In 2016, ex-President Trump spent $66 million of his own money for his campaign. Perhaps he would do so in 2024 as well, but a judge in New York has just fined him half a billion dollars. That makes self-funding much less likely. Because political speech by a candidate is involved here, strict scrutiny is warranted, and it seems obvious that both the intent and the effect of the fine is to influence political speech, though just the effect alone would raise serious concern.
This judicial decision by a state judge says that the half billion dollars is subject to disgorgement:
Disgorgement is “the equitable remedy that deprives wrongdoers of their net profits from unlawful activity.” Liu v Sec. & Exch. Comm’n, 140 S Ct 1936, 1937 (2020) (further stating that “it would be inequitable that a wrongdoer should make a profit out of his own wrong”).
But, in Liu v. SEC, Justice Sotomayor’s majority opinion repeatedly said that a disgorgement, to be a valid equitable remedy under federal law, must be “awarded for victims.” That is, the disgorgement must not only be less than or equal to the defendant’s net profits, but must also be disbursed to victims. In contrast, the half billion dollars in the Trump case is headed for the New York State treasury, because there were no victims, and the court says Trump is “liable to plaintiff,” i.e. liable to the state.
No one disputes that the Equal Protection Clause applies against the states, nor disputes that it forbids unequal administration of a facially neutral statute, nor disputes that it requires strict scrutiny when an enumerated fundamental right is involved. The state statute in question, Statute 63(12), is obviously a facially neutral statute. Even if the Equal Protection Clause did not exist, enforcing a facially neutral statute in such a way as to discriminate against a particular person or political party is excessive as to that person or party, within the meaning of the Excessive Fines Clause of the Eighth Amendment. And if neither of those clauses existed, still self-funding by a candidate is a right under the First Amendment. In Trump’s case, self-funding itself has been a selling point, because it allegedly means he is less beholden to special interests. The state statute allows a court to direct “restitution and damages and…the court may award the relief applied for or so much thereof as it may deem proper.” That doesn’t seem to authorize fines beneficial to the state treasury, but New York courts will interpret state law as they wish even if they employ imagination.
I’m not suggesting that New York State cannot require defendants to disgorge ill-gotten gains, nor suggesting that such disgorgement cannot be to the state instead of to victims. But if and when New York State does so pursuant to a facially neutral statute, it must proceed in a neutral manner to conform with the Equal Protection Clause, the Excessive Fines Clause, and especially the First Amendment when political speech would be infringed.
Professor Orin Kerr wrote this week:
I do see opinions about other equitable enforcement actions that Attorney General Letitia James brought under this law against other businesses. In just the last few months, for example, opinions include People by James v. Richmond Capital Group LLC, 80 Misc.3d 1213(A) (N.Y. 2023) (enforcement action against loan sharks, ordering a long list of equitable remedies including canceling contracts); People by James v. Mashinsky, 79 Misc.3d 1237(A) (N.Y. 2023) (refusing to dismiss action brought by James against CEO of crypto company based on alleged scheme to defraud investors by inducing them, through false and misleading statements, to deposit their digital assets with his now-bankrupt company); James v. Scores, 79 Misc.3d 1118 (N.Y. 2023) (enjoining towing company from engaging in predatory towing practices).
As far as I know, those cases did not involve any political speech, nor any equitable disgorgement to the state, and that’s an important distinction per the above-mentioned opinion of the Court in Liu, which Judge Engeron cited (see first blockquote above). Liu was decided in 2020, with only Justice Thomas dissenting. For the Court, Justice Sotomayor wrote:
The equitable nature of the profits remedy generally requires the SEC to return a defendant’s gains to wronged investors for their benefit. After all, the Government has pointed to no analogous common-law remedy permitting a wrongdoer’s profits to be withheld from a victim indefinitely without being disbursed to known victims.
In dissent, Justice Thomas wrote that no sort of disgorgement qualifies as equitable relief, because it is “not a traditional equitable remedy.” So, the Court was unanimous in saying that there is no valid equitable disgorgement remedy that steers money to the federal government instead of to victims. Perhaps New York can take a different approach under state law, but New York cannot insist that the U.S. Constitution treat the matter as equitable in nature, as opposed to a fine. And an unequal, excessive, “
Posted at 10:06 AM