Notice & Comment

Agency Action, Agency Failure to Act, and Universal Relief in Corner Post v. Board of Governors of the Federal Reserve System, by John Harrison

Corner Post v. Board of Governors of the Federal Reserve System,[1] recently argued in the Supreme Court, mainly concerns the limitations period for judicial review of agency decisions. The case also raises issues about administrative law remedies, which came up briefly at the argument. Important for both sets of issues is that Corner Post, a private business seeking judicial review, is not a regulated party claiming that the government has regulated too much. Corner Post is a regulatory beneficiary – a merchant customer of regulated banks – claiming that the Federal Reserve has regulated the banks too lightly. The case involves an agency’s failure to act. 

This essay concerns the implications of that feature of the case for the question of so-called universal remedies in administrative law, an issue Justice Kavanaugh raised at the argument. If Corner Post obtains relief, that relief will be universal in a sense. Relief for Corner Post would lead to more stringent requirements on all banks, not only on those banks that do business with Corner Post. Justice Kavanaugh’s questions raised the possibility that if universal relief for a regulatory beneficiary like Corner Post is appropriate under the Administrative Procedure Act (APA), then so is the form of universal relief now called vacatur of agency rules.[2] Vacatur, as that term is often used today, is a judicial remedy that eliminates the binding force of a rule.

Justice Kavanaugh and counsel at argument may have assumed that the appropriate relief for a party that seeks more regulation is a form of vacatur as understood in suits by regulated parties. The APA’s remedy for regulatory beneficiaries like Corner Post, however, is quite different from the kind of vacatur that regulated parties seek. Eliminating an existing rule, as vacatur is understood to do, frequently would harm regulatory beneficiaries, not remedy their harm.

The remedy for regulatory beneficiaries like Corner Post, and vacatur as currently understood, differ both in their substance and in their derivation from the APA. Both are universal in a sense, but the argument that supports relief for plaintiffs like Corner Post illuminates difficulties with the argument for vacatur under the APA. This essay first elaborates on the special features of suits by regulatory beneficiaries, next describes Justice Kavanaugh’s exchange with counsel at the argument in Corner Post, then explains how the APA supports a form of universal relief for regulatory beneficiaries without supporting vacatur as currently understood, and finally explores the reasons judges and lawyers assume that in suits by regulatory beneficiaries, the judicial elimination of rules that do not go far enough is called for.

Corner Post and the Earlier Challenge to the Interchange Fee Rule

Corner Post concerns a Federal Reserve rule adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. That statute provides for the regulation of interchange fees charged by banks to merchants such as Corner Post. The statute requires that those fees be reasonable, and directs the Federal Reserve to adopt regulations implementing that requirement. The Federal Reserve issued a Notice of Proposed Rulemaking in 2010. After extensive comments, in July, 2011 the Federal Reserve adopted a rule capping interchange fees.

Later in 2011, merchants and merchants’ trade associations sued the Federal Reserve in the district court for the District of Columbia in NACS v. Board of Governors of the Federal Reserve System[3], arguing that the rule did not go far enough. (Corner Post was not yet in business and was not a party.) District Judge Richard Leon agreed with the plaintiffs that the Federal Reserve had misconstrued the statute, finding that in setting permissible interchange fees, the agency had taken into account banks’ costs that the statute did not allow the agency to consider.[4]

Judge Leon understood that he could not choose a lower cap on interchange fees himself. Only the agency could do that, based on the statute as the court had construed it. But the rule the Federal Reserve had adopted was gravely flawed, and the agency would have to replace it with a very different rule.[5] In the terminology the courts often use, the rule would have to be remanded to the agency. Under the D.C. Circuit’s precedents, Judge Leon had to decide whether to issue an order purporting to deprive the rule of binding force – to vacate it in the courts’ terminology – or to remand without vacatur. Because any new rule would have to be very different, remand without vacatur was not appropriate.[6]

