Notice & Comment

Too Late in Corner Post: Why the Supreme Court Should Time Bar this Term’s “Sleeper” Administrative Procedure Case, by Susan C. Morse

A North Dakota truck stop opened its doors in 2018. It pays debit card  “swipe fees” to banks at the maximum rate set by Federal Reserve regulations promulgated in 2011. May it challenge the regulations under the Administrative Procedure Act, or APA, as (1) arbitrary and capricious and (2) ultra vires, or in excess of statutory authority? Or does the six-year limitations period of 28 U.S.C. § 2401(a) time bar the claim? This is the issue in Corner Post, an administrative law “sleeper case” argued at the Supreme Court on February 20 and awaiting a decision this Term. (John Harrison’s recent JREG post considers another angle in Corner Post: the universal remedy of vacatur.)

If the Court allows the truck stop’s claim to proceed, new legal avenues to challenge administration action – such as the possible weakening of Chevron deference in the pending Loper Bright case – would be available for decades-old regulations. As Justice John Roberts said at oral argument, Corner Post’s rule would open regulations to challenges “20 years later” and require courts to “create the universe” of rules “repeatedly,” as opposed to having the certainty of known “ground rules.” As Justice Ketanji Jackson suggested, “finality principles should be playing a significant role” in Corner Post. A Corner Post win would cause a serious disturbance in the force of countless legal rules that countless regulated parties rely on. In Corner Post itself, for instance, the D.C. Circuit decided in 2014 that the Federal Reserve’s debit card swipe fee regulation was within the authority of the statute. On the other hand, if the Court blocks the truck stop’s claim, then Corner Post’s ability to challenge the Federal Reserve reg will be much more limited. 

Both the arbitrary and capricious claim and the ultra vires claim in Corner Post are facial claims, which means that they are pre-enforcement challenges to the validity of an administrative rule, without any direct application of the rule by the Fed to the plaintiff’s specific case. The Court should time bar both claims, consistent with precedent, text, and policy. (My recent paper, Old Regs: The Default Six-Year Time Bar for Administrative Procedure Claims further explores the argument for earlier limitations period accrual.)

Corner Post got this case to the Supreme Court by alleging a circuit split between Herr v. U.S. Forest Service – a 2015 Sixth Circuit case authored by Judge Jeffrey Sutton – and the rest of the case law. In Herr, the court refused to time-bar a claim that a Forest Service order violated state property rights where the claim arose more than six years after the order, but less than six years after the plaintiff acquired standing. 

But as Corner Post acknowledged at oral argument in response to questioning from Justice Clarence Thomas, neither Herr nor any other decided case offers the general rule that the six-year limitations period accrues for APA claims when a plaintiff acquires standing. Judge Sutton even wrote in Herr that a “classic example” of accrual of an APA claim at the time of promulgation is when “an agency . . . issues a rule without following all requirements of notice-and-comment rulemaking.” Corner Post made a similar concession in its reply brief, writing that “procedural attacks mentioned in the government’s cases [such as notice-and-comment violations] will likely still be barred six years after a rule becomes final.” This is consistent with case law, including examples from the Second, Sixth, and Federal Circuits.

Corner Post argues that its arbitrary and capricious and ultra vires claims are different from earlier-accruing notice-and-comment claims mentioned by Judge Sutton and conceded in Corner Post’s briefing. But it is hard to distinguish the rationale under 28 USC § 2401(a). Existing case law does not do so. The Fifth Circuit recently time-barred a facial arbitrary and capricious administrative procedure claim leveled against the FDA’s 2000 approval of mifepristone. Federal appellate decisions have also blocked facial ultra vires claims, including in the Fourth and Federal Circuits.

Corner Post says that this case law misinterprets the following language in 28 USC § 2401(a): “[E]very 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.” Corner Post argues, citing and quoting a Supreme Court case about a fraud claim against an investment advisor, that “first accrues” means “when the plaintiff has a complete and present cause of action.” Otherwise, says Corner Post, the limitations period would be measured by reference to something the defendant – the government – has done. And that, says Corner Post, would be a statute of repose, while 28 USC § 2401(a) is generally considered a statute of limitations. 

