The U.S. Supreme Court took away another piece of regulatory agency influence July 1, reversing lower-court rulings that supported a Federal Reserve board of governors’ regulation that has a six-year limit to challenge a regulation.
The decision doesn’t pack the headline power of the court on June 28 overturning its 40-year Chevron deference standard, which said judges should defer to regulators’ expertise for interpreting ambiguous or unclear laws, or its June 27 decision declaring unconstitutional the Securities and Exchange Commission’s in-house judges.
However, the 6-3 ruling in Corner Post Inc. et al. vs. Board of Governors of the Federal Reserve System could have a broad impact by expanding plaintiffs’ ability to challenge regulations in court despite the six-year standard set by the Administrative Procedure Act.
“A claim accrues when the plaintiff has the right to assert it in court — and in the case of the APA, that is when the plaintiff is injured by final agency action,” Justice Amy Coney Barrett, wrote for the majority, reversing rulings by a federal District court and federal appeals court and sending the case back for further review.
“An APA plaintiff does not have a complete and present cause of action until she suffers an injury from final agency action, so the statute of limitations does not begin to run until she is injured,” Barrett wrote.
Congress “could have chosen different language” for the law, but it didn’t, she wrote. As for the board of governors’ argument that a pro-petitioner ruling would create “significant burdens on agencies and courts,” Barrett cited passages from two previous Supreme Court rulings that “pleas of administrative inconvenience” never justify “departure from the statute’s clear text.”
The majority’s opinion provoked a furious dissent from Justices Ketanji Brown Jackson, Sonia Sotomayor and Elena Kagan, who said it will encourage more lawsuits.
“When an administrative agency changes its own rules, it follows specific, established processes, so parties have some predictability about how the rules of the road might change,” Jackson wrote for the dissenters. The APA was enacted in 1946.
“But when every rule on the books can perpetually be challenged by any new plaintiff, and is thus subject to limitless ad hoc amendment, no policy determination can ever be put to rest, and certainty about the rules that govern will forever remain elusive,” she wrote.
Branding as “baseless” the majority’s opinion, Jackson warned that it “allows for every new entity to challenge any and every rule that an agency has ever adopted.”
This opinion and the Chevron deference opinion will encourage a “tsunami” of lawsuits against regulators creating “the potential to devastate the functioning of the federal government,” she wrote.
“It is utterly inconceivable that (the) statute of limitations was meant to permit fresh attacks on settled regulations from all newcomers forever. Yet, that is what the majority holds today,” she wrote, adding that Congress should correct the law.
Corner Post was supported in its petition by several business associations as well as anti-regulation law groups, many of which also filed amicus briefs with the Supreme Court in the Chevron deference case and the SEC in-house judges case.
The dispute here started July 20, 2011, when the board of governors issued a rule regarding debit card interchange fees, which meant the statute of limitations expired in July 20, 2017.
In April 2021, the North Dakota Retail Association and the North Dakota Petroleum Marketers Association sued in the U.S. District Court in Bismarck. The board of governors filed a motion to dismiss in July 2021 based on the APA statute of limitations.
The associations then added another plaintiff, Corner Post Inc., a truck stop and convenience store in Watford City, N.D., which opened for business in March 2018.
The District Court dismissed the complaint in March 2022, saying “all facial challenges” to the rule should have been filed before July 20, 2017, referring to the legal term that says a law or rule could be challenged “on its face” as being unconstitutional.
The plaintiffs appealed and lost at the 8th U.S. Circuit Court of Appeals in St. Louis in December 2022. “When plaintiffs bring a facial challenge to a final agency action, the right of action accrues, and the limitations period begins to run upon publication of the regulation,” the judges wrote.
Corner Post appealed to the Supreme Court — without the two trade groups — saying that because it started operating in 2018 that it should be accorded six years to sue the Federal Reserve Board because it wasn’t in existence when the initial statute of limitations expired.
Corner Post said it was unfair that it couldn’t challenge the rule, adding that the 8th Circuit opinion conflicts with the opinion of the 6th U.S. Circuit Court of Appeals in Cincinnati in what the plaintiff said was a similar case. The plaintiff said the Supreme Court should overrule the 8th Circuit so it could challenge the regulation.
Barrett noted that several other appeals courts have ruled for a strict adherence to the six-year standard, but she added that the Supreme Court acted to resolve the so-called circuit split among the courts.
