Our Law Alerts tend to be measured in tone, avoiding hyperbole. A court decision or IRS or DOL regulation may be unexpected or unanticipated, and we would characterize it as such, and then describe it. There is, in almost all instances, no need for hyperbole. However, just as there are exceptions to most legal rules, we are making a Law Alert exception in this instance. Just three days after a motions panel of the Court of Appeals for the Fifth Circuit issued a stay of the nationwide injunction of the Corporate Transparency Act, on December 26, the Fifth Circuit, wanting to maintain the constitutional status quo while a merits panel of the Fifth Circuit considered the merits of the government’s appeal, vacated the stay it issued just days ago of the nationwide injunction, so the injunction is back in effect.
The latest action by the Fifth Circuit, looked at in isolation, is not unreasonable. The CTA raises difficult constitutional issues on which the lower courts have been divided, with two District Courts concluding that the CTA is likely unconstitutional, while two District Courts have held that it is likely unconstitutional. Based upon this latest order, that same division of view apparently exists within the Fifth Circuit. However, for a court to make such a dramatic reversal of an order this quickly of its own volition, if not unprecedented, is totally inconsistent with ordinary practice. As we pointed out in our December 24th Law Alert (available here), in its prior decision to issue a stay on the Texas District Court’s ruling and lift the injunction, the Fifth Circuit ruling went out of its way to admonish the District Court, underscoring the gaping rift that clearly exists in the Fifth Circuit on this matter.
If your reaction to this latest development is “are you kidding me?” or sentiments to that effect or stronger, that is certainly justified. In any event, we will continue to keep you advised of the latest developments in this saga, which will likely include an updated statement on the FinCEN website.
