116. The Corporate Transparency Act and Nationwide Injunctions
The 19th—and, likely, last—emergency application from the Biden administration includes a (surprising) request that the justices conclusively settle the propriety of "universal" equitable relief
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I wanted to devote some time in this week’s issue to the 19th (and, probably, last) emergency application filed by the Biden administration—asking the Supreme Court to put back into effect the Corporate Transparency Act (CTA), which is currently blocked by a nationwide injunction issued by Judge Amos Mazzant in the Eastern District of Texas. On the merits, the dispute over the CTA raises an important (if not especially intricate) question about the scope of Congress’s power to regulate interstate commerce under Article I of the Constitution.
But the Biden administration isn’t just asking the justices to put the statute back into effect pending further litigation; it’s also asking the Court to grant certiorari “before judgment” in the Fifth Circuit—and to conduct expedited plenary review solely on a procedural issue, i.e., when/whether district courts can issue “nationwide” injunctions in the first place. That would be a big deal at any point in time; it’s an especially striking request given that partisan control of the federal executive branch—against whom most nationwide injunctions are directed—is about to switch hands.
But first, the (little) news.
On the Docket
As expected, the Court didn’t make many headlines during the first week of 2025. I wrote last Thursday about the Chief Justice’s year-end report, but the only order out of the full Court was the expected (and routine) grant of divided argument in the TikTok case—giving argument time to both TikTok and the creators who also challenged the constitutionality of the statute in the D.C. Circuit.
The justices have a busier week ahead—with a regularly scheduled Conference this Friday right after the hastily scheduled oral argument in the TikTok case (which will begin at 10:00 ET, and will, like all other arguments this term, be live-streamed). I continue to think that it’s possible that we’ll get a ruling on the emergency applications in the TikTok case, but probably not the merits, as early as late on Friday—especially if the Court is inclined to uphold the statute (and, thus, deny the emergency applications). Denying the emergency applications would signal to everyone that the January 19 effective date isn’t going anywhere—while buying the justices time to flesh out the opinion(s) respecting the merits.
Speaking of Friday afternoon, the regular Order List out of this Friday’s Conference is expected next Monday at 9:30 ET. But if the justices want to add any more cases to the docket for the current term, they’re likely to announce that as soon as late on Friday—given that we’re getting close to the cut-off for a case to be argued in the last session in April without expediting the briefing schedule (and so there’s a meaningful difference between granting a case this Friday versus next Monday).
The only pending emergency application likely to produce the full Court’s attention is the Biden administration’s application in the CTA case, about which much more below. But because the challengers’ response to the application isn’t due until 4 p.m. (ET) this Friday, and because the justices have … other things … going on on Friday, it’s unlikely that we’ll get a ruling this week—one way or the other.
The One First “Long Read”:
Universal Relief and the CTA
The Corporate Transparency Act, part of the Anti-Money Laundering Act of 2020 (itself part of the National Defense Authorization Act for Fiscal Year 2021), was enacted by Congress (over President Trump’s veto) in January 2021. As relevant here, the statute requires a remarkably broad range of business entities (perhaps as many as 32.6 million enterprises, according to the government), in the absence of an exemption, to file information identifying their “beneficial owners” with the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”).1 The animating premise of the statute, which was over a decade in the making, was that bad actors often hide their ownership of corporations and other entities to facilitate an array of unlawful activities—such as money laundering, tax fraud, human and drug trafficking, and the financing of terrorism.
To that end, the CTA was designed to shift the burden of collecting ownership information from financial institutions to the companies themselves—by not only requiring even very small companies to identify their “beneficial owners” to FinCEN (and to update FinCEN when there’s a material change), but by imposing stringent penalties for willful non-compliance and unauthorized disclosures. The uniform and comprehensive reporting of ownership information that the CTA requires, the theory goes, will improve transparency for national security, intelligence, and law enforcement agencies in their efforts to detect and prevent an array of illicit activities. It is, to be sure, an awfully broad statute in its sweep, but one with a clear and well-defined purpose.
Although the CTA became law on January 1, 2021, its reporting requirements were not scheduled to go into effect until early this year. Once the government finalized the relevant implementing regulations, an array of lawsuits were brought challenging the statute on constitutional grounds, including the suit relevant here—brought by four entities subject to the Act, an individual affiliated with one of those entities, and a membership organization (the National Federation of Independent Business, which itself has roughly 300,000 members), in the Sherman Division of the U.S. District Court for the Eastern District of Texas. Importantly, those plaintiffs sought an injunction preventing the CTA from being enforced only against them.2 On December 3, the district court sustained their constitutional challenge—concluding that the plaintiffs were likely to succeed on their claim that the CTA exceeds Congress’s regulatory authority under the Commerce Clause. And it issued a preliminary injunction barring enforcement of the CTA not just against the plaintiffs, but against anyone, anywhere.3
The federal government immediately appealed that ruling—and sought a stay of the district court’s injunction (both in whole and at least as applied to parties other than the plaintiffs) from the Fifth Circuit. On Monday, December 23, a three-judge motions panel of the Fifth Circuit granted the requested stay—putting the CTA back into effect.4 After the plaintiffs asked the full Fifth Circuit to reconsider, the (unidentified) three-judge “merits” panel assigned to hear the federal government’s appeal quickly stepped in—on its own—to vacate that stay just three days later.
