On June 3, the U.S. Treasury Department filed a reply in its 11th Circuit litigation[1] against the National Small Business Association regarding the constitutionality of the Corporate Transparency Act (CTA). Of late, the Treasury Department has faced additional pressure and scrutiny, with 22 states filing a joint amicus brief last month, asserting that the CTA displaces state authority and would economically harm residents.

The CTA, which was enacted in 2021, requires businesses to identify their beneficial owners and any changes in ownership. Under the CTA, the newly required disclosures are compiled into a database by the Treasury’s Financial Crimes Enforcement Network (FinCEN). The goal of the CTA, as articulated by FinCEN, is to “protect[] the U.S. financial system, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.”

The states, led by West Virginia, have expressed concern that the CTA overreaches because it “takes an unprecedented swipe at the quintessentially state-controlled area of corporate law.” On the other hand, the Treasury, whose arguments are premised in large part on the broad powers afforded to the federal government pursuant to the Commerce Clause, argues that the objectors have not “identif[ied] any covered business not engaged in economic activity,” such that they would not be subject to the commerce clause.

Takeaway

While consumer protection and corporate responsibility remain focal points of state attorney general (AG) attention, some states remain uncomfortable with the federal government’s exercise of similar power under the Commerce Clause. With that discomfort comes the challenge to and aspiration for the dissolution of federal legislation, especially when that legislation competes with state interests. Given the back and forth between developing federal legislation and corresponding state challenges, businesses and their stakeholders need to stay apprised of not just the promulgation of new federal legislation, but also the challenges from AGs seeking to invalidate such legislation.


[1] National Small Business United, dba National Small Business Association, and Winkles v. U.S. Department of the Treasury et al., Case No. 24-10736


Troutman Pepper State Attorneys General Team

Ashley Taylor – Co-leader and Firm Vice Chair
Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation.
Clay Friedman – Co-leader
Clayton is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice, multidisciplinary teams with decades of experience crafting effective strategies to help deter or mitigate the risk of enforcement actions and litigation.
Judy Jagdmann
Judy is a partner in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based in the Richmond office. She brings experience serving as chair and commissioner of the Virginia State Corporate Commission (VSCC) from 2006 through 2022, which includes regulating the utilities, insurance, banking, and securities industries. She also served as Virginia’s attorney general from 2005-2006.
Stephen Piepgrass
Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on enforcement actions, investigations, and litigation. Stephen primarily represents clients engaging with, or being investigated by, state attorneys general and other state or local governmental enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, with a particular focus on heavily regulated industries.
Michael Yaghi
Michael is a partner in the firm’s State Attorneys General and Regulatory Investigations, Strategy + Enforcement (RISE) Practice Groups, nationwide teams that advise clients on consumer protection enforcement matters and other regulatory issues.
Samuel E. “Gene” Fishel
Gene is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) practice, based in the Richmond office. He brings extensive regulatory experience, having most recently served as senior assistant attorney general and chief of the Computer Crime Section in the Office of the Attorney General of Virginia, and as special assistant U.S. attorney in the Eastern District of Virginia for 20 years.
Tim Bado
Tim is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, where he represents corporations and individuals facing potential civil and criminal exposure. Tim’s experience in government investigations, enforcement actions, and white-collar litigation spans a number of industries, including financial services, pharmaceutical, health care, and government contracting, among others.
Chris Carlson
Chris Carlson represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
Blake R. Christopher
Blake collaborates with clients on matters related to government contracting, investigations, and disputes. His senior-level government experience generates valuable insights and strategies for clients across a variety of industries.
Natalia Jacobo
Natalia is an associate in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice. She focuses her practice on two primary areas: government contracting and state attorney general work.
Namrata Kang
Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising.
Michael Lafleur
Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
Susan Nikdel
Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes.
John Sample
John is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on a wide range of general and complex litigation matters, including shareholder disputes, fraud, products liability, breach of contract, and Biometric Information Privacy Act claims.
Whitney Shephard
Whitney is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
Trey Smith
Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice. He focuses his practice on helping financial institutions and consumer facing companies navigate regulatory investigations and resulting litigation.
Daniel Waltz
Daniel is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and State Attorneys General team. He counsels clients in connection with navigating complex government investigations, regulatory compliance, and transactions, involving state and federal government contracting obligations. Drawing on his broad experience as a former assistant attorney general for the state of Illinois, Daniel is a problem solver both inside and outside the courtroom.
Stephanie Kozol
Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.