Eliminating the legal force of the rule the Federal Reserve had adopted, however, would have made the successful plaintiffs worse off. Interchange fees would have been unregulated until the agency adopted a replacement rule. Judge Leon saw that problem and concluded that to avoid harm to the prevailing parties, the proper disposition was to vacate the regulation and remand to the Federal Reserve, while staying vacatur of the existing rule.[7]

On appeal, the D.C. Circuit largely disagreed with the district court about the statute, finding that the agency’s reading satisfied Chevron.[8] On one point, though, the court of appeals found that the Federal Reserve had inadequately explained its decision to limit its regulation.[9] Like Judge Leon, the appellate judges realized that eliminating the legal effect of the rule while the agency conducted further proceedings would harm the plaintiffs, who had prevailed on that point.[10] The court addressed that problem with the remedy called remand without vacatur, under which an agency is directed to conduct additional proceedings, but the court does not give an order purporting to deprive the existing rule of binding force.[11] The D.C. Circuit remanded to the district court, the agency considered further, then reaffirmed its decision with an additional explanation, and the parties then stipulated to dismissal.[12] No judicial decree purporting to undo the rule or any part of it went into effect.

In 2021, merchant trade associations sued the Federal Reserve in the district court for the District of North Dakota, seeking review of the 2012 rule. Corner Post, which was not in business when the rule was adopted or when the earlier NACS case was decided, joined as a plaintiff when the agency moved to dismiss the suit as time-barred under 28 U.S. C. § 2401(a). The district court granted the agency’s motion to dismiss the suit as time-barred, the court of appeals for the Eighth Circuit affirmed, and the Supreme Court granted certiorari as to section 2401(a).

Corner Post mainly concerns the limitations period, but also implicates the current debate over universal relief under the APA. A central question in that debate is whether section 706(2) of the APA, 5 U.S.C. § 706(2), directs courts to give a form of relief often called vacatur of agency action when the courts find an action to be unlawful.

Justice Kavanaugh’s Questions at Argument in Corner Post

At argument, Justice Kavanaugh asked counsel for Corner Post “what relief can you get here . . . if you can’t get vacatur of the rule.”[13] Counsel responded, “we can’t imagine a situation where our client can get relief from this rule absent vacatur. But that’s not true in — in most cases. In most cases [Justice Kavanaugh interjected “Right”] directly regulated parties can –.”[14] Justice Kavanaugh went on, “but, on the vacatur issue, which is always lurking, a party who’s not regulated would be able to get no relief in a situation like this?”[15] Counsel responded that “it would depend on the context,” and “[t]here are some instances where you might be able to do it,” but “not in this one.”[16]

During argument by counsel for the Federal Reserve, Justice Kavanaugh asked: “[Corner Post] asked in this suit to set aside the rule. Your position, the Solicitor General’s position, is that that can’t be done under the APA. If you can’t set aside the rule and you’re not a regulated party, how is their injury redressable in this suit and why do they have standing?”[17] Counsel for the government may have thought that Justice Kavanaugh had in mind that Corner Post seeks a form of universal relief. Government counsel replied, “I think our position has been that courts are only able to provide relief to the party before them and that ordinarily they –.”[18] Justice Kavanaugh then asked, “How would that be done in a circumstance like this?”[19] Counsel replied, “I think that in this circumstance, it’s possible that the only way to provide this party relief would be vacatur. . . . I’m not certain that that’s right, but I think that’s possible.”[20] Justice Kavanaugh responded, “I think that’s probably right, which is why I was surprised when you said what you said, that if you don’t have the set aside remedy, they probably don’t have standing here.”[21]

Neither Justice Kavanaugh nor either lawyer elaborated on the meaning of vacatur or setting aside. Perhaps the Justice’s questions, and counsels’ answers, reflected only the assumption that relief for a party like Corner Post must in a sense be universal. Corner Post wants the Federal Reserve to impose more stringent regulation on all banks, not only on banks that do business with Corner Post. Vacatur figures in the current debate about universal relief as a standard form of that kind of remedy, so perhaps by asking whether a remedy that is well known to be universal is required, the Justice was asking whether a universal remedy of some kind is required.