The latter ruling put the district court’s injunction back into effect, and the CTA back on hold, in order, in the panel’s words, “to preserve the constitutional status quo.” (Never mind that the pre-litigation “constitutional status quo” was that the statute was in force, or that the “constitutional status quo” when the merits panel ruled was that the statute was … in force. Oh, the Fifth Circuit…) Suffice it to say, this was all quite a lot of over-the-holidays litigation whiplash—especially with regard to a statute that affects a remarkably broad array of American businesses (and, for whatever it’s worth, the lawyers who represent them).
On December 31, the Biden administration asked the Supreme Court to weigh in. Specifically, the application asks the justices (1) to stay the injunction in full; (2) to stay it at least as applied to parties other than the plaintiffs; and (3) if the Court is so inclined, to grant certiorari before judgment in the Fifth Circuit—not to conduct expedited plenary review of the CTA’s constitutionality, but solely to decide “whether the district court erred in entering preliminary relief on a universal basis.” (As noted above, Justice Alito has ordered the challengers to respond by 4 p.m. ET this Friday, January 10.)
***
In my view, the Biden administration has a strong argument for emergency relief. Although there continues to be rich debate over the scope of Congress’s regulatory powers under the Commerce Clause, the CTA is based upon detailed findings by Congress about the relationship between the anonymous operation of business entities in the United States and money laundering, tax fraud, and the financing of terrorism—activities that all, in the words of the Supreme Court’s doctrinal test, “substantially affect interstate commerce.” The information businesses are required to report does not itself comprise economic activity, of course, but the whole premise of the statute is that the businesses are engaged in economic activity—and that maintaining information about their ownership is necessary to maximize the government’s ability to prevent financial crimes (which, obviously, also involve economic activity).
The statute may have other constitutional problems (especially with regard to the data it compels all companies to provide to the federal government). But the district court’s Commerce Clause analysis is difficult to square with even more recent Supreme Court interpretations of the Commerce Clause. And even for those, like me, who are generally unpersuaded that governments suffer irreparable harm whenever their laws are blocked, here, if one believes that, whatever their wisdom as a policy matter, the reporting requirements will facilitate the government’s ability to investigate, prosecute, and deter money laundering, tax fraud, and the financing of terrorism, their suspension necessarily harms the government’s ability to do so.
Even for those less persuaded, the Biden administration’s fallback argument—that the district court’s preliminary injunction should be limited to the plaintiffs—is, arguably, even stronger. Whatever one thinks about “universal” injunctions (more on that in a moment), this case is one in which the plaintiffs didn’t even seek one. It can hardly be said to burden the plaintiffs (now the respondents before the Supreme Court) to limit the district court’s injunction to the relief they specifically requested.
But what’s especially striking about the application is its final suggestion—that the Court consider taking up for full review now whether the district court had the power to issue a universal injunction in the first place. That’s a striking request not just in the posture in which this case reaches the Supreme Court, but at this exact moment—with a very different administration two weeks away from taking office.
I’ve written before about the broader debate over “universal” relief—and whether/when federal courts have the power to block government actions not just against the plaintiffs who are challenging them, but against anyone. (Such orders are often called “nationwide” injunctions, but it’s their applicability to non-plaintiffs, not their geographic scope, that’s the source of controversy—hence the use of “universal,” instead.)
My own view, as I’ve tried to unpack here, is that federal courts do have the power to provide such relief in appropriate cases—but in far narrower circumstances than those in which they are currently being entered. (That is, the standard ought to be meaningfully higher than the standard for a plaintiff-specific preliminary injunction.) And unlike, say, differences in immigration policies along the U.S.-Mexico border (over which three different courts of appeals have geographical jurisdiction), it seems less obvious to me why an injunction against enforcement of the CTA must be universal to be effective; non-plaintiffs can simply comply with the reporting obligations while the plaintiffs are exempt. Indeed, at least one other district court has already issued just such a narrower injunction against the statute.
Mine is not the only view of the universal relief debate, of course. But for as much as Justices Thomas and Gorsuch have repeatedly urged the Court to take up, once and for all, the propriety of universal relief, the Court has thus far been reluctant to do so—perhaps because some of the key votes, such as Justice Kavanaugh, are as ambivalent about the general propriety of such relief as I am. And even if the injunction in this case is a good candidate for being limited to the plaintiffs (the narrower relief the Biden administration is seeking), it’s not clear that anything significant has changed with regard to the broader debate over when/whether such relief is ever within the power of federal district courts to provide (and the application doesn’t suggest anything has).
