11th Circuit upholds collusion finding in Trump’s $10 billion IRS lawsuit

A federal appeals panel has backed a Florida judge’s ruling that President Trump’s lawsuit against the IRS was collusive and brought in bad faith, leaving sanctions on two of his attorneys in place.

A three-judge panel of the 11th Circuit Court of Appeals on Tuesday sided with U.S. District Judge Kathleen Williams on her collusion and bad faith findings in the case, The Hill reported. The panel also held that sanctions against two Trump attorneys fell within the district judge’s power.

The suit sought $10 billion in damages from the IRS over the leak of Trump’s tax returns. Trump filed it in January against his own administration. In late May, he struck an agreement with the IRS to dismiss the case.

Williams, a Florida-based judge appointed by former President Obama, ruled in July that the parties were never truly averse. She said there was never a case or controversy, and never a question of who would prevail.

In a 56-page filing, she concluded the lawsuit was used to dress up a deal that funneled legitimacy to access taxpayer money and shield the plaintiffs from audits and investigations.

"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,"

Williams wrote. She determined 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.”

She also found the case 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,” and that it was “brought to manipulate the judicial process.”

Appeals panel says Trump side offered no evidence to rebut collusion finding

The 11th Circuit panel was blunt about the record on appeal. Appellants, it said, failed to show clear error in the district court’s collusion and bad faith findings.

"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. 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,"

the panel wrote.

That leaves Williams’s core conclusions intact for now: no real adversity between the parties, an improper purpose tied to taxpayer funds and audit protection, and a dismissal that the court refused to treat as an ordinary hard-fought settlement.

Legal fights around Trump rarely stay narrow, and readers following election-related clashes over citizenship checks already know how quickly court orders become political weapons in Washington.

Speech ban on calling it a “settlement” survives First Amendment challenge

Williams did more than criticize the filing. She sanctioned two Trump attorneys and barred the Trump administration from referring to the litigation as having reached a settlement.

On appeal, the Trump side pressed First Amendment objections to that speech-related prohibition. The panel was not persuaded.

"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 judges wrote. They added:

"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."

In plain terms, the appeals court treated the gag on the word “settlement” as a penalty tied to sanctionable conduct, not as a freestanding censorship rule the appellants had shown was unconstitutional.

Separate court fights have also constrained how the administration moves on high-profile projects, including a federal judge’s notice order on Kennedy Center demolition plans, another reminder that injunctions and sanctions now shape day-to-day governance.

$1.776 billion “anti-weaponization” fund was the hook, and it is now defunct

The Hill’s account ties the lawsuit to a Department of Justice “anti-weaponization” fund pegged at $1.776 billion. The fund was described as a pool to pay people who claim the government wronged them.

DOJ created that fund outside the court process, according to the reporting around Williams’s findings. The same account now calls it a defunct compensation fund.

Williams’s ruling framed the dismissed IRS case as the vehicle that tried to put a judicial stamp on access to taxpayer money and on relief from audits and investigations. The appeals court left that bad-faith framing in place.

For taxpayers, the sequence is straightforward on the court’s telling: a $10 billion claim, a quick agreement to drop it, a massive fund narrative attached to the dispute, and a judge who said the courtroom was never a real fight.

Opposition figures have spent years looking for new ways to keep Trump on the defensive, from impeachment rhetoric tracked in James Talarico’s long record of prosecute-Trump calls to other pressure campaigns that never quite end.

Tax return leak started the case, court focused on what came after

The underlying grievance was not invented in a vacuum. Trump sued over the leak of his tax returns, a breach that fueled years of political combat and media feeding frenzies about his finances.

What Williams seized on was not the leak itself. It was the posture of the litigation once filed: plaintiff and defendants under the same administration’s control, a dismissal deal in late May, and what she called a bid for judicial cover on money and audit insulation.

The 11th Circuit’s message was narrower still. Whatever explanation the appellants might have offered for that conduct, they did not put evidence of it before the appeals court in a way that showed clear error below.

Threats and rage around Trump remain part of the broader climate, including cases such as a former podcaster facing federal charges for repeated death threats against him. The IRS case, by contrast, turned on civil procedure, sanctions power, and whether a lawsuit was a real dispute.

Obama-appointed judge’s findings now carry appellate backing

Williams’s July rulings did not arrive without political context. She is an Obama appointee. Her 56-page opinion cast the Trump plaintiffs’ use of the courts in the harshest institutional terms, manipulation of process, no adverseness, no genuine controversy.

The three-judge panel did not redo her fact-finding from scratch. It held the appellants failed the clear-error showing required to topple collusion and bad faith conclusions, and failed to make a strong showing on their First Amendment theory about the speech remedy.

Two Trump attorneys remain under the sanctions she imposed. The administration remains under her prohibition on calling the outcome a settlement. The $1.776 billion fund tied to the episode is described as gone.

Open questions still sit outside the opinion’s edges. The public report does not name the two sanctioned attorneys. It does not spell out Treasury’s role beyond the headline pairing with the IRS. It does not detail whether any money ever moved from the anti-weaponization fund, or whether a further appeal will follow the panel’s action.

What the record now does show is a district judge who said the IRS case was never a true fight, and an appeals court that left that conclusion standing when the appellants brought no evidentiary rebuttal.

When courts police “collusion” inside an administration while the original leak of a president’s tax returns barely earns the same institutional fury, voters can be forgiven for wondering which abuses still count.