Trump Penalty Thrown Out: Excessive Fine Ruling and Split Panel

A New York appellate court threw out the roughly $500 million civil fraud penalty against Donald Trump on August 21, 2025, ruling that the disgorgement order was an unconstitutionally excessive fine under the Eighth Amendment. The same decision left in place the trial court’s finding that Trump, the Trump Organization, and two of his adult sons committed fraud under New York law. Both sides are now appealing to the state’s highest court.¹

What the Appeals Court Did

A five-justice panel of the New York Appellate Division, First Department issued a 323-page decision that split three ways, with no single opinion commanding a majority.¹ The outcome was the elimination of the financial penalty ordered by Justice Arthur Engoron in February 2024, which had grown to about $507 million against Trump personally by mid-2025 as pre-judgment interest of more than $100,000 a day accumulated.²

What did not go away was the underlying liability. The trial court’s conclusion that Trump and the other defendants engaged in “persistent fraud” under New York Executive Law § 63(12) remains on the record. So do disgorgement awards vacated against co-defendants Allen Weisselberg and Jeffrey McConney; the fraud findings against them stand even though their monetary penalties were erased.¹

Why the Penalty Was Unconstitutional

Justices Peter Moulton and Dianne Renwick wrote that the $464.5 million disgorgement was an “excessive fine that violates the Eighth Amendment of the United States Constitution.”¹ They acknowledged that harm had occurred but concluded it was not “the cataclysmic harm that can justify a nearly half billion-dollar award to the State.”²

Justice Moulton reasoned that the disgorgement was punitive rather than remedial: the money was payable to the state rather than to any harmed party, it served retributive and deterrent purposes, and it was imposed as joint and several liability. To pass constitutional muster, the court held, a disgorgement would need to be “reasonably calculated to encompass only the actual proceeds that defendants realized from their fraud.” The state’s calculation, the court said, fell “far from a reasonable approximation.”³

A Panel That Could Not Agree

Three separate opinions emerged from the five justices, and their reasoning diverged sharply.

Moulton and Renwick would have upheld liability but vacated the fine on Eighth Amendment grounds.¹

Justices John Higgitt and Llinét Rosado agreed the attorney general had authority to bring the lawsuit but concluded that errors at the trial level, including Judge Engoron’s grant of summary judgment on fraud before trial, required a new trial on some transactions.⁴⁵ Despite that view, they joined the Moulton-Renwick order vacating the disgorgement for the “sole purpose of ensuring finality,” a procedural move that allowed the case to move up to the Court of Appeals.¹

Justice David Friedman dissented in favor of dismissing the case entirely. He argued that the attorney general exceeded her authority under Executive Law § 63(12) because the transactions were “private bilateral deals between sophisticated parties who were satisfied with the results.” He called the lawsuit “political hygiene” and characterized it as aimed at “the derailment of President Trump’s political career and the destruction of his real estate business.”⁶

What Else Survived the Ruling

The appellate court upheld the non-monetary penalties Judge Engoron had imposed, describing the injunctive relief as “well crafted to curb defendants’ business culture.”⁷ Those restrictions include:

Those non-monetary penalties are paused for now, pending the next stage of appeals.⁷ Sanctions that had been imposed on Trump’s attorneys were also vacated.⁹

What the Case Was About

New York Attorney General Letitia James filed the civil lawsuit on September 21, 2022, against Trump, his three adult children Donald Jr., Eric, and Ivanka, longtime executives Weisselberg and McConney, and ten corporate entities. The complaint alleged that between 2011 and 2021, Trump and his associates created more than 200 false or misleading asset valuations on annual Statements of Financial Condition submitted to banks and insurers, producing roughly $250 million in illicit financial benefits.¹⁰

The case was brought under Executive Law § 63(12), a broad New York anti-fraud statute that allows the attorney general to pursue “persistent and repeated” business fraud without proving intent or reliance by a victim.¹ After a non-jury trial, Judge Engoron found the defendants liable for submitting “blatantly false financial data” to accountants to secure lower interest rates and better insurance terms. He rejected the defense argument that no one was harmed because the loans were repaid, writing that “timely and total repayment of loans does not extinguish the harm that false statements inflict on the marketplace.”¹¹

Engoron ordered $355 million in disgorgement, which grew with interest to the roughly $500 million figure that the appellate court later erased.²

Where the Case Goes From Here

Attorney General James announced her intent to appeal to the New York Court of Appeals, the state’s highest court, on the day the appellate ruling came down. “It should not be lost to history: yet another court has ruled that the president violated the law, and that our case has merit,” she said.¹² Her office formally filed a notice of appeal on September 4, 2025, though the specific legal arguments had not been filed as of that date.¹³

Trump and his sons have also filed appeals, seeking to challenge the fraud findings and the non-monetary restrictions that survived.¹³ Trump called the appellate ruling a “TOTAL VICTORY,” while his legal team maintained throughout the proceedings that the case was “politically motivated, legally baseless, and grossly excessive.”¹²

The Court of Appeals will now decide whether the fraud finding stands, whether any monetary penalty can be reinstated, and whether the non-monetary restrictions ultimately take effect. Until it rules, the fraud finding remains on the books, the penalty does not, and the injunctive measures are on hold.

1
Justia. People v Trump, 2025 NY Slip Op 04756
2
NBC News. NY Appeals Court Throws Out Trump’s $500 Million Fraud Judgment
3
Reason. An Appeals Court Says the $464 Million Fine in Trump’s Civil Fraud Case Violated the Eighth Amendment
4
FindLaw. People v Trump – Appellate Division Decision
5
ABC7NY. Appeals Court Throws Out Massive Civil Fraud Penalty Against Trump
6
Courthouse News Service. New York Appeals Court Tosses Trump’s $500 Million Civil Fraud Penalty
7
NPR. Civil Fraud Penalty Against President Trump Thrown Out on Appeal
8
BBC News. New York Appeals Court Throws Out Trump Financial Penalty
9
JURIST. New York Appeals Court Tosses $465 Million Award in Trump Civil Fraud Case
10
New York Attorney General. Attorney General James Sues Donald Trump for Years of Financial Fraud
11
New York Attorney General. People v. Trump – Trial Court Decision
12
The Hill. Trump Fraud Case Appeals Court Tosses Penalty
13
The Hill. Letitia James Appeals Trump Penalty Ruling