Supreme Court considering expanding timeframe to challenge federal rules

In a case involving a small truck stop in North Dakota called Corner Post, a potential Supreme Court ruling could dramatically alter the time allowed to challenge federal regulations.

On Tuesday, Feb. 20, the U.S. Supreme Court heard oral arguments in the case of Corner Post v. Board of Governors of the Federal Reserve System. The case centers on the question of when the clock starts on the statute of limitations to challenge a federal regulation.

Challenges to federal regulations fall under Administrative Procedure Act claims. According to federal law, these claims must be “filed within six years after the right of action first accrues.” For decades, courts have set the clock of the six-year statute of limitations to start when a regulation was enacted. However, plaintiffs in the Corner Post case argue that the clock should start when a business first suffers harm from the regulation.

The case stems from a challenge to a 2011 federal regulation governing interchange fees charged to merchants by debit card issuers. Based on the statute of limitations, any challenge to that regulation had to occur before 2017. However, Corner Post did not open for business until 2018.

Corner Post is claiming that the regulation governing interchange fees goes against what Congress intended, causing the truck stop financial harm. Since it did not experience harm from the regulation until 2018, it argues in its petition that 2018 is when the statute of limitations should begin.

If the Supreme Court rules in favor of Corner Post, new businesses will be allowed to challenge long-held federal regulations.

During oral arguments, Supreme Court justices were split on the matter, with the court’s three liberal justices skeptical of Corner Post’s arguments. Some of the conservative justices appeared to be conflicted on the implications of setting the clock at the time harm was inflicted rather than the date a federal rule was enacted.

When questioning the government’s attorney, Assistant to the Solicitor General Ben Snyder, Chief Justice John Roberts suggested new businesses have a right to have their day in court.

“You have an individual or an entity that is harmed by something the government is doing. And you’re saying, well, that’s just too bad, you can’t do anything about it because other people had six years to do something about it – and maybe another person, a business organization or whatever, did do something about it,” Roberts said.

Justice Sonia Sotomayor had questions regarding regulatory finality. She pointed out that Corner Post should have known about the interchange fees, as the final rule regulating them had been long-established.

“There’s no injury in my mind when you enter a business knowing its structure and accepting rules that have been final,” Sotomayor said.

Justice Elena Kagan also raised issues of regulatory finality and a potential flood of lawsuits that could arise if the court sides with Corner Post. Kagan suggested that trade associations could resurrect a previously failed attempt to overturn a regulation a decade later. Specifically, she said that once a regime change in the Supreme Court becomes more favorable to a trade association, a new company could be created to challenge an old rule.

Kagan also seemed worried about what a decision in favor of Corner Post could mean in combination with another case pending at the Supreme Court.

Sometime this summer, the high court will rule on a case that could strip power from federal agencies when interpreting regulations. Snyder said that if the court strips federal agencies of that power, a ruling in favor of Corner Post could magnify the unintended consequences of flooding the courts with regulatory challenges.

Defending the current regulatory process, he pointed out that there is already a way for companies like Corner Post to challenge a final rule: filing a petition for rulemaking. Snyder said that the original complaint cites financial data from 2013 to 2019, which is irrelevant in a challenge to a 2011 rule. He added that it would make more sense to file a petition for rulemaking where an agency can revisit the rule in a more modern context.

Roberts pushed back on that idea.

“Maybe they don’t want a rule,” he said. “They want the government to stop what it’s doing to them.”

More than a dozen organizations and individuals filed an amicus brief in the Corner Post case. All but two support the truck stop’s bid to redefine the statute of limitations.

Those in support include conservative think tanks, legal scholars, 18 Republican states and the National Federation of Independent Businesses. Countering the point made by Sotomayor, the National Federation of Independent Businesses explained why it is impractical and financially burdensome for someone thinking about starting a small business to know all relevant regulations.

“Because of the majority rule, a prospective small business owner must spend days, weeks or months scouring the Code of Federal Regulations for all regulations that may apply to their new business,” the association said. “Failing to do so could expose them to unforeseen financial costs, like debit card fees. The prospective business owner could hire consultants and lawyers, but these professionals cost money, and a prospective small business owner sits on limited resources.”

Progressive consumer rights think tank Public Citizen and the Small Business Associations filed a brief in support of the statute of limitations starting at the time a rule is enacted.

Both organizations argued that the current interpretation of the six-year statute of limitations creates stability and certainty, which consumers and small businesses rely on.

“Stability, predictability and consistency can enable small businesses to survive and thrive. In a stable environment, entrepreneurs considering opening a business can evaluate likely compliance obligations and build systems and business models that efficiently account for these obligations from the start,” the Small Business Associations stated in its brief. “Business owners in a stable environment can more confidently allocate scarce resources to the next best strategic investments for their business. And a well-structured regulatory environment can help put small businesses on more even footing with larger corporations, allowing Main Street to compete with Wall Street.”

The Supreme Court is expected to rule on the Corner Post case this summer. LL