The Supreme Court in a Monday ruling opened the door to broad challenges to federal regulations long after they take effect.
In another 6-3 decision, the Supreme Court effectively eliminated the statute of limitations to challenge federal rules as illegal, arbitrary or capricious. Justices differed in viewing the outcome as either being more fair to companies or serving as a potential source of instability for the business world.
The case, Corner Post, Inc. v. Board of Governors, was brought by the Corner Post, a North Dakota convenience store, which argued that the Federal Reserve’s Regulation II violated the Administrative Procedure Act. Corner Post, which opened in 2011, filed a 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 to challenge a final rule issued by the federal government begins ticking when an individual party is injured, not when the action is finalized.
Justice Amy Coney Barrett wrote for the majority that companies harmed by federal rules should be able to challenge them in court, regardless of how long those regulations have been in effect.
The case could open the door to challenges to any federal regulation.
In her dissent, Justice Ketanji Brown Jackson said the majority “throws caution to the wind” with the decision.
“The flawed reasoning and far-reaching results of the Court’s ruling in this case are staggering,” Jackson wrote. “Allowing every new commercial entity to bring fresh facial challenges to long-existing regulations is profoundly destabilizing for both government and businesses. It also allows well-heeled litigants to game the system by creating new entities or finding new plaintiffs whenever they blow past the statutory deadline.”
The decision could hold more significance in the wake of last week’s ruling that overturned the 1984 Chevron decision, giving courts substantially more power in deciding whether a federal agency acted within its statutory authority, and the Jarkesy decision to strip the Securities and Exchange Commission of a major tool to fight securities fraud—a process used by other federal agencies as well.
The Corner Post decision opens the door to an “avalanche” of litigation involving final agency actions, according to the University of Cincinnati Law Review, which said the ruling reduces the federal statute of limitations to “meaningless words.”
“The case will have a myriad of consequences that threaten the stability and overall function of administrative agencies by subjecting each new regulation to potentially never-ending challenges when new businesses come into existence and decide to take issue with a long-standing rule,” according to a University of Cincinnati Law Review blog post.
In a blog post, the Competitive Enterprise Institute, which has a goal of “eliminating excessive regulation,” said the decision “finally ended the Catch-22 at the center of the default statutes of limitations in federal law.” A CEI attorney called the federal statute of limitations “hilariously unfair” and said the Supreme Court decision ensures government accountability by starting the clock to challenge a law when harm occurs.
In an amicus brief filed in the case by the National Federation of Independent Business with the Restaurant Law Center, the Buckeye Institute and the Manhattan Institute, the groups argued that publication of a final agency rule cannot injure nonexistent entities and that newly formed entities are not injured by an agency rule until they are operating and subject to the rule.
“Unreasonable government regulations are consistently a top issue for small business owners, and today’s decision will allow owners to challenge them as they see fit,” Beth Millito, NFIB executive director of the Small Business Legal Center, said in a statement.
