CTA Currently Unenforceable: CTA Enforcement Enjoined Again While Fifth Circuit Considers Appeal
Client Alert | December 27, 2024
On December 26, 2024, the U.S. Court of Appeals for the Fifth Circuit vacated a Fifth Circuit panel’s order granting a stay pending appeal of a recent district court order that preliminarily enjoined enforcement of the Corporate Transparency Act (CTA).[1] This means that the CTA will remain unenforceable for now while the Fifth Circuit considers the government’s expedited appeal of the district court order.
To stay up to date on the latest CTA developments, please consult our resource page, available at https://www.gibsondunn.com/corporate-transparency-act-resource-center-insights-and-updates.
For additional background information, please refer to our Client Alerts issued on December 5, December 9, December 16, and December 24, 2024.
On December 3, a judge of the U.S. District Court for the Eastern District of Texas ruled that the CTA was likely unconstitutional.[2] The court issued a nationwide preliminary injunction against enforcement of the law and postponed the effective date of the Reporting Rule that set filing deadlines for compliance. On December 13, the Department of Justice, on behalf of FinCEN, asked the Fifth Circuit to stay the district court’s order pending appeal.[3]
On December 23, a motions panel of the Fifth Circuit granted the government’s request and stayed the district court’s order pending appeal.[4] The motions panel consisted of Judges Stewart, Haynes, and Higginson. Judge Haynes joined the order in part and disagreed in part, noting her agreement that a nationwide injunction was inappropriate but that she would deny the stay pending appeal with respect to the parties.[5] The panel also ordered that the government’s appeal be expedited to the next available panel to decide the merits.[6] FinCEN then issued a statement extending the filing deadline for many entities subject to the law—with most reporting entities receiving an extension until January 13, 2025.[7]
On December 26, the Fifth Circuit issued a new order indicating that a merits panel now has the appeal and vacating that portion of the motions panel order granting the government’s motion to stay the preliminary injunction. The order explained that vacating the stay of the preliminary injunction would “preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.”[8] On December 27, the court issued an order requiring merits briefing to be completed by February 28, 2025, and scheduling oral argument for March 25, 2025.[9]
What the Latest Order Means for Entities Subject to the CTA
Now that the motions panel’s stay of the district court’s order has been vacated, the nationwide preliminary injunction against enforcement of the CTA is once again in effect. This means that FinCEN cannot enforce the CTA’s reporting requirements against anyone, for as long as the district court’s preliminary injunction remains in place. The government may seek an emergency stay of the district court’s order from the Supreme Court or seek en banc review of the merits panel’s order reinstating the injunction. In light of the Fifth Circuit’s order scheduling oral argument for March 25, 2025, it is likely that the preliminary injunction will remain in place through at least that date, unless either the entire Fifth Circuit or the Supreme Court intervenes and enters a stay.
Entities that believe they may be subject to the CTA and its associated Reporting Rule should closely monitor this matter, and consult with their CTA advisors as necessary, to understand their obligations and options. It is possible that the district court’s injunction will again be stayed—and the CTA will become enforceable—on short notice.
Additional updates will be available at our resource page, available at https://www.gibsondunn.com/corporate-transparency-act-resource-center-insights-and-updates.
[1] Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, Dkt. 160-2 (5th Cir. Dec. 26, 2024). A prior alert by Gibson Dunn explaining the Fifth Circuit’s initial order is available at https://www.gibsondunn.com/cta-enforceable-again-after-fifth-circuit-stays-district-court-injunction-fincen-provides-extension-to-jan-13-2025-for-most-reporting-entities.
[2] Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-CV-478, Dkt. 30 (E.D. Tex. Dec. 3, 2024).
[3] Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, Dkt. 21 (5th Cir. Dec. 13, 2024).
[4] Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, Dkt. 140-2 (5th Cir. Dec. 23, 2024). A “motions panel” is a panel of judges, drawn randomly from the Fifth Circuit’s active judges, who screen and handle administrative and emergency motions before the Fifth Circuit. See 5th Cir. Rs. 27, 34, and Internal Operating Procedures of the United States Court of Appeals for the Fifth Circuit.
[5] Id. at 2 n.1.
[6] Id. at 7.
[7] See https://www.gibsondunn.com/cta-enforceable-again-after-fifth-circuit-stays-district-court-injunction-fincen-provides-extension-to-jan-13-2025-for-most-reporting-entities.
[8] Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, Dkt. 160-2 (5th Cir. Dec. 26, 2024).
[9] Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, Dkt. 163, 165 (5th Cir. Dec. 27, 2024)
Gibson Dunn has deep experience with issues relating to the Bank Secrecy Act, the Corporate Transparency Act, other AML and sanctions laws and regulations, and challenges to Congressional statutes and administrative regulations.
For assistance navigating white collar or regulatory enforcement issues, please contact the authors, the Gibson Dunn lawyer with whom you usually work, or any leader or member of the firm’s Anti-Money Laundering, Administrative Law & Regulatory, Investment Funds, Real Estate, or White Collar Defense & Investigations practice groups.
Please also feel free to contact any of the following practice group leaders and members and key CTA contacts:
Anti-Money Laundering:
Stephanie Brooker – Washington, D.C. (+1 202.887.3502, [email protected])
M. Kendall Day – Washington, D.C. (+1 202.955.8220, [email protected])
David Ware – Washington, D.C. (+1 202-887-3652, [email protected])
Ella Capone – Washington, D.C. (+1 202.887.3511, [email protected])
Sam Raymond – New York (+1 212.351.2499, [email protected])
Chris Jones – Los Angeles (+1 213.229.7786, [email protected])
Administrative Law and Regulatory:
Stuart F. Delery – Washington, D.C. (+1 202.955.8515, [email protected])
Eugene Scalia – Washington, D.C. (+1 202.955.8673, [email protected])
Helgi C. Walker – Washington, D.C. (+1 202.887.3599, [email protected])
Matt Gregory – Washington, D.C. (+1 202.887.3635, [email protected])
Investment Funds:
Kevin Bettsteller – Los Angeles (+1 310.552.8566, [email protected])
Shannon Errico – New York (+1 212.351.2448, [email protected])
Greg Merz – Washington, D.C. (+1 202.887.3637, [email protected])
Real Estate:
Eric M. Feuerstein – New York (+1 212.351.2323, [email protected])
Jesse Sharf – Los Angeles (+1 310.552.8512, [email protected])
Lesley V. Davis – Orange County (+1 949.451.3848, [email protected])
Anna Korbakis – Orange County (+1 949.451.3808, [email protected])
White Collar Defense and Investigations:
Stephanie Brooker – Washington, D.C. (+1 202.887.3502, [email protected])
Winston Y. Chan – San Francisco (+1 415.393.8362, [email protected])
Nicola T. Hanna – Los Angeles (+1 213.229.7269, [email protected])
F. Joseph Warin – Washington, D.C. (+1 202.887.3609, [email protected])
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