When a state appellate court in New York last month dismissed Ivanka Trump from a massive fraud lawsuit, effectively taking her out of the New York attorney general’s sights, the decision gave the rest of her family something of a gift: a way to weaken the case that seeks to destroy the Trump Organization.
On June 27, a five-judge appellate panel at New York’s First Judicial Department drew a cutoff in the long timeline of the Trumps’ alleged fraud, saying that an entire slate of accusations are simply too old to sue over. And that ruling has opened the door to pare down AG Letitia James’ lawsuit.
“The time has run,” said Cardozo Law School professor Alexander A. Reinert, who reviewed the appellate opinion. “It gives an opportunity to the defendants to whittle down the claims.”
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The extent of the damage to James’ case is unclear, as lawyers on both sides are now set to battle over technical definitions. But one thing is certain: Trump’s delay tactics are working.
Eric Trump, who oversaw real estate projects, refused to speak to investigators under oath until a judge forced him to—and even then, he merely pleaded the Fifth. Former President Donald Trump ignored a subpoena, waiting until he was hit with a $110,000 fine for contempt of court to turn over records and testify. And the Trump Organizations’s stalling games and dodgy behavior led the court to assign a former judge to oversee it as something of a corporate babysitter. James has been speaking about this investigation since at least 2018, but it wasn’t until mid-2022 that the lawsuit finally came together.
That slowdown will have consequences.
The attorney general’s case boils down to the idea that the former president’s entire real estate and marketing business is built on layers of lies; credit lines, insurance policies, and tax breaks all came from shameless inflation of asset values on financial statements—in some cases, bending reality by making up nonexistent space.
But the fulcrum of her lawsuit—what gives her the ability to crack down on those lies—is the notion that Trump’s alleged lawlessness continues to cause societal harm, as he kept profiting from those lies, even if they were first made long ago. It’s a long-established legal concept aptly named “the continuing wrong doctrine,” and it works like resetting the clock on the statute of limitations every time someone benefits from their fraud.
But appellate judges have just called into question that doctrine, and may dramatically hamper James’ case.
In their opinion, the judges wrote that James’ claims are too old if the deals in question—such as bank loans—”were completed” before a certain date. At the behest of the AG’s investigators, who needed more time to dig into this, the Trump Organization agreed to temporarily hit pause on the statute of limitations by signing what’s called a “tolling agreement”—so that cutoff might be as far back as July 2014.
“The continuing wrong doctrine does not delay or extend these periods,” judges wrote.
That, in effect, might stop the AG from taking the Trumps to trial for some of the most important business deals that establish this alleged pattern of fraud.
As defense lawyers pointed out in appellate court filings, Trump purchased a golf course in Miami’s suburb of Doral in June 2012 and refinanced a $130 million loan for the Trump International Hotel and Tower Chicago in November 2012. Those two make up a sizable chunk of the lawsuit section that describes how Trump used “false and misleading statements of financial condition… to secure and maintain financial benefits.” Both are now seemingly out of reach of the attorney general.
James’ case, filed in court last year and set for trial in October, detailed the way Trump allegedly duped banks by personally guaranteeing both those loans while showing them imaginative financial statements—and somehow maintaining that he was still worth $2.5 billion.
But the appellate judges in New York’s first department have decided that any lying in those deals happened too long ago. In doing so, they cited two recent cases in the same appellate circuit that both came to a similar conclusion. In one of those, for example, a New Yorker who was duped when Bank of America repeatedly billed him for fake credit protection services could only point to the original date the bank enrolled him—not the monthly charge that persisted for years later.
So, the statute of limitations starts to run when the initial domino gets flicked, but the clock doesn’t reset when other dominoes fall.
Daniel L. Feldman, a former attorney at the AG’s office who now teaches at the City University of New York’s John Jay College of Criminal Justice, thinks it’s wrong to give the Trumps a free pass this way.
“It’s puzzling. There’s continuing harm and wrong. You could say that the fraud hasn’t ended, even though the misrepresentation or omission took place long ago,” he said.
Trump lawyers handling the case did not return calls for comment last week.
With only three months left before the scheduled trial, lawyers on both sides are expected to start fighting over specific details, like when exactly a real estate deal was considered closed and who’s considered bound by the tolling agreement. For example, the AG’s lawsuit claims that Trump’s inflated financial statements helped him score a $170 million Deutsche Bank loan for the Trump International Hotel Washington, D.C.—but the credit memo approving the loan came in May 2014 (just before the cutoff date) and the deal was closed in August 2014 (just after).
But the entire “Old Post Office” deal, as it’s called, is too old for any defendant in the case who isn’t part of the tolling agreement.
The New York County trial court judge still has to decide who gets to benefit from the tolling agreement that temporarily paused the countdown clock—and Trump, his eldest son Don Jr., and other executives could still be on the hook. As Reinert, the Cardozo law professor, pointed out to The Daily Beast, the tolling agreement is with the Trump Organization—but the company is defined as any sister companies and “all directors, officers, partners, employees, agents, contractors, consultants, representatives, and attorneys” of the firms.
However, the Trumps still think they’re one-stop removed, and they’re trying to water down this case even further. Their lawyers argue that it’s bonkers for a company to sign on behalf of a bunch of other people who aren’t even a party to a legal dispute, noting in court filings that a tolling agreement only applies to the one who signs the agreement—in this case, the Trump Organization.
The bad news for them is that this is getting kicked back to New York Supreme Court Justice Arthur F. Engoron, the very same judge who grew weary at the Trumps’ delay tactics, oversaw enforcement of the subpoenas, and has repeatedly warned them to stop playing games.
As the AG’s office stated in the wake of the decision, “There is a mountain of evidence that shows Mr. Trump and the Trump Organization falsely and fraudulently valued multiple assets and misrepresented those values to financial institutions for significant economic gain. Those facts haven’t changed. This decision allows us to hold him accountable for that fraud, and we intend to do so.”
