Supreme Court ruling could alter established regulatory landscape

Among the flurry of high-profile administrative law cases resolved by the United States Supreme Court over the last several weeks, it would have been easy to miss what could become one of this term’s most significant. Corner Post, Inc. v. Board of Governors of the Federal Reserve System posed a simple question: for purposes of determining when a cause of action is barred by the statute of limitations, does the clock for bringing a facial challenge to an administrative regulation begin to “accrue”, or start, upon the plaintiff’s injury, or the moment an agency adopts a final regulation?

As background, all lawsuits under the Administrative Procedure Act (APA) must be brought within a six-year statute of limitations that commences as soon as the plaintiff has a “complete and present cause of action.” 28 U.S.C. § 2401(a). However, other than the 6th U.S. Circuit Court of Appeals, most courts traditionally agreed that the limitations period would start to run as soon as the agency action becomes final—meaning that entities who were injured more than six years after the regulation was enacted were simply out of luck, regardless of whether they were even in existence.

However, in 2021, a North Dakota convenience store, Corner Post, joined a lawsuit challenging Regulation II, a rule promulgated by the Board of Governors of the Federal Reserve System (the “Board”) setting a maximum “interchange fee” for all debit card transactions. Corner Post alleged that Regulation II was invalid under § 702 and § 704 of the APA because it allowed payment networks to charge higher fees than permitted by the enabling statute. And yet, because that rule was adopted in 2011—long before Corner Post had even opened its doors—the plaintiffs’ ability to move forward with its case hit a roadblock when the District Court dismissed it as untimely.

The Supreme Court, however, disagreed. In a 6-3 decision authored by Justice Amy Comey Barrett, the Court evaluated the plain and traditional meaning of the word “accrue” to mean “when the plaintiff has a complete and present cause of action”—not the point at which a defendant acts. Slip Op. at 6 (emphasis added). In other words, an action cannot become “complete and present” until the plaintiff is injured by the final agency action, and thereby has an opportunity to “file suit and obtain relief.” Id. (citing Green v. Brennan, 578 U. S. 547, 554 (2016)). Any other interpretation, the Court explained, gave little regard to the APA’s “basic presumption” of judicial review and “deep-rooted historic tradition that everyone should have his own day in court,” leaving anyone injured beyond the limitation period with no recourse to challenge even the most illegal of regulations. Id. at 21–22 (citations omitted).

The majority also rejected as hyperbolic the subjective policy concerns raised by the federal government and in the Court’s dissent opinion, including the burdens resulting from increased litigation and the need for administrative finality. In explaining its reasoning, the majority of the Court emphasized that any “[p]leas of administrative inconvenience” can “never ‘justify departing from the statute’s clear text,’” id. at 20–21 (citing Niz-Chavez v. Garland, 593 U. S. 155, 169 (2021)), and if the statute of limitations imposed by 28 U.S.C. §2401(a) is no longer a good fit for modern APA litigation, the “ball is in Congress’ court” to enact something new. Id. at 22–23.

At first glance, this somewhat obscure procedural holding might not seem particularly monumental in light of the myriad of other political issues grappled with by the Supreme Court over the last year. But when considered alongside the Court’s recent decision in Loper Bright Enterprises v. Raimondo overturning the decades-old Chevron doctrine—meaning that courts no longer require courts to defer to agencies’ “permissible” interpretations of the statutes they administer—lawsuits considered under the new framework could have a significant effect on the established regulatory landscape. Simply, established regulations once thought to be immune with regulated parties just had to live with sometimes overbearing, outdated, or irrational requirements are ostensibly now subject to legal challenge. This ability to challenge agency regulations implementing statutory laws only magnifies the impact of the other various agency-skeptical decisions that have been issued by the Supreme Court over the last several years.

Further, while Corner Post’s holding applies only to federal agencies, some stakeholders are now predicting that the new regulatory landscape created by cases such as Loper Bright and Corner Post could have downstream effects on state regulations. This especially remains to be seen for states such as California that have adopted numerous state-level regulations that touch on federally regulated industries, such as the environment, health care, financial services, and transportation. Because these state regulations are intended to work within (and thus rely upon) the federal structure, an increase in the number of challenges to final agency actions could conceivably cause some unpredictability in certain industries at the state level.

On the other hand, many states—including California—have their own administrative procedures limiting when and how an injured party must raise a challenge to agency regulations. See California Government Code Section 11350. Many have also already rejected Chevron deference as applied to state regulations. See In re H.C., 17 Cal. App. 5th 1261, 1270 (2017); Yamaha Corp. of Am. v. State Bd. of Equalization, 19 Cal. 4th 1, 7 (1998); see also, e.g., A.R.S. § 12-910(F). For that reason, it is unlikely that states will see a significant increase in challenges that rely exclusively on state law and are limited to subjects falling specifically within state domain. However, if a court were to infer deference to a state agency and bar an action as untimely, impacted companies and individuals would have a significant tool to push back against government overreach and outdated regulations.