United States Supreme Court Agrees to Hear Case With Potentially Large Implications for the Business Community

On September 29, 2023, the United States Supreme Court granted certiorari review in Corner Post, Inc. v. Board of Governors. The Court’s decision in the case will impact businesses across the country.

Three Plaintiffs, two business associations and Corner Post Inc. sued the Board of Governors of the Federal Reserve in federal district court in North Dakota.¹ Plaintiffs argued that an APA rule, which set processing fees for debit card transactions at 21 cents per transaction,² was arbitrary and capricious under the APA³ and violated the Durbin Amendment.⁴ The Durbin Amendment requires that transaction fees be reasonable and proportional to the cost of the good sold.⁵ The district court dismissed the case without considering the validity of the APA rule, because the court found that Plaintiffs’ claims were barred by the statute of limitations under 28 U.S.C. § 2401(a).⁶ Section 2401(a) states that “every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.” The parties dispute focused on when a “right of action” “first accrues” under the statute. Plaintiffs appealed the decision to the Eighth Circuit.⁷

On appeal, Plaintiffs argued that a right of action first accrues when a plaintiff suffers a legal wrong and, accordingly, the statute of limitations begins running when a plaintiff becomes subject to and is harmed by an agency rule. Thus, a business has six years from the time it first became subject to a government regulation to bring suit challenging the regulation.

In contrast, the Government argued that a right of action first accrues at the time the agency rule is published. Under this theory, a business can only challenge a government regulation within six years of the regulation’s publication. A later formed business has essentially two options: (1) comply with the rule, or (2) intentionally violate the rule and invite government enforcement so that the rule can be challenged.

The Eighth Circuit ultimately sided with the Government.⁸ Specifically, the court held that: “[W]hen 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.”⁹ The Eighth Circuit further held that Plaintiffs did not qualify for “equitable tolling,” a legal doctrine that allows a party to toll the statute of limitations if it can show it exercised due diligence, but exceptional circumstances prevented timely filing.¹⁰

Corner Post Inc. appealed the Eighth Circuit’s decision and the Supreme Court granted certiorari review. The Court will hear oral argument on the issue sometime in the next few months.  

Practical Implications:

If the Court affirms the decision of the Eighth Circuit and finds in favor of the Government, the implications are clear: the ability of businesses to challenge unlawful government regulations would be severely undermined. Any company formed six years after an agency rule is published could not challenge the rule—no matter how unlawful or harmful the rule is. This is particularly troubling given the growing number of federal agencies and regulations. Over the past few years, dozens of new agencies have been created.¹¹ And there is now over 185,000 pages of federal regulations.¹²

However, if the Court reverses and sides with Corner Post Inc. then individuals and businesses alike will be able to challenge unlawful government regulations—so long as they bring suit within six years of first being harmed by the regulation.

Hunton Andrews Kurth will stay up to date on the Court’s decision and notify clients when a decision is issued.

 

¹ Corner Post, Inc. v. Bd. of Governors of Fed. Reserve Sys., 1:21-CV-00095, 2022 WL 909317, at *1 (D.N.D. Mar. 11, 2022). 

² See Debit Card Interchange Fees and Routing, 76 FR 43394-01 (July 20, 2011).

³ A provision of the APA codified in 5 U.S.C. § 706(2)(A) allows courts to invalidate agency rules that are arbitrary and capricious.

⁴ The Durbin Amendment is codified in 15 U.S.C. § 1693o-2.

⁵ See 15 U.S.C. § 1693o-2.

⁶ See Corner Post, Inc., 1:21-CV-00095, 2022 WL 909317, at *10.

⁷ N. Dakota Retail Ass'n v. Bd. of Governors of the Fed. Reserve Sys., 55 F.4th 634 (8th Cir. 2022).

⁸ Id. at 641.

⁹ Id.

¹⁰ Id. at 642-43.

¹¹ Brief for National Federation of Independent Business Small Business Legal Center, Inc. as Amicus Curiae Supporting Petitioner, Corner Post, Inc. v. Bd. of Governors, FRS, 22-1008, 2023 WL 6319653 at *11 (U.S. Sept. 29, 2023).

¹² Id.