In a scathing decision issued on Monday, a federal judge in Florida ruled that President Donald Trump’s January 29 lawsuit against the IRS was nothing more than a pretext for a “settlement agreement” granting him, his family, and his supporters huge favors at the expense of U.S. taxpayers. The plaintiffs and the defendants “worked in tandem and were never actually adverse,” writes U.S. District Judge Kathleen Williams, who ordered sanctions against Trump’s lawyers. “Because this fact was so obvious and so insurmountable, the Court finds that this matter was brought for an improper purpose—to gain the imprimatur of judicial legitimacy for a ‘settlement’ that had no viable basis in law or fact.”
That “settlement,” which Acting Attorney General Todd Blanche announced on May 18, included $1.8 billion in taxpayer money for an “Anti-Weaponization Fund” designed to benefit Trump’s friends and followers. As Blanche revealed the next day, the agreement also included protection from liability for tax violations and any other federal offenses that Trump or his relatives may have committed prior to May 19—a provision that could save the president more than $100 million in back taxes, interest, and penalties.
The Anti-Weaponization Fund provoked a fierce bipartisan backlash that persuaded Blanche to abandon the scheme two weeks after announcing it. But Blanche said the sweeping immunity deal remained in place. Although Williams’ order does not affect either boon, it highlights the brazenly corrupt nature of the arrangement, which was based on a phony lawsuit that pitted Trump against agencies he oversees, represented by Justice Department lawyers who also answer to him.
Trump’s lawsuit, which was joined by two of his sons and the Trump Organization, preposterously alleged that an IRS contractor’s illegal disclosure of their tax returns had caused “at least” $10 billion in damages. In addition to offering an improbable estimate of the injury he had suffered, Trump filed the lawsuit more than two years after learning about the leak, exceeding the time limit set by the statute he invoked.
That law covers unauthorized disclosures by “any officer or employee of the United States.” So even if Trump had filed his lawsuit on time, he would have faced the challenge of arguing that a contractor employed by a consulting business fit into that category—a point that the Justice Department has disputed in other cases involving similar claims.
Despite those legal weaknesses, the Justice Department never bothered to contest Trump’s claims, in sharp contrast with the way it usually treats such lawsuits. That failure highlighted the blatant conflicts of interest created by a case in which both sides were represented by lawyers who worked for Trump. Further compromising the Justice Department’s ability to defend the IRS, an executive order that Trump issued in February 2025 bars the government’s lawyers from taking legal positions at odds with the president’s.
The situation was so bizarre that Williams, who oversaw the case in the Southern District of Florida, questioned whether it involved a genuine controversy between adverse parties, as required for the lawsuit to proceed. Trump dropped his case two days before the deadline for briefing on that issue, so Williams never resolved it. Nor did she have a chance to review the settlement. But on May 29, Williams ordered Trump’s lawyers to address “grievous allegations” about that cozy arrangement, including “charges of collusion” and “the assertion that the dismissal in this case was premised on deception by the Parties.” Williams was mulling “whether the case should be reopened because the Court was the ‘victim of a fraud.'”
Monday’s order is the product of that inquiry. Williams notes that Trump could have “brought this lawsuit in a timely fashion while he was a private citizen.” Instead, he “did not pursue his claims until he once again occupied the White House and had appointed his former lawyer” (Blanche) and the former lawyer of persons who are putative beneficiaries of the ‘Anti-Weaponization Fund'” (Associate Attorney General Stanley Woodward Jr., who signed the “settlement agreement” on behalf of the Justice Department) to “prominent positions in the DOJ.”
That delay fundamentally changed the nature of this purported legal dispute, Williams notes, since it meant Trump had “direct, unassailable control over Defendants.” By the time he filed his lawsuit, he was in charge of the the IRS, the Treasury Department, and the lawyers representing them. And as Williams notes, Trump has made it clear that he exercises complete control over those supposed adversaries.
Under Trump’s February 2025 order, “no employee of the executive branch acting in their official capacity may advance an interpretation of the law as the position of the United States that contravenes” the president’s “opinion on a matter of law,” including “positions advanced in litigation.” Williams underlines the implications: “In this case, unlike others that private parties have instituted, Defendants and their representatives [were] unable to advance any legal position or interpretation—however legitimate or well-reasoned—contrary to that held by Lead Plaintiff in this matter, President Trump.”
In addition to precluding the Justice Department from opposing Trump’s legal positions, his order said “it shall be the policy of the executive branch to ensure Presidential supervision and control of the entire executive branch.” The Supreme Court recently embraced that position in Trump v. Slaughter, affirming the president’s untrammeled authority to fire members of the Federal Trade Commission.
“Subordinates who exercise the President’s power are subject to removal by him,” Chief Justice John Roberts wrote in the majority opinion. “Then, and only then, can they remain accountable to the President, and the President to the people….These officers exercise the President’s power, not their own, and thus must be responsible to him.”
That principle means all the relevant actors in the IRS case, including Treasury Secretary Scott Bessent, IRS CEO Frank J. Bisignano Jr., Blanche, and other Justice Department officials, are proxies for Trump who serve at his pleasure. “Plaintiffs cannot argue before the Supreme Court that Executive Branch actors ‘unquestionably exercise[] executive power, and must therefore be controlled by the Chief Executive,'” Williams writes, and then argue in this case that “the Parties are sufficiently adverse to establish an actual case or controversy.”
