Judge says Trump IRS lawsuit was filed for 'improper purpose,' refers lawyer for possible discipline

WASHINGTON — President Donald Trump's lawsuit against the Internal Revenue Service over his leaked tax returns was filed for an “improper purpose,” a judge said Monday as she referred one of his lawyers for potential disciplinary action and characterized the $10 billion complaint as an exercise in self-dealing.

U.S. District Judge Kathleen Williams accused Trump and his lawyers in a scathing ruling of having manipulated the court system when he sued a federal agency under his control, bypassing a requirement that parties in a lawsuit must have adverse interests. The lawsuit ended in a settlement that granted the president immunity from tax audits and established a $1.776 billion fund to compensate Trump allies who believe they have been unjustly persecuted.

The judge stopped short of explicitly voiding the deal shielding Trump from tax scrutiny but said the government cannot claim in official proceedings that the agreement was the result of a legitimate legal process.

“Whether Executive Branch actors can privately agree to give themselves and their former clients blanket immunities and billions of dollars in tax monies for legally undefined grievances was never an issue advanced to this Court,” said Williams, an appointee of President Barack Obama. “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 ruling comes just ahead of a key confirmation hearing

Though the practical impacts of the ruling may be limited since the lawsuit was voluntarily dismissed months ago and the administration has already abandoned the $1.776 billion “Anti-Weaponization Fund” that came out of it, the order nonetheless amounts to a scathing rebuke and tees up a politically uncomfortable line of questioning for Acting Attorney General Todd Blanche as he faces the Senate Judiciary Committee for his confirmation hearing on Wednesday.

“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," Williams wrote in her ruling.

She added: "Ensuring that our courts are used only for the express purpose created by the Constitution is the obligation of every judge and an obligation that this Court must discharge in light of the matter before it.”

The $10 billion suit against the IRS and Treasury Department in January accused the agencies of a failure to prevent a leak of the president’s tax information to news outlets between 2018 and 2020.

In May, however, the administration announced that it was settling the case and creating a fund to compensate people who believe they've been mistreated by the criminal justice system. The fund was quickly shelved amid bipartisan backlash, though the Trump administration has said it intends to proceed with a separate element of the deal affording Trump and family members protection from tax audits.

From the start, the judge had appeared skeptical of the complaint and assigned a group of attorneys to determine whether there was a conflict in the case since, as sitting president, Trump was suing “entities whose decisions are subject to his direction.”

Even after the settlement was revealed, she directed Trump attorneys to lay out their positions on whether the parties in the case were truly adverse to each other, whether the dismissal of the lawsuit was premised on deception and whether the case should be reopened.

She made clear in her ruling that she was not satisfied by the lawyers' answers.

“After a review of the record, and the Parties’ statements, the Court declines to adopt or accept the credulous exercise of divorcing President Trump’s current job title from an understanding of what happened here,” she wrote.

The ruling also raises the possibility of disciplinary actions

The judge referred Trump attorney Alejandro Brito, who filed the case, for possible disciplinary action before the state bar in Florida and said another lawyer, Daniel Epstein, will not be granted permission to file within the Southern District of Florida for up to a year.

A spokesman for the Trump legal team responded to a request seeking comment from Brito with a statement that blamed the IRS for allowing the president's tax returns to be leaked.

The judge also ordered that her ruling be sent to the state bars in New York and the District of Columbia, where ethics complaints have been filed against Blanche and Associate Attorney General Stanley Woodward.

Williams pointed to Blanche’s congressional testimony in early June in which he revealed that the fund was no longer moving forward. Though nothing had been filed in court, Blanche appeared confident in his testimony that he “could speak for, and bind, both sides of this matter,” Williams said.

“Acting Attorney General Blanche’s apparent capacity to speak for both Plaintiffs and Defendants, sign a ‘settlement’ document on behalf of all Parties to this action, and then repudiate part of that agreement, demonstrates that there was only one party whose interests were being represented throughout this case,” the judge wrote.

The judge also raised ethical concerns about Blanche and Woodward’s involvement in the settlement given Blanche’s past representation of Trump as well as Woodward’s previous defense of Jan. 6 defendants and a co-defendant in Trump’s classified documents case.

“Instead of either recusing because of their previous representations or vigorously defending this lawsuit as required to do so by DOJ policies and procedures, these lawyers agreed to a ‘settlement’ involving a staggering amount of money potentially benefitting former clients,” she said.

Blanche denied in a CNN interview last spring that he had developed the settlement terms, saying, “The president has outside counsel, and their counsel, the Department of Justice, not me."