A three-judge panel of the 11th U.S. Circuit Court of Appeals on Tuesday affirmed a lower court's finding that President Trump colluded with the Internal Revenue Service and the Justice Department in a $10 billion lawsuit that was later dismissed under questionable circumstances.
The ruling upholds Florida-based U.S. District Judge Kathleen Williams' July decision, which determined that the lawsuit—filed by Trump against his own administration over the leak of his tax returns—was never a genuine adversarial proceeding. Williams found that the case was brought for an improper purpose and sanctioned two Trump attorneys.
"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 appellate panel wrote. "Given the record before us, the appellants have not made a strong showing that the district court committed clear error in its collusion and bad faith findings."
At the heart of the dispute is a sequence of events that Judge Williams described as a sham. Trump sued the IRS in January, years after the leak of his tax returns, and then struck an agreement with the agency in late May to dismiss the case. The Justice Department subsequently created a $1.776 billion "anti-weaponization" fund to compensate individuals who claim they were wronged by the government—a fund that Williams noted was established outside the normal court approval process.
In her 56-page ruling, Williams was blunt: "In sum, 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." She added that the plaintiffs "improperly employed this lawsuit to justify a particular award in this matter—access to taxpayer funds and exemption from audits and other investigations—which was accomplished by leveraging control over Defendants."
The judge also prohibited the Trump administration from referring to the litigation as a "settlement," and her sanctions against the two attorneys were likewise upheld by the appeals court, which found she acted within her authority.
"The appellants have not persuaded us to construe the sanction more broadly and have not made a strong showing that they will prevail on their First Amendment challenges," the panel wrote. "They do not cite any authorities suggesting that a speech-related prohibition imposed as a penalty for conduct determined to be sanctionable violates the First Amendment."
The ruling lands amid a broader pattern of legal and political maneuvering by the Trump administration, including controversial financial arrangements such as a Venezuelan oil fund that has raised separation-of-powers concerns. The case also intersects with ongoing debates over executive power and the use of government resources for personal benefit.
For now, the 11th Circuit's decision leaves in place a stinging rebuke of the president's legal tactics and a finding that he used the courts not to resolve a genuine dispute but to secure favorable treatment from the agencies he oversees.