Another possibility is that Justice Kavanaugh and counsel recognized that Corner Post can obtain relief as to interchange fees only if the numbers now in the rule are eliminated, whether by the court directly or by the agency in response to the court’s order. An order to an agency telling the agency to reconsider and if necessary modify its rule might be called an order setting aside or vacating the rule.

More likely, however, Justice Kavanaugh and the lawyers assumed that to give Corner Post relief, a court must give the form of universal relief called vacatur of a rule. That form of relief is a judicial act that deprives an agency rule or order of binding force. In general, vacatur is understood to be a step a court takes, not a step an agency takes pursuant to the court’s order. If Justice Kavanaugh and the lawyers were assuming that to give Corner Post relief, a court would have to eliminate the current rule before any new rule goes into effect, their reasoning matched Judge Leon’s in RACS, when he concluded that relief for merchants who successfully argued that the Federal Reserve had under-regulated had to include judicial vacatur of the existing rule.

I suggest that if Justice Kavanaugh was asking whether vacatur by the court is necessary for a party like Corner Post to obtain relief, the answer is no. If a regulatory beneficiary who claims that an agency has regulated too little prevails, a court can give that party full relief without itself vacating any rule the agency has adopted. The court should enter a mandatory injunction telling the agency to conduct further proceedings to take steps necessary to bring its rules into conformity with the statute as the court has expounded it. If the agency determines that a rule it has adopted does not go far enough, the agency may need to amend that rule to make it more stringent, for example by changing a number in the rule. The agency should not, however, create a gap period by eliminating the limits it has imposed on regulated parties without simultaneously replacing any rule it has adopted with a more demanding rule. Courts should not undertake to vacate inadequate existing rules themselves, thereby creating a regulatory hiatus and making successful parties worse off.

I next explain how the APA leads to the relief just described, not to vacatur by courts.

Relief for Regulatory Beneficiaries Under the APA

Corner Post seeks more regulation, not less. A path through the APA leads to relief for parties that seek more regulation. Although the relief at the end of that path sometimes aids non-parties, the path does not go through the reading of section 706(2) that is usually relied on for universal relief for regulated parties. Rather, the reading of the APA that supports relief for regulatory beneficiaries matches the understanding of section 706(2) according to which that provision does not call for a remedy of vacatur of agency action.

The path to relief for regulatory beneficiaries such as Corner Post begins with a familiar feature of the APA that figures in the parties’ arguments about the limitation period: the APA provides for judicial review of agency action. Section 702, titled “Right of Review,” begins, “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.” 5 U.S.C. § 702. Section 704’s finality requirement for judicial review is also cast in terms of agency action: “Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review.” 5 U.S.C. § 704.

Judicial review of agency action might seem an inapt vehicle for a claim such as Corner Post’s, which alleges that an agency should do more, not less. Government under-performance, however, was known to the APA’s drafters. “Agency action” is a defined term in the APA, and includes inaction: “’[A]gency action’ includes the whole or a part of an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act.” 5 U.S.C. § 551(13) (emphasis added). Failure to act is a form of agency action. 

The next step on the path to relief is section 706(1), which clarifies an important point about claims of agency failure to act. That clarification addresses a question about the roles of agencies and courts that arises because agencies engage in activities, such as adopting rules and building roads, that are not within the judicial sphere. Agencies’ possession of the power to take positive steps raises the question whether a court would impermissibly intrude on agency power by responding to failure to act with an affirmative mandate. Section 706, titled “Scope of Review,” deals with the allocation of authority between courts and agencies. Section 706(1) makes clear that while taking agency action is for agencies, courts can order that agencies act, so failure to act is within the scope of judicial review. The clause tells reviewing courts to “compel agency action unlawfully withheld or unreasonably delayed.” 5 U.S.C. § 706(1).

