Last week, a five-judge panel of the Appellate Division of New York State Supreme Court heard oral arguments in former President Trump’s appeal of a bizarre ruling in February by a New York State judge that he must pay almost half a billion dollars in fines and interest over some subjective real estate evaluations he offered to banks on loan applications, which were claimed to be violations of the state’s consumer protection laws.
At the time we opined here that the case, brought by New York’s Attorney General Letitia James – who ran for the job, she said, in order to take Donald Trump down – aas a legal stretch and proof positive that the political weaponization of our legal system had reached dangerous critical mass. We went on to express the hope that the appellate courts would intervene.
So, we are encouraged that many of the questions posed by the judges at the hearing reflected considerable skepticism about the legitimacy of the case. To be sure, the judges did not directly address the political weaponization issue – although some did inquire cryptically about possible “mission creep” by the attorney general’s office, i.e., taking on new activities that lie outside its core purpose. And one judge suggested that the court may need to impose “guardrails” on the AG’s power. But they did unequivocally probe the controversial aspects of the case making many of the same points we and others have made.
Thus, several of the judges questioned whether it was appropriate to invoke the consumer protection laws which were designed to protect unwary consumers against predatory banks and merchants. Indeed, Judge David Friedman observed that it seemed the attorney general’s office had sued to “upset a private business transaction that was between equally sophisticated partners.” That is, the banks involved did their own due diligence, profited from the loans and welcomed Trump’s future business. They certainly did not complain that they were defrauded by Trump. In a word, no one was harmed.
Indeed, back in February we had noted that The New York Times had researched the question and was not able to find a single instance where the statute in the Trump case was used against an individual or a company that did not also commit a criminal offense, go bankrupt or financially victimize anyone.
We had also observed that the allegedly inflated valuations Trump offered to the banks were just that, offers, made in the context of industry-wide practice that, before making loans, lenders typically do their own due diligence in verification of what they assume to be subjective presentations.
Some of the judges also focused on the enormity of the penalties, noting that since there was no harm to anyone, it was hard to reconcile the size of the penalties which are typically tied to the size of the harm claimed.
We hope the appellate court will end up seizing this opportunity to strike a blow for the rule of law.
