Takeaways from the NY court hearing on Trump’s $454 million civil fraud judgment appeal

A New York appeals court grilled attorneys for both Donald Trump and the New York attorney general’s office Thursday over the $454 million civil fraud judgment against the former president, raising questions about the size of the penalty and the scope of the attorney general’s authority to bring case itself.

Trump did not attend Thursday’s oral argument, but his lawyers are seeking to overturn the judgment levied by state Judge Arthur Engoron in February, who found that Trump, his sons Donald Trump Jr. and Eric Trump, and his business liable for fraud, as well as issuing false financial statements and false business records.

The appellate hearing is yet another legal development for Trump playing out the same time as his presidential campaign hits the home stretch. In addition to the civil fraud appeal, Trump’s lawyers have argued to dismiss the guilty verdict in the New York criminal case, the federal election interference case in Washington, DC, and the E. Jean Carroll defamation verdict – all in the past month.

Here’s what to know from Thursday’s hearing:

The five-judge appellate panel peppered Deputy New York Solicitor General Judith Vale with questions about the scope of the attorney general’s authority, the lack of alleged victims in the conduct and the size of the penalty Engoron imposed.

“The immense penalty in this case is troubling,” said Justice Peter Moulton. “How do you tether the amount that was assessed by the Supreme Court to the harm that was caused here where the parties left these transactions happy?”

Vale responded that while it was a large number, the process of disgorgement, or the return of “ill-gotten gains” looks to take away the gain from the wrongdoer.

“Although this is a large number, it’s a large number for a couple reasons. One, because there was a lot of fraud and illegality,” she said.

“That is an enormous benefit they got from this conduct” of falsifying financial statements to obtain better loan rates, Vale said.

The judges also questioned how the disgorgement was calculated. Justice Llinet Rosado asked if it should have been calculated based on the difference in the property valuations.

Vale argued that the disgorgement was properly calculated based on the difference in loan rates that Trump received from the falsified financial statements, which they were able to quantify.

She also pushed back on the notion that the penalty against Trump “double-counted” the Trump’s sale of Old Post Office building in Washington, DC, saying that the disgorgement properly included both the benefit Trump received with a better loan rate and the profits from the sale.

Much of questioning of the New York state attorney involved the law that state Attorney General Letitia James, a Democrat, used to bring the action against Trump and his business.

Justice David Friedman questioned the attorney general’s authority given that Deutsche Bank is not saying they were harmed by Trump’s actions.

“It hardly seems to justify bringing an action to protect Deutsche Bank against President Trump which is what you have here,” Friedman said. “You have two really sophisticated players in which no one lost any money.”

Vale responded by saying the statute doesn’t require that. She also pushed back on the idea that Deutsche Bank wasn’t harmed by the financial statements, saying the bank did complain when the allegations of false statements were raised and ultimately pulled out of the agreement.

Moulton said that the underlying issue behind the questions about the attorney general’s scope was “the question of mission creep.”

“There has to be some limitation in what the attorney general can do in interfering in these private transactions … where people don’t claim harm. So what is the limiting principle?” he asked.

“There are still limits,” Vale responded. “It is not falsity in the wind … it has to be related and relevant to the business at hand, and it does have to have a capacity or tendency to deceive.”

She argued that the statute was intended to protect honest businesses that were not engaging in the fraud.

“When you have hidden risks,” Vale said, “that hurts the market and honest participants in the market.”

A lawyer for Trump argued the $454 million judgment should be thrown out because most of the conduct at issue was too old.

“This case involves a clear-cut violation of the statute of limitations and the law of case doctrine,” Trump lawyer John Sauer argued. Sauer pointed to a ruling by this court before the 2023 trial that drew lines around what conduct was too old to be considered and dismissed Ivanka Trump, the former president’s daughter, as a defendant.

“There’s a direct contradiction, a direct disregard of this court’s prior opinion,” Sauer argued.

All five of the judges interrupted to pose questions, including digging in on whether Trump’s team was trying to curtail the attorney general’s authority to bring cases about “persistent” and “repeated” fraud.

Presiding Justice Diane Renwick asked, “Why isn’t the language of the statute here” repeated and persistent fraud? “Why doesn’t that define the scope of the statute. Why do we need to go to harm?”

Sauer said, “We have a situation where there were no victims, no complaints, no evidence of materiality or reliance.” He said the lenders “did do their due diligence.”

Sauer said he was not asking for a ruling about the scope of the state’s authority, merely a reversal of the claims in this case.

Moulton asked Trump’s attorney about deterrence to others in the marketplace. He said it may be fine, “but in the future some deal might not go down well, and someone may be harmed by that.”

In February, Engoron ruled that Trump and his co-defendants inflated the value of the former president’s assets in order to obtain more favorable loan and insurance rates.

The judgment against Trump was for $354 million, with an additional $100 million in interest that had accrued when the judge’s ruling was issued in February. The interest is still accruing at a rate of nearly $112,000 per day while Trump appeals, and the amount had surpassed $478 million as of Thursday, according to a person familiar with the judgment.

Trump posted a $175 million bond in April while the appeal is ongoing.

Thursday’s hearing gave his lawyers an opportunity to air their grievances with the 11-week trial held last fall, in which the former president frequently clashed with the judge, including while on the witness stand. In his ruling, Engoron wrote that Trump and his co-defendants’ “complete lack of contrition and remorse borders on pathological.”

Trump’s attorneys have argued in written filings ahead of Thursday’s hearing that the monetary penalty in the judgment was unconstitutional and that most of the case against Trump should have been barred because the conduct was too old.

The former president’s attorneys raised several other legal arguments they lost at the trial court-level, including that no bank or counterparty lost money on loans, saying the judge made reversal mistakes in his rulings.

“The award of $464 million in a case with no victims, no proven injuries, and no losses is not remotely defensible,” Trump’s lawyers wrote. The additional $10 million relates to other defendants in the case.

The New York attorney general’s office, which brought the case against Trump, has argued in written filings there was “overwhelming evidence” that Trump knowingly committed fraud and inflated the value of his properties on financial statements to obtain loans.

“This Court should affirm. Supreme Court’s liability determinations are supported by overwhelming evidence that, in each Statement, defendants used a variety of deceptive strategies to vastly misrepresent the values of Mr. Trump’s assets,” the attorney general’s office wrote in a filing last month.

The attorney general’s office argued that Trump’s lawyers, in their briefs, largely avoided “any substantive discussion of the many different deceptive practices they used to vastly inflate the values of Mr. Trump’s assets on each annual Statement.”

“Instead, defendants focus their appeal primarily on meritless legal arguments about the elements of” the law, they wrote. “These arguments are contrary to the statutes text and settled precedent and should be rejected.”

The panel did not rule at the end of Thursday’s hearing and no decision is expected before the election, and the appeals court ruling can still be appealed to New York’s highest appellate court.

This story has been updated with additional developments.