The CTA madness continues. On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit (the "Fifth Circuit"), in the case of Texas Top Cop Shop v. Garland ("Texas Top Cop Shop"), stayed the enforcement of an injunction issued by the U.S. District Court for the Eastern District of Texas which temporarily halted the enforcement of the Corporate Transparency Act (the "CTA"). Yesterday, a mere three days later, the Fifth Circuit has, in effect, reversed its own order of December 23. As a result, the enforcement of the CTA is once again enjoined.
What You Need to Know:
It is uncertain how the Government will respond or how the merits of the Texas Top Cop Shop case will ultimately be decided. Although, as a result of yesterday's order, the injunction against enforcement of the CTA is once again in effect, reporting companies which have not yet filed their beneficial ownership reports should, as we have previously recommended, be prepared to file on short notice should the stay of enforcement of the CTA be lifted again or should the merits of the case be decided against the Government.
Brief History of Texas Top Cop Shop
By way of history, on December 3, 2024, the United States District Court for the Eastern District of Texas entered an order in the Texas Top Cop Shop case enjoining enforcement of the Corporate Transparency Act and its corresponding Reporting Rule.
In response, the Government requested a stay of the preliminary injunction, which the district court denied the Government appealed, and on December 23, 2024, a motions panel of the Fifth Circuit granted the government's emergency motion for a stay pending appeal. The order also expedited the appeal to the next available oral argument panel.
The merits panel of the Fifth Circuit now has the appeal, which remains expedited, and a briefing schedule is expected to be issued shortly. However, in order to preserve the constitutional status quo while the merits panel considers the parties' "weighty substantive arguments," the Fifth Circuit, in its order issued on December 26, determined to vacate that part of the motions-panel order granting the Government's motion to stay the District Court's preliminary injunction enjoining enforcement of the CTA and the Reporting Rule.
Saul Ewing's CTA Team will continue to monitor this, and other cases relating to CTA compliance and will provide relevant updates as they become available.
