Adding to my FTPB Discussion of Civil Suits for Disclosure of Return Information for the Trump "Settlement" (5/26/26; 5/28/26)

Added 5/27/26 7:00pm and 5/28/26 3:30pm: I have added new matters at the end of this blogging. Since the issue is developing, I may update on the developments by additions below or by separate blog.

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.

Addendum by JAT 5/27/26 7:00pm: 

Former Federal Judges have filed a document in Trump v. IRS (the case discussed above which the district court dismissed the case with prejudice. The new document is titled: Motion for Relief From Judgment Or Order, Or, In the Alternative, for Leave to Appear as Amici Curiae by Thirty Five Former Federal Judges. The document is here; the docket entries in the case is here; note that the docket entries at docket # 63 styles the document: MOTION to Reopen Case by Thirty-Five Former Federal Judges. The MOTION had the following Exhibits:

• Exhibit A, the original "Settlement Agreement" dated 5/18/26, here.
• Exhibit B, the addendum dated 5/19/26, here.
• Exhibit C, a separate agreement dated 5/18/26, here (related to the operation of the Settlement Fund). (This is new to me.)

I have not been able to process this new development. I will go to my regular exercise session for about 1.50-2 hours and then think some more about it. I may add something tonight.

Addendum by JAT 5/28/26 3:30pm: JAT Comments on Trump v. IRS and the “Settlement”:

I offer comments. Please keep in mind that these are just general comments drawing on my past experiences and research over the years, rather than new research. The comments are somewhat off-the-cuff prepared primarily to suggest topics readers may want to pursue further.

