NUT DOCK
By Amy Howe
on 1 January 2025
at 4:33 p.m
(Katie Barlow)
The Biden administration came to the Supreme Court on Tuesday afternoon, asking the justices to let it enforce an anti-money laundering law while the government appeals to the U.S. Court of Appeals for the 5th Circuit and, if necessary, to the Supreme Court. US Attorney Elizabeth Prelogar told the justices that an order from a federal judge preventing the government from enforcing the Corporate Transparency Act “hinders efforts to prevent financial crime and protect national security” and “undermines the ability of the United States to pressure other countries to improve their own anti-money laundering regimes.”
More generally, Prelogar suggested that courts could weigh the propriety of so-called “universal injunctions”—orders that prevent the government from enforcing the law anywhere in the country. Some of the court’s conservative justices — Clarence Thomas, Neil Gorsuch and Brett Kavanaugh — have previously indicated that the Supreme Court should decide whether such injunctions are proper.
Universal injunctions have been used (as in this case) to block laws and policies under both the Biden and Trump administrations.
The case is a challenge to the constitutionality of the Corporate Transparency Act, a 2021 law designed to prevent crimes like money laundering and terrorist financing by requiring companies to report information about their owners. A rule issued by the Treasury Department initially required companies established before 2024 to file initial reports by January 1, 2025.
On Dec. 3, U.S. District Judge Amos L. Mazzant III in Sherman, Tex., agreed that the law is likely unconstitutional and entered an order preventing the government from enforcing the law anywhere in the country.
The Biden administration went to the 5th Circuit and asked that court to put Mazzant’s order on hold while it appealed. A three-judge panel initially granted the government’s request, but another judge panel reinstated Mazzant’s order and scheduled oral arguments in the case for March 25.
Prelogar then came to the Supreme Court on Tuesday afternoon, asking the justices to intervene and allow the government to enforce the law while its appeals move forward.
The reporting requirements imposed by the law, she wrote, “fall comfortably within Congress’s authority under the Commerce Clause to regulate economic activities (here, the anonymous operation of business entities) that significantly affect interstate commerce.”
Congress also has the power to impose the reporting requirements, Prelogar continued, because they are “necessary and proper” to carry out some of the powers the Constitution gives it, such as the power to regulate commerce, levy taxes and oversee foreign affairs.
Prelogar noted that three other federal district courts had rejected similar requests to block the law — two because they concluded the law is likely constitutional and one on the grounds that the challengers had not shown they would be permanently harmed if the law were passed to enter into force. She acknowledged that an Alabama district court had ruled the law unconstitutional, but she emphasized that the court’s order in that case only prevented the government from enforcing the law against the challengers.
At the very least, Prelogar told the justices, the Supreme Court should “narrow the district court’s very broad” ruling. Universal injunctions like the one issued by Mazzant in this case, Prelogar argued, exceed the powers of the federal courts, which can only remedy the damages suffered by the specific plaintiffs in the case. Moreover, she added, universal injunctions create “other legal and practical problems” — for example, by encouraging forum shopping and allowing a district court to effectively cut off other litigation on the same issue. Universal injunctions also work “asymmetrically,” she continued, so that while “the government must prevail in every case to keep its policy in effect,” “plaintiffs can block a federal statute or regulation nationwide with just a single lower court victory.”
In other cases involving universal injunctions that have come to the Supreme Court, Prelogar noted that the justices have resolved the case on other grounds without having to address the appropriateness of universal injunctions. If the justices wait until the government’s appeal in the 5th Circuit is resolved to take up this case, “the court could resolve this case at that time, and the issue of universal aid would again escape the court’s review.” But if the justices granted review now, without waiting for the appeals court to act, and addressed only “whether the district court erred in granting universal relief,” she wrote, it could “decide the relief issue during this period.”
The Biden administration’s request first goes to Judge Samuel Alito, who is in charge of emergency appeals from the 5th Circuit. Alito can act on his own; he may also (which is more likely) ask the challengers to file an answer or refer the request to the full court.
This article was originally published on Howe on the Court.
