Corner Post: Helping Hold the Administrative State to Account

M uch attention has been paid to the Supreme Court’s recent overrule of the 40-year-old Chevron decision in Loper Bright Enterprises v. Raimondo. Chevron had facilitated the expansion of the administrative state by instructing courts to defer to “reasonable” federal agency interpretations of ambiguous statutes. Now courts, not bureaucrats, will interpret the laws. But a less noted decision four days later in Corner Post v. Board of Governors of the Federal Reserve System — a case examining statutes of limitations that limited challenges to federal regulations — may prove just as important, making it easier for injured parties to challenge erroneous agency actions.

In 2021, Corner Post — a truck stop and convenience store that opened in 2018 — sued under the Administrative Procedures Act (APA), claiming that a 2011 Fed rule regulating debit-card-interchange fees that banks charge merchants allows fees that exceed those permitted by the governing 2010 statute.

The District Court and the Eighth Circuit Court of Appeals dismissed the suit as time-barred. Both cited a general statute of limitations — 28 U.S.C. §2401(a) — requiring actions against the federal government to be “filed within six years after the right of action first accrues.” The Eighth Circuit held that for facial challenges to regulations (challenges asserting that the regulations are unconstitutional under all circumstances and therefore void), the right of action accrues, and the limitations period begins to run, when the regulation is published. Hence, the limitations period for the 2011 regulation expired in 2017, before Corner Post existed.

Section 702 of the APA requires a potential litigant to show he has suffered an injury owing to agency action. Section 704 states that judicial review is available only for “final agency action.” The Fed Board argued that injury is necessary to initiate a lawsuit but irrelevant to the statute of limitations, which begins to run with the “final agency action” of issuing a regulation.

Justice Amy Coney Barrett, writing for the 6–3 majority, disagreed. Her decision held that both the injury and finality requirements must be satisfied to have a right of action; neither alone is sufficient to state a claim. A right of action accrues only “when the plaintiff has a ‘complete and present cause of action’ — i.e., when she has the right to ‘file suit and obtain relief.’” Since a plaintiff cannot file a suit “until she suffers an injury from final agency action, so the statute of limitations does not begin to run until she is injured.”

Justice Ketanji Brown Jackson’s dissent was joined by Justices Elena Kagan and Sonia Sotomayor. (The same three justices also dissented in the Loper Bright case.) It warned that the “tsunami of lawsuits against agencies that the Court’s holdings in this case and Loper Bright have authorized has the potential to devastate the functioning of the Federal Government.” Both the dissent and the Fed Board argued that allowing challenges past their proposed six-year cutoff will unduly burden agencies and upset the reliance interests of the agencies and regulated parties that have operated under longstanding rules.

These concerns are overstated. Both the Fed Board and the dissenters acknowledge that regulated parties may always challenge a regulation as exceeding the agency’s statutory authority in enforcement proceedings against them — an “as-applied” challenge — even if more than six years have passed since the regulation’s publication. Moreover, a challenger can petition an agency to reconsider a long-standing rule and then appeal the administrative denial of that petition.

These are the most common scenarios. This case, though, dealt with a different situation. Affected parties who are not directly regulated by an agency — the Fed regulates banks, not merchants like Corner Post that are affected by the banks’ fees — need the option to mount a facial challenge to rules. The Fed’s preferred interpretation that the “right of action first accrues” when the regulation is published applies only to facial challenges to the regulation.

The dissent posits that expanding the time for facial challenges will invite manipulation by regulated communities with a proliferation of new entities to function as plaintiffs challenging old, established rules in court. This suggests that prospective litigants are willing to engage in costly litigation even if their claims lack merit and are unlikely to succeed. Alternatively, it suggests that many agency rules, approved under the now-overruled Chevron precedent’s required deference, incorrectly interpreted the relevant statutes. As Justice Barrett wrote in rejecting the prospect of a “tsunami” of lawsuits: “Perhaps the dissent believes that the Code of Federal Regulations is full of substantively illegal regulations vulnerable to meritorious challenges; or perhaps it believes that meritless challenges will flood federal courts that are too incompetent to reject them.”

The dissenters seem unconcerned that APA §702 guarantees that persons injured by agency actions are “entitled to judicial review thereof.” A policy argument that seeks to deny otherwise-meritorious claims access to court would seem to conflict with fundamental fairness.

Nor do they seem to care that people and companies may be harmed by erroneous agency rules. They seem far more concerned with preserving the administrative state by protecting agency decisions from judicial review.

Justice Jackson gives the game away when she complains that “any new objection to any old rule must be entertained and determined de novo by judges who can now apply their own unfettered judgment as to whether the rule should be voided” (emphasis added). But judges do not apply unfettered judgement. They apply rules of statutory construction and analysis of the underlying statute to see if it authorizes the rule the agency has advanced. The dissenters, in both Corner Post and Loper Bright, advance the untenable notion that agency bureaucrats make nothing but reasoned, expert determinations when they formulate rules, free from the political influence or policy preferences to which the dissenters believe their judicial colleagues are susceptible.

Contrary to the dissent’s claim that allowing “fresh facial challenges to long-existing regulations is profoundly destabilizing,” finality and regulatory certainty will likely increase after the Corner Post ruling. Until Chevron was overruled, agency statutory interpretations could change with each new administration, as long as the new interpretations were arguably reasonable. Since important regulations are often immediately challenged, there will now be appellate precedents establishing a statute’s meaning that, under Loper Bright, will remain binding. Subsequent courts will no longer have to defer to each new administration’s reasonable agency interpretation.

Making sure that injured parties can obtain relief from meritless rules, regardless of how long ago the rules were published, is a crucial victory. Significantly, it is coupled with the Court’s repudiation of Chevron deference. Regardless of how long ago they ago they were promulgated, courts, not the agencies who issued them, will now be determining whether rules comply with the statutes Congress passed.