At the last step on the path to relief for unlawful failure to act is section 703, titled “Form and Venue of Proceeding.” Section 703 lists forms of proceeding for judicial review, including “actions for declaratory judgments or writs of prohibitory or mandatory injunction.” 5 U.S.C. § 703. Together, sections 706(1) and 703 contemplate that a court that finds unlawful failure to act can compel the action that had been unlawfully withheld through a mandatory injunction.

As described so far, the path leaves out a step. Courts are to compel agency action that has been “unlawfully withheld.” Those words do not tell courts much about how to decide whether an agency failure to act is unlawful. Neither does section 706’s introductory sentence, which instructs reviewing courts to “decide all relevant questions of law.” Section 706(2) fills out the APA’s concept of unlawful agency action (which includes unlawful failure to act). That clause tells courts to “hold unlawful and set aside” agency action that suffers from one of the flaws it lists, such as being “short of statutory right,” 5 U.S.C. § 706(2)(C).

Section 706(2)’s use of “set aside” is at the center of the current debate over universal relief under the APA. According to one reading, which Justice Kavanaugh may have had in mind at argument in Corner Post, section 706(2) tells reviewing courts to give a specific remedy. It directs courts to set aside agency action, where to set aside is to deprive of binding legal force, or to vacate.[22]

According to another reading, which I endorse, section 706(2)’s directive concerns the rule of decision the court applies, not the remedy.[23] To hold an agency action unlawful is to make a finding that will guide the court’s disposition of the case, and similarly to set the action aside is to disregard any binding force the action may purport to have and decide the case on the law as it otherwise appears. On this reading, section 706(2) does not address remedial questions, which are governed by the remedies law applicable in the form of proceeding referred to in section 703. In a suit for a mandatory injunction, the remedy would be governed by equitable principles about affirmative relief.[24]  

Under the rule-of-decision reading, section 706(2) combines with section 706(1) in cases such as Corner Post, where a private party objects to failure to act. Section 706(2) tells the court when to treat the agency’s decision not to act as unlawful and unauthoritative, section 706(1) tells the court to compel unlawfully withheld action, and section 703 lists the standard mode of compulsion, a mandatory injunction.

If a court enters a mandatory injunction directing an agency to regulate more than the agency already has, or to consider doing so pursuant to the court’s directions, the agency can decide whether it must change or supersede any rule it has adopted. Any new regulation usually will apply to all regulated parties, so the mandatory injunction calling for new regulation will in effect be universal relief. When an agency makes an existing rule more demanding, it can do something a court has trouble doing: the agency can avoid a time gap in regulation by immediately replacing a less demanding requirement with a more demanding requirement, if necessary by changing an existing rule. When a regulatory beneficiary that seeks additional regulation prevails, the court will have no occasion to give the remedy that is standard in anticipatory suits by regulated parties: an injunction prohibiting enforcement proceedings.

Agency Failure to Act and Difficulties with Vacatur as a Remedy for Regulatory Beneficiaries

Relief for regulatory beneficiaries like Corner Post does not require judicial vacatur as currently understood. As just discussed, readings of section 706(2) that do not entail vacatur are consistent with relief for beneficiaries that is universal but in which the courts do not undo any rule the under-regulating agency has adopted, or any part thereof. By contrast, I now argue, the reading of section 706(2) that supports vacatur leads to unreasonable results in cases of unlawful failure to regulate.

On the remedial-vacatur reading of section 706(2), when a court applies the criteria set out in section 706(2) and finds the agency action under review to be unlawful, the court is to set aside the agency action. To set aside an agency action that purports to have binding force is to eliminate that binding force – to vacate the action the way an appellate court vacates a judgment below. 

Claims by regulatory beneficiaries that an agency has not gone far enough in rulemaking arise in three main circumstances (there may be others). First is the situation in which the agency has not adopted any rule, and a regulatory beneficiary argues that a rule should have been adopted. Second is the situation in which the agency has adopted a rule, and a regulatory beneficiary does not object to any provision of the rule, but argues that the rule should have additional content.

