Justices allow enforcement of corporate transparency law to go forward

The Supreme Court on Thursday afternoon granted the federal governments request to be allowed to enforce a federal anti-money-laundering law while the governments appeal moves forward in the conservative U.S. Court of Appeals for the 5th Circuit. In a brief unsigned order, the justices put on hold an order by a federal trial judge in Texas that would have barred the government from enforcing the law anywhere in the United States.

Justice Ketanji Brown Jackson dissented from the courts decision to temporarily block the lower courts ruling. She observed that the governments appeal is moving quickly in the 5th Circuit, and she questioned whether there is any real emergency warranting the justices intervention.

The law at the center of the case is the Corporate Transparency Act. Passed in 2021, it is intended to prevent crimes like money laundering and the financing of terrorism by requiring businesses to report information about their owners.

A group led by businesses that will have to file reports under the Corporate Transparency Act went to federal court in Sherman, Tex., challenging the laws constitutionality. U.S. District Judge Amos Mazzant agreed with them that the law is likely unconstitutional, and on Dec. 3 he issued an order that prohibited the government from enforcing the law throughout the United States.

The 5th Circuit ultimately left Mazzants order in place and scheduled oral arguments in the case for March 25. That prompted then-U.S. Solicitor General Elizabeth Prelogar to come to the Supreme Court on Dec. 31, 2024, asking the justices to put Mazzants order on hold and allow the government to enforce the law while the appeals play out in the 5th Circuit and, if necessary, the Supreme Court.

Prelogar told the justices that Mazzants order impedes efforts to prevent financial crime and protect national security. Moreover, she added, it undermines the United States ability to press other countries to improve their own anti-money laundering regimes.

Prelogar suggested that the Supreme Court could also use the dispute as an opportunity to weigh in on the propriety of so-called universal injunctions orders, like Mazzants, that prohibit the government from enforcing a law or policy anywhere in the country, rather than simply against those involved in the dispute.

The challengers urged the court to deny the governments request. They stressed that any harm to the government from delaying the implementation of the reporting requirement would be minimal, particularly when it had waited three years to set the deadline. By contrast, they wrote, mandating compliance during review would plainly cause irreparable injury to those forced to report, in the forms of unrecoverable compliance costs which the government estimates to be in the tens of billions and constitutional injury to their First and Fourth Amendment rights from being compelled to disclose their associations and other private information.

Three days after the Trump administration took office, the justices issued a one-paragraph order that put Mazzants order on hold while the governments appeals continue in the 5th Circuit. Although they did not do so explicitly, the justices effectively turned down the request from Prelogar (who is no longer the solicitor general) to rule on the appropriateness of universal injunctions.

Justice Neil Gorsuch agreed with the decision to grant the governments request. He noted, however, that he would take up the universal-injunction question and resolve it definitively.

Jackson disagreed with the decision to put Mazzants order on hold. Even if the government is correct that the Corporate Transparency Act is likely constitutional, she explained, the government has not shown that this is the kind of urgent situation warranting the courts intervention both because the 5th Circuit has fast-tracked the governments appeal and because the government initially moved slowly to implement the law. The Government, she concluded, has provided no indication that injury of a more serious or significant nature would result if the Acts implementation is further delayed while the litigation proceeds in the lower courts.

This article was originally published at Howe on the Court.