Of course, it’s entirely understandable that, for institutional reasons, the Department of Justice will generally be opposed to universal relief no matter who the President is. That said, there are at least two reasons why it seems odd to me that the government chose this case, in particular, as the vehicle through which to take such a prominent stand.
First, the case is in a very preliminary posture. The Fifth Circuit has yet to rule on the validity of the district court’s preliminary injunction at all, let alone its scope. All that has happened to date is a back-and-forth over whether the injunction should be stayed pending appeal. And yet, the Biden administration is asking the Court to leapfrog the Fifth Circuit solely on the scope-of-relief issue. I’ve written before about how the Court has seemingly watered down the historical standard for certiorari before judgment. But here, it’s the Biden administration doing so.
The only argument that the government offers for leapfrogging the court of appeals is the possibility that, after judgment in the Fifth Circuit, the Supreme Court could rest any ruling in this case solely on the constitutionality of the statute—which is how it sidestepped the scope-of-relief issue in prior cases. But that’s by no means inevitable; the Court could always choose separately to address the scope of the injunction in those circumstances, whether as a reason to vacate it or in defense of a ruling affirming it.
Second, as you may have noticed, we’re two weeks away from a change in administration. Even if DOJ’s institutional interests are hostile to universal relief in all cases, the notion that Biden administration political appointees think it’s worth (or, at least, agreed to endorse) expending the government’s capital now for a ruling that, if successful, would limit the ability of federal courts to block Trump administration policies is more than a little surprising. Maybe that’s the very idea—that raising the issue at this exact juncture will persuade the Court that the government’s reasons for doing so aren’t political (in the partisan sense). But given how much of the Biden administration’s policy agenda has been thwarted by the very universal relief that it is now asking the Court to vitiate, it seems like a remarkably asymmetrical (and myopic) conceit—especially in a context in which the request itself (certiorari before judgment) is extraordinary.
I expect the Court will rule on the application, one way or the other, by early next week. As for whether it takes up the Biden administration’s request to use the case, captioned Garland v. Texas Top Cop Shop, as a referendum on universal injunctions writ large, I’d be more than a little surprised at this point. Then again, I’m more than a little surprised that DOJ has even asked it to do so.
SCOTUS Trivia: Final Data on Biden Administration Emergency Applications
I’ve previously written about the Biden administration’s (surprisingly good) track record when it comes to obtaining emergency relief from the Supreme Court. Assuming that the CTA application is the last one, that will make 19 total applications across the four years in which President Biden has been in office (for comparison, the Bush and Obama administrations, between them, filed eight applications in 16 years; the first Trump administration filed 41 in four years):
As the above chart notes, the CTA application is the 14th(!!) of the 19 to come in a case arising out of the Fifth Circuit. Of the first 18 applications, the Court has granted nine (seven from the Fifth Circuit) and denied nine—although the Court ended up siding with the Biden administration after plenary review in three of the cases in which it had initially denied emergency relief (all of which came from courts within the Fifth Circuit).
However one quantifies that success rate, it seems especially striking given that as many as 18 of the 19 applications have come in cases with clear ideological valences—in which the current administration’s views are generally at odds with those of a majority of the justices.5 Thus, whatever ends up happening with the CTA application, it seems safe to say that the Justice Department fared surprisingly well in its requests for emergency relief between January 2021 and January 2025—whether because it was careful to pick its battles; because it litigated those cases exceptionally well; because the Fifth Circuit continues to be way out of touch with the middle of the Supreme Court not just on the merits, but with respect to emergency relief, too; or because of some combination of all three.
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Under the CTA, covered entities must identify all individuals who exercise substantial control over the entity or own or control 25% of its ownership interests. And they must report their beneficial owners’ names, dates of birth, addresses, and unique identifying numbers (e.g., driver’s license or passport numbers).
The federal government has argued that NFIB should be entitled to relief, at most, with respect to only the two members it specifically identified in the complaint. But even if relief encompassed all of NFIB’s 300,000+ members, that’s still only a small percentage of the entities required to report under the CTA.
There are at least four other pending lawsuits challenging the constitutionality of the CTA. In three of them, district courts (in Michigan, Oregon, and Virginia) denied requests for preliminary injunctive relief. In the fourth (in Alabama), the court granted a preliminary injunction, but only with respect to the named plaintiffs.
The panel was unanimous as to a stay of the injunction as applied to non-plaintiffs; Judge Haynes dissented from the stay as applied to the plaintiffs themselves.
The only counterexample, in my view, is the Purdue Pharma bankruptcy case.
My pet legislative solution is to limit jurisdiction to issue “universal injunctions” against the federal government to the DC District Court. That would go a long way toward killing the rampant judge shopping that happens now.
Thank you for posting DOJ's SCOTUS Application, Garland vs Texas Top Cop Shop.
I concur.