A federal judge ruled on Monday that President Donald Trump’s $10 billion lawsuit against the Internal Revenue Service over his leaked tax returns was filed for an “improper purpose” and in “bad faith,” ordering sanctions against Trump’s lawyers and blocking the controversial settlement agreement that had created a $1.776 billion fund.
U.S. District Judge Kathleen Williams, in a scathing 56-page decision, found that Trump and his family acted in bad faith in bringing the donald trump irs lawsuit, which concluded in May 2026 with a settlement that granted Trump immunity from tax audits and established the “anti-weaponization” fund. The judge’s ruling nullifies the entire settlement agreement, barring Trump, his sons, his business entities, and the government from citing or using any part of it in future proceedings.
“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.
The lawsuit centered on the leak of Trump’s tax returns, which had occurred years earlier. Trump’s settlement with the Justice Department in May included permanent immunity from IRS audits for Trump, his family, and related entities. The deal also created the $1.776 billion fund, initially labeled as compensation for victims of government “weaponization.” Acting Attorney General Todd Blanche announced in early June that the administration was scrapping the fund portion of the deal, though the tax immunity provisions remained in place until the judge’s ruling Monday.
Williams found several indicators of bad faith and collusion. One of Trump’s lawyers, Daniel Epstein, never sought permission to appear in the southern district of Florida court—a step he had taken in other cases—suggesting he never intended to pursue the case seriously. The Justice Department also never answered basic legal questions about whether the agreement violated the emoluments clause or a law prohibiting the president from ordering or ending an audit of a particular taxpayer.
Most damaging to Trump’s position, Williams noted that the fact Trump controlled the Treasury Department—which oversees the IRS—meant there was no genuine controversy between adverse parties, a requirement for any lawsuit. “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.
Williams referred one of Trump’s lawyers, Alejandro Brito, to the Florida bar for potential disciplinary action and blocked another attorney, Daniel Epstein, from appearing on behalf of clients in the southern district of Florida for one year. She also referred Acting Attorney General Blanche and associate attorney general Stanley Woodward to disciplinary authorities in New York and the District of Columbia, where they face ongoing proceedings.
The ruling comes after Williams took the extraordinary step in May of reopening the case at the urging of a group of retired federal judges who argued the settlement was fraudulent. Trump had voluntarily withdrawn his claims when the initial agreement was announced. The judge ordered the parties to pay the legal fees of the retired judges and other third parties who had filed friend-of-the-court briefs challenging the settlement.
The decision represents a significant legal setback for Trump’s efforts to resolve the donald trump irs lawsuit and represents one of the strongest judicial rebukes of the settlement. Critics have called on Congress to take additional action to ensure the settlement never takes effect and to prevent similar arrangements in the future.
Sources
- PBS News — reported Judge Kathleen Williams’ ruling that Trump’s IRS lawsuit was filed for improper purpose and recommended attorney discipline
- The Guardian — detailed the judge’s nullification of the settlement agreement and sanctions against Trump’s lawyers
- NBC News — covered the judge’s finding that Trump administration attempted to manipulate the judicial process
- CNN — reported on the judge’s ruling and sanctions order
- The Wall Street Journal — covered the judge’s bad faith finding and the $1.8 billion fund implications
