Maine Judge Denies Challenge To Corporate Transparency Act

According to Law360, a Maine federal judge upheld the Corporate Transparency Act, rejecting one of several challenges across federal courts claiming Congress lacked the power to require companies to disclose their real owners.

U.S. District Judge Stacey D. Neumann on Friday granted a motion for summary judgment from the government while denying a similar bid from William Boyle, a majority owner of Maine-based LLCs, who sued in March seeking a declaratory judgment that the CTA is unconstitutional.

The judge said Congress appropriately found that the so-called beneficial ownership information called for in the CTA is necessary for protecting interstate and foreign commerce, and that lawmakers "asserted a rational basis for concluding the existence of corporate entities has a substantial effect on interstate commerce."

"In Light Of The Massive Role Corporate Entities Play In 
The Modern Economy, The Court Readily Finds A Rational
Basis Exists To Conclude Corporate Entities' Existence Has A Substantial Effect On Interstate Commerce,"
Judge Neumann Said.

"Therefore, Congress may regulate such entities, and the CTA is authorized by the commerce clause."

Boyle had argued that the CTA is not regulating activities that substantially affect interstate commerce, and Judge Neumann noted the plaintiff focused "largely on dormant entities that own no assets and make no transactions." But the judge said it "strains credulity to imagine that any significant portion of the 2 million entities formed each year will exist perpetually without engaging in commercial transactions."

Daniel L. Rosenthal of Marcus Clegg, counsel for Boyle, said in a statement that he thinks other U.S. district courts that have found the CTA to be likely unconstitutional "reached the right conclusion."

"We're disappointed with the ruling and will be reviewing it and considering our client's options going forward, including an appeal to the First Circuit." Rosenthal said of Friday's order.

The law remains paused nationwide as a result of a suit alleging Congress exceeded its authority under the constitution's commerce clause by enacting it. 

Cases are underway at four circuit courts, and more are in the pipeline, making it likely that the matter will ultimately be resolved by the justices, attorneys previously told Law360.

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