From Trump v. IRS, issued today by the Eleventh Circuit with Judges Adalberto Jordan, Robin Rosenbaum, and Kevin Newsom on the panel:
On January 29, 2026, President Donald J. Trump (in his personal capacity), Donald J. Trump, Jr., Eric Trump, and the Trump Organization, LLC, initiated a suit against the Internal Revenue Service and the United States Department of the Treasury, alleging that a former IRS employee unlawfully accessed and disclosed their tax records. The plaintiffs asserted violations of 26 U.S.C. § 6103 and 26 U.S.C. § 7431(a)(1), as well as 5 U.S.C. § 552a(e)(10), and sought, among other remedies, damages of at least $10,000,000,000.00.
Shortly after filing, the plaintiffs—represented by attorneys Alejandro Brito and Daniel Epstein—moved for voluntary dismissal with prejudice under Federal Rule of Civil Procedure 41(a)(1)(A)(i). owing to the self-executing nature of the dismissal, the court closed the case the same day.
Thereafter, 35 former federal judges (the “former judges”) asked the district court for relief from judgment, requesting that the notice and the dismissal be set aside and the matter reopened. In their motion, the former judges announced a settlement that had been disclosed by the Department of Justice. The settlement terms provided the plaintiffs with a $1.776 billion settlement fund from the Treasury, to be paid to non-parties to the suit, and a broad release by the government of “any and all claims” it could have against the plaintiffs, as well as President Trump’s family and enterprises, through May 18, 2026, the date of the asserted settlement. The former judges contended that the settlement resulted from collusion and constituted a fraud on the court.
In its order inviting responses, the district court reminded the parties of its authority under Rule 11 to investigate possible misconduct and warned that sanctions could be imposed for filing a case with an improper aim, such as coercing a settlement. In reply, the plaintiffs challenged the court’s power to levy monetary sanctions and argued that there had been no Rule 11 violation or fraud on the court because the suit was not marred by collusion. They did not, however, submit affidavits, declarations, or other evidence to rebut concerns about adversity, collusion, or improper purpose, nor did they request an evidentiary hearing.
On July 13, 2026, the district court issued an order finding that the parties to the action were not adverse and imposed non-monetary sanctions on the parties and on two of the plaintiffs’ lawyers, Mr. Brito and Mr. Epstein.
First, the district court concluded that President Trump exercised control over the defendants by virtue of the constitutional structure. As the head of the Executive Branch, the court reasoned, he possessed all federal executive power, including the power to remove certain subordinate officers—all of whom wield authority subject to his supervision and can be removed by him. The court gave examples, noting that Treasury and IRS executives act under his oversight and are removable at his will.
Second, the court found that—in his capacity as Secretary of the Treasury—Scott Bessent fell under President Trump’s direct supervisory authority as a cabinet member. The district court labeled Mr. Bessent as President Trump’s “alter ego” in his official role, and it observed that the IRS Commissioner is, by statute, appointed and removable by the President.
Third, the district court explained that, through an executive order, President Trump had asserted his supervision and control over the entire Executive Branch, explicitly extending to its litigation activities. The order states that his interpretations of law govern the actions of executive-branch employees and that he provides definitive legal interpretations for the executive branch. Consequently, the court found it unsurprising that, unlike in comparable cases, no attorney for the defendants appeared or challenged the action.
“Taking into account the brief chronology, the quiet docket, and the defendants’ deviation from routine litigation tactics used in similar matters,” the court concluded that the defendants chose not to present a legal interpretation that would oppose President Trump’s view of this lawsuit. The court attributed this to President Trump’s authority over the defendants’ conduct.
Fourth, the district court observed that the way the case was resolved suggested that the parties’ interests aligned, signaling a lack of true adversity and improper motive: the unusual, expansive award crafted for claims never litigated and for unnamed third parties whose future remedies have no connection to the present dispute indicated that genuine adverse interests were never before the court.
After detailing additional reasons, the district court stated that the absence of genuine adversity and the collusive, jurisdictionally irregular nature of the suit made it clear that the plaintiffs had filed the case to rationalize and legitimate a “settlement” with no solid legal or factual basis.
Turning to sanctions, the district court considered whether the complaint was filed in bad faith for an improper purpose. Using Rule 11’s objective, fact-bound standard of reasonableness under the circumstances, the court found that the circumstantial evidence—the plaintiffs’ unusual litigation conduct and the surrounding settlement dynamics—demonstrated that they acted in bad faith and for an improper aim by collusively docketing a lawsuit with claims that faced dispositive defenses solely to provide cover for a collusive settlement.
Consequently, the district court imposed sanctions on counsel Brito and Epstein and prohibited the parties—and any “agents, representatives, officers, or anyone acting in concert with” them, or under their control—from “referring to the purported ‘settlement agreement,’ or using, offering, admitting, or citing any provision of it in any judicial, administrative, regulatory, arbitration, or other official proceeding as evidence of a ‘settlement’ reached in this matter.”
Additionally, the district court determined that the conduct satisfied the subjective bad-faith standard for inherent-authority sanctions, finding that the plaintiffs knew or should have known that their claims were time-barred, that the requested damages were unsupported by the facts or law, that the defendants shirked their duty to defend the United States, and that the litigation served to give legitimacy to a settlement entered under ethically dubious circumstances—all of which supported a finding of bad faith.
However, the district court declined to impose monetary sanctions, instead allowing time for memoranda on attorneys’ fees. The fee proceedings remain ongoing, and the court has not yet ruled on the former judges’ request to reopen the case and set aside the dismissal.
On appeal, the Eleventh Circuit addressed several procedural issues and weighed in on the First Amendment claim as well:
The speech-related sanction bars the appellants from “referring to the … ‘settlement agreement,’ or from using, offering, admitting, or citing any of its provisions in any judicial, administrative, regulatory, or other official proceeding as evidence of a ‘settlement’ reached in this matter.” …
The speech-related sanction is not, as the appellants contend, a prior restraint. It was entered by the district court after allowing responses to the motion filed by the former judges and was grounded in findings of collusion and bad faith. See Pittsburgh Press Co. v. Pittsburgh Commission on Human Relations (1973) (The special harm of a prior restraint is that communication is suppressed prior to a proper determination that it is not protected by the First Amendment).
Although the appellants argue that the restriction is overly broad and essentially imposes a gag order, preventing them from mentioning the settlement in all situations, the district court explained that the injunction is narrower. It clarified that the prohibition is not a blanket ban on all references to any agreement between the parties, but rather a restriction on how the settlement can be cited.
Specifically, the court noted that the injunction is twofold in its limits. First, it narrowly prevents the parties from presenting the settlement as evidence of a settlement that was reached in the case before this Court. Second—and perhaps more crucially for the plaintiffs—the injunction applies only to official proceedings such as judicial, administrative, regulatory, or arbitration contexts.
The appellants have not persuaded us to construe the sanction more broadly, and they have not shown a strong likelihood of success on their First Amendment challenges. They do not cite authorities suggesting that a speech-related penalty imposed for conduct deemed sanctionable violates the First Amendment. Indeed, in judicial settings, the right to free speech is highly constrained. Gentile v. State Bar of Nev. (1991). See also id. (explaining that the speech of those appearing before the courts may be restricted and that litigants do not surrender their First Amendment rights at the courthouse door, though those rights can be subordinated in this context).
