A federal appeals court has refused to pause sanctions against lawyers involved in Donald Trump's $10 billion lawsuit against the IRS. The three-judge panel offered no dissent, leaving the legal team's request with the warm reception usually reserved for expired coupons.
The dispute centers on a proposed settlement between Trump and federal agencies controlled by his own administration. U.S. District Judge Kathleen Williams found the arrangement collusive and said the parties had misused the judicial system.
The proposed settlement carried extraordinary benefits
The agreement reportedly included a $1.8 billion compensation fund for Trump allies and protections from tax audits. The Justice Department later abandoned the compensation fund after bipartisan opposition.
Williams barred the parties from citing the proposed agreement in other proceedings and referred Trump attorney Alejandro Brito to Florida legal disciplinary authorities.
The appeals court rejected the free-speech argument
Trump's attorneys and the Justice Department argued that the sanctions improperly restricted speech. The 11th U.S. Circuit Court of Appeals concluded that the measures did not violate the First Amendment and noted that the challengers had not supplied evidence rebutting the judge's collusion finding.
The ruling does not resolve every underlying claim involving the IRS. It leaves the sanctions in effect while related litigation continues.
Reuters reported the appellate ruling and the proposed settlement's terms on September 29, 2026.
A president suing agencies he controls and negotiating a settlement with the government he runs is the kind of conflict that makes a flowchart file for workers' compensation. The court has decided, for now, that the answer cannot simply be “everybody sign here and never mention it again.”
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