Trump’s Appellate Prospects after Ruinous Civil Fraud Judgment

I have a column up on the homepage about the financial peril that Donald Trump faces as a result of the mind-blowing $355 million judgment rendered against him last week in New York State’s civil fraud case against him. I was traveling for the last week, and a big question people had even before the elected progressive Democratic judge, Arthur Engoron, issued his ruling is whether the former president stood a good chance of getting the case reversed on appeal — assuming he does appeal, which he has vowed to do (a costly proposition, as my column details).

In the column, I say:

Obviously, I have no idea whether Trump can afford to appeal. On this and other aspects of our discussion here, it is important to bear in mind that the injustice many of us have highlighted in the civil-fraud case is that the punishment is utterly out of proportion to the wrong done, not that no wrong was done. Trump was found liable of fraud based on his inflation of assets. While he has pushed back, insisting that he and his assets are actually worth more than attested by the statements of financial condition (SFCs) that were the heart of the state attorney general’s case, there was significant evidence of asset inflation.

Just to elaborate a bit more on this point: To my mind, it is unlikely that Trump’s appeal will result in a clean win for either side. That is, I could easily see the disgorgement penalty being substantially slashed. Yet that does not necessarily mean an appellate court is going to reverse the underlying findings that Trump and his underlings grossly exaggerated asset values in contexts where they were obliged to provide good faith estimates — even if their counterparties were sophisticated financial actors who were sure to do their own due diligence.

Those findings are conclusions of fact. Even though this was a bench trial before a judge whose hostility to Trump was unconcealed (as was Trump’s contempt for the tribunal), appellate courts are loath to disturb factual conclusions by the trial judge who heard the witness testimony and other evidence. (Appellate courts are much more likely to reverse a trial judge’s conclusions of law.)

Should Judge Engoron have been the factfinder? I don’t think so, and one argument Trump could make on appeal involves whether this case should have been a jury trial. If he raised this issue and won, he would get the entire case reversed. But I wouldn’t bank on that. The statutes involved did not call for a jury trial under New York law. Despite that, given how punitive the potential penalties were (and turned out to be), I think the defense should have been constitutionally entitled to a jury trial. But whether I’m right or wrong about that, such an argument does not make itself. Unless I’m missing something, the Trump legal team seems to have accepted that a jury trial was not legally available. They complained about being stuck with a bench trial before a hostile judge, but they don’t seem to have zealously contended that the circumstances constitutionally called for a jury trial, regardless of what New York’s business statutes say. If the record indicates that the Trump team did not sufficiently object, an appellate court is apt to find that the issue is waived at this point — despite the harshness of the judgment.

Trump can also be expected to claim that the monstrous statute he was prosecuted under, New York’s business law §63(12), was not intended to apply to business transactions involving sophisticated financial actors (it’s designed for consumer fraud cases). Moreover, it can result in ruinous penalties despite the lack of such due-process protections as a jury trial, and the lack of basic substantive protections the law normally provides in a fraud case — e.g., requirements that the state establish proof of fraudulent intent and victims who were actually harmed. If such claims were to get traction on appeal, Trump could get big chunks of the case reversed. But as I explained a few months back in outlining what the case was about, §63(12) was not the state’s only cause of action — though it was the most significant one. Engoron has now found against Trump on other claims that required establishing knowing, purposeful dishonesty. So again, even if Trump could knock out the big claim, that wouldn’t necessarily call for reversal of the whole case.

Of course, Trump will also claim that he was selectively subjected to a lawsuit that the state would not bring against similarly situated defendants. I believe this is not credibly deniable. Trump could even get some momentum from the fact that (1) New York attorney general Letitia James campaigned for office promising state Democrats that she’d target Trump (for what, it seemed not to matter); (2) Engoron, a club Democrat lawyer whom the party eventually nominated to run unopposed for a judgeship, intimated that he was a “bad guy” even before the trial started; and (3) Democratic governor Kathy Hochul just a few days ago pleaded with businesses, in essence, not to flee the state because the harsh treatment of this civil prosecution was uniquely meant for Trump.

All that said, however, selective prosecution claims are virtually never successful. That is especially so post-trial if the record supports the state’s claims that the defendant engaged in unlawful conduct. I could see the state’s unabashed partisan vindictiveness providing some atmospheric help to Trump’s appeal; I can’t see it being the basis per se on which the verdict is vacated.

I dilate on all of this because, unless Trump gets a sweeping appellate win that knocks out the whole case, most of the penalties against him are going to remain more or less intact. That is, even if he gets the huge disgorgement penalty reduced by tens or even hundreds of millions of dollars, he is still very likely to remain under severe restrictions regarding the oversight of his organization by a monitor and his ability to negotiate loans, insurance coverage, and other business needs.

This is why, as I pointed out in today’s column, we need to bear in mind that the Trump Organization, though not Trump himself, has been criminally convicted on 17 tax felonies by the Manhattan DA’s office. This has to be taken in combination with the civil fraud judgment, as well as the nearly $100 million that will be tied up in Trump’s appeals of the civil verdicts won by E. Jean Carroll. Even financial institutions that have enjoyed good, profitable relationships with Trump in the past are unlikely to be tripping over themselves to do business with him going forward. And that doesn’t even factor in the very real potential of criminal convictions, prison sentences, and the overall strain on Trump’s resources at a time when he has big loans coming due that will either have to be paid off or renegotiated.

Because I believe the civil case against Trump was nakedly partisan and resulted in no harm to anyone, I hope it gets overturned on appeal. For the sake of the business climate in New York, it would be better if the case were overturned. But the realist in me is not banking on a sweeping appellate win for Trump. I anticipate that he will get material relief in terms of the dollar amount, but I wouldn’t hold my breath on the rest of the penalties. And those penalties matter, a lot.