NRPLUS MEMBER ARTICLE {A} s I listened to the news coverage while driving across a big chunk of the country yesterday, it became clear that there is still confusion about exactly what is happening in the Manhattan courtroom where former president Donald Trump is standing trial. At issue is the civil fraud case brought by New York attorney general Letitia James. On Monday, the trial began with opening statements and the first of many witnesses. Before hitting the road, I dashed off a column to try to explain it — especially the oddity that the trial is seemingly starting only after guilt has been found and a sentence imposed (or, in civil-law parlance, liability has been found and judicial relief ordered).
Confusion about this is widespread. Some, for example, liken this civil proceeding to criminal prosecutions (especially death-penalty cases), which are bifurcated into the “guilt phase,” where the jury determines whether the defendant committed the alleged offenses, and the “penalty phase,” where the judge (or the jury in a capital case) imposes sentence. That analogy is not exactly wrong, but it’s not quite accurate, either. So let’s try to make more sense of things.
To cut to the chase: James’s lawsuit has seven “causes of action” — the civil equivalent of what we call “counts” in criminal indictments. The reason there is now a trial, even though Trump has already been found liable, is that Judge Arthur Engoron has found him liable on only the first cause of action. The trial is on the remaining six causes of action. Moreover, besides seeking up to $250 million in damages (in the form of “disgorgement” of Trump’s business profits since 2011), James asked for nine other remedies. So far, Engoron has granted only the first two remedies to the state; it is at the ongoing trial — which is expected to last through most of the rest of the year — that the other remedies, plus the exact amount of disgorgement, will be decided.
A little background. In criminal cases, the defendant is presumed innocent and entitled to a trial no matter how overwhelming the evidence may be. That is not how it works in civil cases, which are frequently decided without a trial by what’s known as a summary judgment. This is largely because discovery is much more expansive in civil than in criminal cases, with the parties obliged to show each other essentially all of their claims and defenses and required to submit to testimonial depositions.
As we covered extensively in connection with E. Jean Carroll’s lawsuit against Trump, in civil proceedings the defendant is (a) subjected to deposition testimony pretrial, (b) expected to testify if there ends up being a trial, and (c) virtually always one of the most important witnesses. In the ongoing trial, Trump was deposed during discovery, and he will surely be the trial’s pivotal witness. One of the main objectives of liberal discovery in civil litigation is to flesh out all the disputed factual issues at an early stage. That conserves finite court resources by encouraging parties to settle without trial. By and large, trials occur only where, even after all the discovery and any rulings by the judge on questions about the applicable law, there remain disputed factual issues that can only be resolved by a jury — or by the judge if the parties waive whatever legal rights they have to a jury trial.
As we outlined at the time, about a year ago, James filed her massive civil lawsuit — in a 214-page complaint — against Trump, executives of the Trump Organization including his three adult children, the Trump Organization itself, and various corporate entities under the organization’s umbrella. During the pretrial stage, the claims against Ivanka Trump were dropped because they fell outside the statute of limitations. Trump’s sons Don Jr. and Eric, who ran the organization from 2016 through 2020 while Trump was president (and while Ivanka took a leave of absence to serve in the administration), remain defendants.
James’s case was filed in Manhattan County supreme court. As usual, we must clarify New York’s confusing judicial nomenclature. In the Empire State, the “supreme court” is the lower court where trials occur. The intermediate appeals court is called the Appellate Division. (Appeals from Manhattan supreme court cases go to the Appellate Division’s First Department.) Finally, the highest court in the state (what is called the “supreme court” in most states and in the federal government) is the New York Court of Appeals. To add to the confusion, New York calls its supreme court trial judges “justices.” In reality, New York being a one-party state with elected judges in the lower court, these judicial officers — whether you call them judges or justices — tend to be lawyers active in the Democratic Party and its sundry organizations and clubs; they are rewarded for their years of loyalty by being placed on the party’s slate of judicial candidates, which runs virtually unopposed for election. Trump’s case was assigned to Justice Arthur Engoron (who is also referred to as Judge Engoron).
As noted above, James’s lawsuit has seven “causes of action.” They are pled on pages 198–212 of the complaint. Again, Engoron has thus far found him liable on only the first cause of action. And while the state has been granted some remedies significant enough to put the Trump Organization out of business in New York, whether Trump will face more severe penalties — including damages of up to a quarter billion dollars — will be decided by Engoron’s assessment of the trial evidence.
To elaborate, Engoron set an extraordinarily speedy October 3 trial date, with an aggressively tight discovery schedule, at the urging of James. Ordinarily, litigants wait years in the clogged civil-justice system for their day in court. Obviously, both Democrats have the presidential-election calendar in mind — a three-month civil fraud trial will steer Trump right into both the early primaries and the two upcoming federal criminal prosecutions brought by the Biden Justice Department.
In any event, as is standard practice, both the state and Trump moved for summary judgment. The burden of proof in civil cases is preponderance of the evidence (basically, showing it is more likely than not that the defendant committed the alleged wrong) — a much easier standard for the plaintiff to meet than beyond a reasonable doubt, the burden of proof borne by prosecutors in criminal cases. Summary judgment may be granted on a cause of action only if, considering all the evidence that emerged in pretrial discovery, there are no unresolved factual issues that would make a difference to the outcome.
By moving for summary judgment, then, the Trump defense was saying that the state had failed to establish its claims and that nothing it might be able to prove at trial would change that. Engoron wholly rejected that argument.