When a regulatory beneficiary has no objection to any provision in any rule the agency has adopted, but argues for a new rule or additions to an existing rule, the agency’s failure to act can easily be separated from any positive action the agency may have taken. A missing rule, or a missing provision of a rule, is only failure to act. 

Judicial vacatur of a non-existent rule, or a non-existent provision of a rule, is nonsensical. To vacate a non-existent rule or provision might be to adopt the needed rule or provision, but only an agency can adopt or change a rule; a court cannot. The only possible meaning for vacatur in the absence of positive agency action thus is an order to the agency to take the needed action. To give such an order is to compel agency action unlawfully withheld under section 706(1), and the way to compel agency action is through a mandatory injunction, as section 703 indicates. Calling that remedy vacatur engenders confusion by using the ungainly double negative of vacating failure to act.

In a third situation, the agency has adopted a rule and a regulatory beneficiary argues that a provision of the rule should be changed to impose stricter regulation. Corner Post and NACS fall into that category. At issue in those cases is 12 C.F.R. § 235.3. Section 235.3(a) imposes a requirement that bank interchange fees be reasonable. Section 235.3(b) imposes specific numerical caps: interchange fees may not exceed 21 cents plus 5 basis points of the amount of the transaction. Corner Post wants those numbers, or one of them, to be lower, as did the plaintiffs in RACS.

The numbers in section 235.3(b) can be seen as both positive agency action and as failure to act. They are positive action because they impose binding limits on banks. They are failure to act because the Federal Reserve did not adopt lower numbers. 

Corner Post seeks lower numbers, so giving Corner Post relief might seem to require that the court eliminate the numbers the agency adopted – that the court vacate the part of the rule that uses the numbers. Once again, however, judicial vacatur is not a reasonable remedy. To vacate the relevant part of the rule might mean to erase the numbers, which would produce a rule with a blank. That would be meaningless, and probably arbitrary and capricious if adopted by the agency. Or to vacate might be to eliminate section 235.3(b) while leaving in place section 235.3(a), which requires that fees be reasonable. Doing that would produce a rule with no specific numbers, which is very different from the rule the Federal Reserve chose and which only the agency, not a court, could adopt. Third, to vacate might be to eliminate section 235.3 altogether, which would make regulatory beneficiaries like Corner Post worse off.

Judge Leon in NACS apparently thought that vacatur meant eliminating section 235.3, and saw the problem with that relief. Judge Leon decided in favor of the merchants, stated that the relief called for was vacatur, and recognized that vacatur of the existing rule would make the merchants worse off, by eliminating all limits on interchange fees. He then concluded that he should vacate and remand, while staying the vacatur while the agency acted further.[25]

The Federal Reserve then filed a notice of appeal. While the case was in the D.C. Circuit, Judge Leon stayed his entire judgment pending appeal.[26] The successful plaintiffs had supported a stay, arguing that “plaintiffs would suffer substantial, and likely irreparable, harm from the absence of a stay.”[27] Absent the existing rule, interchange fees would be unregulated. The Federal Reserve would not be able to require refunds for the interim period in a new, more stringent, rule, because agencies generally cannot act retroactively. With judicial vacatur, merchants would pay higher fees for a while and never get the money back.

Judge Leon faced a conundrum: successful plaintiffs asked him not to give them relief. Judge Leon’s solution – staying the remedy that harms the plaintiff – makes sense as far as it goes, but shows the difficulties with vacatur in cases like NACS and Corner Post. As Judge Leon realized, the way to keep vacatur from harming the plaintiffs was to stay vacatur until the Federal Reserve had modified the rule pursuant to the court’s order. But once the part of his order directing further proceedings had been complied with, the part of his order vacating the existing rule would have become moot. The agency would have eliminated the earlier rule to the extent called for, without creating a gap in regulation. Judge Leon’s assumption that the APA called on him to vacate the existing rule led to the conclusion that he should issue a vacatur order that he expected would never become operative.

