Adding to my FTPB Discussion of Civil Suits for Disclosure of Return Information for the Trump "Settlement" (5/26/26)

I have just finished a first draft of the portion of the working draft of my Federal Tax Procedure book 2026 discussing the civil remedy for improper disclosures of tax return information under § 7431. In the 2025 version, I have a paragraph discussing the settlement with Ken Griffin regarding disclosures of prominent (meaning wealthy) taxpayers' return information. I have not changed that paragraph, but have added immediately after it a discussion of the Trump v. IRS § 7431 suit and the settlement of Trump’s suit that has been so much in the news recently. I suspect most, perhaps all, the readers will already know the basics of the settlement that I offer. I link here a pdf with redline of the new discussion with footnotes. I copy and paste below the discussion (text only) with the new material after the Griffin paragraph (which I do not redline here).

           A prominent example of this remedy is a suit brought by a Kenneth Griffin, reputedly a hedge fund billionaire. An employee of a third party contractor to the IRS, Booz Allen Hamilton, Inc., illegally accessed and disclosed the tax return information of Griffin and others to a news organization, ProPublica, which in turn published some of the tax return information. Griffin sued the IRS under (i) § 7431, alleging violation of § 6103, and (ii) the Privacy Act. The employee was prosecuted and pled guilty, receiving a five-year sentence. Griffin and the IRS settled the civil action resulting in a dismissal with prejudice. All of the terms of the settlement are not available, but the IRS agreed to and did issue a public apology. Another reputed billionaire brought related action against the employee’s employer, Booz Allen Hamilton, Inc.

           An even more prominent example arising from the same mass disclosures is a 2026 suit Donald J. Trump filed in his personal (rather than Presidential) capacity for $10 billion damages (asserting both the minimum $1,000 per disclosure with disclosures at $1,000 justifying $10 billion or actual damages of $10 billion) and for punitive damages in an amount not stated. The parties plaintiff also included Trump related persons and entities. The Judge in the case asked the parties to brief whether, given Trump’s control over the Government parties (IRS and DOJ) and personal interest as Plaintiff, the case met the required Article III case or controversy requirement. The Court also appointed distinguished amicus to provide here independent briefing on that issue. Before the parties presented their briefing but after the amicus provided its initial briefing, the Trump parties moved to dismiss requiring the Court to dismiss with prejudice under FRCP Rule 41(a)(1)(A)(i); as required by that Rule, on 5/18/26, the Court dismissed with prejudice, the Court noted:

           Because the Notice does not reference any settlement or include a stipulation of settlement, there is no settlement of record. Additionally, Defendants—federal agencies represented by the Department of Justice, which has an independent obligation to uphold the “public’s strong interest in knowing about the conduct of its Government and expenditure of its resources” and the “fair administration of justice,” 28 C.F.R. §§ 50.9, 50.23—neither submitted any settlement documents nor filed any documents ensuring that settlement was appropriate where there was an outstanding question as to whether an actual case or controversy existed.

In short, the Court smelled a rat but under the Rule was required to dismiss with prejudice.

           Shortly afterward, on 5/18/26, DOJ announced that it had “settled” the dispute (and all other disputes known or unknown between or among the opposing parties). The key terms of the “settlement” are:

           • Recitals including (i) the tax return information disclosure discussed above; (ii) administrative claims arising from the Biden administration “unlawful raid on Mar-a-Lago” and the Russia-collusion hoax”; and (iii) but for the settlement, the Trump parties planned to amend the complaint in Trump v. IRS to include other parties as a “putative class claim.”

          • As the Trump parties “sole and complete relief,” the United States will issue a “formal apology” to the Trump parties (citing the Griffin settlement); that relief will not include “monetary payment or damages of any kind” (citing the Griffin settlement). Trump parties will dismiss with prejudice the claims in Trump v. IRS (discussed above) and withdraw the administrative claims noted in the Recitals.

          • DOJ creates an “Anti-Weaponization Fund” for a nominal $1.776 billion to pay damages to others than the Trump parties for prior administration’s weaponization and lawfare improperly targeting others for political purposes.

          • By separate agreement dated 5/19/26, Treasury and the IRS (the Defendants in the litigation) releases the Trump related parties (“Plaintiffs” and any “or related or affiliated individuals (including, without limitation, family or others filing jointly), or parties including trusts, parent, sister, or related companies, affiliates, and subsidiaries”) that had accrued and thus could have been asserted by the Defendants (Treasury and IRS) as of the Effective Date (presumably 5/19/26).

I make no attempt to answer the many questions that the “settlement agreement” raises since they will be thrashed around in the public news and litigation for many years. However, I urge students and practitioners to consider this agreement from a tax procedure perspective (did the Trump parties in the litigation have any merit in the claim, including whether the suit was timely filed), whether the Treasury or IRS can contractually exempt taxpayers from audits that the law otherwise permits, and from a citizens’ perspective as to appropriate use of taxpayer money. Is this the type of agreement you want our Government to enter, particularly where, as the Judge in the case noted, there is no one protecting the Government’s or the taxpayers’ interests?

I encourage readers to note in the comments or in an email to me (jack@tjtaxlaw.com) any suggestions for improving this part of my working draft for the 2026 editions.