Appeals Court Questions Validity of New York Civil Fraud Suit Against Trump

During a hearing on September 26, New York appeals judges posed numerous queries to the New York Attorney General’s Office. These questions suggested a level of skepticism about the application of an anti-fraud law to the business practices of former President Donald Trump.

Trump Faces Civil Fraud Case

The inquiries were made during oral arguments about Trump’s assertion that the state Supreme Court made errors in managing the civil fraud case. This case resulted in a hefty $489 million penalty for the former president. D. John Sauer, Trump’s legal representative in the case, argued before a five-judge panel in the court’s appellate division that both the judge and prosecutors disregarded time limits on the claims involved. Sauer also suggested that Attorney General Letitia James’s office had an overly expansive interpretation of legally punishable fraud. He maintained that the former president had not committed fraud in his interactions with banks and other entities.

Questions About State Authority

Some of the judges questioned whether the state was operating within its authority or had a valid interest in filing the suit. Justice David Friedman asked New York Deputy Solicitor General Judith Vale if there was any precedent for the attorney general suing over transactions involving sophisticated parties where neither party “lost any money.” Friedman pointed out that all the cases Vale cited involved damage to consumers or to the marketplace, which he argued was not the case here. Vale countered that “there was absolutely a public impact and a public interest here,” and identified “at least four different public harms from the kind of misconduct here.”

The Definition of Fraud

Part of Sauer’s argument was that the attorney general’s understanding of fraud was too broad, and he noted that no one was victimized by Trump’s conduct. He argued that under existing precedent, there must be a capacity or tendency to deceive, or an atmosphere conducive to fraud. He pointed out that there were no victims or complaints in this case, and that Trump’s business partners had done their due diligence. Presiding Justice Dianne Renwick questioned whether the statute required some kind of harm to prove fraudulent activity. She read the relevant portion of the statute and asked Vale if harm or threat of harm should be read into the statute. Vale responded that there were no such cases “as to liability and not in cases like this where what the attorney general is seeking injunctive relief and disgorgement.”

Disgorgement Amount Questioned

Trump is currently facing a disgorgement of $489 million, with interest accruing daily. During oral arguments, Vale faced multiple questions about the appropriateness of this amount. Justice Peter Moulton described the disgorgement amount as “troubling” and asked Vale how it was connected to the harm caused, given that the parties involved in the transactions were satisfied with the outcomes. Vale responded that “disgorgement looks at taking the gain away from the wrongdoer.” Despite the high amount, she argued that “there was a lot of fraud ... and illegality.”

Bottom Line

The appeals court's skepticism towards the application of an anti-fraud law to former President Donald Trump's business practices raises questions about the interpretation of fraud and the extent of state authority. As the case continues, it will be interesting to see how these questions are addressed and what impact this will have on future cases. What are your thoughts on this matter? Feel free to share this article with your friends and discuss it further. Remember, you can sign up for the Daily Briefing, which is delivered every day at 6pm.