Judicial vacatur produces unreasonable results when part of a rule is both positive action and failure to act and a regulatory beneficiary prevails. If a party like Corner Post succeeds on the merits, the court should set aside the rule in the rule-of-decision sense. The court should treat as non-binding the agency’s judgment that the rule goes far enough. The court then should give a mandatory injunction telling the agency to reconsider its decision. The court should direct the agency to implement the statute as the court has expounded it, and to change the existing rule if necessary. A judicial order telling an agency to reconsider an issue while disregarding the agency’s earlier erroneous view of the law might be called setting aside the agency’s earlier action, but it is not judicial vacatur as that concept is normally used.[28]

Concurring in the judgment in United States v. Texas, Justice Gorsuch asked, “what would it even mean to say a court must render null and void an agency’s failure to act?”[29] Rendering failure to act null and void is hard to understand, as Justice Gorsuch pointed out, because failures to act cannot be deprived of the binding force they do not claim. A court cannot make a failure to act void, but it can give a mandatory injunction compelling positive action that has been unlawfully withheld, or requiring an agency to consider action to implement the statute as the court has construed it. 

The Thinking Underlying the Assumption That Vacatur Is Called for in Cases like Corner Post

Parties like Corner Post who want more regulation also want existing rules to remain in effect to the extent those rules benefit them, until more stringent regulation is in place. At argument in Corner Post, however, Justice Kavanaugh and counsel for both sides seem to have assumed that parties like Corner Post need vacatur as the remedy if they prevail. Justice Kavanaugh indicated that Corner Post’s standing depended on the availability of that relief. Judge Leon in NACSassumed that he was required to vacate the existing rule, then realized that doing so would injure the prevailing party. How can judges and lawyers come to assume that vacatur is called for when a regulatory beneficiary prevails?

One part of the answer is the assumption that section 706(2) instructs courts to vacate unlawful agency action. But that assumption, which in my view is incorrect, is only part of the explanation. Cases like Corner Post and NACS involve claims of too little regulation, and therefore of agency failure to act. In cases of that kind, why do judges and lawyers look to section 706(2) rather than section 706(1)? Whatever section 706(2) means, and whether or not it says anything about remedies, section 706(1) contemplates a remedy for agency action unlawfully withheld. If section 706(2) is read as addressing remedies, it is readily understood as working in conjunction with section 706(1). If both clauses concern remedies, section 706(1) describes the remedy for unlawful failure to act, while section 706(2) describes the remedy for unlawful action of a positive kind.[30] Why did Judge Leon in NACS think that section 706(2) was relevant, and that it called on him to vacate the rule the agency had adopted?

Two lines of thought may explain why counsel and judges focus on section 706(2) (read to require vacatur) and disregard section 706(1). First, as sections 702 and 704 reflect, the APA provides for judicial review of agency action. Section 551(13) defines agency action to include failure to act, but that aspect of the system is easy to lose track of when the vast bulk of cases involve claims that action of a positive kind, such as a rule or order, unlawfully goes too far. In cases like Corner Post and NACS, where an agency has adopted a rule, the party arguing that the agency should have done more will say that it seeks review of the rule. A more accurate description would be to say that the plaintiff seeks review of the agency’s decision not to go farther – the agency’s failure to act – but counsel and courts focus on action of a positive kind. That focus is especially likely in cases where, in order to regulate more stringently, the agency would have to modify or replace a rule it has adopted. 

Second, as the nomenclature of remand shows, lawyers and judges analogize judicial review of agency action under the APA to appellate review of lower-court decisions. That analogy is especially natural because of special statutory review proceedings, a familiar form of judicial review. Review of agencies in special statutory proceedings is patterned on appellate review of lower courts: the agency finds facts and judicial review is usually in a court of appeals initially, rather than a district court.[31] That analogy reinforces the assumption that judicial review of an agency is review of some positive action by the agency, just as appellate review usually requires a judgment by a lower court. 

