- In three years of litigation, Donald Trump has never opposed NY's civil fraud case on constitutional grounds.
- But in spirited closing arguments Thursday, Trump's lawyer raised multiple constitutional issues.
In spirited closing arguments Thursday, a defense lawyer told a Manhattan judge that the extraordinary penalties New York seeks in the state's $370 million fraud lawsuit against former President Donald Trump and his real-estate empire violate the US Constitution.
That word — Constitution — hasn't cropped up often, if at all, in the long history of New York Attorney General Letitia James's pursuit of Trump.
Thursday's closings were, in fact, the first time in three years of litigation that Trump has opposed the attorney general on constitutional grounds, one trial insider noted, speaking on condition of anonymity because they were unauthorized to comment on the case.
But the newly-debuted constitutional focus now suggests that when a verdict comes down in the next two weeks, Trump wants to be ready to fight it all the way to the US Supreme Court, the insider and other experts who've monitored the case said Friday.
Laying the groundwork for a SCOTUS challenge is a smart move, according to attorney Marc Frazier Scholl.
After a three-year history of futile defenses — including Trump's repeatedly rejected claim that he's the victim of a political attack — a constitutional challenge is one of the most reasonable and promising legal moves Trump has tried, Scholl said.
"This type of claim is the way the case should have been defended all along," said Scholl, a former financial crimes prosecutor for the Manhattan District Attorney's Office who also worked as a public corruption investigator for the New York Inspector General.
"They should have focused all along on actual arguments, as opposed to what Trump wanted them to say about unfairness and witch hunts," said Scholl, who is now of counsel at Lewis Baach Kaufmann Middlemiss.
The path to SCOTUS
An appeal of the judge's final setting of penalties — complaining it's too high or that the judge made mistakes in presiding over the investigation and trial — is all well and proper on the state level but would never reach the US Supreme Court.
Instead, his lawyers must challenge the constitutionality of Executive Law 63(12), the two-paragraph New York statute that has empowered James over the course of six years to develop her fraud case against Trump and bring it to trial.
This law lets a judge shut down a business and banish its executives from the state if an attorney general proves persistent fraud and criminality, as James has alleged of Trump.
On their way to the US Supreme Court, Trump's lawyers would first need to exhaust their New York state appellate options.
If the state's highest court, the Court of Appeals, ultimately upholds Executive Law 63(12) as constitutional, at least as it applies to Trump, the defense can ask the US Supreme Court to hear the case next.
Throwing the case to the US Supreme Court could, at the least, delay the imposition of penalties, Scholl said.
It would transfer the case into what Trump sees as friendlier hands, given the high court's six-three conservative supermajority, including three justices he nominated himself.
A constitutional challenge could also have a fighting chance, Scholl said.
It's unlikely the US Supreme Court would throw out New York's executive law in its entirety, he predicted. But the court could quite possibly pare back, at least in Trump's case, its most severe penalties.
And those severe penalties are?
James has demanded that Trump, his business, his two eldest sons, and two other long-standing Trump Organization executives give back $370 million — plus interest — that she says they pocketed through fraud.
The AG additionally wants to permanently ban Trump from running a New York business and to ban him for five years from selling or buying commercial property in New York or borrowing from a New York-registered bank.
And in a bombshell pre-trial fraud ruling from September, the judge presiding over the non-jury case, state Supreme Court Justice Arthur Engoron, has already set the most damaging penalty allowed under 63(12), ordering the "dissolution" of all Trump properties licensed to do business in New York.
The properties are to be be placed in receivership and sold, with Trump keeping the cash proceeds. These looming dissolutions remain on hold pending appeal. It remains to be seen if Engoron will preserve that draconian penalty in his final verdict, expected by the end of January.
"My guess would be that they would say that a penalty that amounts to a financial death sentence, or a corporate death sentence, is unconstitutional," Scholl said of the US Supreme Court.
"It's a massive thing to lock him and his company out of the state, basically, and say you are no longer allowed to do business here."
Trump's lawyer debuts a constitutional strategy
"What they're asking you to do implicates the Constitution," Trump's lead lawyer, Christopher Kise, told the judge in Thursday's closing arguments, broaching the topic as Trump watched from the defense table.
Kise devoted a page of his summation slide show to the sections of the Constitution that he believes the attorney general wants the judge to violate.
One was the Fifth Amendment, which, in addition to offering protection against self-incrimination, also protects against excessive punishments, including high fines.
"A number in the sky" and "absurdly disproportionate," Kise called the AG's $370 million demand.
This may not be Trump's strongest Constitutional argument, experts said, given that James has painstakingly justified that number.
The bulk of the proposed penalty is $169 million in loan-interest savings that James says Trump enjoyed over the course of a decade through fraudulently exaggerating his wealth in annual net-worth statements sent to banks.
The 'Takings Clause'
Kise also cited the Fifth Amendment's protection against the seizure of property without due process, known as the "Takings Clause."
"A prohibition on President Trump engaging in any commercial real-estate transactions!" Kise argued, outrage rising in his voice.
"I mean, that interferes with his power over the disposition of his own property," he argued.
"It impacts hundreds of nondefendant companies, employees, properties. This is a taking. It's a confiscatory taking without compensation."
The Takings Clause is Trump's strongest constitutional argument, Scholl said, calling it "the argument with the best chance."
Due process
Kise made the very briefest of mention on Thursday of Trump being denied "due process."
"The court has to consider the harm or potential harm actually suffered" by Trump's alleged misdeeds, and then weigh whether that would be "an excessive punitive award," Kise said vaguely before moving on to another topic.
Due process is something that shows up in both the Fifth and Fourteenth Amendments. It protects against a state enforcing a judgment against someone without giving them an opportunity to be heard.
Trump arguing that his due-process rights were violated would seem a stretch, experts said.
"States have the power to take away licenses and the ability to do business in cases of fraud and deception," noted Adam S. Kaufmann, also of Lewis Baach Kaufmann Middlemiss, where he is an executive partner.
And Trump has had three years of litigation in which to be heard, culminating Thursday, when the judge let him make a five-minute statement on his own behalf.
But there are two kinds of due process, Scholl explained.
"It can be argued that he had plenty of opportunity to be heard in the case, but that's only what's called "procedural due process," Scholl said of Trump.
There's also what's called "substantive due process."
A substantive due process challenge would go beyond questioning whether Trump had an opportunity to be heard. It would question the process itself.
Is it due process for New York state to have the power to take someone's property in this circumstance, in a case where no bank or individual has complained they were defrauded?
"For somebody who just lied about how much they're worth, can you really take all their property away?" Scholl asked, describing what a substantive due process challenge would question.
The Commerce Clause
In his closings Thursday, Kise also mentioned the Commerce Clause from Article I of the Constitution, which empowers Congress to regulate commerce among the states.
"The AG wants you to rule that a Florida resident, President Trump, cannot transact any lawful business with any New York financial institution," he told the judge.
James wants to deny "New York financial institutions the right to transact commerce with him," Kise said. "This is an exceptional unconstitutional burden on interstate commerce."
Invoking this Article would be a stretch, Scholl noted, calling it Trump's weakest constitutional argument.
"I think that his argument that he is a Florida resident is a waste of time," he said. "That's just part of a shotgun approach."
Kise did not respond to a request for comment on this story.