Corner Post: The Statute of Limitations for APA Challenges

In Corner Post v. Board of Governors, FRS, the U.S. Supreme Court determined that a claim under the Administrative Procedure Act (“APA”) does not accrue for purposes of the applicable statute of limitations until the plaintiff is injured by final agency action.

Factual and Procedural Background

Corner Post is a North Dakota truck stop and convenience store that opened in 2018. Like most merchants, it accepts debit cards as a form of payment and therefore pays an interchange fee to the bank that issued the card. The allowable amount of the interchange fee is set by the Federal Reserve Board (“Board”) pursuant to its authority under the Dodd-Frank Act. The Board published the rule setting the maximum interchange fee in 2011.

In 2021, Corner Post joined a suit against the Board under the APA, challenging the rule on the ground that it allows higher interchange fees than the statute permits. The district court dismissed the suit as time-barred under the six-year statute of limitations applicable to suits against the Federal Government. The 8^th Circuit affirmed, and Corner Post appealed to the Supreme Court.

SCOTUS Decision

The Supreme Court decision focused on the interplay of two provisions of the APA and the six-year statute of limitations that generally applies to suits against the Federal Government. That general statute of limitations requires the complaint to be filed within six years after the right of action first accrues. Traditionally, this has been interpreted to mean that the complaint must be filed within six years of the issuance of a regulation or other final action by an agency. The APA, however, has two provisions, which, when read together, provide that a plaintiff may bring an APA claim only after she is injured by a final agency action. In other words, only after the agency action actually applies to the plaintiff. The two provisions of the APA are sections 702 and 704. Section 702 of the APA authorizes persons injured by agency action to obtain judicial review by suing the U.S. or one of its agencies, officers, or employees. In previous decisions, the Supreme Court has stated that this provision requires a litigant to show, at the outset of the case, that she is injured in fact by agency action. Section 704 of the APA provides that judicial review is available in most cases only for final agency action.

In the Corner Post case, the Board, along with the 8^th Circuit, asserted that the right of action first accrues when the final rule is issued. Following other Circuits, the 8^th Circuit distinguished between “facial” challenges to a rule (like Corner Post’s challenge to the Board’s interchange rule) and challenges to a rule “as applied” to a particular party. (A “facial” challenge to a rule is a contention that the rule is invalid on its face.) The 8^th Circuit held that when plaintiffs bring a facial challenge to a final agency action, the right of action accrues, and the limitations period begins to run, upon publication of the regulation. Under this interpretation, the six-year statute of limitations period began in 2011 and expired in 2017, before Corner Post was even operating.

The Court, in a 6-3 opinion, disagreed, finding that because an APA plaintiff may not file suit and obtain relief until she suffers an injury from final agency action, the statute of limitations does not begin to run until she is injured.

In his concurring opinion, Justice Kavanaugh explained a “crucial additional point” that Corner Post can obtain relief in this case only because the APA authorizes agency rules to be set aside (i.e., vacatur). The majority opinion, however, did not decide vacatur is available under the APA.

In her dissent, Justice Jackson, joined by Justices Sotomayor and Kagan, argued that the statute of limitations for facial challenges starts running when the rule is published. The dissent argues that, due to this ruling, there is effectively no longer any limitations period for lawsuits that challenge agency regulations on their face.

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 dissent argued that this case is the “poster child” for the type of manipulation that the majority now invites – new groups being brought in (or created) just to do an end run around the statute of limitations.

The majority opinion, however, asserts that the Board’s policy arguments and the dissent’s concerns are overstated. First, separate from facial challenges, regulated parties may always challenge a regulation as exceeding the agency’s statutory authority in enforcement proceedings against them or they may petition an agency to reconsider a longstanding rule.

Moreover, the opportunity to challenge agency action does not mean that new plaintiffs will always win or that courts and agencies will need to expend significant re­sources to address each new suit. Given that major regula­tions are typically challenged immediately, courts enter­taining later challenges often will be able to rely on binding Supreme Court or circuit precedent. If neither this Court nor the relevant court of appeals has weighed in, a court may be able to look to other circuits for persuasive author­ity. And if no other authority upholding the agency action is persuasive, the court may have more work to do, but there is all the more reason for it to consider the merits of the newcomer’s challenge.

Implications for Financial Services

This decision opens up the possibility that new entrants to a market can challenge long-standing regulations. This may be appealing to fintech companies looking to create new products and services within a long-standing regulatory framework. However, this also may cause substantial uncertainty for fintechs and others in the financial services sector that will question if they can rely on existing rules. If there is a new wave of challenges to long-standing regulations, it would be destabilizing for the federal agencies and the businesses they regulate. Multiple challenges may lead to conflicting decisions and circuit splits, causing even more confusion and uncertainty.

This decision presents an opportunity for Congress to act. Congress could amend the APA to require that the period for purposes of the statute of limitations accrues at the time of agency action. Congress also could impose agency or rule-specific limitations periods.

Additionally, this decision does not impact enforcement proceedings. As the majority noted, a regulated party may always challenge a regulation as exceeding the agency’s statutory authority in enforcement proceedings against them. The focus is on APA rulemakings and other final agency actions.