• The Settlement Agreement recites: “Counsel for Plaintiffs have indicated that, but for this settlement, they would intend to amend their complaint, including in order to likely add a putative class claim.” Does that mean that the Trump Plaintiffs traded away the rights of others in order to take money from the Treasury for Trump allies? Was the “indication” of pursuing class action status even credible. I think it has no credibility whatever; that means that no reasonable defendant would have "paid" anything for that indication. Why do I say the indication of pursuing class claim was not credible? If the Trump Plaintiffs moved for class action status, the Court may have refused class action status because of the lack of adversity between Plaintiffs and Defendants. In any event, if the Court approved class action status, the Court would effectively have a lot of control over the litigation. The Court could inquire into and perhaps allow discovery over whether Trump’s lawyers could represent the class (the Trump Plaintiffs likely would not be permitted to opt out because they would have been the persons insisting on class status for the lawsuit). The Court could more directly address lack of adversity between the Defendants and the Trump Plaintiffs that she was concerned about. And, most importantly, the Court could address the fairness of any settlement and not approve it if she smelled a rat, permit discovery, etc.  In any event, any settlement of the putative  class action would not include some fund to benefit parties other than the class claimants. And so forth. In other words, the idea of a class action is floated to offer the smoke and mirror semblance only of additional consideration for the Settlement Agreement for which there is otherwise no consideration for the substantial monetary benefits paid by taxpayer dollars for the Trump allies who are beneficiaries of the Weaponization Fund and the monetary benefits Trump and related parties receive from audit and related action to force them to pay their tax liabilities. 
• In any real, non-sham settlement, the parties evaluate the litigation risks and negotiate accordingly. What were the risks of the Department of Treasury and the IRS with respect to the tax return disclosure suit under § 7431? Marginal at best, hardly the stuff to assess the risk at $1.776 billion.
• Note that Griffin, a billionaire with the capacity to fund extensive and quality legal representation, received only an apology with no monetary compensation to anyone. Griffin was in the same position that the Trump Plaintiffs were. Griffin got nothing of monetary value. Was Griffin making a contribution to the Government by not pursuing his claim to judgment? Yeah, babies come in baskets.
• The § 7431 wrongful return information disclosure litigation would have probably required the consideration of the Trump return information in order, at a minimum, to establish that a wrongful disclosure was made, that the Trump Plaintiffs suffered any actual damages and quantify same, the nature of the claim for $1,000 per disclosure, and the factors, if any, to consider for punitive damages. Of course, the Court could put such information under seal during the pendency of the law suit, but much of it would come out in the public trial if that happened (required if a jury) and in the Court documents reaching its decisions. All of which is to say, that, in the § 7431 litigaiton, the Trump Plaintiffs likely would have ended up where Griffin ended up—an apology and no monetary compensation to them or to others through a slush fund.
• And then, the validity of § 7431 litigation requires a timely claim. I have read that there are substantial reasons that the Trump § 7431 litigation was not timely in the two year statute of limitations. I don't address that issue here, but readers might be on the lookout for it. If the § 7431 litigation is untimely, there was zero value in the Trump Plaintiff's claims in the § 7431 litigation.
• The Trump Other Claims for Damages from the Mar A Lago search and from the so-called “Russia-collusion hoax” (referred in the Settlement Agreement generically as the “Pending Agency Claims”) appear quite iffy to me. Keep in mind that I have no specialized expertise with regard to those claims and the Settlement documents provide no detail regarding those alleged claims. 
• These Pending Agency Claims are not part of the litigation in Trump v. IRS. 
• I suspect that they the Pending Agency Claims are worthless. First, the Mar A Lago search was authorized by a Federal Magistrate Judge. I suspect that the application was not so defective as to give rise to an actionable claim. But again, that is my suspicion only. Second, the so-called Russia-collusion apparently relates to the Mueller Special Counsel investigation. I doubt that they have any merit. However, the discovery and trial on the Russia-collusion issue could turn into a mini-Mueller investigation where Russia-collusion would be an issue provable by a preponderance of the evidence. Would the Trump Plaintiffs really risk that?
• Of course, since Trump is on both sides of the Pending Agency Claims, he can exercise power to “settle” those claims for any reason he chooses (I guess short of his personal fraud which might make any settlement null or voidable; if his personal fraud is involved, I assume he could also be prosecuted at the end of his term (unless death or mental icompetency intervened).
• There are a lot of unanswered questions in the Settlement Agreement and the Addendum. My opinion is that neither of the documents suffered from consideration and drafting by competent attorneys. There are a lot of holes in the documents which appear to me to have been prepared by lawyers who did not fully consider the implications, perhaps reflecting haste because of Judge Williams' pressure. Proof of that may be inferred from the need to do an Addendum one-day after the original Settlement Agreement with no additional consideration being provided in the Addendum for the major benefits of relief from tax liability and perhaps relief from criminal prosecution supposedly conferred on the Trump Plaintiffs and related parties (unnamed).
• At the most basic level, the only authority to settle in the Code is in §§ 7121 and 7122. I don’t think either of those sections have been read to allow the IRS to compromise (or settle) liabilities or agree to anything for unknown parties (unknown taxpayers). So, if that is the authority behind the supposed agreement not to pursue audits, tax liabilities, or even criminal prosecution of unknown parties, I don’t think that authority exists. 
• Moreover, other potential footfaults include § 7122 which requires the IRS must prescribe guidelines for settlement; I am sure that such guidelines exist for § 7431 settlements, the documents make no attempt to indicate compliance for § 7431 settlements. 
• Also, § 7122(b) requires an opinion of the General Counsel or his delegate to include the amount of tax assessed, the interest and penalties assessed, the amount actually paid except in cases involving less than $50,000. Obviously, such an opinion cannot be made as required for unknown taxpayers and unknown liabilities. And, even for the known parties (the Trump Plaintiffs), there is no indication that the IRS can even quantify the tax liabilities the document supposes to give relief. And, finally, the settlement documents are open for public inspection. See IRS web site titled "Offer in compromise public inspection file," here.
• Another factor is that, once DOJ has received a case, it has sole settlement authority. § 7122(a).  However, that relates only to the matter referred to DOJ which is the §  7431 suit. No transfer appears to have been made of all the other audit matters for the Trump Plaintiffs and related parties. Hence, the agreement to forego audits would certainly be a compromise subject to the requirements for IRS compromise, including the General Counsel or delegate opinion and terms accessible to the public. However, even on the §  7431 suit actually transferred to DOJ, the DOJ solicits the views of the IRS for settlements and that should offer a paper trail as to the reasoning or nonreasoning for the settlement. And, for DOJ to settle, the process formerly required review by what was formerly called the Review Section. I presume that a similar function has been moved into the Civil Division Tax unit. Another opportuunity for discovery, but I suspect that the Review function was not invoked.
  

There are obviously many more problems with the documents. Full discovery by uninterested persons (including the next administration) may uncover sufficient problems (including fraud) to make any such agreements void or voidable and even permit the opportunity to criminally prosecute the actors in these transactions. Thus, I don't think the Supreme Court's misguided grant of immunity to Trump for his official acts could possibly cover for these actions. (That is an opinion, not a statement of fact.)