In the last of a series of watershed opinions this term that curtail federal agency power, the Supreme Court in Corner Post, Inc. v. Board of Governors of the Federal Reserve System has ruled (6-3) that the statute of limitations for challenging agency action under the Administrative Procedure Act (APA) does not accrue until the specific plaintiff in question has been injured. The holding opens the door for challenges to long-standing rules, including the rule at issue in Corner Store, which the Federal Reserve promulgated in 2011 to set the maximum interchange fees for debit card transactions.

Key Takeaways

• Challenges to agency actions under the APA are not limited to six years from the date when the agency first took the action. Rather, the six-year statute of limitations generally applies from the date a party is first harmed. Agency actions can include rulemakings (as in Corner Post) as well as other determinations or undertakings that harm a party.
• Congress may specify other statutes of limitations and when and how these run. But absent such specification, Corner Post clarifies the default rule.
• New entrants to a regulated space (e.g., fintechs or financial institutions with new business models or offering new products or services) that are governed by older regulations may still challenge them if they are harmed by the action.
• Critics have argued that some parties may create a new business entity (with relative ease) to challenge an agency rule/action and thereby frustrate the regulatory process and hold up the agencies and the courts. Whether and how courts may attempt to curtail this strategy remain to be seen. Strategic litigation, including identifying the best possible plaintiff, is not new, but Article III standing still requires actual, redressable injury that may be lacking if an entity has been created solely to challenge a statute.
• Although the Court ruled in the plaintiff’s favor on the applicable statute of limitations, it did not decide anything concerning Regulation II and interchange fees. Those substantive issues were remanded. The Federal Reserve also has a proposed rule on interchange fees that would lower the interchange fee cap in Regulation II and have the Federal Reserve revisit the fee cap every other year.

Interchange fees are paid by businesses to banks when customers use debit cards for purchases. In 2011, the Federal Reserve promulgated a rule that capped debit card interchange fees at 21 cents per transaction plus 0.05 percent of the transaction value. Corner Post, a small truck stop in North Dakota, incorporated in 2017 and opened for business in 2018. In 2021, it brought this suit against the Federal Reserve, arguing that the 2011 rule permits higher fees than the so-called Durbin Amendment to the Dodd-Frank Act allows.

There is a six-year statute of limitations for APA challenges to regulations, which, until Corner Post, was traditionally thought to begin when the agency action became final. Based on that theory, the government argued the statute of limitations to challenge the interchange rule expired in 2017, and therefore Corner Post’s challenge was out of time. The district court and Eighth Circuit agreed, siding with a number of other circuits to consider the issue.

But the Supreme Court disagreed. Writing for the majority, Justice Barrett asserted that the statute of limitations does not apply “until the plaintiff is injured by final agency action.” That is, the statute of limitations is “accrual-based,” and a cause of action does not accrue “until the plaintiff can file suit and obtain relief.” Corner Post did not process its first debit card transaction until 2018; therefore, the Court reasoned, the action did not accrue until then. The Court further noted that the textual background of the statute of limitations is “plaintiff-centric,” further bolstering the conclusion that an action cannot accrue until an individual plaintiff suffers an injury.

Justice Kavanaugh, in his concurring opinion, noted that Corner Post, which is not regulated by the Federal Reserve, could “obtain relief only because the APA authorizes vacatur of agency rules,” a question the majority opinion declined to answer. According to Justice Kavanaugh, because Corner Post could not be subject to an enforcement action under the rule, the only way for Corner Post to obtain relief from the injury it suffered (excessive interchange fees) is if the rule is subject to vacatur under the APA. Justice Kavanaugh warned that a contrary finding would give the government the “power to issue rules free from potential suits by unregulated but adversely affected parties.”

In her dissent, and joined by Justices Kagan and Sotomayor, Justice Jackson lamented that the decision “wreaks havoc” on agencies and businesses alike, warning that “[t]he tsunami of lawsuits against agencies that the Court’s holdings … have authorized has the potential to devastate the functioning of the Federal Government.”

As a practical matter, this decision means that entities could challenge rules that are decades old or even longer, so long as there is a contemporaneous injury for which the statute of limitations has not yet expired. This is likely to result in increased litigation, particularly now that the Court has eliminated the obstacle of Chevron deference, and those challenges will be accompanied by a shifting regulatory landscape across all industries.