If judicial review of agencies is likened to appellate review of lower courts, lawyers and judges will look for some positive agency action that is similar to a court’s judgment and can be subject to review. By contrast, if judicial review of agencies is likened to other lawsuits, judicial relief in the absence of any positive action falls into a familiar category. Plaintiffs often claim that the defendant has failed to perform an affirmative duty, for example in suits for specific performance.

Analogizing judicial review of agencies to appellate review of lower courts is not always apposite. In cases like Corner Post, a private party claims that an agency has not done enough, and often regards what the agency has done as fine as far as it goes. A 21-cent cap is better than no cap for Corner Post. The APA shows how courts can decide cases of that kind, and give relief when appropriate. Often that relief may be universal in that it will instruct an agency to take a positive action that will benefit parties not before the court. A mandatory injunction telling the agency to take the appropriate positive action is the APA’s remedy in those circumstances. Judicial vacatur is not called for.

John Harrison is the James Madison Distinguished Professor of Law at the University of Virginia.

[1] No. 22-1008 (U.S.). 

[2] Vacatur is also called setting aside, because vacatur is attributed to 5 U.S.C. § 706(2), which uses “set aside.” As explained below, in my view, section 706(2) does not give an instruction concerning remedies.

[3] 958 F. Supp. 2d 85 (D.D.C. 2013).

[4] Id. at 99 (agreeing with plaintiffs that the agency had misconstrued the statute).

[5] Id. at 115 (stating that the rule the agency had adopted was “seriously deficient” and that the agency must develop entirely new rules to correct these errors”).

[6] Judge Leon followed the common assumption that unlawful agency rules are binding despite being unlawful, until a court renders them inoperative by vacating them. In my view, that assumption was correct in RACS but is usually incorrect. Rules that unlawfully regulate too much are in general void ab initio, whereas rules that are unlawful only because they regulate too little are binding, although the agency may be obliged to regulate more.

[7] “I will stay vacatur, however, to provide the Board an opportunity to replace the invalid portions of the Final Rule. In so doing, I can prevent the Board from adopting similar regulations while at the same time avoid the disruption of vacating the entire regime.” Id. at 115 (citation omitted).

[8] NACS v. Board of Governors of the Federal Reserve System, 746 F.3d 474 (D.C. Cir. 2014).

[9] Id. at 492-93 (discussing regulation of transactions-monitoring costs).

[10] See id. at 493 (noting that “vacating the Board’s rule would lead to an entirely unregulated market, allowing the average interchange fee to once again reach or exceed 44 cents per transaction”).

[11] See id. (deciding to remand to the agency without vacating the existing rule). I have criticized the practice of remand without vacatur, focusing mainly on cases in which regulated parties successfully challenge rules that impose duties on them. See, John Harrison, Remand Without Vacatur and the Ab Initio Invalidity of Unlawful Regulations, 48 BYU L. Rev. 2077 (2023). In those circumstances, I argue, remand without vacatur rests on the usually mistaken premise that a rule that unlawfully goes too far is binding until displaced by a court. In cases like RACS, remand without vacatur raises issues I will not discuss here.

[12] See Combined Joint Status Report and Stipulation of Final Judgment, NACS v. Bd. of Governors of the Fed. Reserve Sys., 958 F. Supp. 2d 85 (D.D.C. 2013) (stipulation of dismissal dated Sept. 9, 2015).

[13] Transcript of Oral Argument at 32, Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 22-1008 (U.S.) (argued Feb. 20, 2024).

[14] Id. at 33.

[15] Id

[16] Id

[17] Id. at 75.

[18] Id

[19] Id

[20] Id. at 75-76.

[21] Id. at 76.

[22] See Mila Sohoni, The Power to Vacate a Rule, 88 Geo. Wash. U. L. Rev. 1121 (2020) (describing the development of the thesis that Section 706(2) calls on courts to vacate unlawful agency rules).