Attorney General James moved for partial summary judgment. Basically, the state was saying that on part of the case — mainly, the first cause of action — it had already proved that Trump and the other defendants had, more likely than not, committed the alleged wrongs and that no material issues remained, so no trial was necessary. But the state was conceding that a trial might be necessary to resolve other allegations and remedies. Engoron essentially agreed with the state, ruling that it had proved the first cause of action and that the defendants should be denied the privilege of doing business in New York. Nevertheless, he further concluded that there are material disputed fact issues in the other six causes of action, and in connection with other damages sought, that require a trial.
Why did Engoron distinguish the first cause of action from the remaining six? Because the first was brought as what’s known as a “standalone” action under New York’s Executive Law 63(12). In general, §63(12) enables the attorney general to sue if a party has engaged in “repeated” or “persistent” acts of “fraud” or “illegality.” In the hands of an abusive attorney general, the law is a nightmare for businesses because the state need not prove that a defendant intended to commit fraud or illegality, nor need it demonstrate that any victim was actually defrauded or otherwise harmed. All that’s needed is to show that the defendant engaged in a persistent pattern of supplying information that turns out to be untrue (such as the overvaluation of assets that James alleges Trump carried out for years). That’s why it was so easy for Engoron to find against Trump.
While causes of action two through seven of James’s complaint are also brought under §63(12), they are not standalone claims. To the contrary, as Engoron fleetingly observed in his summary-judgment opinion (at pp. 19–20), though civil in nature, these claims spring from what the state alleges are “violations of the New York Penal Law prohibiting falsification of business records, issuance of false financial statements, and insurance fraud.” Unlike the standalone claim, then, these other civil claims require the state to establish elements usually associated with criminal prosecution — knowledge of falsity, intent to mislead, and that misstatements were material.
In fact, instead of analogizing the ongoing trial to the penalty phase of a criminal case, I would say it is better seen as the civil-law version of the criminal case that the Manhattan District Attorney’s Office decided not to charge — based on Trump’s financial records, including years of tax returns. (Eventually, DA Alvin Bragg reversed course on a small portion of that investigation — specifically, how the Trump Organization booked the hush-money payments to porn star Stormy Daniels. But to the consternation of some prosecutors, Bragg and his advisers determined that the overarching business fraud case was too weak — undoubtedly because there were no victims.)
Still, the analogy to the sentencing phase of a criminal case rings true to this extent: Even though Engoron has already found Trump liable on the first cause of action, and has imposed several onerous penalties based on that finding, the full range of penalties Trump will face has not yet been determined. It hinges on the outcome of the trial of the remaining causes of action.
In its complaint, the state sought disgorgement of Trump’s profits since 2011, which James portrays as “ill-gotten gains” from Trump’s misrepresentation of his financial condition, even though Trump paid his creditors, and the state can point to no victim who claims to have been swindled. In addition, the state asked for nine other remedies (listed as “A” through “I” in the “prayer for relief” at p. 213 of the complaint).
Last week, in ruling in James’s favor on the first cause of action, Engoron also granted the first two remedies: (A) the canceling of the defendants’ certificates-of-doing-business in New York State, and (B) the appointment of an independent monitor to oversee financial reporting and legal compliance at the Trump Organization for the next five years. (The latter is a continuation of the status quo; Engoron imposed a monitor on Trump shortly after the complaint was filed.) The judge further concluded, however, that only after a trial on causes of action two through seven could he determine “the amount of disgorgement of profits” to which the state is entitled. The trial, he added, would also be necessary before he could decide the remaining remedies that James seeks (on a list denominated “C” through “I,” which omits an item “H,” apparently inadvertently), which are:
C. Replacing Trump’s “Revocable Trust” (a vehicle central to controlling the Trump Organization) with new, “independent trustees”;
D. Requiring Trump, for the next five years, to prepare an audited statement of financial condition (SFC) that complies with generally accepted accounting principles (a request that is patently political, not legal; James aims to illustrate that Trump is not the super-rich, savvy businessman he purports to be in his election campaigns; she pretends to have a legal purpose by saying the accurate SFC would be shared with creditors who have received inaccurate SFCs from Trump — but those creditors, who were paid in full, are not asking for that);
E. Barring Trump and his organization from acquiring real estate in New York for the next five years;
F. Barring Trump and his organization from applying for loans from New York financial institutions;
G. Barring Trump and his adult sons from serving as officers or directors of corporations or business entities registered or licensed to do business in New York; and
I. Similarly barring Trump Organization financial officers Allen Weisselberg and Jeffrey McConney from serving in financial positions in New York corporations and businesses.
The three-month trial that began Monday will thus decide (i) whether Trump and his co-defendants are liable on causes of action two through seven, (ii) how much of Trump’s profits he will have to pay to the state, which is seeking $250 million, and (iii) whether, in addition to remedies A and B that Engoron has already granted, remedies C through I will be granted.
Finally, we should note that this is a bench trial. Trump could have had a jury trial — and given Engoron’s unabashed hostility to him, is now complaining about the lack of a jury trial. Yet Trump’s legal team — presumably in consultation with him — apparently waived the right to a jury trial early in the case. It is not obvious why. But they may have had political and legal reasons. Trump is deeply unpopular, politically speaking, in New York, so we can’t assume a jury would have been favorably disposed to him. Plus, in civil cases a jury does not have to be unanimous, so a jury of one’s peers is not much of a protection for a defendant against whom there is evidence of behavior that, whether or not criminal, is at least unsavory. But perhaps most saliently, Trump may well have calculated that, since there was a good chance he’d lose the case, it would be better to blame his woes on an elected Democratic judge than on members of the public.
So the trial is on. Donald Trump has already lost big . . . but he still has a great deal at stake — not just his electoral prospects but the very existence of a business empire he has run from the Big Apple for decades.