The Volokh Conspiracy
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Former President Donald Trump's New York State Civil Fraud Verdict
A partial response to my friend and co-blogger Orin Kerr.
Orin Kerr has published a thought-provoking response to my post several days ago critiquing the New York State $450 million civil fraud verdict against Donald Trump. Orin pointed out that New York State Attorney General Letitia James has brought other civil fraud actions against businesses, as well as the action that she brought against Donald Trump, which is helpful to know. But, in my view, the action civil fraud action brought against former President Donald Trump was a case of selective prosecution of a victimless crime brought because of Trump's political views, and because he is the de facto nominee of the Republican Party in the 2024 presidential election. Selective prosecution raises both due process and equal protection clause issues of the kind that led the Framers to ban Bills of Attainder and Ex Post Facto laws, which clauses are also relevant here.
Orin takes issue with my claim that New York Banks do not rely on borrowers' claims as to the amount of wealth that they own, but they do their own independent assessment of a borrowers' wealth so Trump's alleged fraud was a victimless crime. No harm no foul. Orin gives as a hypothetical the example of a person who drives home, legally drunk, arrives safely at his house, and then is arrested, and deprived of his driving license because he endangered the public. Orin argues this is perfectly appropriate behavior by the police because the drunk driver endangered the general public in violation of the law. By analogy, Orin argues that Trump endangered the New York real estate market by borrowing money while offering inflated valuations of his real estate assets, even though lenders were discounting his valuations and making their own independent valuations before issuing him loans all of which he repaid.
First, there is a fundamental difference between Orin's hypothetical and what Donald Trump actually did in this civil fraud case with no victim. Donald Trump signed contracts to borrow money from particular lenders who then did their own due diligence about the value of his real estate assets. There was privity of contract between Trump and the wealthy banks he borrowed from. Trump paid back all the money he borrowed, and there was no victim in the New York State civil fraud case who claimed he had been defrauded. But, when a person drives home legally drunk and makes it safely to his house and living room, there is no consent to his action by the other drivers and pedestrians on the road who the drunk driver endangered. There is no privity of contract to undertake the risk in Orin's hypothetical, whereas there was privity of contract between Trump and those who loaned him money. Witnesses testified that they would gladly lend Trump money in the future, and no one appeared who accused Trump of fraud except for the politically ambitious New York State Attorney General who was probably seeking to win over Democratic primary voters who pathologically hate Trump in a future gubernatorial or senatorial primary.
Second, while Orin is right that driving home drunk is a crime even if you safely arrive home, there is no prosecutor in the world who would seek to deprive such a person of their driver's license, as Orin would, or enter their property. In Edwards v. Police, 2 New Zealand Law Review 194 (1994), Edwards was driving his motor cycle home and was followed by a police officer who believed Edwards was inebriated. Edwards reached his house, turned off and parked his motorcycle in his driveway, and then the police officer who had been following Edwards arrested him on his own property and brought him to the police station against his will, and a breath exam indicated the presence of alcohol.
On appeal, the conviction of Edwards was reversed with the court saying "Edwards was subjected to unlawful restraint and detention amounting to assault and false imprisonment. *** [I]t is important in a case such as this that the Court vindicate and give tangible recognition to the substantial breach of rights which has occurred. The only way in which that can be done is by excluding the evidence which resulted in a direct and material way from the breach." Steven Got Calabresi et al., The U.S Constitution and Comparative Constitutional Law: Texts, Cases, and Materials at 1325 (Foundation Press 2016). We strongly suspect that most American juries or judicial fact-finders or district attorneys would have the same reaction to Edwards v. Police, which the New Zealand appellate court arrived at. Technically, Edwards broke the law by riding his motor cycle home while inebriated, but the police officer who arrested Edwards once he had safely reached his own property was found to have committed "assault and false imprisonment."
Third, Orin puts great weight on the fact that in New York State you need a license from the State to conduct business and such licenses, once obtained, require ethical conduct. In Germany, Japan, South Africa, and Israel, in contrast, there is a right to pursue whatever occupation you want to, subject to the government's power by just laws, enacted for the general good of the whole people, to adopt regulations. Most American States regulate over 100 different occupations most of which pose no harm to the general good of the whole people. Among the occupations regulated are being: a butcher, a florist, the owner of a tanning salon, a barber, a plumber, or an optician. These laws would all be unconstitutional in Germany, Japan, South Africa, or Israel. The Constitutions of those four countries all explicitly protect freedom of occupation. Such laws exist in the United States, however, only because Justice Stephen Field's dissent in The Slaughter-House Cases, 83 U.S. 36 (1873) garnered only four votes and not five. The Supreme Court doubled-down on its support for the unlimited regulation of occupational freedom in Williamson v. Lee Optical Co., 348 U.S. 483 (1955) where it applied the rational basis text to claims of occupational liberty. In my view, these Supreme Court decisions are profoundly wrong and ought to be over-ruled. To be sure, there are occupations where licensing should be required as for: medical doctors, or airplane pilots, or engineers, or lawyers. State regulation of your freedom to run a business in New York State should be allowed when just laws are enacted for the general good of the whole people. Corfield v. Coryell, (6 Fed. Cas. 546, no. 3, 230 C.C. E. D.Pa. 1823 (opinion of Justice Bushrod Washington). Otherwise, there should be a presumption of liberty; not a presumption of serfdom.
Fourth, the view that some take, not necessarily Orin, that we are all born subjects to be regulated conflicts profoundly with the view of both the Framers of the Declaration of Independence and of the Fourteenth Amendment, which Speaker of the House of Representatives, Schuyler Colfax, thought applied the rights under the Declaration of Independence to the States. "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness." Donald Trump has a constitutional right to do business in New York State, free of regulation, except by just laws enacted for the general good of the whole people.
I stand by my position that New York State has violated Donald Trump's First Amendment freedom of expression rights; his rights under the due process, equal protection, excessive fines, and Bill of Attainder Clauses; and that he has been stripped of the liberty of occupation that is necessary to protect his "Life, Liberty, and the pursuit of Happiness. Because New York State's civil fraud verdict interferes with Former President Donald Trump's right to run for President, the U.S. Supreme Court should hear this case as fast as possible.