Corner Post’s textual argument on behalf of later accrual is backed by John Kendrick in his amicus brief as well as by Aditya Bamzai and John Duffy in theirs. Their argument emphasizes a historical meaning of “first accrues” in effect when the predecessor of 28 USC § 2401(a) became law in 1887, in conjunction with the Little Tucker Act, which allows some contract suits against the federal government. In a contract suit, a limitations period generally does begin to run, or accrue, at the first moment the plaintiff can sue. 

But as the Bamzai/Duffy brief explains, the 1948 recodification of 28 U.S.C. § 2401(a) deleted the phrase “under this act,” which had previously limited the limitations period to Little Tucker Act claims. The limitations period was thereby transformed into a “catch-all” or default limitations period for suits against the federal government (subject to sovereign immunity limitations, which were later lifted for APA claims). Since Congress expanded 28 USC § 2401(a) so that it is no longer limited to Little Tucker Act claims, basing the understanding of “first accrues” on the narrower understanding of that language in contract cases no longer makes sense. (Michael Buschbacher and James Conde offer a different take on the Little Tucker Act and 28 U.S.C. § 2401(a) here.)

Moreover, as Justice Elena Kagan pointed out at oral argument, one does not have to read “first accrues” to mean the moment when the plaintiff has standing. It could also mean the moment when all the elements of the claim are complete and there is a “full cause of action that can be brought.” The moment of accrual need not be specific to a plaintiff, as the cause of action may not be confined to that plaintiff, but may be common to many plaintiffs. For the facial claims at issue in Corner Post, the moment when all the elements of the claim are complete and a “full cause of action can be brought” is the moment of promulgation. At that moment, in general, APA-based challenges are ready to be pursued. They wait unchanged for an eligible plaintiff to come along and raise them. 

Corner Post’s reply brief concession that earlier accrual applies for a notice-and-comment claim only makes sense if such a claim “first accrues” when the regulation is promulgated. And that means that for such a claim, Justice Kagan’s interpretation of the text of the statute must be right – the claim “first accrues” at the moment of promulgation because that is the moment when all the elements of the notice-and-comment claim are complete and a “full cause of action … can be brought.”

Corner Post tries to distinguish notice-and-comment claims by arguing that the aggrieved parties in the case of notice-and-comment claims are the commenters whose comments are ignored, or the would-be commenters whose comments could not be made. But this is not how the law works. The APA allows plaintiffs who object to a regulation and who are otherwise eligible to sue (for instance, based on standing and timeliness), to challenge a regulation on the ground that procedure such as notice-and-comment was faulty. Challengers are not limited to commenters or would-be commenters.

Nothing limits the earlier-accrual textual interpretation to the notice-and-comment claims that Corner Post concedes. One can read the text to mean that the claim “first accrues” at promulgation as much for an arbitrary and capricious claim and a facial ultra vires claim as for a notice-and-comment claim. In each case, in general, all elements of the claim are complete and a full cause of action can be brought when the regulation is promulgated. 

The time of promulgation is also when the injury occurs, because the injury is the harm caused to the public process required by the law of administrative procedure. The point of administrative procedure is to provide members of the public an opportunity to participate in administrative decision making, for instance through notice-and-comment informal rulemaking procedure. When there is an administrative procedure harm, it is suffered by the public generally. For example, in Herr, Judge Sutton justified the result of accrual at promulgation for notice-and-comment claims by explaining that such a violation is a “denial of process to the public at large.” At oral argument in Corner Post, Justice Sonia Sotomayor added that a regulated party organized after promulgation presumably has not suffered injury as a result of the regulation, since the person would have gone “into a business knowing its structure.”

Starting accrual at promulgation for procedural lineage claims about notice-and-comment or arbitrary and capricious process flaws also squares with the way that other public procedural claims are dealt with. Only narrow avenues exist to challenge election results under state law, for instance. And it’s practically impossible to challenge a procedural footfault (such as a failure to comply with the Origination Clause) in Congressional legislative procedure.

There is more to say about ultra vires claims because some 28 USC § 2401(a) cases treat these in-excess-of-statutory-authority claims differently and allow later accrual. However, these cases involve as-applied claims, not facial claims. In contrast to a facial claim, an as-applied claim arises after an agency enforces a regulation against a person. The case law has long held, in a line of cases starting with the Ninth Circuit’s 1991 Wind River decision, that in such an as-applied claim, a plaintiff can object to a regulation on ultra vires grounds. In an as-applied case, the limitations period for a claim about the “procedural lineage” of a regulation accrues earlier, at promulgation – just as it does for a facial claim. But an ultra vires as-applied claim accrues later, with the agency enforcement action. This later-accrual rule for ultra vires as-applied claims is an exception to the usual rule of earlier accrual of the six-year limitations period.

