US Supreme Court Leaves Door Open to Challenges to Federal Rules

The U.S. Supreme Court has ruled that federal regulations can be challenged long after an agency issues them. Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 22-1008 (July 1, 2024). The six-year statute of limitations under the Administrative Procedure Act for challenging a final agency regulation begins when the plaintiff is harmed by the agency’s final action, not when the regulation is issued, a majority of the Court explained.

While many were waiting for the Court’s decision in the case of “Chevron “respect” in Entry of Loper Bright. w. Raimondo, this Corner post the matter seems to have gone unnoticed. But the opinion could prove to be just as important to the federal agency’s powers.

Corner post concerned a gas station convenience store’s time-barred attempt to challenge a 2011 Federal Reserve rule governing “interchange” fees for debit card transactions. The applicable statute of limitations gave plaintiffs only six years to challenge the new rule. Corner Post could barely file a timely lawsuit — it didn’t even exist until 2018.

The court held that the six-year clock starts running when a plaintiff first suffers legal harm because of a rule, not when the rule is originally issued. In this case, the Corner Post clock NO until it first paid an interchange fee under Federal Reserve rules.

Before the Court’s decision, plaintiffs who did not file suit within six years of the agency’s issuance of a formal rule had two options: (1) willfully violate the rule, resulting in an enforcement action, and then challenge the rule “as applied” to the plaintiff; or (2) petition the agency to modify or repeal the rule and appeal the agency’s decision when it refused to do so. Corner post, however, it provides an opportunity to bring new challenges to the agency’s long-standing regulations. The decision in Loper Bright, that abandoned the rule that courts must defer to federal agencies ensures that when courts revisit those rules, they will scrutinize them with greater scrutiny to make sure that a given regulation is consistent with the statute it purports to interpret.

Please contact your Jackson Lewis attorney if you have any questions regarding the impact Corner post decision, a landmark term for the Court of Federal Administrative Agencies, and what it means for your organization.