Unsettling the regulatory landscape: The dangers of Corner Post

On the last day of a Supreme Court term packed with blockbuster cases involving gun rights, reproductive freedom, and presidential immunity, the Court issued its decision in Corner Post v. Board of Governors of the Federal Reserve System, an administrative law case that had previously drawn comparatively little notice. Although Corner Post resolved a discrete matter of statutory interpretation, the decision has enormous potential to disrupt the stability of our regulatory landscape.

Under the Administrative Procedure Act (APA), a party that has been “adversely affected or aggrieved by agency action” is entitled to seek judicial review. Because the APA does not specify a statute of limitations for challenges to agency action, such challenges are typically subject to a six-year limitation period that applies to claims against the government, unless the challenge is governed by a specialized law that contains its own distinct statute of limitations. Where the general limitations period applies, the six-year window to file a challenge begins to run when “the right of action first accrues.”

In Corner Post, the Supreme Court addressed the question of when “the right of action” to raise a facial challenge to the validity of an agency regulation “first accrues.” Prior to the Court’s decision, the longstanding view in the courts of appeals was that accrual occurs when the regulation becomes final. At that time, the regulation has become part of the governing law that binds the public, the administrative record is complete, and the regulation’s facial validity is ascertainable.

The Supreme Court rejected this widely held understanding of accrual. Instead, the Court held that a plaintiff’s right to challenge a regulation as facially invalid accrues when the regulation first adversely affects that particular plaintiff. As a practical matter, the Court’s decision exposes long-established agency regulations to unending waves of destabilizing facial challenges brought by newly injured plaintiffs, regardless of the extent to which regulated parties and the public at large have organized their personal or business affairs in reliance on the regulatory status quo.

The facts of Corner Post illustrate how the decision essentially obviates the applicable statute of limitations. In 2011, the Federal Reserve Board promulgated a regulation capping the fees that a bank may charge a retailer for processing debit-card transactions. Shortly after the regulation was promulgated, several major trade organizations sued, unsuccessfully, in the District of Columbia to challenge the caps as impermissibly high.

Fast forward to 2021, ten years after the Board’s regulation became final. Two large trade groups filed another challenge to the regulatory cap, this time in North Dakota. After the government moved to dismiss on timeliness grounds, the trade groups amended their complaint to add a new plaintiff: Corner Post, a truck stop and convenience store that opened in 2018.

According to the Supreme Court’s recent Corner Post decision, this maneuver cured the timeliness problem. Because Corner Post began conducting debit-card transactions in 2018, it was first adversely affected by the allegedly too-high regulatory cap in 2018. Accordingly, its claim that the Board’s 2011 regulation was invalid “first accrued” in 2018, giving it six years – until 2024 – to bring a timely facial challenge. Meanwhile, a business that opens in 2028 can challenge the 2011 regulation until 2034. A business that opens in 2038 can challenge the regulation until 2044. And on and on.

Because new individuals and businesses are constantly coming within the scope of existing regulations, Corner Post creates a limitless supply of potential plaintiffs capable of seeking judicial invalidation of longstanding regulations.

Prior to Corner Post, a party that disliked a regulation that was more than six years old would generally have to direct its request for regulatory change to the relevant agency by petitioning for a new rulemaking under the APA. During the rulemaking process, the agency would have the opportunity to provide public notice of a potential regulatory change, seek input from interested parties, and compile a fresh administrative record with up-to-date evidence.

After Corner Post, however, the opponent of an established regulation that is subject to the general six-year limitations period can easily find a suitable plaintiff to file a lawsuit – preferably in an ideologically sympathetic district – and seek to have the regulation invalidated without public participation and without inviting the informed deliberation of the agency’s subject-matter experts.

Another decision from this term, Loper Bright Enterprises v. Raimondo, compounds the potential instability. Loper Bright overruled Chevron v. Natural Resources Defense Council, a 40-year-old precedent that directed courts to defer under certain circumstances to an agency’s reasonable interpretation of the statutes it is responsible for implementing. Countless court of appeals decisions upholding existing regulations – including the D.C. Circuit decision upholding the Federal Reserve Board regulation at issue in Corner Post – have relied on Chevron.

To be sure, Loper Bright purported not to alter the precedential value of decisions that applied Chevron deference. But after Corner Post, a party who is opposed to a decades-old regulation that has been upheld under Chevron by multiple circuit courts can mount a new facial challenge to the regulation in a circuit that has not yet issued an opinion deciding the regulation’s validity. And since the court resolving that challenge will not apply Chevron deference, the challenger will enjoy a more favorable legal standard than it would have received had it sued any time in the last 40 years, closer in time to the regulation’s promulgation.

Although Corner Post threatens drastic consequences for regulatory stability, two points of optimism are worth bearing in mind. First, the general six-year limitations period addressed in Corner Post does not apply to all agency regulations. Many statutes authorizing agencies to promulgate regulations provide a substantially shorter limitations period, often 60 days, and specify that it begins to run as soon as the agency issues the regulation. Challenges under these statutory regimes are unaffected by the decision in Corner Post.

Second, because Corner Post resolved a question of statutory interpretation, Congress can respond by amending the APA. Indeed, efforts are underway to draft a bill that would legislatively overrule Corner Post by establishing that the statute of limitations for a facial challenge to a regulation begins to run as soon as the regulation is promulgated.