11th Circuit Refuses to Block Sanctions Over Trump's Collusive $10 Billion IRS Lawsuit

A federal appeals court on Tuesday, Sept. 29, refused to let President Trump sidestep sanctions tied to his own $10 billion lawsuit against the IRS, leaving in place a lower court's finding that the case was never a real legal fight at all.

The three-judge panel of the 11th U.S. Circuit Court of Appeals, made up of Judges Adalberto Jordan, Robin Rosenbaum and Kevin Newsom, ruled that Trump and his legal team failed to show they were likely to win their appeal or would suffer irreparable harm without a stay, according to the panel's written order. Newsom was appointed to the bench by Trump during his first term. Jordan and Rosenbaum were appointed under President Obama, a detail several outlets, including NDTV Profit, flagged to show the ruling crossed the usual partisan lines people expect from the judiciary.

How we got here

Trump, his sons Donald Jr. and Eric, and the Trump Organization sued the IRS and Treasury Department in January, alleging a former IRS contractor illegally accessed and leaked the family's tax returns. That part isn't in dispute. The contractor was charged and pleaded guilty to unauthorized disclosure of tax information, according to the Epoch Times.

What happened next is the problem. Trump's team voluntarily dismissed the $10 billion suit with prejudice in May and struck an agreement with the IRS, an agency the president directly oversees as head of the executive branch. The Justice Department then rolled out a $1.776 billion "anti-weaponization" fund, funded by taxpayers, meant to compensate people who claimed the government had targeted them politically. The deal also included a release shielding Trump, his sons and the Trump Organization from audits and other claims through May 18, 2026, according to RadarOnline.

A coalition of 35 former federal judges challenged the arrangement, arguing it amounted to a fraud on the court. U.S. District Judge Kathleen Williams, an Obama appointee based in Florida, agreed. In a 56-page July ruling, she found the IRS and the president were never genuinely adverse parties, meaning there was no real case or controversy for a court to resolve in the first place.

"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, concluding the suit was filed in bad faith to give "judicial legitimacy" to a deal that had no basis in law.

Williams sanctioned two of Trump's attorneys, referring one for possible state bar discipline and barring another from practicing in the Southern District of Florida. She also barred Trump and administration officials from describing the arrangement as a legitimate court settlement in any official proceeding going forward.

The appeal, and what the panel actually decided

Trump's lawyers argued Williams had no legal basis for the sanctions and that the speech restriction amounted to an unconstitutional gag order. The 11th Circuit panel wasn't persuaded on either point.

"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," the panel wrote, adding that Trump's team had not made "a strong showing" that Williams committed clear error. On the First Amendment claim, the panel noted the speech restriction only applies to judicial, administrative, regulatory or arbitration proceedings, not public commentary, and said Trump's side cited no case law showing a sanction like that violates free speech.

Tuesday's order is not a final ruling on the merits. The sanctions stay in place while the underlying appeal continues. Trump's legal team, in a statement, denounced the original leak of the president's tax information and said Trump "continues to hold those who wrong America and American" citizens accountable, without directly addressing the collusion finding, according to NDTV Profit.

The leak was a real crime, the contractor admitted guilt, and the president has a right to seek damages for it. But a federal judge and now a three-judge appellate panel, including one of Trump's own appointees, found the process used to extract $1.776 billion from taxpayers and lifetime audit immunity for his family was staged, not litigated.

Deputy Attorney General Todd Blanche has already pulled the plug on the compensation fund itself. What's left is a legal fight over whether Trump's lawyers broke the rules getting there, and whether he personally benefited from a settlement a federal court says was never real to begin with.

What's next

Trump can now ask the full 11th Circuit to rehear the case en banc or take it to the Supreme Court. The underlying appeal of Williams's collusion and bad-faith findings is still pending, with no date yet set for a final decision.