You can challenge old laws before the government sues you, judges rule

The Supreme Court issued its ruling Monday in the case of Corner Post Inc. v. Board of Governors of the Federal Reserve System. (LD/iStock/Getty Images)

Convinced that bureaucrats know best, the modern administrative state has long made efforts to suppress any attempts to question its actions.

So when Corner Post — a grocery store and truck stop in North Dakota — challenged federal rules governing fees for debit card transactions shortly after it opened but years after the rules took effect, the government argued that Corner Post had somehow come to court too late.

Fortunately, the Supreme Court on Monday in the case of Corner Post Inc. v. Board of Governors of the Federal Reserve System had a different opinion on the matter.

Every time someone swipes a debit card, the company involved has to pay the bank a fee to transfer money from that person’s account to the company’s account. When debit card companies began competing for bank customers by raising these fees, Congress intervened with a law that directed the Federal Reserve System to impose a cap on the fees and set a cost to the Federal Reserve System.

The Board of Governors had the right to take this into account when setting this ceiling.

When the board proposed a 12-cent per-transaction limit, large banks balked—even though each transaction cost about 5 cents at the time. In response, the board considered four costs not listed in the law and raised the limit to 21 cents per transaction. The board also allowed an ad valorem factor of 0.05 percent of the transaction value, which significantly increased bank profits—and costs for debit card companies. The Fed finalized the rule in 2011.

In March 2018, Corner Post opened for business and, like any other business, began accepting debit card payments. Three years later, Corner Post joined a lawsuit challenging the debit card fee cap based on the Council’s use of factors not permitted by statute.

Under the Administrative Procedure Act, Corner Post had standing to seek judicial review of the Fed’s decision because it was a party “adversely affected or aggrieved by the agency’s action.” However, another statute, 28 U.S.C. § 2401(a), limits the time to file civil lawsuits against the United States to “six years from the time the right to sue accrues.”

The government filed a motion to dismiss Corner Post’s lawsuit as untimely. Corner Post, the government argued, was wronged when the council issued its final order, meaning Corner Post should have sued no later than 2017 — a year before it began operating.

Because Corner Post had no other means of challenging the rule, the government’s interpretation of section 2401(a) would have left Corner Post with no other recourse than to ask the Board to amend the rule.

Still, the district court granted the government’s motion and dismissed Corner Post’s case. The Eighth Circuit Court of Appeals affirmed, adopting a rule that most other federal appellate courts have adopted: The time to file a lawsuit begins to run when the agency promulgates a regulation—even if a company like Corner Post doesn’t form before the deadline.

The decision of the District Court of the 8th Circuit widened the divide between the majority of courts and the District Court of the 6th Circuit, which held that the limitation period begins to run when the harm is caused to the plaintiff, regardless of when the authority issued the relevant regulation.

Corner Post appealed, and on Monday the Supreme Court, by a majority of 6 to 3, reopened the legal proceedings against Corner Post.

Writing for the majority, Justice Amy Coney Barrett explained that a lawsuit alleging that an agency violated the Administrative Procedure Act by taking a final action (such as issuing a regulation) can be filed within six years of the plaintiff suffering harm — even if that harm occurred more than six years after the agency took the challenged action.

The definitions of “accrue” at the time Section 2401(a) was adopted show that the date someone was wronged — not the date the action causing the harm — starts the clock on filing a lawsuit. And when Congress wants the clock to start from a different date, Barrett noted, it makes that clear.

Justice Brett Kavanaugh agreed, writing separately to make clear that Corner Post could obtain relief in this case because the Administrative Procedure Act permits vacatur. In other words, the statute allows a person who is not subject to a regulation but has been wronged — and therefore cannot otherwise challenge the regulation — to ask a court to declare illegal and set aside an illegal agency action solely because the agency violated the statute in issuing the regulation.

Justice Ketanji Brown Jackson, joined by Justices Sonya Sotomayor and Elena Kagan, dissented and argued that the majority’s interpretation “effectively” stripped away restrictions on when someone can challenge agency regulations. She also warned that this case and the court’s Friday decision in Loper Bright (which rejected judicial deference to agencies’ interpretations of ambiguous statutes) would trigger a “tsunami” of lawsuits and could “destroy the functioning of the federal government.”

Corner Post may not be able to ride off into the sunset victoriously just yet. Its visit to the Supreme Court was merely an attempt to keep the case alive. But at least the Supreme Court decision gives Corner Post a chance to challenge a legally flawed rule.

In the fight against the dishonest administrative state, this is already a victory.