The U.S Supreme Court is poised to tackle the issue of whether new businesses can legally challenge federal regulations that pre-date their establishment. This investigation comes as a result of a case called Corner Post v. Board of Governors of the Federal Reserve System, which aims to determine whether a right of action challenging a federal agency rulemaking is granted when the rule is introduced or when the plaintiff is affected by it.
The outcome of this case is anticipated to be of particular importance to regulated entities, and especially to fledgling businesses as it would offer them the same opportunities to dispute agency regulations as established companies enjoy.
The Corner Post is a convenience store based in North Dakota that, similar to many other businesses, relies on a plethora of small dollar transactions. When a customer pays by debit card, the store has to pay an “interchange fee” to facilitate the transaction to the card issuer. The Federal Reserve controls the interchange fee, which was determined to be a maximum of 21 cents per transaction in 2011, pursuant to an amendment to the Dodd-Frank Act. However, Corner Post’s challenge under the Administrative Procedure Act was dismissed by the Eighth Circuit as it had missed the six-year statute of limitations for civil actions against the U.S as laid out in 28 U.S.C. § 2401(a).
The statute argues that the time for Corner Post to challenge the interchange fee expired in 2017, despite the business only being established in 2018. Nonetheless, the established rule suggests that an action under Section 2401(a) does not come into effect until the plaintiff has suffered injury.
In previous decades, the Supreme Court emphasized that the Administrative Procedure Act maintains a basic presumption of judicial review of unlawful federal agency action, as detailed in the precedent case Abbott Laboratories v. Gardner. This case posits that regulated parties should have the opportunity to challenge the validity of federal regulations before their enforcement. Hence, businesses should not have to wait until they bear the brunt of enforcement to voice their objections.
While pre-enforcement review is deemed a necessary check on the administrative state, it raises concerns about the statutes of limitations. For new businesses, such as Corner Post, interpreting the rule that a right of action can only be invoked when the affected party experiences injury is crucial for they become the victims of administration before they are even able to act. The traditional rules for civil actions need to be and can be adapted to ensure a more fair process.
The Eighth Circuit’s approach contradicts the fundamental aspects of statutory text, despite other courts following the same trajectory. In the face of the increasing expanse of the administrative state, this aberrant approach deprives new companies that are affected by old agency action of their right to address federal courts. It is hence urgent, and lawful, to reassert that a statute of limitations starts only when the plaintiff has suffered injury.
The case sparking this discussion is called Corner Post, Inc., Petitioner v. Board of Governors of the Federal Reserve System, No. 22-1008.
For nuanced insights onto this topic, you can refer to detailed analysis composed by Jeremy Broggi and Michael Showalter at Wiley Rein’s issues and appeals group, who filed an amicus brief in this case on behalf of the Cato Institute and provided the original examination which we’re examining today, available on Bloomberg Law.