An appeals court in New York has thrown out a civil fraud penalty that would have cost United States President Donald Trump and his business associates nearly half a billion dollars, calling the fine “excessive”.

On Thursday, a five-judge panel in New York’s Appellate Division rendered its decision after weighing Trump’s appeal for nearly 11 months.

In its ruling, the panel cited the Eighth Amendment of the US Constitution, which prohibits the government from levying unduly harsh penalties on its citizens.

The case stems from a civil suit brought by New York Attorney General Letitia James, who argued that Trump had inflated his financial records in order to secure advantages with insurance companies, banks and other financial institutions.

In February 2024, a lower court had ordered Trump to pay $355m in penalties, an amount the appeals court called into question. That amount has since grown to about $515m due to accumulating interest.

“While the injunctive relief ordered by the court is well crafted to curb defendants’ business culture, the court’s disgorgement order, which directs that defendants pay nearly half a billion dollars to the State of New York, is an excessive fine that violates the Eighth Amendment of the United States Constitution,” two of the panel’s judges, Dianne T Renwick and Peter H Moulton, wrote in one opinion.