If that reality were not enough to establish the lack of adverseness, Williams says, the Justice Department’s response to Trump’s lawsuit confirms that both sides were serving his interests. In contrast with their conduct in other cases involving claims based on the same statute and the same IRS contractor’s unauthorized disclosure of confidential tax information, she notes, the government’s lawyers did not “endeavor to defend” the agencies they were charged with representing, seek to “safeguard taxpayer monies,” or “even file an appearance.”
Instead, “before the Parties’ deadline for addressing the Court’s critical jurisdictional questions passed,” they “executed the ‘settlement agreement’ that effectively mooted the issues the Court identified,” Williams writes. “This case was ‘resolved’ before any litigation occurred and before the Government was required to explicate its position.”
Given “the brief chronology, the silent docket, and Defendants’ deviation from basic litigation strategies pursued in similar cases,” Williams says, “the Court must conclude that Defendants chose not to ‘advance an interpretation of the law as the position of the United States that contravenes’ President Trump’s opinion regarding this lawsuit. It is clear that obeisance to the mandate of his Executive Order has been fulfilled by Defendants’ actions (or more accurately, inaction) in this case,” which “demonstrates President Trump’s actual control in this litigation.”
That conclusion is consistent with Trump’s assertion, during a 2017 interview with The New York Times, that “I have [the] absolute right to do what I want to do with the Justice Department.” It is also consistent with the way Trump has portrayed his legal claims against federal agencies. “I’m suing myself,” he noted last October, when he sought $230 million in compensation from the Justice Department for federal investigations of him during the Biden administration. “I’m supposed to work out a settlement with myself,” he told reporters a few days after he sued the IRS.
“The Parties, most of whom are government actors, did not engage in any public discussion or judicial review regarding their ‘unusual’ arrangement and whether they were legally adverse,” Williams notes. “Indeed, they actively avoided such an undertaking. And the extraordinary award fashioned by the Parties for claims that were never litigated, and have yet to be defined, on behalf of unidentified third parties whose future remedies bear no relationship to the claims in this case, indicates that real adverse interests were never before the Court.”
Blanche confirmed that point when he decided not to implement the Anti-Weaponization Fund. That decision, “which has not been memorialized or adopted by Plaintiffs or their lawyers, demonstrates his confidence that he could speak for, and bind, both sides of this matter,” Williams writes. “This certitude supports the conclusion that the Parties worked in tandem and were never actually adverse. Indeed, ‘a party may not unilaterally repudiate a settlement agreement once it is reached.'”
The remaining provisions of the “settlement” are also legally dubious. One “purports to bar the IRS from conducting any future tax audits of President Trump, his sons, and their entities,” Williams notes. She says “this provision directly contravenes” 26 USC 7217, which makes it “unlawful” for an executive-branch official to “request, directly or indirectly, any officer or employee of the Internal Revenue Service to conduct or terminate an audit or other investigation of any particular taxpayer with respect to the tax liability of such taxpayer.”
The “explicit text of this statute” prohibits Trump and his lawyers from “asking for or promoting termination of an audit directed toward him,” Williams writes. “And acquiescing to any such demand is wholly incompatible with the duties of DOJ attorneys (as well as CEO Bisignano for the IRS) to enforce the law and protect the public interest.” Williams adds that “the conferral of possibly millions of dollars in tax relief and corollary benefits potentially violates Article II, Section I of the United States Constitution,” which says a president may not receive additional “compensation” from the government beyond his official salary.
“Whether executive branch actors can privately agree to give themselves and their former clients blanket immunities and billions of dollars in tax moneys for legally undefined grievances was never an issue advanced to this court,” Williams says. “The question is whether the parties could do so by claiming to be adverse and engaging the legitimacy of a court proceeding. The answer is a resounding ‘no’: The lead plaintiff and the government are one, a fully realized unitary interest.”
A court “should not be a forum for a party that cynically views a lawsuit as a vehicle to achieve a predetermined outcome,” Williams writes. “Plaintiffs 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.” And that, she says, violated Rule 11 of the Federal Rules of Civil Procedure, which prohibits filings “presented for an improper purpose.”
Based on that conclusion, Williams referred Alejandro Brito, one of Trump’s lawyers, to the Florida Bar for “its consideration, review, and determination as to whether any disciplinary action is appropriate.” She also barred another Trump lawyer, Daniel Z. Epstein, from representing clients in the Southern District of Florida for a year. And she said the parties to the lawsuit, including Trump, his sons, the Trump Organization, the IRS, and the Treasury Department, are “prohibited from referring to the purported ‘settlement agreement,’ or using, offering, admitting, or citing any of its provisions in any judicial, administrative, regulatory, arbitration, or any other official proceeding as evidence of a ‘settlement’ reached in this matter.”
Williams also exercised her “inherent authority” to “protect the integrity of judicial proceedings.” Under that heading, she authorized requests that the plaintiffs reimburse the legal expenses incurred by parties that submitted amicus briefs in this case, including the 35 retired federal judges who prompted this inquiry by urging her to reopen the case.
“This action was never about a party seeking judicial resolution of a legal issue or a factual dispute,” Williams concludes. “The nature of the suit itself and the conduct of the Parties and counsel from its filing make plain that this was an attempt to use the Court to provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the President and to earmark billions of dollars from American taxpayers to redress grievances not defined in the law.” In short, she says, “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.”
The post A Federal Judge Slams Trump's IRS Lawsuit As a Pretext for Delivering a Phony 'Settlement' appeared first on Reason.com.
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