Supreme Court Effectively Eliminates Statute of Limitations for Federal Law Challenges

The Supreme Court’s ruling Monday opened the door to broad challenges to the federal law long after it took effect.

In another 6-3 decision, the Supreme Court effectively eliminated the statute of limitations on challenging federal regulations as illegal, arbitrary or capricious. The justices differed in viewing the result as more fair to companies or as a potential source of instability for the business world.

Suitcase, Corner Post, Inc. v. Board of Governorswas filed by Corner Post, a North Dakota grocery store that argued that the Federal Reserve’s Regulation II violated the Administrative Procedure Act. Corner Post, which opened in 2011, filed the lawsuit in 2021 challenging debit card transaction fees issued by the Federal Reserve Board in 2011. The store argued that the six-year statute of limitations for challenging a final rule issued by the federal government begins to run when a party is harmed, not when the action is finalized.

Justice Amy Coney Barrett wrote for the majority that companies harmed by federal regulations should be able to challenge them in court, regardless of how long the regulations have been in place.

The case could open the door to challenges to any federal regulations.

In her dissenting opinion, Justice Ketanji Brown Jackson said the majority “abandons caution” with this decision.

“The flawed reasoning and sweeping results of the Court’s ruling in this case are staggering,” Jackson wrote. “Allowing any new commercial entity to bring new challenges to long-standing laws is deeply destabilizing for both government and business. It also allows wealthy litigants to game the system by creating new entities or finding new plaintiffs once they have missed the statutory deadline.”

The decision may have greater significance in light of a ruling last week that overturned the 1984 decision. Chevron decision, giving courts much greater authority to decide whether a federal agency acted within its statutory authority, and Jarkesy decision to strip the Securities and Exchange Commission of its main tool for fighting securities fraud — a process also used by other federal agencies.

This Corner post The decision opens the door to an “avalanche” of litigation involving the agency’s final actions, according to the University of Cincinnati Law Review, which said the ruling reduces the federal statute of limitations to “meaningless words.”

“This case will have myriad consequences that threaten the stability and overall functioning of administrative agencies, as any new rule will be exposed to potentially endless challenges as new businesses emerge and decide to challenge the long-standing rule,” the University of Cincinnati Law Review wrote in a blog post.

In a blog post, the Competitive Enterprise Institute, which aims to “eliminate overregulation,” said the decision “finally ends the catch-22 at the heart of default statutes of limitations in federal law.” A CEI lawyer called the federal statute of limitations “ridiculously unfair” and said the Supreme Court’s decision ensures government accountability by starting a clock to challenge the law when harm occurs.

In an amicus curiae brief filed in this case by the National Federation of Independent Business, along with the Restaurant Law Center, the Buckeye Institute, and the Manhattan Institute, the groups argued that the publication of the agency’s final rule could not harm defunct entities, and that newly created entities are not harmed by the agency’s rule until they begin operating and are subject to the rule.

“Unreasonable government regulations continue to be a top concern for small business owners, and today’s decision will allow owners to challenge them at their discretion,” Beth Millito, executive director of the Small Business Legal Center at NFIB, said in a statement.