When Does 28 U.S.C. § 2401(a) Accrue for APA Challenges to Regulations?

Facial ChallengeAs-Applied Challenge
Procedural ChallengeEARLY: When the regulation is promulgated.  EARLY: When the regulation is promulgated.    
Ultra vires ChallengeEARLY: When the regulation is promulgated.    LATER: When the agency enforces the regulation.

The as-applied ultra vires exception established in the case law could explain the Herr case. This is the Judge Sutton-authored Sixth Circuit case that Corner Post says created a circuit split. A compelling way to understand Herr is as an as-applied ultra vires challenge, not a facial challenge – which would mean that there really is no circuit split. The Sixth Circuit explained in Herr that the Forest Service “enforced” the regulations against the Herrs in 2013, based on a letter from the Forest Service to the Herrs stating that it intended to prohibit motorboats on the lake where the Herrs owned property. The court wrote that the regulations “exceed the Forest Service’s power as applied to the Herrs” because the federal authorizing statute did not allow the Forest Service regulations’ interference with the Herrs’ private state property rights. One might counter that technically the Forest Service’s letter was not a final agency enforcement action, but the court did not consider this point in the Herr case.

Why the distinction between ultra vires and procedural lineage cases in the as-applied context? One reason is that the ultra vires claim gets at the concern that the authorizing substantive statute continues to constrain the agency when it applies the law. In contrast, for procedural lineage claims, the relevant statute – the Administrative Procedure Act – governs actions that the agency takes when it promulgates the regulation. There are no procedural lineage actions that the agency can take after the regulation is promulgated, and thus no set of later agency actions can produce a moment for later accrual to begin.

The hardest question posed by Corner Post relates to the facial ultra vires claims (even though the D.C. Circuit has rejected this challenge to the same Federal Reserve regulation). It seems important that Corner Post’s treatment under the regulation squares with the authorizing statute. As to that claim, at least, why shouldn’t Corner Post have its day in court? 

Here are two reasons why Corner Post should not be able to pursue even the ultra vires claim as presented in the case. The first reason is the statutory text. Because a facial claim is a pre-enforcement claim, the specifics of the plaintiff’s experience do not modify the claim. All of the elements of a facial ultra vires claim are present when the regulation is promulgated – consistent with Justice Kagan’s description, and consistent with Corner Post’s concession for notice-and-comment claims. Under the text of the statute, the claim “first accrued” in 2011, and the six-year time bar expired before Corner Post paid its first swipe fee, since it opened its doors in 2018.

The second reason is that there actually is a way for Corner Post to get its ultra vires claim to court even if the Supreme Court correctly holds that its facial ultra vires claim is time-barred. The way is to use the exception provided by the case law. That is, Corner Post could pursue an as-applied ultra vires claim.

The as-applied claim is difficult to see at first, since the maximum debit card fees authorized by the Fed’s regulation are not imposed directly by the Fed on Corner Post. Rather, various banks charge Corner Post these swipe fees. But if Corner Post shows that the Fed’s regulation causes the banks to charge the maximum authorized fees (and thus to cause the bank to (allegedly) violate the authorizing statute) Corner Post should be able to challenge the validity of the regulation. This follows the idea of third-party causation and standing developed in Allen v. Wright. A model for this argument is provided by Title IX litigation in which male athletes challenged Department of Education “substantial proportionality” guidance that allegedly caused universities to cut men’s athletic programs. Athlete plaintiffs were allowed to sue the Department of Education when the plaintiffs showed a causal link between the regulation and a university’s actions (and where they also sued the university). A causal link between the Fed’s regulation and the bank’s fees could probably be shown here, too.

Corner Post’s case before the Supreme Court, though, is not about the as-applied ultra vires exception to earlier accrual. Instead, it reaches too far by claiming that new plaintiffs can bring facial challenges to old regulations forever. But the statutory text does not produce that result, and it’s at odds with precedent and policy, too. The Court should affirm the Eighth Circuit’s decision in Corner Post.

Susan C. Morse is a Sr. Professor in Civil Jurisprudence and the Associate Dean for Academic Affairs at the University of Texas at Austin.

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