This Day in Legal History: Sedition Act Passed
On this day in legal history, July 14, 1798, the United States Congress passed the Sedition Act, one of the most controversial laws in the nation’s early political history. Part of the broader Alien and Sedition Acts, this law made it a crime to publish “any false, scandalous and malicious writing” against the federal government, Congress, or the President with the intent to defame or bring them into disrepute. Ostensibly aimed at quelling foreign influence and internal subversion during the quasi-war with France, the Act was also a clear weapon against domestic political opposition—particularly the Democratic-Republicans led by Thomas Jefferson.
Federalist lawmakers, who dominated Congress and the presidency under John Adams, justified the law as necessary for national security. However, it was widely criticized as an assault on First Amendment rights and a means of silencing dissent. The law resulted in the prosecution of several Republican editors and even members of Congress, including Representative Matthew Lyon of Vermont, who was sentenced to four months in jail.
The Sedition Act provoked a fierce backlash and spurred Jefferson and James Madison to draft the Kentucky and Virginia Resolutions, which introduced the doctrine of nullification—the idea that states could declare federal laws unconstitutional. Public outrage over the Act played a significant role in the Federalists' defeat in the election of 1800 and the subsequent repeal or expiration of most provisions of the Alien and Sedition Acts.
The Sedition Act expired on March 3, 1801, the day before Jefferson assumed the presidency. Its legacy remains a cautionary tale about the tension between national security and civil liberties, and it is frequently cited in debates over the limits of free speech in times of political crisis.
California tax authorities have flagged over 1,500 high-end vehicles sold by 500 dealerships as likely being registered through Montana LLCs in an attempt to avoid California sales tax and vehicle registration fees. These vehicles—worth more than $300 million collectively—are tied to a long-running strategy used by buyers of luxury assets like exotic cars, yachts, and RVs to exploit Montana’s zero percent sales tax and minimal registration costs. Dealers and buyers now face possible penalties, audits, and investigations as California intensifies enforcement.
The scheme works like this: a buyer sets up a Montana LLC, purchases and registers the vehicle under that entity, and keeps the car out-of-state on paper—even if it’s garaged and driven daily in a state like California. That regulatory fiction is precisely what states are cracking down on. Bloomberg Tax recently highlighted the scale of the problem, noting that more than 600,000 vehicles are likely registered in Montana but used elsewhere, costing states billions annually in uncollected taxes.
Montana LLCs have become a go-to workaround for the wealthy looking to sidestep their home-state tax obligations. While technically legal under Montana law, when the vehicle is used in another state without proper registration or tax payment, it becomes a form of tax evasion. States like Illinois and Utah are following California’s lead, passing laws to “look through” LLCs and hold in-state beneficial owners accountable.
This isn’t just a niche tax dodge—it’s a broader challenge to state tax enforcement. As wealthier individuals increasingly exploit differences between state tax codes, it’s prompting legal reforms and inter-agency cooperation to close loopholes once thought too obscure or dispersed to address. California’s latest enforcement push suggests these Montana LLC schemes are no longer flying under the radar—and that other states may soon follow with penalties and structural reforms of their own.
California Finds 1,500 Vehicles Linked to Montana Tax Shelters
Nearly two-thirds of the U.S. Department of Justice’s Federal Programs Branch—the unit charged with defending Trump administration policies in court—has resigned or announced plans to leave since Donald Trump’s reelection. Out of roughly 110 attorneys, 69 have exited, according to a list reviewed by Reuters. The exodus includes nearly half the section’s supervisors and is far greater than typical turnover seen in prior administrations. While the Trump administration maintains its legal actions are within constitutional bounds, current and former DOJ lawyers cite an overwhelming workload and ethical concerns as key drivers of the departures.
Many career lawyers reportedly struggled to defend policies they saw as legally dubious or procedurally flawed, including efforts to revoke birthright citizenship and claw back federal funding from universities. Several feared they’d be pressured to make misleading or unethical arguments in court. In some cases, lawyers were expected to defend executive orders with minimal input from the agencies involved. A recent whistleblower complaint even alleged retaliation against a supervisor who refused to make unsupportable claims in immigration cases.
Despite the mass departures, the Trump administration continues to rely heavily on the unit as it seeks to expand executive power following favorable Supreme Court rulings. The DOJ has reassigned attorneys from other divisions, brought in over a dozen political appointees, and exempted the unit from the federal hiring freeze to keep up with litigation demands. Critics argue the changes undermine DOJ independence, while supporters claim the administration is merely ensuring its policies get a fair defense in court.
Two-thirds of the DOJ unit defending Trump policies in court have quit | Reuters
An $8 billion trial kicks off this week in Delaware where Meta CEO Mark Zuckerberg and several current and former Facebook leaders are accused by shareholders of knowingly violating a 2012 FTC consent decree aimed at protecting user privacy. The lawsuit stems from the 2018 revelation that Cambridge Analytica accessed data from millions of Facebook users without their consent, ultimately leading to billions in fines and costs for Meta—including a $5 billion penalty from the FTC in 2019. Shareholders, including union pension funds like California’s State Teachers’ Retirement System, want Zuckerberg and others to reimburse the company, alleging they operated Facebook as a law-breaking enterprise.
Defendants in the case include Sheryl Sandberg, Marc Andreessen, Peter Thiel, and Reed Hastings. While Meta itself is not a defendant, the case focuses on the board’s alleged failure to oversee privacy practices and enforce the 2012 agreement. The plaintiffs must prove what legal experts call the most difficult claim in corporate law: a total failure of oversight by directors. Delaware law gives leeway for poor business decisions—but not illegal ones, even if they’re profitable.
Zuckerberg is expected to testify, and plaintiffs argue he personally directed deceptive privacy practices and tried to offload stock ahead of the Cambridge Analytica scandal to avoid losses, allegedly netting $1 billion. Defendants deny wrongdoing, claiming the company took privacy seriously by investing in compliance and being deceived by Cambridge Analytica.
Share this post