A three-judge panel declined to pause sanctions tied to a judge’s conclusion that the president’s $10 billion tax-returns lawsuit was manufactured to unlock a $1.776 billion payout fund.

A federal appeals court on Tuesday backed a finding that President Donald Trump colluded with the IRS and Treasury when he sued his own administration over leaked tax returns — and refused to pause the sanctions a Florida judge imposed on his lawyers.

A three-judge panel of the Atlanta-based 11th Circuit Court of Appeals rejected Trump’s challenge to U.S. District Judge Kathleen Williams’ July ruling, which concluded the $10 billion lawsuit was never a genuine legal dispute. Instead, she found, it was engineered to justify a settlement that created a $1.776 billion “anti-weaponization” fund payable from taxpayer money.

What the appeals court actually decided

The panel declined to stay Williams’ ruling while the case proceeds, leaving her sanctions and restrictions in place for now. In its opinion, the court wrote that Trump and his attorneys “did not submit or offer any evidence to explain their litigation conduct or demonstrate that the lawsuit and the settlement were not collusive.”

The judges added that the appellants “have not made a strong showing that the district court committed clear error in its collusion and bad faith findings.” The panel made that assessment in declining to pause the July ruling while the appeal continues.

The practical effect: Williams’ July order stands. Trump and certain officials remain barred from citing the deal in “official” proceedings as proof of a legitimate settlement, and the penalties against two of his lawyers remain active.

The $10 billion lawsuit over leaked tax returns

The underlying case began in January, when Trump, his sons Donald Trump Jr. and Eric Trump, and the Trump Organization sued the IRS and Treasury Department in Miami federal court. The complaint sought $10 billion in damages over the leak of their tax returns to news organizations.

The family accused the agencies of failing to safeguard “confidential, personal financial information.” The leak traced back to Charles “Chaz” Littlejohn, a former IRS contractor now serving a five-year prison sentence for disclosing the records to media outlets.

The stakes were personal as well as financial. The New York Times’ 2020 reporting on the leaked returns revealed Trump paid just $750 in federal income tax the year he won the presidency — and no federal income tax at all in 10 of the previous 15 years. Trump had long refused to release his returns, citing audits, before publishing them himself in 2022.

The settlement that raised red flags

Here is where the case turned strange. In late May, Trump’s own Justice Department agreed to dismiss the lawsuit and create a $1.776 billion fund to compensate people who claim they were wronged by government prosecutions — what officials branded an “anti-weaponization” fund.

Williams, an Obama appointee based in Miami, saw a problem: the president had sued his own administration, then settled with it on terms his own administration controlled. In a 56-page ruling, she wrote that “there was never adverseness between the Parties; there was never a case or controversy; and there was never a question as to who would prevail.”

Her sharpest criticism targeted Trump himself. She noted he filed the suit years after the leak, only after returning to office with the power to fire the very officials he was suing. In her view, the litigation existed mainly to create a legal hook for the payout.

The sanctions on Trump’s lawyers

Williams did not stop at findings. She referred Trump attorney Alejandro Brito to the Florida Bar for potential discipline and barred lawyer Daniel Epstein from practicing before the federal district court in South Florida for a year.

She also prohibited the parties from publicly describing the settlement as a resolution of the claims — a restriction aimed at preventing the deal from being framed as vindication while its legitimacy is contested.

Trump’s legal team asked the 11th Circuit to immediately lift those sanctions and the speech limits. Tuesday’s order means they must keep living under them while the appeal moves forward.

Why the ruling matters beyond one lawsuit

The case centers on a basic structural principle: courts exist to resolve genuine disputes between adverse parties. Williams concluded that Trump’s lawsuit and settlement with his own administration were not genuinely adversarial and were used to justify the reported $1.776 billion fund.

Williams’ collusion finding remains in effect while the appeal proceeds. The 11th Circuit declined to pause her ruling, saying the appellants had not made a strong showing that she clearly erred in her collusion and bad-faith findings.

The 11th Circuit’s order did not resolve the appeal on the merits. It addressed whether to pause Williams’ ruling and concluded, based on the record before it, that the appellants had not made the required strong showing of clear error.

What happens next

Tuesday’s order is not the final word. The appeal itself continues, and Trump’s team can still contest the collusion finding and the sanctions on the merits. The panel’s ruling means the lower court’s order remains in effect while that review plays out.

Open questions remain. Will the full 11th Circuit or the Supreme Court take up the case? Will the Florida Bar act on the referral of Brito? And will the $1.776 billion fund operate while the settlement’s legal foundation is under challenge? None of those answers are settled — but for now, the finding that the lawsuit was collusive remains intact, and the president’s lawyers remain sanctioned.