A federal appeals court refused to reverse a federal judge’s decision to punish President Donald Trump and his lawyers for engaging in “bad faith” conduct and collusion in the president’s lawsuit, and subsequent out-of-court agreement, over an IRS contractor leaking his tax returns.
The three-judge panel of the 11th U.S. Circuit Court of Appeals found Trump and his lawyers were not likely to overturn the collusion finding. The panel left the lower court’s penalties in place as the case proceeds and will reconvene for a final decision at a future date.
“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 wrote.
Tuesday’s ruling stems from a January case in which Trump and his two sons sought compensation from the IRS and Treasury Department over leaked tax details pertaining to their family enterprise.
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As president, Trump had direct oversight of the same agencies he was suing, meaning he effectively ran both sides of the courtroom.
U.S. District Judge Kathleen Williams ruled that, before even filing their claim, Trump and his lawyers had colluded with the IRS defendants to eventually arrive at a settlement establishing a $1.78 billion “anti-weaponization” fund paid for by taxpayers to compensate people who felt targeted over political beliefs or actions.
The deal also gave Trump and his family lifetime immunity from tax audits. Attorney General Todd Blanche has declared that the fund portion of the deal is now dead.
“The facts before this Court demonstrate 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,” Williams wrote in her May decision.
“The Court expressly finds that Plaintiffs acted in bad faith,” she wrote.
Williams punished Trump’s lawyers by ordering his personal attorney to appear before disciplinary boards and forbidding Trump from benefiting from the settlement terms in the future.
Trump’s lawyers argued that the punishment lacked legal justification and violated the First Amendment, claims the appeals court rejected Tuesday.
“The appellants mount two main attacks on the district court’s speech-related sanction,” the appeals court wrote in its decision. “We conclude that the appellants have not made a strong showing that they will succeed on either of these grounds.”
Representatives of a bipartisan coalition of 35 former federal judges, who asked Williams to reopen the case, applauded Tuesday’s ruling.
“As we said from the beginning, Trump’s $10 billion lawsuit against the IRS was a sham, and the slush fund and global release deals that flowed from it were too,” they said. “The Eleventh Circuit saw this collusive scheme for exactly what it is and refused to stay the consequences.”
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