On July 1, 2024, the U.S. Supreme Court issued a decision in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, holding that an Administrative Procedure Act (APA) claim does not accrue for purposes of the APA’s six-year statute of limitations until the plaintiff is injured by final agency action. The question before the Court was whether a plaintiff’s APA claim first accrues when (a) an agency issues a rule—regardless of whether the plaintiff suffered an injury as a result of the rule on that date, or (b) the rule first causes a plaintiff to suffer a legal harm. In its holding, the Court clarified that “[a] right of action ‘accrues’ when the plaintiff has a ‘complete and present cause of action’—i.e., when she has the right to ‘file suit and obtain relief.’”
In Corner Post, the plaintiff merchant did not open its doors and begin accepting debit cards until more than six years after the promulgation by the Federal Reserve Board (Board) of Regulation II. Before courts could assess the challenge to Regulation II on its merits, they first had to determine whether the plaintiff’s claim was time-barred. As a result of this holding, the lower court may now hear the plaintiff’s underlying claims.
APA Statute of Limitations
The Court’s holding resolves a circuit split over when the APA’s statute of limitations begins to run for APA suits challenging agency actions. As the Court notes, at least six circuits had determined that the limitations period for “facial” APA challenges begins on the date of final agency action, whereas the Sixth Circuit has found that the APA’s statute of limitations does not begin to run until a plaintiff is injured by agency action, regardless of when such agency action was finalized.
Relying upon the statutory language of the APA, which provides 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[,]”[1] the Court held that a right of action does not begin to “accrue” until the plaintiff suffers injury, which may occur after the date of final agency action. This holding will permit challenges to long-standing regulations if the plaintiff is able to establish that it first suffered an injury during the statute of limitations period.
Legal Challenges to Regulation II
While the Court considered only timeliness in Corner Post, the plaintiff’s underlying substantive claims center on the interchange fee calculation set forth in Regulation II. Through authority conferred by Congress, the Board implemented Regulation II to, among other things, establish an interchange fee cap that was “reasonable and proportional to the cost” banks incur when processing a debit card transaction.
Corner Post is not the first legal challenge to Regulation II. Following the promulgation of Regulation II in 2011, merchant associations and trade groups sued the Board in NACS v. Board of Governors of the Federal Reserve System, contending that Regulation II is not consistent with the statute.
While the Court declined to opine on the substantive merits of the case in Corner Post, it did acknowledge the holding in NACS, noting that the U.S. Court of Appeals for the D.C. Circuit held that “the Board’s rules generally rest on reasonable constructions of the statute.”[2]
Key Takeaways
It is widely anticipated that the Corner Post decision will increase the number of challenges to agency actions and regulations, because newly formed or newly injured parties will be able to challenge long-standing agency actions. Corner Post, as an entity, demonstrates why this is so. Corner Post’s litigation can continue because the company sued less than six years after it was created and started accepting debit cards. New businesses open every day, and any of those new entities will have six years to challenge regulatory actions that allegedly harm them, even if those actions were taken decades before the business opened its doors.
Taken together, Corner Post and Loper Bright, which overruled a long-standing doctrine that granted deference to agency interpretation of ambiguous statutes, and is discussed in greater detail in our earlier client alert, are likely to have a substantial impact on the landscape of administrative law moving forward. The decisions impact both when a plaintiff can challenge an agency action and the discretion agencies have to interpret statutes when promulgating regulations.
FAQs
On July 1, 2024, the U.S. Supreme Court issued a decision in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, holding that an Administrative Procedure Act (APA) claim does not accrue for purposes of the APA's six-year statute of limitations until the plaintiff is injured by final agency action.
What is section 702 of the Administrative Procedure Act? ›
§702.
A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.
What are the four purposes of the Administrative Procedures Act? ›
The purposes of the act were: (1) to ensure that agencies keep the public informed of their organization, procedures, and rules, (2) to provide for public participation in the rule-making process, (3) to prescribe uniform standards for the conduct of formal rule making and adjudicatory proceedings, and (4) to restate ...
