The Humiliation Of Letitia James -- And Of The New York Legal Establishment

You have probably seen that last week an appellate court in New York (Appellate Division, First Department) reversed the civil judgment against President Trump where he had been ordered to pay a fine in excess of $450 million to the state of New York. This case originated during Trump’s first term, as part of then newly-elected New York Attorney General Letitia James’s campaign promise to take down the President. Here is a picture of Ms. James from the Wall Street Journal:

Today, six plus years later, everything about the case has become an embarrassment and a humiliation for AG James, as well as for other parts of the New York political and legal establishment.

James was first elected Attorney General in 2018. In running for office, James made a principal focus of her campaign how she would use the powers of the AG’s office to take down Trump, then the sitting President. For example, here is a video from James’s campaign from September 2018. Excerpt:

“I believe that this president is incompetent. I believe that this president is ill-equipped to serve in the highest office of this land. And I believe that he is an embarrassment to all that we stand for. He should be charged with obstructing justice. I believe that the president of these United States can be indicted for criminal offenses and we would join with law enforcement and other attorneys general across this nation in removing this president from office.”

James took office in January 2019, and in March 2019 promptly opened a wide-ranging fishing expedition into Trump’s affairs. And then everything went quiet for years (except for some occasional skirmishing over subpoenas). In January 2021, when Trump left office, there was still no word from James’s investigation. That finally changed on September 21, 2022 — some three and a half years after the investigation began, and at a time when Trump was out of office but James was in the thick of a campaign for re-election. On that date James filed a civil enforcement action claiming that Trump had overvalued certain properties on personal financial statements submitted to banks in connection with loans, and that these overvaluations constituted “fraud” in violation of a provision of New York’s so-called Executive Law.

At the time, I had a post where I opined that the charges appeared to me to be ridiculous on their face, because in my own substantial experience, both personally and professionally, no bank ever takes the borrower’s word for the value of real estate.

Trial on the AG’s claims began in October 2023 (relatively expeditious for such a matter), before a New York state court trial judge named Arthur Engoron, and continued for some two plus months. Justice Engoron issued a ruling in February 2024, in which he gave the AG everything she had asked for and more. There was a fine of $350+ million (supposedly a “disgorgement” of improperly-obtained interest savings on the loans), plus interest of about another $100 million (and continuing to accrue post-judgment), and various additional injunctive relief, including barring Trump from participating in management of any New York company for several years.

Trump immediately appealed, and the appeal again at first proceeded very rapidly for such matters. After full briefing, the argument before a panel of five Appellate Division judges took place on September 26 last year. And then again, the case went silent for nearly a year.

The Appellate Division’s decision was finally issued last week. It is a highly unusual document, and you can see why it took so long to write. First of all, there is no majority opinion. That is close to unheard of from any court, although there are small numbers of examples. (The most famous case of all time without a majority opinion is the 1977 Bakke decision of the U.S. Supreme Court on the issue of affirmative action in university admissions, a case which screwed up the law of university admissions for decades.). I am unaware of any prior decision of the First Department Appellate Division without a majority opinion, although there may be one somewhere. Instead of any majority opinion, the panel of five judges split 2, 2 and 1, with the various opinions dissecting and criticizing each other.

Second, the whole thing aggregates some 323 pages. Afficionados of the First Department will recognize how crazy this is: this court processes a huge volume of business, between 2000 and 3000 cases per year, and the large majority of its decisions are one-paragraph summary affirmances of the court below. Only a small minority of this court’s cases get a decision of as much as ten pages.

While the decision is fractured, all five judges agreed on one thing: the $450+ million fine (now exceeding $500 million with ongoing interest accruals), is vacated in its entirety. The fine is not reduced to some smaller amount, such as $1 million or even $1000, which was an option the judges could have adopted, but rather it is eliminated entirely. And they also unanimously agree on a rationale: the amount constitutes an “excessive fine” under the Eighth Amendment to the U.S. Constitution.

Because of the unanimity on this issue, and because the rationale is based in the U.S. Constitution rather than New York law, it is highly unlikely for any large fine against Trump to be imposed in subsequent appeals. The case can be appealed to New York’s highest court, the Court of Appeals. But for that court to reverse and re-instate a large fine, it would need to overrule a unanimous five-judge court below on this point. And then, because this is an issue of U.S. constitutional law, such a decision would be subject to review by the U.S. Supreme Court, which would be highly unlikely to affirm a large civil fine in this absurd and made-up case. The last thing the New York Court of Appeals would want is to get slapped down by the Supremes in this case, particularly trying to impose a large fine on an absurd basis upon the sitting President of the United States. So I see almost no likelihood of any fine against Trump in this case getting re-instated in subsequent appeals.

Without the fine, the case is no longer of any particular significance in the grand scheme of things. Letitia James’s signature effort, the thing on which she based her claim for office, has come to nothing.

But in fact it’s worse than that. Of the five judges, three would reverse not just the fine, but the whole thing. Two of those would reverse various of the decisions of the highly partisan Justice Engoron and then send the case back for a new trial; and the third, Justice David Friedman, argues that the case should be thrown out entirely.

In interpreting these decisions, some background on the New York State court system is important. Unlike federal judges, New York State judges do not have life tenure. Justices of the Appellate Division have been elected to the Supreme Court for terms lasting fourteen year, and then at some point during those fourteen years they have been appointed by the Governor to the appellate court for a term that expires when their elected term is up. To continue to serve on the Appellate Division at that point, a judge needs to get re-nominated by his county party organization, run in a partisan election, win, and then get re-named by the Governor to the Appellate Division. Thus, judges whose term may be up soon, and who are not ready to retire and who like to keep their job, are very much subject to political influence in their decisions. Political influence is not relevant to very many of their decisions, but it is highly relevant in this case.

The two judges who voted in this case to affirm everything but the monetary penalty are Peter Moulton and Diane Renwick. Moulton wrote the opinion. His term is up in 2027. Renwick’s term is up in 2029. The two judges who voted to send the case back for a new trial (Higgitt and Rosado) have terms that are up in 2026 and 2028 respectively. Form your own judgment.

Then we have Justice David Friedman, the dissenter who thinks the case should be thrown out entirely. Justice Friedman turns 76 next year, which means that he is facing mandatory retirement. Nobody can touch him at this point, so he can freely speak his mind.

Read Justice Friedman’s decision (starting at page 221) if you want to be entertained as to the absurdity of the case. Excerpt from page 224:

On this appeal from the nearly half-billion dollar judgment against President Trump and his codefendants, two of my colleagues have cited scores of cases in an attempt to shoehorn this case into section 63(12). They have gone so far as to claim that the Attorney General, by bringing this action, has possibly saved the world from a replay of the financial meltdown of 2008; how this might be is not explained. Despite their efforts, they are unable to point to a single precedent – not even one – for the use of section 63(12) to target transactions such as those at issue here – bilateral, negotiated, arm’s-length transactions between highly sophisticated parties, which had no effect on any public market, and which were, so far as the parties to the transactions were concerned, complete successes.

On pages 244-45, Justice Friedman gets to various campaign statements of Ms. James promising to (mis)use the powers of the office to take down a political adversary. What an embarrassment.

Six years and many millions of taxpayer dollars to fund a massive legal effort to take down the white whale, and Ms. James has nothing to show for it. She is humiliated.

And how about our two big bar associations, the Association of the Bar of the City of New York and the New York State Bar Association? I have looked many times, and I can find no statement from either criticizing Ms. James for misusing her office to try to take out a political adversary.