[23] See John Harrison, Section 706 of the Administrative Procedure Act Does Not for Universal Injunctions or Other Universal Remedies, 37 Yale J. Reg. Bull. 37 (2020).

[24] A third, intermediate, reading, treats the directive to “set aside” as referring generically to the remedy, but not as calling for any specific form of relief. On this reading, to set the agency action aside is to give whatever relief is called for by the applicable law of remedies, such as an order discharging a prisoner in a habeas corpus proceeding, see 5 U.S.C. § 703 (listing habeas corpus actions as a form of proceeding for judicial review). 

[25] Judge Leon’s initial opinion is not clear as to whether he was ordering the agency to vacate its existing rule, see NACS v. Bd. of Governors of the Fed. Reserve Sys.,958 F. Supp. 2d 85, 115 (D.D.C. 2013) (concluding that “the proper remedy here is to remand to the Board with instructions to vacate the Board’s interchange transaction fee”), or was vacating the rule himself, see id. (stating that “the Court will vacate the interchange transaction fee . . . and network non-exclusivity . . . regulations, staying vacatur until further Order of this Court, and will remand to the Board for further proceedings consistent with this Memorandum Opinion.”) (citations omitted). The difference is significant. Judicial vacatur would have harmed the plaintiffs, so Judge Leon had reason to stay it. But an order to the Federal Reserve to vacate its earlier rule if and when the agency adopted a new rule would have been harmless, and unnecessary: the agency could not have adopted a lower number without eliminating the higher number. Although Judge Leon’s initial formulation of the relief he had in mind was equivocal, the plaintiffs’ response and his response show that he had judicial vacatur in mind, because only judicial vacatur would create the problem that a stay addressed.

[26] See Memorandum Order of September 18, 2013, NACS v. Bd. of Governors of the Fed. Reserve Sys., 958 F. Supp. 2d 85 (D.D.C. 2013) (describing the court’s earlier decision to vacate the Federal Reserve’s rule while staying vacatur pending a new rulemaking, and staying the court’s entire judgment pending appeal).

[27] See Plaintiffs’ Combined Response in Support of Defendant’s Motion for Stay and Submission in Response to This Court’s Request for Briefing on Interim Final Rulemaking, at 4, NACS v. Bd. of Governors of the Fed. Reserve Sys., 958 F. Supp. 2d 85 (D.D.C. 2013) (response filed Aug. 28, 2013) At a prior hearing, the court had expressed surprise that plaintiffs would support a stay pending appeal. Id. at 2. Plaintiffs explained that they “vastly prefer the status quo,” id., in which interchange fees were limited, to “an unregulated ‘free for all,’” id.

[28] On the intermediate reading noted above, section 706(2) uses “set aside” to refer to remedies generically, not to a specific remedy of vacatur, and tells courts to give whatever remedy is called for under the circumstances. On the generic-remedy reading, in cases like Corner Post that involve failure to act, section 706(2) points to both section 706(1) and to the applicable remedies law.

[29] United States v. Texas, 143 S. Ct.1964, 1982 (2023) (Gorsuch, J., concurring in the judgment).

[30] In my view, the two clauses are not parallel in that way. Because agency action includes failure to act, section 706(2) is more general than section 706(1), and section 706 is not divided between failure to act and action of a positive kind. Rather, section 706(1) singles out failure to act because failure to act raises distinctive questions concerning the scope of review, and section 706(2) addresses all agency action as defined by the APA, whether positive or passive.

[31] See Thomas W. Merrill, Article III, Agency Adjudication, and the Origins of the Appellate Review Model of Administrative Law, 111 Colum. L. Rev. 939, 940 (2011) (describing the development of an “appellate review model of the relationship between reviewing courts and agencies” that was “borrowed from the understanding that governs the relationship between appeals courts and trial courts in civil litigation”).

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