Risk Update

Compliance News — Corporate Transparency Act Canceled? Michigan Bar Suggests Barring Judicial Socialization with Firms

For those following the Corporate Transparency Act: “Court Challenge to Corporate Transparency Act Prevails – For Now” —

  • “On March 1, 2024, U.S. District Judge Liles C. Burke for the Northern District of Alabama, Northeastern Division, issued a Final Judgment ruling in favor of the Plaintiffs’ (National Small Business United, et al. ‘NSBU’) motion for summary judgment, and against the U.S. Treasury (Defendants).”
  • “This judgment held that the Corporate Transparency Act (CTA) is unconstitutional because it exceeds the Constitution’s limits on Congress’ power.”
  • “Further, FinCEN is permanently enjoined from enforcing the CTA against the Plaintiffs in that case (but only the Plaintiffs in that case).”
  • “It is currently unclear as to the implications of this ruling for the business community at large. This ruling may be persuasive in similar cases brought against Treasury outside of the Northern District of Alabama, but is not precedential, meaning that other judicial forums may rule differently on the issues presented in this case.”
  • “In reaching its conclusions, the court reviewed all of the arguments made by Treasury and the Plaintiffs. First, the court dispensed with Treasury’s standing argument finding that the Plaintiffs had a redressable injury and the NSBU had associational standing in order to bring the suit in federal court. Next, the court discussed the various constitutional arguments the Plaintiffs made, determining the CTA did not pass muster under the Necessary and Proper Clause (referring to foreign affairs and national security), the Commerce Clause, nor Congress’s taxing power under the Necessary and Proper Clause. The court extensively discussed Supreme Court precedent to reach the result that the CTA cannot be justified as a constitutional exercise of Congress’s powers. The Court indicated that its conclusion made it unnecessary to decide whether the CTA violates the First, Fourth, or Fifth Amendments of the Constitution, as also asserted by the Plaintiffs.”
  • “Because this case only included questions of law, and was decided on summary judgment based solely on dispositive motions by the parties, the appeals court will have de novo review of this case. That is, the appeals court will decide all issues in the case, as if the case was being heard for the first time.”

State Bar of Michigan: “Ethics opinion details the judicial ethical obligations when invited to attend firm-sponsored events” —

  • “Judicial officers should decline to attend law firm-sponsored events with limited exceptions, according to a new ethics opinion from the State Bar of Michigan’s Standing Committee on Judicial Ethics.”
  • “‘It may be permissible for a judicial officer to attend an event if the judicial officer has a personal connection to the firm and has weighed the ethical limitations to ensure that there is no appearance of impropriety, it does not detract from the dignity of the office, and it does not interfere with the performance of judicial duties,’ the opinion states.”
  • “The opinion analyzes Canon 2, which deals with the appearance of impropriety, and Canon 4, which outlines allowable extrajudicial activities, as to why judges should not attend events at law firms.”
  • “The opinion concludes by saying that judicial officers play a crucial role in maintaining public trust in the judiciary, necessitating careful consideration of their participation in law firm-sponsored events. The opinion advises that judicial officers should therefore decline invitations unless they have personal connections to the firm and that, when considering attendance, they should conduct thorough analyses to ensure they are in compliance with the Code of Judicial Conduct.”
  • “Factors to consider include being aware of the event’s public visibility, avoiding ex parte communications, and refraining from discussions regarding pending cases. These factors should be considered for the judicial officer to ensure that they continue to uphold the dignity of their office and to ensure activities align with ‘ordinary social hospitality.'”
  • Text of full opinion here.