The litigation surrounding the Corporate Transparency Act ("CTA") is evolving rapidly, with key developments unfolding in Texas and in the U.S. Court of Appeals for the Fifth Circuit (the “Fifth Circuit”). As courts continue to examine the constitutionality and enforcement of the CTA, significant legal implications are emerging for businesses across the country. This legal update highlights the latest developments and the potential impact on corporate transparency obligations.
As explained in our recent client alert, on December 3, 2024, the U.S. District Court for the Eastern District of Texas (the “District Court”) issued a nationwide preliminary injunction, holding that the CTA was likely unconstitutional and enjoining the enforcement of the CTA by the Financial Crimes Enforcement Network ("FinCEN") and the U.S. Department of Justice (together with FinCEN, the “Government”)
On December 5, 2024, the government filed a notice of appeal in the District Court. Since then, the Government has sought a stay of the District Court's preliminary injunction from both the District Court and the Fifth Circuit.
Yesterday, December 17, 2024, the District Court denied the stay of its own preliminary injunction.
The Government's Emergency Motion for Stay Pending Appeal is still being briefed before the Fifth Circuit. Yesterday afternoon, the plaintiffs in the District Court filed their brief in opposition in the Fifth Circuit to the Government's motion to stay the preliminary injunction.
While the Government is seeking a stay of the nationwide injunction altogether from the Fifth Circuit, the Government has requested the alternative relief of limiting the injunction to the specific plaintiffs in the District Court case, similar to how the U.S. District Court for the Northern District of Alabama limited its inunction to the plaintiffs in that case.
The Fifth Circuit has issued a briefing schedule, and the Government's emergency stay motion will be fully briefed by Thursday, December 19, 2024, at noon Central Time. We could see a ruling on the stay motion as early as the afternoon of December 19, and the Government has asked the Fifth Circuit to rule by December 27 – less than a week before the CTA's original filing deadline for tens of millions of small businesses. Additionally, regardless of what the Fifth Circuit does, we could also see an emergency petition to the U.S. Supreme Court.
While our primary focus is on the ongoing Fifth Circuit matter, we are also tracking an earlier case involving the CTA currently pending before the U.S. District Court for the Eleventh Circuit. This case is particularly relevant to many of our clients in Georgia, Alabama, and Florida.
We are closely monitoring all litigation developments and will provide timely updates as the situation progresses.
