By AP and Reuters

This article was published on 13 Jul 202613 Jul 2026.

The ruling represents a rare judicial rebuke of a settlement involving the sitting president and his own administration.

A United States federal judge has ruled that a civil settlement reached between US President Donald Trump and his own Department of Justice was unlawful.

The ruling by US District Judge Kathleen Williams on Monday broadly characterised the situation as self-dealing.

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Trump had launched the $10bn lawsuit against the Internal Revenue Service (IRS) in January, accusing the agency of not properly preventing the leak of his tax returns during his first term as president.

After that, the Department of Justice negotiated an agreement with Trump to set aside $1.8 billion into a fund intended to compensate individuals the administration claimed were targets of government weaponization and lawfare.

The settlement also gave Trump sweeping tax protections.

In her decision, Judge Williams stated that Trump and the Justice Department lacked genuine adversity in the case, a requirement under the US Constitution for civil lawsuits.

“The nature of the suit itself and the conduct of the Parties and counsel from its filing make plain that this was an attempt to use the Court to provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the President and to earmark billions of dollars from American taxpayers to redress grievances not defined in the law,” she wrote.

“Ensuring that our courts are used only for the express purpose created by the Constitution is the obligation of every judge and an obligation that this Court must discharge in light of the matter before it,” she said.

The ruling comes after the administration had already backed away from the so-called “Anti-Weaponization Fund” amid pushback from both Republican and Democratic lawmakers.

Still, it represents a major rebuke to the administration and could prove politically damaging to acting Attorney General Todd Blanche, who faces a confirmation hearing next week.

Williams suggested that Blanche was working on behalf of both Trump and the DOJ throughout the proceedings, pointing to his “apparent capacity to speak for both Plaintiffs and Defendants”.

The judge also referred a Trump lawyer in the case, Alejandro Brito, and senior Justice Department officials who signed off on the settlement to state bar authorities to determine if their actions violated legal ethics rules.

This case highlights the delicate balance between executive authority and judicial oversight. The court's rejection of the settlement may have implications for how future administrations handle legal disputes with current officials. It also raises questions about the use of taxpayer funds for settlements that lack specific legislative authorization.