The supposed “settlement” of the legal claim of President Donald Trump against his own Treasury and Internal Revenue Service (IRS) is, of course, an outrage. It is perhaps one of the most—if not the most—brazenly corrupt exercises of any president. Impeachment and removal from office should follow, although they are unlikely to do so.
From a legal(istic) perspective, however, there are two remarkable features (at least) to this shoddy episode.
The first remarkable feature, which this Weekly Constitutional blog has covered before, is that there was not really a dispute between the parties capable of being adjudicated by the courts. The judge in this case doubted that the court had jurisdiction to hear a suit brought by one person against entities he effectively controlled.
The judge could have then struck out the case for want of jurisdiction, but she instead wanted to hear the arguments of the parties on the point. The deadline for those submissions was this week. But Trump and his fellow plaintiffs—his son and his corporation—did not make any submissions. They “settled” the case instead.
And this brings us to the second remarkable feature: the extraordinary nature of the supposed “settlement”. Here, the starting point is that in the eyes of the court there is no settlement. According to the court record—the docket is publicly available here—the suit has been withdrawn. The plaintiffs have simply dropped the case.
This means that the parties have not put before the court any settlement agreement. Often in civil litigation such compromise agreements are filed at court so that they can be judicially recognised and, if need be, enforced. But here, as the judge expressly notes in her order bringing the case to an end, no settlement agreement has been submitted.
What has happened instead is that the parties have reached a private settlement agreement. This is not unusual, and it sometimes suits parties to litigation to make an agreement without reference to the court. What is unusual is the nature of this particular compromise.
You can read the supposed “settlement” agreement here. What one would normally expect to see is that the parties agree to end a case in return for a payment from one side to the other. But here the plaintiffs say they are not accepting a payment in lieu of the civil wrongs they allege they have suffered.
Instead, the parties purport to agree to create an elaborate fund for the benefit of third parties. This is called “The Anti Weaponization Fund”. And it is to be created by the agreement of the United States attorney general. The agreement then sets out detailed provisions for the composition and operation of this fund, including its tax status and its legal powers. According to this press release, the fund will be worth $1.776bn.
Many things can be done by a contract, the legal device by which parties can agree to have obligations and rights which they otherwise would not have at law. Sometimes agreements, including those for settling litigation, can contain complex and imaginative provisions. But what is being done here is something else.
This “settlement” agreement is setting out the sort of thing which is normally done by primary legislation. It is taking taxpayers’ money and creating the means by which parties not connected to the litigation can benefit from payments by that money. This is not about litigation or its settlement: this is fiscal policy by other means.
Can a private agreement to settle litigation—and one not even recognised or enforceable by the court before which that litigation was brought—provide a sound legal basis for a complex fund for third parties? Or is such a compromise too flimsy or non-existent to support such a structure?
These are questions with which the US courts will soon have to wrestle—and like much of recent American law and policy, these are questions nobody would have thought to have asked before. Can a private agreement really be the basis for such a scheme?
There are further legal questions, for example about the purpose of the fund in benefitting those convicted of wrongdoing and alleged insurrection. This purpose makes the proposed scheme all the more breathtaking as something based on a private agreement.
Reading the “settlement” agreement is like being a student dealing with the most fanciful exam question combining constitutional and contract law. This is the stuff of fantastic legal fiction.
But because of the current politicised and polarised nature of US law and politics, no person can be sure the scheme will not just be struck down on contact with the courts. Trump and his co-plaintiffs may get away with this, especially as the end date for the scheme is December 2028, shortly before the end of this presidential term.
During this term Trump has done many things which are tests for constitutionalism and legality. In many (literal) cases the courts and the constitution have been found wanting, though sometimes judges have pushed back. This Anti Weaponization Fund built on an agreement between Trump and his own government is perhaps the most extraordinary test yet. And if it is not struck down on the spot, one can only imagine what Trump will come up with next.
