This is a significant victory for the president.

A New York appeals court has thrown out the outrageous half-billion-dollar fine imposed on President Trump after he was found liable in the civil fraud prosecution brought by New York State Attorney General Letitia James.

This is a significant victory for the president, wiping out the crushing financial penalty. Nevertheless, Trump has not been completely vindicated — at least not yet. The appellate division was divided on the underlying merits of the case, but it left in place the lower court’s fraud verdict. Moreover, some of the nonfinancial injunctive penalties meted out by Judge Arthur Engoron (like James, an elected progressive Democrat) will remain in place. That means the Trump Organization will be subject to continued monitoring and other restrictions.

Still, Trump could ultimately be vindicated in full. The appellate division is the intermediate level of appeal in New York. The case will now move on to the Court of Appeals, the state’s highest tribunal.

As we covered extensively here in National Review, AG James’s civil fraud lawsuit was the case that criminal prosecutors — including even Manhattan District Attorney Alvin Bragg — refused to charge. Although Trump undeniably exaggerated and otherwise manipulated the value of his assets in order to get more favorable treatment from lenders, insurers, and other financial counterparties, there were no fraud victims. In fact, Trump’s business associates all made money and, for that reason, were content to keep doing business with the real estate magnate then based in Manhattan.

The appeals court invalidated the fine, originally $355 million but much higher now with compounding interest, on an Eighth Amendment theory. That, of course, is the U.S. Constitution’s prohibition against cruel and unusual punishments, which is binding on the states. We usually think of this as related to draconian physical punishment, but it has long been applied by the courts to another form of cruelty: oppressive punishments that clearly do not fit the crime. Here, the five-judge panel quite justifiably found that the mismatch between the trifling wrong proved and the ruinous financial penalty imposed was so extreme it could not stand.

If you were reading NR during and after the trial, this will not surprise you. To repeat what I said in February 2024:

Obviously, I have no idea whether Trump can afford to appeal. On this and other aspects of our discussion here, it is important to bear in mind that the injustice many of us have highlighted in the civil-fraud case is that the punishment is utterly out of proportion to the wrong done, not that no wrong was done. Trump was found liable of fraud based on his inflation of assets. While he has pushed back, insisting that he and his assets are actually worth more than attested by the statements of financial condition (SFCs) that were the heart of the state attorney general’s case, there was significant evidence of asset inflation.

Just to elaborate a bit more on this point: To my mind, it is unlikely that Trump’s appeal will result in a clean win for either side. That is, I could easily see the disgorgement penalty being substantially slashed. Yet that does not necessarily mean an appellate court is going to reverse the underlying findings that Trump and his underlings grossly exaggerated asset values in contexts where they were obliged to provide good faith estimates — even if their counterparties were sophisticated financial actors who were sure to do their own due diligence.

That last point is why I opined, after oral argument in the appellate division went badly for James, that the Trump team should be guardedly optimistic. There were two major flaws in the state’s theory.

First, without precedent, James invoked a civil fraud statute that is meant to address consumer fraud. In the heartland case, a mendacious seller defrauds a large swath of ill-informed buyers; it’s easy to see a rationale for the state to get involved in such commercial fraud: no individual victim’s loss is likely to be large enough to justify the expense of a private lawsuit, but the state can target the fraudster on behalf of all victims. In stark contrast, Trump and his counterparties were sophisticated financial actors. Indeed, financial institutions and insurance companies are in the business of assessing risk. Trump’s counterparties did not rely on his valuation of assets; they did their own due diligence (as Trump’s statements of asset valuation admonished them to do).

The appellate division was troubled by James’s ploy, but it did not throw out the case in light of the strong proof that Trump did, in fact, exaggerate his assets. The Court of Appeals could go further and conclude, from a due process standpoint, that Trump had no reason to be on notice that the state would apply a consumer protection statute to his conduct in very different business circumstances.

Second, because the state could prove no victims and no concrete financial losses — a major problem for prosecutors in a fraud case — James had to concoct losses. As I explained at the time, Judge Engoron helped her do it: He permitted testimony from a banking expert, who conjured up a formula to calculate an interest surplus that banks would supposedly have received had Trump more forthrightly valued his assets. This was not only voodoo mathematics; it ignored the fact that the banks (which I daresay are more adept than New York State at evaluating risk when they have skin in the game) did their own assessments and decided to do business with Trump. That is, the state could not prove that, if Trump had valued his assets differently, banks would actually have charged him higher rates.

In the end, so arbitrary was James’s damage claim that (a) she initially valued it at $250 million, and then (b) by the end of the trial, after she’d proved no fraud victims, she nonetheless hiked the damages claim to nearly $400 million. (See my January 5, 2024, column.)

Unsurprisingly, then, the appellate division was skeptical from the outset about the astronomical penalty. The patent lack of fit between the wrong and the punishment explains why, in one of its first actions in the case, the appellate court slashed the amount of the bond Trump was required to post in order to stop James from enforcing the judgment while the now-president pursued his appeal. (See my February 28, 2024, column.) And now, the court has slashed the financial penalty to zero.

I know I am a broken record on the subject of lawfare, but indulge me. Donald Trump is president today because of the Democrats’ lawfare: their unabashedly partisan exploitation of the legal system to destroy their archnemesis — to leave him penniless, imprisoned, and politically dead. This is not just un-American. Decent people, including many who do not care for Trump, were offended by the realization that if this could be done to a wealthy, powerful man with a huge national fan base, it could be done to them, too. Trump is the principal target of progressives, but he’s far from the only one. Voters understood that.

They still do. Today is a very good day for President Trump. But he is playing with fire in seeking retribution against his tormentors by using the very same lawfare tactics. He can have a much more successful presidency if he accepts that he got his retribution by winning the election. If he adopts his enemies’ tactics, he’s apt to end up with their results, too.