What is the Administrative Procedure Act for the IRS? ›
The APA is the legal authority for rulemaking and promulgation of procedures necessary to ensure fairness and equity in administration of the federal income tax laws (5 U.S.C. §551(4)).
What is the summary of the Administrative Procedure Act? ›
The Administrative Procedure Act (APA) governs the process by which federal agencies develop and issue regulations. It includes requirements for publishing notices of proposed and final rulemaking in the Federal Register, and provides opportunities for the public to comment on notices of proposed rulemaking.
What is Section 705 of the Administrative Procedure Act? ›
When an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review.
What does section 702 say? ›
FISA Section 702 is an indispensable tool in the FBI's efforts to protect against national security threats. It authorizes the targeted collection of foreign intelligence information from non-U.S. persons located abroad. Section 702 will expire on December 31, 2023, unless Congress takes action to reauthorize it.
What are the three basic requirements of the Administrative Procedure Act as far as rule making is concerned? ›
The APA requires that the notice of proposed rulemaking include "(1) the time, place, and nature of public rulemaking proceedings; (2) reference to the legal authority under which the rule is proposed; and (3) either the terms or substance of the proposed rule or a description of the subjects and issues involved."11 ...
What are three types of powers that constitute the administrative process? ›
Usually, the agency will have all three kinds of power: executive, legislative, and judicial.
What is Section 4 of the Administrative Procedure Act? ›
(4)(A)(i) In order to carry out the provisions of this section, each agency shall promulgate regulations, pursuant to notice and receipt of public comment, specifying the schedule of fees applicable to the processing of requests under this section and establishing procedures and guidelines for determining when such ...
The U.S. Constitution and the Administrative Procedure Act (APA), among other sources, establish due process protections for citizens during administrative rulemaking and adjudication processes. These protections are designed to prevent administrative agency violations of individual rights.
What are the rights of IRS administrative appeal? ›
As an administrative function of the IRS, Appeals can only consider your arguments if they are based on tax laws. Appeals cannot consider your arguments if they are based only on moral, religious, political, constitutional, conscientious, or similar objections to the assessment or payment of Federal taxes.
What is the comment period for the Administrative Procedure Act? ›
The agency must give individuals a period of at least 30 days to comment on the proposed rule.
What is the arbitrary and capricious Administrative Procedure Act? ›
It was originally defined in a provision of the 1946 Administrative Procedure Act (APA), which instructs courts reviewing agency actions to invalidate any that they find to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." The test is most frequently employed to assess the ...
What is an Administrative Procedure Act direct final rule? ›
In a direct final rule, the agency states that the rule will go into effect on a certain date, unless it gets substantive adverse comments during the comment period. An agency may finalize this process by publishing in the Federal Register a confirmation that it received no adverse comments.
What is arbitrary and capricious? ›
"A decision is arbitrary if it comes about seemingly at random or by chance or as a capricious and unreasonable act of will. It is capricious if it is the product of a sudden, impulsive and seemingly unmotivated notion or action." City of Livingston v. Park Conserv.
What does 702 stand for? ›
Section 702 was enacted after 9/11 to give the government greater powers to monitor foreign terrorists. It authorizes the government to collect the communications of non-Americans located abroad without a warrant from a court.
Does Section 702 require a warrant? ›
When the government wants to obtain Americans' private information, the Fourth Amendment requires it to go to court and obtain a warrant. But the U.S. government has repeatedly used Section 702 to conduct warrantless surveillance of Americans, including protesters, members of Congress, and journalists.
What is the Section 702 Amendment? ›
Section 702 only permits the targeting of non-United States persons who are reasonably believed to be located outside the United States. United States persons and anyone in the United States may not be targeted under Section 702.
What is APA 702 standing? ›
Persons who suffer a "legal wrong because of agency action" or are "adversely affected or aggrieved by agency action within the meaning of a relevant statute" has standing to receive judicial review of the agency's action (5 U.S.C. § 702).
