Trump Ordered to Explain $10B Lawsuit Against His Own Government That Judge Fears Is an Attempt to Secure Fraudulent Payouts

A federal judge has thrown a constitutional roadblock in front of Donald Trump's £7.9 billion ($10 billion) lawsuit against the IRS and Treasury Department, demanding that both sides explain how a sitting president can credibly sue agencies he controls.

On 25 April 2026, US District Judge Kathleen Williams issued an order questioning whether the case, Trump v. IRS, No. 1:26-cv-20609, satisfies the constitutional requirement of an adversarial dispute between genuinely opposing parties. She set a 20 May 2026 deadline for written submissions from both Trump's private attorneys and the Department of Justice, with a hearing to follow on 27 May. The order came just days after Trump's lawyers and government attorneys jointly signalled they were in settlement talks, raising the possibility that taxpayers could be left covering a payout to the sitting president.

Citizens for Responsibility and Ethics in Washington (CREW) has filed an amicus brief urging the court to block any settlement, arguing that Trump using his own Justice Department to negotiate a payout to himself threatens the constitutional separation of powers and the integrity of federal courts.

The £7.9 Billion Complaint and the Leak Behind It

Trump, together with his sons Donald Trump Jr. and Eric Trump, and the Trump Organization, filed suit on 29 January 2026 in the US District Court for the Southern District of Florida. The complaint names the IRS and the Treasury Department as defendants, accusing them of failing to safeguard confidential tax information that was subsequently disclosed to news organisations.

The underlying leak dates to 2019 and 2020. Charles Littlejohn, a former IRS contractor employed by Booz Allen Hamilton, illegally obtained and disclosed Trump's tax returns to The New York Times and ProPublica. Reporting based on those records revealed that Trump paid just $750 in federal income taxes in both 2016 and 2017. Littlejohn pleaded guilty in October 2023 to one count of unauthorised disclosure and received a five-year prison sentence in January 2024.

The Trump complaint asserts that the defendants 'have caused Plaintiffs reputational and financial harm, public embarrassment, unfairly tarnished their business reputations, portrayed them in a false light, and negatively affected President Trump, and the other Plaintiffs' public standing.' Trump's legal team put the total damages figure at a minimum of £7.9 billion ($10 billion), citing both each individual unauthorised disclosure and subsequent republication of that data across media platforms as separate counts of liability under Section 6103 of the Internal Revenue Code.

A spokesman for Trump's legal team stated 'The IRS wrongly allowed a rogue, politically motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organisation to The New York Times, ProPublica and other left-wing news outlets.' The IRS referred press enquiries to the Department of Justice, which did not immediately respond.

The Constitutional Adverseness Problem

At the heart of Judge Williams' scepticism lies a foundational constitutional principle. For a federal court to exercise jurisdiction, it must have before it a genuine 'case or controversy' between parties who are genuinely opposed to one another. Williams wrote in her 25 April order: 'Typically, adverseness is found in a situation where one party is asserting its right and the other party is resisting. Consequently, if there is no adverseness, there is no case or controversy.'

The judge pointed directly to the executive orders Trump has signed since returning to office, including one barring executive branch employees from advancing legal interpretations that contradict his 'opinion on a matter of law.' Williams wrote 'One such employee of the executive branch, the attorney general, has a statutory obligation to defend the IRS when it is hailed into court, but is ostensibly required by executive mandate to adhere to the president's opinion on a matter of law in such a case. This raises questions over whether the parties here are truly antagonistic to each other.'

Acting Attorney General Todd Blanche declined to address the specifics of the case at an unrelated press conference earlier this week. He stated only that 'the Department of Justice handles complicated decisions involving those type of issues every day, all day,' and that he was confident the department could 'handle it in an appropriate and ethical manner.'

Trump himself appeared to acknowledge the structural absurdity of the arrangement. He has previously stated publicly that the lawsuit would effectively require him to 'work out a settlement with myself.' Bloomberg Law reported that outside groups filing amicus memorandums have urged Williams to stay the entire proceeding until Trump leaves office.

Collusion Concerns, Taxpayer Exposure and Legislative Counter-Move

The amicus brief filed by CREW and four former senior federal tax officials on 6 February 2026 used unusually stark language. 'This case is extraordinary because the president controls both sides of the litigation, which raises the prospect of collusive litigation tactics,' the brief stated. 'To treat this case like business as usual would threaten the integrity of the justice system and the important taxpayer and privacy protections at the heart of this case.'

The same brief argued that the claim may be time-barred under the two-year limitations period in the Internal Revenue Code, that the suit improperly targets the United States for actions carried out by a private contractor, and that the £7.9 billion ($10 billion) damages figure is 'unsupported and excessive.' The filing urged the court to consider appointing a special master to oversee proceedings independently of the executive branch.

The settlement talks compound the conflict. If Trump reaches a deal, the payout comes from the US Treasury, meaning ordinary Americans would fund a financial award to their own president. Trump has said he intends to donate any proceeds to charity, though that assurance carries no legal force and would not prevent the initial transfer of public funds. No legislation currently bars a sitting president from receiving such a payment.

That gap prompted a legislative response. Representative Mike Thompson of California, announced on 2 February 2026 a bill called the Prevent Presidential Profiteering Act, which would impose a 100% tax on any civil judgement or settlement paid by the United States to a sitting president or their immediate family if the legal action was filed while that president held office. The bill was introduced in the House that same week. It has not advanced through committee.

A judge has now forced into the open a question American law was never designed to answer: what happens when the most powerful individual in the country sues himself, with public money on the line and no one on the other side with the independence to say no.