A federal judge has delivered a sweeping rebuke of President Donald Trump’s lawsuit against the Internal Revenue Service, ruling that the case never presented a legitimate legal controversy, voiding the purported settlement that would have created a $1.776 billion “Anti-Weaponization Fund” and the backdoor IRS deal to protect Trump’s family, and referring one of Trump’s attorneys for possible professional discipline.
In a blistering 56-page order issued Monday, U.S. District Judge Kathleen Williams concluded that the lawsuit was brought “for an improper purpose” and that the parties sought to use the federal courts to confer judicial legitimacy on an agreement that lacked any legal foundation.
“Court finds that this matter was brought for an improper purpose—to gain the imprimatur of judicial legitimacy for a ‘settlement’ that had no viable basis in law or fact.”
The ruling effectively dismantles what critics had described as a sweetheart deal between the Trump administration and the IRS.
Judge: There Was Never a Real Lawsuit
At the heart of Judge Williams’ decision is a constitutional finding that there was never an actual “case or controversy” as required under Article III of the Constitution.
The judge found that because President Trump, as head of the Executive Branch, ultimately controlled the agencies he sued—the Treasury Department and the IRS—the parties were never genuinely adverse.
Williams wrote that the litigation amounted to one side effectively controlling both plaintiff and defendant, making the lawsuit constitutionally defective from the outset. The order repeatedly points to Trump’s authority over Treasury officials, IRS leadership, and Justice Department litigation positions as evidence that the government could not genuinely oppose him.
The opinion states that the parties worked together to secure judicial legitimacy for an agreement that had already been negotiated outside the ordinary litigation process.
$1.776 Billion Fund Nullified
The order also nullifies the purported settlement announced by the Justice Department in May.
That agreement called for creation of a $1.776 billion “Anti-Weaponization Fund,” financed through the Treasury Department’s Judgment Fund, to compensate individuals claiming they had been victims of government “weaponization” or “lawfare.” The settlement also included a formal apology to Trump and other plaintiffs.
Judge Williams sharply criticized the arrangement, describing it as:
“The extraordinary award fashioned by the parties for claims that were never litigated, and have yet to be defined, on behalf of unidentified third parties whose future remedies bear no relationship to the claims in this case.”
The court emphasized that no meaningful litigation had occurred before the settlement was announced. Government lawyers never filed a response to the complaint, never defended the agencies, and instead jointly sought an extension before voluntarily dismissing the case while simultaneously unveiling the settlement publicly.
Court Rejects Comparison to Other Government Settlements
Judge Williams rejected the Justice Department’s attempt to justify the agreement by comparing it to the landmark Keepseagle settlement involving discrimination against Native American farmers.
The opinion notes that Keepseagle followed nearly a decade of contentious litigation, class certification, discovery, hearings, and judicial oversight. By contrast, Trump’s lawsuit lasted just over three months, featured virtually no adversarial proceedings, and produced a multibillion-dollar agreement before the government had even filed a substantive response.
Blanche’s Statements Become Evidence
The court also highlighted public statements by Acting Attorney General Todd Blanche as evidence supporting its conclusion that the parties were never genuinely adverse.
Williams specifically referenced Blanche’s later public statement that the Anti-Weaponization Fund would not be moving forward, writing that his ability to announce its demise demonstrated confidence that he could effectively speak for both sides of the dispute. It also specifically blasts Blanche and sends the order to the New York State Bar:
According to the judge, Blanche’s public comments “demonstrate[] his confidence that he could speak for, and bind, both sides of this matter. This certitude supports the conclusion that the Parties worked in tandem and were never actually adverse.”
Sharp Criticism of Litigation Conduct
Throughout the opinion, Judge Williams repeatedly questioned the conduct of both the plaintiffs and government attorneys.
She rejected plaintiffs’ characterization of the case as “ordinary,” writing:
“There is nothing ‘ordinary’ about this case; it is the very definition of sui generis.”
The court further wrote that the central issue was whether top Executive Branch officials had “ignored ethical norms, court rules, and legal authority to manipulate the judicial process” in order to obtain “unprecedented access to the public fisc with the patina of legitimacy.”
Sanctions and Professional Discipline
In addition to nullifying the settlement, Judge Williams imposed Rule 11 sanctions related to the litigation and referred one of Trump’s attorneys for possible professional discipline.
The opinion concludes that the lawsuit improperly invoked the authority of the federal judiciary to legitimize an agreement that the court determined lacked a genuine legal dispute.
The ruling represents one of the strongest judicial rebukes of litigation involving President Trump during his second administration.
