Trump’s Billion-Dollar Lawsuit and Potential Settlement Explained

A lawsuit and a settlement are unprecedented, and both likely violate the Constitution and federal law.

The Department of Justice is reportedly considering settling a $10 billion lawsuit filed by President Trump against the IRS and the Treasury Department. Although former prosecutors and IRS officials consider Trump’s claims to be legally and factually weak — “meritless” — recent reports indicate that Trump is considering dropping his claims in exchange for the creation of a $1.7 billion fund administered by a five-member commission to make payments to people viewed as “victims of weaponization,” many of whom were arrested after storming the Capitol on January 6, 2021. Initial reporting indicated that Trump would be given a large-scale settlement payment and possible immunity from IRS audits. Whether it’s a payment to Trump or into a fund he controls, either of the proposed settlements is unprecedented and would likely violate the Constitution and federal law and would incentivize these types of payments in the future.

Photo by wes lewis on Unsplash

• Why is Trump suing his own government?

  Trump’s $10 billion claim arose from the unauthorized disclosure of his tax returns by a government contractor who pleaded guilty in 2023.

• Where would the $1.7 billion for the possible settlement come from?

  We the American taxpayers would likely be footing the bill. Settlement payments are funded by taxpayers through a “Judgment Fund“ appropriated by Congress and administered by the Department of Justice. Members of Congress should properly question whether this is an authorized use of taxpayer funds.

• How would this fund impact me?

  Instead of your taxpayer dollars going toward public works projects, paying down the federal budget deficit, or any of the hundreds of public services the federal government is supposed to provide, this deal would allow those monies to go to Trump’s friends and allies — people who were rightly investigated and held accountable for their actions. It would also set a new precedent for similar “meritless” claims brought by Trump and settled by DOJ in the future.

• Why would Trump or Justice want to settle the case now?

  The judge overseeing the case expressed doubt that the president could sue his own IRS and Treasury Department and requested briefings by the parties and a hearing on the matter later this month. To avoid having to explain to the court why it has jurisdiction when no “case or controversy” appears to exist and to prevent the judge from dismissing the case outright, which would deny Trump the relief he is seeking, Trump and the DOJ appear motivated to settle the case sooner — before the briefing due date or the hearing itself — rather than later.

• Why would the judge dismiss the case?

  For a court to have jurisdiction over a case, it requires a “case or controversy.” But in this case, the president is serving as both the plaintiff (having brought forth claims in his personal capacity) and the defendant (by virtue of serving as the sitting president exercising executive authority over the named defendant agencies). This “unique dynamic” raises questions about whether there is sufficient adversity between the parties necessary to establish jurisdiction.

• What would this proposed fund do?

  The exact details surrounding the fund are still emerging, but it purportedly would compensate individuals who claim they were unfairly targeted by the Biden administration, including many Jan. 6 insurrectionists. A five-member commission would operate mostly in secret under Trump’s control and make disbursements by majority vote without disclosing the identity of the recipients. We understand that Trump would not be able to receive a payout from the fund.

• Would the proposed settlement payments violate the Constitution?

  Either of the proposed settlement arrangements would likely be viewed as unlawful under the Constitution. If the parties agree to pay Trump a large-scale settlement, that settlement would likely be viewed as unlawful under the Domestic Emoluments Clause of the Constitution. That provision bars the president from accepting any payment other than his salary from the federal government. If the parties instead agree to funnel the payment to the so-called “victims fund,” it would also be viewed as unlawful. The definition of an “emolument” is broadly defined to include “profit, gain, or advantage.” Trump would gain an enormous advantage if he were permitted to direct taxpayer funds to political loyalists through a fund he controls by virtue of having authority to appoint and fire the members of the commission.

• Why else should this case be dismissed?

  In addition to the concerns raised above, Trump’s lawsuit was not brought until January 2026, which appears to be outside the two-year period that is required for claims based on unlawful disclosure. Moreover, the law only allows for $1,000 in damages per disclosure. In no way does Trump’s $10 billion claim justify damages based on 10,000,000 unauthorized disclosures. Finally, because the leak was made by a government contractor and not a government employee, the government may not be liable for damages under the relevant statute.

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Read Contrarian Publisher Norm Eisen’s take on the suit:

Trump to Redistricting Robbers: Hold My Beer

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Virginia Canter is chief counsel and director of ethics and anti-corruption at Democracy Defenders Fund. Riley Pynnonen is a program assistant at Democracy Defenders Action.

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