Certain that bureaucrats know best, the modern administrative state has long labored to snuff out challenges to its actions.
So, when Corner Post—a convenience store and truck stop in North Dakota—challenged a federal rule governing fees for debit-card transactions shortly after it opened for business, but years after the regulation had taken effect, the government argued that Corner Post had somehow shown up in court too late.
Thankfully, the Supreme Court on Monday in Corner Post Inc. v. Board of Governors of the Federal Reserve System had a different view of the matter.
Every time someone swipes a debit card, the business involved must pay a fee to the bank to move money from the person’s account to the business’s. When debit card companies began to compete for banks’ business by raising these fees, Congress intervened with a law directing the Federal Reserve System to impose a cap on the fees and detailing the costs that the Fed’s Board of Governors was permitted to consider in determining that cap.
When the board proposed a cap of 12 cents per transaction, big banks balked—even though each transaction cost about 5 cents at the time. In response, the board considered four costs not listed in the statute and revised the cap upwards to 21 cents per transaction. The board also allowed an ad valorem factor of 0.05% of the transaction’s value, significantly raising the profits for banks—and the costs for businesses that accept debit cards. The Fed finalized the regulation in 2011.
In March 2018, Corner Post opened for business and, like any other business, began accepting debit card payments. Three years later, Corner Post joined a lawsuit challenging the debit card fee cap based on the Board’s use of factors not permitted by statute.
Under the Administrative Procedure Act, Corner Post had a right to seek judicial review of the Fed’s decision because it was a party “adversely affected or aggrieved by agency action.” But another statute, 28 U.S.C. § 2401(a), limits the time for filing civil lawsuits against the United States to “within six years after the right of action first accrues.”
The government moved to dismiss Corner Post’s suit as untimely. Corner Post, the government argued, was harmed when the board issued the final rule, meaning Corner Post should have sued no later than 2017—a year before it even was open for business.
Because Corner Post could not otherwise challenge the rule, the government’s reading of Section 2401(a) would have left Corner Post without a remedy except to ask the Board to change the rule.
Nevertheless, the district court granted the government’s motion and dismissed Corner Post’s case. The 8th U.S. Circuit Court of Appeals affirmed, adopting the rule that a majority of other federal appellate courts also adopted: The clock for filing a lawsuit starts when an agency promulgates a regulation—even if the business, like Corner Post, doesn’t come into existence until after the deadline.
The 8th Circuit’s decision deepened a split between the majority of courts and the 6th Circuit, which held the clock starts when the plaintiff is harmed, regardless of when the agency issued the relevant rule.
Corner Post appealed and in a 6-3 opinion on Monday, the Supreme Court revived Corner Post’s lawsuit.
Writing for the majority, Justice Amy Coney Barrett explained that a lawsuit that alleges an agency violated the Administrative Procedure Act by taking a final action (such as issuing a regulation) can be brought within six years of the plaintiff suffering a harm—even if that harm occurs more than six years after the agency took the challenged action.
Definitions of the term “accrue” when Section 2401(a) was adopted demonstrate that the date that someone is harmed—not the date when the action is taken that causes the harm—starts the clock for filing a lawsuit. And when Congress wants the clock to start running at another date, Barrett noted, it explicitly says so.
Justice Brett Kavanaugh concurred, writing separately to explain that Corner Post could obtain relief in this case because the Administrative Procedure Act allows vacatur. In other words, the act allows someone who is not regulated, but is harmed—and thus can’t challenge the regulation any other way—to ask a court to hold unlawful and set aside an illegal agency action solely because the agency violated the act when issuing the regulation.
Justice Ketanji Brown Jackson, joined by Justices Sonia Sotomayor and Elena Kagan, dissented and argued that the majority’s reading “effectively” wiped out limits on when someone can challenge agency regulations. She also warned that a “tsunami” of lawsuits would be triggered by this case and the court’s decision Friday in Loper Bright (which rejected judicial deference to agencies’ interpretations of ambiguous statutes), and could “devastate the functioning of the Federal Government.”
Corner Post might not be able to ride victorious into the sunset just yet. Its trip to the Supreme Court was just an effort to keep its case alive. But at the very least, the Supreme Court’s decision gives Corner Post the opportunity to challenge a legally flawed regulation.
In the fight to rein in a rogue administrative state, that in itself is a victory.
