District Court in ND Alabama Holds the Corporate Transparency Act Unconstitutional (3/4/24)

In Nat'l Small Business United v. Yellen et al. (N. D. Ala. No. 5:22-cv-1448-LCB Dkt 52 3/1/24), CL here, the Court declared the Beneficial Ownership reporting requirements of the Corporate Transparency Act unconstitutional and enjoined its application against the defendants in the case.  For more on the Beneficial Ownership Information requirements, see the FinCEN page here. The judgment in the case is here.

The Court starts its opinion with the following: 

            The late Justice Antonin Scalia once remarked that federal judges should have a rubber stamp that says STUPID BUT CONSTITUTIONAL. See Jennifer Senior, In Conversation: Antonin Scalia, New York Magazine, Oct. 4, 2013. The Constitution, in other words, does not allow judges to strike down a law merely because it is burdensome, foolish, or offensive. Yet the inverse is also true—the wisdom of a policy is no guarantee of its constitutionality. Indeed, even in the pursuit of sensible and praiseworthy ends, Congress sometimes enacts smart laws that violate the Constitution. This case, which concerns the constitutionality of the Corporate Transparency Act, illustrates that principle.

That’s a cute opening for a final conclusion of unconstitutionality that is, in my gut reaction, constitutionally suspect. Indeed my cute initial analysis (I do not offer a detailed analysis here) is:

This opinion is dumb, stupid.

I will be back to discuss it later when I have given more complete analysis. I will hold open the possibility that my initial reaction above is itself dumb, stupid. (That will not be the first time.) But for now, until further analysis drives me to a different conclusion, I stick to the dumb, stupid characterization.

In the meantime, I do note that the injunction is limited to the plaintiffs only. The court does not attempt universal vacatur which itself is a bit suspect. So, at least,. it is modest in its holding as to the effect of the unconstitutionality holding.

Added 3/5/24 8am Eastern Time:

As to the scope of the injunction, it applies to the members of the “National Small Business Association [which] is ‘an Ohio non-profit corporation that represents and protects the rights of small businesses across the United States,” ‘including ‘over 65,000 businesses and entrepreneurs located in all 50 states.’” The universe of possible persons subject to the CTA is much larger, so those outside the membership of the NSBA are not affected. In any event, the first filing date is not until December 2024, so there is no immediate impact except that the affected parties and other parties not immediately affected have to make the decision whether to do the work in the interim to make the filing if the judgment is reversed.

The New York Times article says this (Kate Kelly, Judge’s Ruling Sets Back Law Meant to Fight Money Laundering (New York Times 3/3/24)):

“This is an aberrant decision issued by a lone district judge in Alabama, based on an extraordinarily narrow view of Congress’s constitutional powers that is unsupported by precedent,” said Senator Sheldon Whitehouse, the Rhode Island Democrat who is one of the law’s supporters. “I would urge the government to appeal quickly to correct the erroneous decision and ensure the law’s transparency requirements can be fully and uniformly implemented.”

Judge Liles C. Burke’s Wikipedia page is here. I found nothing particularly noteworthy there, except the following:

Burke attended The JAG School at the University of Virginia and entered the Judge Advocate General's Corps of the Alabama Army National Guard. He served for more than a decade, achieving the rank of Major.

There is no indication of active duty other than his attendance at the JAG School. In any event, he served in the Alabama National Guard for a long time. His Alabama State Bar page is here, showing him in full Army uniform with the brief description as follows:

Major Liles Burke is a JAG officer in the Alabama Army National Guard . He is assigned to Joint Forces Headquarters in Montgomery, Alabama, where he is the Deputy Staff Judge Advocate. In civilian life Major Burke is a United States District Judge for the Northern District of Alabama with a duty station at the Huntsville, Alabama United States Courthouse.