A New York appeals court on Thursday dismissed a $500 million civil fraud penalty against President Donald Trump and his companies for routinely overvaluing their properties in financial statements. The court ruled the fine was “excessive” and violated the Eighth Amendment of the U.S. Constitution.
Case background
The ruling stems from a 2022 lawsuit filed by the state of New York, which accused Trump of orchestrating a scheme to mislead companies he was doing business with about property values and his overall net worth. In 2023, a judge found him liable for these charges.
After determining that Trump had inflated financial statements sent to lenders and insurers, Judge Arthur Engoron ordered him to pay $355 million in penalties. With interest, the total exceeded $515 million. Additional penalties on other Trump Organization executives, including Trump’s sons, Eric and Donald Jr., brought the total to $527 million, according to NPR.
Trump has consistently maintained that the case and the verdict were politically motivated, calling it “a fraud on me” while asserting his innocence. In January 2024, he proclaimed he was “an innocent man.”
Meanwhile, the Justice Department has subpoenaed Attorney General Letitia James for records related to the lawsuit as part of an investigation into whether she violated Trump’s civil rights. James’ attorney, Abbe D. Lowell, called the investigation “the most blatant and desperate example of this administration carrying out the president’s political retribution campaign,” as reported by NPR.
The court’s ruling
In a 323-page opinion, the panel of judges was sharply divided, with concurring and dissenting opinions. Yet all five judges in the Appellate Division’s First Department agreed that the half-billion-dollar fine should be thrown out.
Two judges wrote that Trump was correctly held liable for business fraud, but the fine was excessive. Two other judges said the case should be retried, noting that the trial court was wrong to decide if Trump committed fraud; despite this, those two judges joined the decision “with great reluctance” to allow the case to be continued on appeal to the state’s highest court.
The fifth judge said the case brought by James should not have been brought in the first place.
The opinion noted, “The documentary evidence supports Supreme Court’s conclusion that the Attorney General made a prima facie showing that each defendant participated in the fraudulent scheme. … While harm certainly occurred, it was not the cataclysmic harm that can justify a nearly half billion-dollar award to the State.”
Attorney General Letitia James reacts to the ruling
James said the case “has merit” and announced her office will appeal to New York’s Court of Appeals, the highest court in the state, to reinstate the penalty.
“The court upheld the injunctive relief we won, limiting Donald Trump and the Trump Organization officers’ ability to do business in New York,” James said. “It should not be lost to history: yet another court has ruled that the president violated the law, and that our case has merit.”
Trump calling it a ‘TOTAL VICTORY’
Trump celebrated the decision, calling it a “TOTAL VICTORY” in a post on Truth Social Thursday: “I greatly respect the fact that the Court had the Courage to throw out this unlawful and disgraceful Decision that was hurting Business all throughout New York State.”
He described the case as a “Political Witch Hunt, in a business sense, the likes of which no one has ever seen before.”
Trump’s former attorney Alina Habba, who represented him in the case, called the ruling “a resounding victory” and said the court struck down a penalty that was “politically motivated, legally baseless, and grossly excessive.”
Partial dissent
Justice David Friedman, in a partial dissent, argued the case was politically motivated and should have been dismissed entirely. He wrote that James’ “ultimate goal was not market hygiene … but political hygiene, ending with the derailment of President Trump’s political career and the destruction of his real estate business.”
He added, “The voters have obviously rendered a verdict on his political career. This bench today unanimously derails the effort to destroy his business.”