How do New York courts calculate disgorgement and on what constitutional grounds did the Appellate Division find this one excessive?
Executive summary
New York courts measure disgorgement by attempting to identify and strip away ill-gotten gains—often by estimating the profits attributable to the wrongful conduct or by calculating victims’ losses—and New York precedent has long treated disgorgement as a remedy that can be compensatory rather than purely punitive [1] [2]. In the Trump civil-fraud appeal the Appellate Division overturned a nearly $515 million money judgment because a majority concluded the disgorgement figure was not a reasonable approximation of defendants’ gains and thus constituted an “excessive” monetary punishment in violation of the Eighth Amendment’s Excessive Fines Clause [3] [4] [5].
1. How New York courts conceptualize and measure disgorgement
New York precedent shows two overlapping strands: disgorgement can be framed as equitable relief aimed at removing a wrongdoer’s net gain or as a compensatory device to make victims whole, and courts determine the proper measure by looking to who actually profited and what harms were caused; in securities and business-fraud contexts judges have parsed settlements and enforcement orders to separate a defendant’s own profits from client gains or investor losses when quantifying disgorgement [1] [2] [6]. The New York Court of Appeals has emphasized that a disgorgement award grounded in estimates of client gain or investor harm can be compensatory and thus not automatically labeled a punitive “penalty,” a distinction that matters both for insurance coverage disputes and for constitutional review [6] [1].
2. The Appellate Division’s criticism of the Trump disgorgement calculation
A five-judge panel of the Appellate Division concluded that the trial court’s disgorgement number—roughly half a billion dollars (originally set at $355 million plus interest in earlier accounting)—was “far from a reasonable approximation” of the defendants’ net ill-gotten gains and therefore could not stand as a lawful disgorgement remedy [3] [4]. Judges on the panel, including Peter H. Moulton and Dianne T. Renwick, wrote that while the injunctions curbing business practices were properly crafted, the monetary award crossed constitutional lines because the disgorgement order “directs that defendants pay nearly half a billion dollars to the State of New York,” an amount the court labeled excessive under constitutional standards [4] [5].
3. The constitutional grounds: the Excessive Fines Clause and competing frameworks
The Appellate Division grounded its reversal in the Eighth Amendment’s Excessive Fines Clause, treating the disgorgement here as a monetary punishment subject to that Clause’s proportionality analysis; in short, the court found the size of the monetary extraction could not be squared with the constitutional bar on excessive fines [4] [7]. That conclusion sits alongside other lines of authority—most notably New York Court of Appeals decisions and Supreme Court jurisprudence distinguishing remedial disgorgement from punishment—which recognize that when disgorgement is truly compensatory it may not be a “penalty” for constitutional or insurance-law purposes; those distinctions, however, turn on whether the award is a reasonable approximation of the wrongdoer’s net profits or instead functions as a punitive windfall to the state [1] [6] [2].
4. Why the calculation mattered: approximation, traceability, and remedy design
The panel’s language—that the calculation was “far from a reasonable approximation”—signals a core due-process and remedy-design concern: disgorgement must be tethered to identifiable gains or measurable harm rather than inflated by speculative, double-counted, or policy-driven multiplies that convert equitable relief into a punitive sweep [3]. New York’s case law on disgorgement in SEC and fiduciary-duty contexts shows courts scrutinize whether awards reflect the defendant’s net gain versus third-party gains or investor losses, because that factual parsing determines whether the monetary order is compensatory (and often insurable) or penal (and constitutionally suspect) [2] [6] [8].
5. Immediate implications and open questions
The Appellate Division’s ruling vacating the monetary award leaves the liability findings intact but forces a narrower lens on remedy calculations—one that will require the trial court on remand (or higher courts on further appeal) to produce a disgorgement number tightly connected to provable gains or losses and to confront whether any large sums cross into the Eighth Amendment’s prohibition on excessive fines [4] [5]. Reporting demonstrates the tension between treating disgorgement as equitable compensation versus punishment; the long-term doctrinal question—how to apply proportionality review without undermining equitable remedies—remains unresolved in the sources reviewed [1] [6]. The available reporting does not provide the trial court’s detailed arithmetic here, so assessment of whether a permissible recalculation is achievable depends on evidence and modeling not contained in these reports [3].