags
In late May, the Justice Department under Trump agreed to dismiss the lawsuit and create a $1.776 billion “anti-weaponization” fund to compensate individuals claiming wrongful government prosecutions. U.S. District Judge Kathleen Williams, an Obama appointee, found this arrangement deeply problematic.
In a 56-page ruling, Williams wrote, “there was never adverseness between the Parties; there was never a case or controversy; and there was never a question as to who would prevail.” She concluded that the lawsuit was improperly used to justify access to taxpayer funds through the settlement fund.
What the Appeals Court Decided
The three-judge panel of the Atlanta-based 11th Circuit Court addressed whether to stay Williams’ ruling while the appeal continues. They rejected Trump’s request, stating that his legal team failed to provide evidence explaining their conduct or disproving the collusion claim. The judges wrote, “The appellants did not submit or offer any evidence to explain their litigation conduct or demonstrate that the lawsuit and the settlement were not collusive.”
The panel also noted that Trump’s attorneys had not shown a strong case that the district court erred in finding collusion and bad faith. As a result, the July sanctions remain in effect, preventing Trump and certain officials from using the settlement as proof of a valid resolution in official matters, and keeping the disciplinary measures against two of his lawyers intact.
Sanctions on Trump’s Lawyers
Judge Williams referred Trump attorney Alejandro Brito to the Florida Bar for potential discipline and banned lawyer Daniel Epstein from practicing before the federal district court in South Florida for one year. The court also prohibited the parties from publicly presenting the settlement as a resolution of the claims, aiming to prevent the deal from being portrayed as vindication while its legitimacy is contested.
Trump’s legal team had sought an immediate lift of these sanctions and speech restrictions, but the appeals court declined, maintaining the restrictions for now.
Ongoing Appeal and Implications
The 11th Circuit’s order does not resolve the appeal’s merits, leaving the collusion finding and sanctions subject to further legal challenge. Whether the full 11th Circuit or the Supreme Court will weigh in remains uncertain. Additionally, the Florida Bar’s response to the referral of Brito and the future of the $1.776 billion fund remain unresolved as the legal battle continues.
This case underscores fundamental principles about the role of courts in resolving genuine disputes between adverse parties and raises questions about the proper use of litigation to trigger taxpayer-funded payouts.
As the appeal proceeds, the sanctions on Trump’s lawyers and restrictions on using the settlement remain in force, marking a significant judicial check on the unusual lawsuit and settlement arrangement engineered by the president and his administration.
