Another SCOTUS ruling cuts Big Government down to size (Part I)

The Supreme Court’s 6-3 ruling in favor of Corner Post last week wasn’t, like many SCOTUS rulings, one that came down on one side or other of the political divide. It was a ruling that came down against government in general, or, as The Wall Street Journal's editorial opinion piece put it: “The little guy has scored another big victory at the Supreme Court against the administrative state.”

The little guy in the Corner Post ruling was a convenience store in North Dakota, but it was also, potentially, all the little guys across the country who find themselves overwhelmed by government overreach. The administrative state in the ruling was embodied in the Federal Reserve but one of its most outspoken spokesmen in recent times is perhaps Nancy Pelosi, who famously argued, in a recent debate in the UK, against “populism,” claiming that the views of “little guys” should be molded by the “elite,” which, in her mind, is a force for the good.

Too bad, little guy, you can’t do anything about it?

The SCOTUS ruling on July 1 overturned a previous ruling issued by the Eighth Circuit which stated flatly that Corner Post did not have the right to challenge one of the Federal Reserve’s regulations because the six-year statute of limitations applied to it, and six years had already passed from the publication of that regulation:

... this court concludes that . . . [Petitioner’s] right of action accrue[d] . . . upon publication of the regulation...

The regulation concerns “swipe fees” on debit card transactions and was passed in 2011. Corner Post opened for business in 2018 and therefore, according to the Eighth Circuit’s interpretation, was not entitled to challenge it.

Corner Post appealed, arguing that the provisions of the Administrative Procedure Act (APA) allow it to bring a suit, as the clock on the six-year limit to challenging a regulation only starts to tick when the plaintiff is damaged by it. 

As Chief Justice John Roberts observed during oral hearings in the case several months ago, Corner Post’s argument was that a “challenge as to how everything is structured [can be] brought 10 years later, 20 years later,” whereas the Federal Reserve’s argument was that if you’re “an individual or an entity that is harmed by something the government is doing, you’re saying, well, that’s just too bad, you can’t do anything about it because other people had six years.”

Should Congress protect federal government from the ‘little guy’?

Roberts eventually joined the majority opinion in favor of Corner Post. In her dissent, Justice Ketanji Brown Jackson wrote vehemently against the “havoc” that the ruling was likely to wreak on both government and business:

The flawed reasoning and far-reaching results of the Court's ruling in this case are staggering ... the Court wreaks havoc on Government agencies, businesses, and society at large ... After today, even the most well-settled agency regulations can be placed on the chopping block.

As Attorney Michael J. Showalter, writing for The Federalist Society, makes clear, this view of the ruling is skewed. The six-year limit on bringing a suit still holds, but it has now been clarified as a limit from the viewpoint of the plaintiff, not the defendant. Unfortunately for the government, this means that certain regulations that affect the lives of real people on an ongoing basis can always be challenged (within six years of harm caused) by those real people who are affected by the regulations.

What these [dissenting judges] really mean is that there effectively is no repose for the defendant.
That is indeed true—because Section 2401(a) is not a statute of repose.

Showalter distinguishes a “statute of limitations,” which looks at a suit from the plaintiff’s vantage point, from a “statute of repose,” which is designed to give any potential defendant the reassurance, after the set number of years have passed, that they will no longer face legal challenges. 

When deciding between a statute of limitations and a statute of repose, then, a legislature must make a tradeoff. The legislature must decide which is the lesser evil for a given cause of action; it cannot avoid both.

While some government regulations do have a cut-off date for filing suit six years after the regulation was made, regardless of how this impacts businesses established later, in the Corner Post case even the leading commentator defending the government position, Professor Susan Morse, conceded that according to the Federal Reserve’s position, 

... accrual is triggered by an action of the defendant, not a claim of the plaintiff [which is] contrary to the plaintiff-focused approach [usually] taken when interpreting [such regulations].

That is to say, while acknowledging that, traditionally, the right to take legal action is understood as beginning when someone is harmed, the Federal Reserve still tried to claim that the Court should step in and ensure that the government is protected from such lawsuits. 

175,000 pages of regulations the ‘little guy’ can’t challenge?

Why should the Court do such a thing? Because, said the Federal Reserve Board of Governors, adopting Corner Post’s interpretation of the APA would make it so much harder for [Big] government to function:

... [it] would substantially expand the class of potential challengers [to government regulations and] increase the burdens on agencies and courts ... [and] leave defendants subject indefinitely to actions for the wrong done.

As Showalter points out, if Congress had been concerned about all of that, it could have passed legislation to protect defendants from being “subject indefinitely to actions” for wrongs done. The fact that it did not suggests that Congress was more concerned with those harmed by wrongs done, and less concerned with the welfare of the wrongdoers.

Indeed, the APA was already being described as a “bill of rights” for “the hundreds of thousands of Americans whose affairs are controlled or regulated by federal agencies” decades ago (as expressed by Sen. McCarran in 1946).

Showalter also notes that the traditional understanding of when the six-year clock starts ticking dates back many years, to when the number of government regulations was far smaller and there was correspondingly less likelihood of little guys being harmed by them:

The Code of Federal Regulations contained 18,000 pages near the close of the New Deal in 1938, but now contains more than 175,000 pages. 

Barrett: Judiciary can cope even with a ‘tsunami’ of lawsuits

Understandably, government agencies may feel a little daunted by the prospect of little guys filing lawsuits on over 175,000 pages of regulations. For Justice Jackson, this was one of the central reasons behind her dissent:

The fallout will not stop with new challenges to old rules involving the most contentious issues of today. Any established government regulation about any issue—say, workplace safety, toxic waste, or consumer protection—can now be attacked by any new regulated entity within six years of the entity’s formation.

Justice Barrett, writing for the majority, dismissed Jackson’s argument, pointing out that the dissent was essentially saying either that many regulations were illegal and therefore vulnerable to lawsuits — or that judges were not competent enough to weed out meritless claims (or both):

The dissent ... warns that today’s opinion will “devastate the functioning of the Federal Government.” This claim is baffling—indeed, bizarre—in a case about a statute of limitations. The Solicitor General, whose mandate is to protect the interests of the Federal Government, comes nowhere close to suggesting that a plaintiff-centric interpretation of §2401(a) spells the end of the United States as we know it.
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. We have more confidence in both the Executive Branch and the Judiciary.

As we will see in Part II of this article, tsunamis come in various shapes and forms. From the government's vantage point, tidal waves unleashed by government wash away problems and usher in truth, justice, and the American way. Those unleashed by "little guys," however, are viewed by government officials as inherently malign.

To be continued...