Trump isn’t going to be happy about this.
A federal judge has dealt a major setback to a legal settlement involving President Donald Trump and the Internal Revenue Service, ruling that the lawsuit used to support the agreement failed to meet the constitutional requirements for a legitimate federal court case.
In a 56-page opinion issued Monday, U.S. District Judge Kathleen Williams concluded that the lawsuit lacked a genuine legal dispute, finding that both sides were effectively working toward the same outcome rather than presenting opposing positions before the court.
The ruling challenges the legal foundation of a proposed $1.776 billion “anti-weaponization” fund and raises broader questions about the role of federal courts in approving government settlements.
Judge Says Lawsuit Was Not a Real Legal Dispute
Trump originally filed the lawsuit in January over the disclosure of his tax returns. In late May, the case ended in a settlement that called for the creation of an “anti-weaponization” fund designed to compensate people who claim they were unfairly targeted by the federal government.
Judge Williams, however, determined that the lawsuit was not a genuine adversarial proceeding, which is a basic requirement for federal courts to hear a case.
“There was never a case or controversy,” Williams wrote, concluding that the parties were not truly opposing one another and that the litigation was used to obtain judicial approval for an agreement that lacked a sufficient legal basis.
According to the ruling, the court found the lawsuit was brought for an improper purpose and was used to justify access to taxpayer funds while seeking protections from future audits and government investigations.
Settlement Included Broad Tax Protections
The agreement also relied on a Justice Department memorandum signed by Acting Attorney General Todd Blanche.
According to court filings, the memo sought to permanently prevent federal agencies from taking future action involving Trump’s previous tax returns. The protections extended beyond the president to include his businesses and certain family members.
Judge Williams criticized that provision, describing it as a sweeping grant of immunity that she said was inconsistent with the Justice Department’s responsibility to enforce federal law and protect the public interest.
Attorneys Face Possible Discipline
As part of the ruling, Williams sanctioned Trump’s legal team and referred attorney Alejandro Brito to the Florida Bar for possible disciplinary review.
The judge also directed court officials to notify disciplinary authorities in New York regarding Blanche and in Washington, D.C., regarding Associate Attorney General Stanley Woodward.
The Department of Justice did not immediately respond to requests for comment following the ruling.
Outside Challenges Prompted Court Review
The case returned to court after outside parties challenged the settlement, arguing that the proposed “anti-weaponization” fund compromised the integrity of the judicial process.
Williams noted that if Trump had pursued the lawsuit while he was a private citizen, the dispute might have proceeded through ordinary legal channels. Instead, she wrote, the lawsuit was filed after he returned to the White House and appointed former legal advisers to senior Justice Department positions.
The judge said those circumstances raised concerns about whether the parties were ever genuinely adverse.
Future of the Fund Remains Unclear
Although the ruling rejects the legal foundation supporting the settlement, it is still uncertain whether it will permanently prevent the proposed fund from being established.
The Justice Department has separate legal authority to create certain compensation programs without relying on a court settlement.
Even so, the proposal had already drawn criticism from lawmakers and legal experts. Some opponents questioned whether taxpayer money could ultimately benefit political allies or individuals who had previously received presidential pardons.
Following that criticism, Acting Attorney General Todd Blanche announced that the Justice Department would not move forward with the proposed fund.
However, some observers have continued to question whether other existing government settlement programs could be used for similar purposes.
Constitutional Questions Raised
Williams also questioned whether portions of the proposed agreement could raise constitutional concerns.
The ruling noted that providing billions of dollars in taxpayer-funded relief under the settlement could potentially implicate constitutional restrictions governing presidential compensation.
The judge emphasized that federal courts cannot simply approve agreements because parties identify themselves as a plaintiff and defendant.
Instead, courts may only hear cases involving a genuine legal dispute between opposing parties.
“The answer is a resounding ‘no,'” Williams concluded, rejecting the argument that the parties could invoke the authority of the federal courts without presenting a real controversy requiring judicial resolution.
The decision represents a significant legal obstacle for the proposed settlement and is expected to remain a closely watched case as questions continue over the scope of executive authority, the Justice Department’s role in settlements, and the limits of federal judicial review.