An extraordinary appellate situation is emerging in New York, with both New York’s attorney general, Letitia James, and President Trump readying to appeal the stunning verdict that preserved the 47th president’s liability for fraud but erased the $500 million penalty attached to that finding.

At issue is a fair amount of pride for both parties — as well as the financial stability of the Trump Organization. It has had to get an 11th hour loan from a subprime car loan magnate in California to stash funds in escrow during the appellate process. 

In 2022, Ms. James sued Mr. Trump, his adult sons, and his companies, claiming they’d embellished mortgage and loan applications in order to get better terms. In 2024, Judge Arthur Engoron found the company liable and imposed the gargantuan judgement. This month, a state appeals court threw out the judgment but upheld the finding of liability for fraud.

The attraction of an appeal for Ms. James is straightforward. New York’s intermediate appellate court failed to find the “cataclysmic harm that can justify a nearly half billion-dollar award to the state.” The appellate tribunal found that the judgment imposed by Judge Engoron amounts to “an excessive fine that violates the Eighth Amendment of the United States Constitution.”

The 323-page ruling — the five justices concocted three separate opinions, and none garnered an outright majority — left in place the underlying verdict that Mr. Trump, his two adult sons, and his family business were liable for what Judge Engoron calls “persistent fraud” that leaps “off the page and shocks the conscience.” 

That was from the appellate division of the New York Supreme Court, which is an intermediate bench. One appellate justice, David Friedman, would have thrown out the case on account of Judge Engoron’s rulings being “infirm in almost every respect.” Justice Friedman, whom Mr. Trump has subsequently praised, reckoned that Ms. James exceeded her authority in bringing the case in the first place.

Justice Peter Moulton, whose position prevailed, reasoned that a new trial would be “both Sisyphean and unneeded,” and “would likely consign this meritorious case to oblivion.” Ms. James said in a statement after the ruling that “It should not be lost to history: yet another court has ruled that the president violated the law, and that our case has merit. … We will seek appeal to the Court of Appeals and continue to protect the rights and interests of New Yorkers.” 

Mr. Trump reflected on Truth Social that  he had achieved “TOTAL VICTORY in the FAKE New York State Attorney General Letitia James Case.” Despite that claim of triumph, though, Mr. Trump on Tuesday filed a notice of appeal to New York’s highest court, the New York Court of Appeals, to reverse the preservation of the fraud verdict.

That both parties are appealing a verdict is, to say the least, an unusual turn of events. The intermediate appeals court took the position that “A remarkable situation has necessitated a remarkable solution” — and now, a remarkable appellate posture.

Mr. Trump’s two elder sons — Eric and Donald Jr. — have also filed notices of appeal. The Trumps will likely seek not only a reversal of the underlying finding of liability but also of the injunctive relief — meaning non-financial penalties — imposed by Judge Engoron. These include the appointment of an independent, outside monitor to oversee the conduct of the Trump Organization as well as an internal  “director of compliance.” 

Also left in place in the Appellate Division’s “decretal” — a word borrowed from the Catholic Church’s canon law that means a decree or order — are various restrictions on the Trumps’ ability to do business in New York State, the historic home of the real estate empire began by Mr. Trump’s father, Fred. The Appellate Division appeared resigned to appeal, as its ruling raised “the option of further review of this matter by the Court of Appeals.”

Ms. James’s and Mr. Trump’s dueling appeals will unfold against a backdrop of escalating tension between the two New Yorkers. The prosecutor could soon be facing prosecution herself as the Department of Justice mulls criminal charges relating to a mortgage fraud referral brought by the director of the Federal Housing Finance Agency, William Pulte. Ms. James’s lawyer, Abbe Lowell, calls that case “threadbare” and “cherrypicked.”

The probe into Ms. James, though, appears to have the backing of the upper echelons of the DOJ — and the White House. Attorney General Pam Bondi has turned to the DOJ’s special attorney for mortgage fraud, Ed Martin, to lead the case against Ms. James. Mr. Martin was two weeks ago spotted ambling around Brooklyn’s Clinton Hill neighborhood, giving one of Ms. James’s properties a gander.

Ms. James also faces legal peril in connection to her fraud case. A federal grand jury upstate has authorized the issuance of a subpoena relating to that investigation, which could mature into the bringing of a criminal or civil case alleging that Ms. James used the power of her office to violate Mr. Trump’s civil rights.  Mr. Trump has repeatedly referred to Ms. James as “racist,” while she has repeatedly insisted that her official actions are not racially motivated.