Supreme Court Rulings Work Both Ways

The U.S. Supreme Court’s rulings on federal regulations would be a boon to all credit unions that oppose federal rules that interfere with their business. The problem is that some federal rules are a boon to credit union business.

That nettlesome reality was highlighted Monday in a case brought by a group of retailers challenging a rule on interchange fees.

For example, the America’s Credit Unions trade group has opposed retailers’ attempts to lower interchange fees because credit unions get a cut of them from Visa and MasterCard. On its face, the Supreme Court’s decision keeps alive retailers’ attempts to lower the fees by blocking the rule.

On the other hand, the trade group and its allies can challenge rules it doesn’t like forever.

In the 6-3 ruling, the court said the clock on the six-year statute of limitation for federal rules should not start after it is approved, but only after an individual plaintiff was first harmed by a rule they are challenging. A rule is never beyond appeal until the last litigant is born.

Carrie Hunt, chief advocacy officer for America’s Credit Unions, said the ruling will mean industries will be vying against one another by filing lawsuits based on changing business circumstances. It adds to the uncertainty created by the 6-3 ruling June 28 in the Loper Bright case, which overturned the 1984 Chevron case doctrine that empowered federal regulators to interpret unclear laws.

“Between the rulings in Chevron and Corner Post v. Fed, the Supreme Court has created a wild, wild west for regulations,” she said. “Prior to this decision, there were limitations in place, but now most credit unions and financial institutions won’t have the certainty they rely on to run their operations.”

“The merchants may come to regret this ruling because financial institutions have just as much, if not more ground to stand on to sue, due to the unstopped increase in fraud. Fraud merchants are not stopping,” Hunt said.

Justice Ketanji Brown Jackson, writing the dissent, said Monday’s ruling on the statute of limitations compounds the damage caused by the conservative majority’s ruling overturning the Chevron doctrine.

“A fixed statute of limitations, running from the agency’s action, was one barrier to the chaotic upending of settled agency rules; the requirement that deference be given to an agency’s reasonable interpretations concerning its statutory authority to issue rules was another,” Jackson wrote.

“The Court has now eliminated both,” she wrote.

“At the end of a momentous term, this much is clear: The tsunami of lawsuits against agencies that the Court’s holdings in this case and Loper Bright have authorized has the potential to devastate the functioning of the Federal Government.”

The rule springs from the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Among other things, Congress required the Federal Reserve Board to set “standards for assessing whether the amount of any interchange transaction fee … is reasonable and proportional to the cost incurred by the issuer with respect to the transaction.”

The Fed finalized a rule in 2011 that sets a maximum interchange fee of 21 cents per transaction plus 0.05% of the transaction’s value.

The group of retail-industry trade associations and individual retailers challenged the rule four months later on the grounds it allows payment networks to charge higher fees than the statute permits. Those groups lost their case, and the statute of limitations expired in 2017.

But the retailers took the novel approach of adding a new plaintiff to their suit in 2021: Corner Post, a North Dakota truck stop that opened in 2018, a year after the statute of limitations expired. Arguing the same points, the suit was dismissed by the U.S. District Court in Washington, D.C., this time because the statute of limitations had passed. The Eighth Circuit Court of Appeals agreed.

The case was taken up by the Supreme Court, which heard arguments in February.

Putting aside the merits of the interchange fee limits, the issue raised by the Supreme Court’s decision is the ramifications of the uncertainty it creates.

The majority said it won’t really matter so much.

Writing for the majority, Justice Amy Coney Barrett said, “The opportunity to challenge agency action does not mean that new plaintiffs will always win or that courts and agencies will need to expend significant resources to address each new suit. If no other authority upholding the agency action is persuasive, the court may have more work to do, but there is all the more reason for it to consider the merits of the newcomer’s challenge.”

Barrett said major regulations are typically challenged immediately, and “courts entertaining later challenges often will be able to rely on binding Supreme Court or circuit precedent.”

The dissent by justices Elena Kagan, Sonia Sotomayor and Jackson said the ruling will “wreak havoc” on federal government and allow “well-heeled litigants to game the system by creating new entities or finding new plaintiffs whenever they blow past the statutory deadline.”

“From this day forward, administrative agencies can be sued in perpetuity over every final decision they make,” she wrote.

Jackson said the ruling also overlooks the impact on business planning.

Previously, the passing of the statute of limitations meant people could understand the regulatory framework they must operate within.

“They make investments because of it. They change their practices because of it. They enter contracts in light of it. They may not like the rule, but they live and work with it, because that is what the Rule of Law requires,” Jackson wrote.

“It is profoundly destabilizing — and also acutely unfair — to permit newcomers to bring legal challenges that can overturn settled regulations long after the rest of the competitive marketplace has adapted itself to the regulatory environment.”

Barrett said the dissent’s argument that the ruling will harm the functioning of the federal government “is baffling — indeed, bizarre — in a case about a statute of limitations.”

“Perhaps the dissent believes that the Code of Federal Regulations is full of substantively illegal regulations vulnerable to meritorious challenges; or perhaps it believes that meritless challenges will flood federal courts that are too incompetent to reject them,” Barret wrote. “We have more confidence in both the Executive Branch and the Judiciary.”

Liz Zelnick with the Accountable.US 501(c)3 consumer rights organization said the Corner Post decision gives corporations more power to interfere with regulations that help American families.

“The reckless and irresponsible Corner Post decision is every bit as bad as the Chevron decision, further gutting checks and balances and giving big corporations more control over the lives of everyday Americans,” Zelnick said.