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Do Americans still deserve their day in court? The Supreme Court is about to decide

It’s been fantastic getting to feature so many of the experts whom I work alongside. For this newsletter, I’m fortunate to feature Michael Pepson, Regulatory Counsel at Americans for Prosperity Foundation, to discuss a case before the Supreme Court that deserves more attention. – Casey

Six years ago, a family opened up a truck stop and convenience store off of a highway in North Dakota and named it Corner Post. They quickly realized that their ability to earn a living was being negatively impacted by a decision that they believe to be unlawful, made years earlier by unelected bureaucrats in Washington, D.C.

But when they sought their day in court, they were essentially told they were out of luck because the window to challenge the regulation had expired before their business even existed.

Every person has the right to have their day in court when newly confronted with a government regulation they believe to be unjust and unlawful.

It’s a hallmark of our country. And it’s up for debate.

In the following weeks, the U.S. Supreme Court will decide a case that tests that very notion.

The Case: Corner Post, Inc. v. The Federal Reserve

You likely haven’t heard of Corner Post, Inc. v. The Federal Reserve. But it’s a case that stands to impact you and millions of your fellow Americans.

At issue is the meaning of a federal statute. It says that if people need to challenge a federal regulation, they’ve got a six-year time limit for filing a complaint.

The question is, when does the clock start? Is it when the SEC, DHS, or other agency finalizes a regulation? Or is it when a person is first harmed by it?

In other words, what happens when a federal agency issues a regulation and then you want to open a bakery, launch a new plumbing business, or start any number of new endeavors that are hurt by the regulation more than six years later? Can you sue? Or are you out of luck simply because the regulation was on the books before you even had the idea?

Don’t mind the fact that the six-year statute of limitations has no bearing on whether the regulation itself is beyond the agency’s power, unconstitutional, or otherwise unlawful?

Just the Facts, Ma’am

Consider the facts of Corner Post. In 2011, the Federal Reserve issued a regulation setting a cap on “swipe” fees that businesses that accept debit cards must pay to banks that process debit-card transactions. But Corner Post didn’t open for business until 2018 — more than six years after the agency issued the debit-fee rule. They weren’t harmed in 2011, because their business didn’t exist. They got hit by the rule when they opened their doors a full seven years after federal officials issued the rule.

The question before the Supreme Court is whether Corner Post is entitled to its day in court to challenge the debit-card regulation.

While millions of small businesses are impacted by that single rule, the implications of this case are much bigger.

Today, most federal law is made not by Congress but by unelected administrators in the form of binding regulations governing private conduct. To put this in perspective, “[i]n contrast to the roughly 200 to 400 laws passed by Congress, the federal administrative agencies adopt approximately 3,000 to 5,000 final rules each year.”

There are untold thousands of regulations governing private conduct in the Code of Federal Regulations, which is more than 180,000 pages.

Many such regulations have been on the books for years, never having been challenged in court. And often, companies and ordinary citizens that violate these regulations are exposed to draconian civil and even criminal penalties.

AFPF Fights for Americans to be Heard

Just imagine. What happens if a government agency issues regulations to govern a new or nonexistent industry? For example, if the FTC writes a suite of regulations governing the use of artificial intelligence technology in 1985… the year the Sony Discman was heralded as a breakthrough tech device.

In this hypothetical, literally no one could sue within six years, as no companies yet existed that would be harmed — a requirement to bring a legal challenge. Another scenario is where an agency issues informal guidance interpreting a long-extant regulation to apply to conduct or parties that were long thought to be outside its scope.

Here’s the rub: A subset of these old regulations are themselves unlawful and thus nullities with no binding effect. An unlawful regulation doesn’t achieve the legitimacy of a duly enacted federal statute simply because it has been on the books for six years. But current case law holds that affected businesses and individuals only have six years after the regulation has been issued to challenge it in court.

So, what are individuals, nonprofits, and businesses supposed to do if they believe an old regulation is harming them?

Violating the regulation, triggering an enforcement action and exposure to draconian civil and criminal penalties, is not a realistic or safe path for any rational business or individual to take to get a day in court.

That’s not realistic, and it’s not right.

Let’s go back to what the statute says: The time limit for challenging a regulation starts when a plaintiff’s “right of action first accrues.”

This means that, just like every other normal statute of limitations, the clock starts ticking for a business to sue when that business is first harmed by a regulation — not when a federal agency issues the regulation. And the government is not entitled to a special rule barring the courthouse doors for people recently injured by its old regulations.

For these reasons, Americans for Prosperity Foundation filed a friend-of-the-court brief in this case urging the Court to keep the courthouse doors open for businesses like Corner Post newly harmed by old regulations.

The Supreme Court heard oral argument on February 20th, and there is reason to hope that the Court will allow Corner Post’s challenge to go forward. A decision is expected before the end of June.

Read the full amicus brief for Corner Post v. The Federal Reserve.

Michael Pepson


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