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Americans for Prosperity Foundation filed a friend-of-the-court brief in the U.S. Supreme Court in Corner Post, Inc. v. The Federal Reserve, urging the Court to allow Corner Post’s challenge to a 2011 debit-fees regulation that Corner Post believes to be beyond the Board’s power.
The question presented may seem dry: when does a business’s legal right to challenge a federal regulation “first accrue,” triggering the six-year statute of limitations courts have found applies to such claims. But the question is what happens when an agency finalizes its regulation and then someone starts a new business more than six years later.
Consider Corner Post, a North Dakota truck stop and convenience store, which didn’t open for business until 2018—more than six years after the Board issued the debit-fee rule—and thus was not financially harmed by the Board’s debit-card fees rule until then.
There will be cases where decades pass before a business or individual is impacted by a regulation. The decision below held that for Corner Post the time limit for challenging this regulation started in 2011, meaning that by the time Corner Post opened its door and started incurring fees it was already too late for Corner Post to sue.
By contrast, the normal rule is that statutes of limitations begin to run when a party has a cause of action, which requires that that party has suffered harm. If that rule applied, Corner Post’s suit would be allowed to proceed, since the time limit for challenging the regulation would not start until 2018—when Corner Post was first harmed by the debit fees.
While wonky, Corner Post is an important case for businesses and individuals impacted by federal regulations—that is, all Americans—for at least two reasons.
The first is practical. 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 over 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.
Here’s the rub: a subset of these regulations are themselves unlawful and thus nullities with no binding effect. As Judge Jones of the U.S. Court of Appeals for the Fifth Circuit put it:
[A] regulation initially unauthorized by statute cannot become authorized by the mere passage of time.
This means 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 newly formed or harmed businesses supposed to do if they believe a regulation imposing burdensome compliance costs, prohibitions, or other financial harm is unlawful?
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. Corner Post doesn’t even have that option, as it can’t trigger an enforcement action as it is not a directly regulated party, instead suffering downstream pocketbook harm as a result of the regulation.
The second reason is more abstract but no less important. Under our system of checks and balances, federal courts are not supposed to make policy choices—that’s Congress’s job. Instead, courts are supposed to say what the law is, interpreting and applying the text of statutes Congress wrote and voted to enact into law.
In this case, the text of the six-year statute of limitations at issue says that the time limit for challenging a regulation starts when a plaintiff’s “right of action first accrues.” This means that 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.
But many courts have mistakenly read this statute of limitations (which starts when a plaintiff is harmed) as a statute of repose (which starts when the defendant acted)—and only for certain types of challenges to federal regulations.
These courts have concluded that old regulations cannot be challenged by newly harmed businesses—even if those businesses didn’t exist when the regulation was first issued. That is a policy choice. And it is for Congress to make. Corner Post provides the Court with yet another opportunity to make this important point.
Read the full amicus brief for Corner Post v. The Federal Reserve.
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