When APA Claims Accrue Under Corner Post: Implications for the Life Sciences Industry

On July 1, 2024, the Supreme Court issued a 6-3 opinion in the case of Corner Post, Inc. v. Board of Governors of the Federal Reserve System, holding that an Administrative Procedure Act (APA) claim “accrues” when a plaintiff is injured by final agency action pursuant to the statute of limitations set forth in 28 U.S.C. § 2401(a), even when the government action being challenged occurred much earlier. This decision follows the Supreme Court’s overruling of Chevron deference in Loper Bright Enterprises v. Raimondo, which we discussed in a previous Advisory. Corner Post will have significant implications for the life sciences industry, particularly when considered together with Loper Bright.

Establishing When a Claim Accrues

In Corner Post, the Supreme Court considered a facial challenge to Regulation II, promulgated by the Federal Reserve Board (the Board) in 2011, which set the maximum interchange fee that issuing banks could charge merchants for debit card transactions. Corner Post, a North Dakota truck stop and convenience store that opened in 2018, joined a suit against the Board under the APA in 2021 alleging that Regulation II was unlawful because it permitted higher interchange fees to be charged than were allowed by the underlying statute, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The district court dismissed the case as barred by the statute of limitations under the general federal statute of limitations, 28 U.S.C. § 2401(a), and the Eighth Circuit affirmed, reasoning that “when plaintiffs bring a facial challenge to a final agency action, the right of action accrues, and the limitations period begins to run, upon publication of the regulation.” (Op. 3). Thus, the statute’s six-year statute of limitations period began upon the publication of Regulation II in 2011 and expired in 2017, before Corner Post even opened.

A total of six circuit courts had embraced that position, while one (the Sixth Circuit) had held that the limitations period begins when the plaintiff is injured by the agency action, regardless of when the action became final. The Supreme Court granted certiorari to resolve that circuit split. In a 6-3 decision, the Supreme Court agreed with the “outlier” circuit, holding that under the general federal statute of limitations, an APA claim does not accrue until the plaintiff is injured by final agency action.

Writing for the majority, Justice Barrett held that “Section 2401(a) embodies the plaintiff-centric traditional rule that a statute of limitations begins to run only when the plaintiff has a complete and present cause of action. Because injury, not just finality, is required to sue under the APA, Corner Post’s cause of action was not complete and present until it was injured by Regulation II. Therefore, its suit is not barred by the statute of limitations.” (Op. 10). Chief Justice Roberts and Justices Thomas, Alito, Gorsuch, and Kavanaugh joined the majority. Justice Kavanaugh also wrote a concurring opinion to explain that Corner Post can only obtain relief in this case because the APA authorizes vacatur of agency rules, rejecting the government’s argument that injured parties may only seek injunctions on their own behalf. Justice Jackson, joined by Justices Sotomayor and Kagan, wrote a dissenting opinion.

The majority explained that when Congress enacted 28 U.S.C. § 2401 in 1948, “accrue” had a well-settled meaning, as it does today. Citing to Supreme Court precedent, as well as legal dictionaries, the majority concluded that when Congress used the phrase “right of action first accrues” in the statute, “it was well understood that a claim does not ‘accrue’ as soon as the defendant acts, but only after the plaintiff suffers the injury required to press her claim in court.” (Op. 7-8). The majority noted that its precedents had treated this understanding of “accrual” as the “standard rule for limitations periods” so that, unless Congress says otherwise in the legislation at issue, “a cause of action does not become ‘complete and present’ for limitations purposes until the plaintiff can file suit and obtain relief.” (Op. 8). The majority also noted that 28 U.S.C. § 2401(a) acts as a statute of limitations in that it establishes a “time limit for suing in a civil case, based on the date when the claim accrued,” rather than a statute of repose, which “puts an outer limit on the right to bring a civil action” that is measured “from the date of the last culpable act or omission of the defendant.” (Op. 9).

Justice Jackson, along with Justices Sotomayor and Kagan, fundamentally disagreed. She argued that “the meaning of accrue for the purpose of a statute of limitations is determined by the particular ‘right of action’ at issue,” and in the context of facial administrative law challenges, “the limitations period begins not when a plaintiff is injured, but when a rule is finalized.” (Dissent 6). Justice Jackson also emphasized how consequential this decision is as “[i]n one fell swoop, the Court has effectively eliminated any limitations period for APA lawsuits … [meaning] that, from this day forward, administrative agencies can be sued in perpetuity over every final decision they make.” (Dissent 20). Referencing the Loper Bright decision, Justice Jackson cautioned that “[n]ow, every legal claim conceived of in those last four decades [since the establishment of Chevron deference] — and before — can possibly be brought before courts newly unleashed from the constraints of any such deference” and “[a]ny new objection to any old rule must be entertained and determined de novo by judges who can now apply their own unfettered judgment as to whether the rule should be voided.” (Dissent 23). Justice Jackson warned that 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,” but noted that “Congress still has a chance to address this absurdity and forestall the coming chaos” through statutory amendments. (Dissent 23-24).

Implications for the Life Sciences Industry

Corner Post overruled the majority rule for when APA actions accrued, switching from essentially a statute of repose that allowed just a six-year window from issuance to a rolling six-year period that begins whenever an affected party is first injured. That alone represents an important doctrinal change. It will also be a significant practical change because it extends the period within which affected parties can bring challenges. To be sure, the lawfulness of many regulations will be settled within six years of issuance because challenges frequently commence soon afterwards, and such decisions would presumably be binding on later challenges within that circuit court. Other cases will see circuit court splits with respect to regulations — and even challenges to long-settled regulatory paradigms that the life sciences industry has worked under for decades.

This is particularly the case under Corner Post because of the Court’s decision just a few days earlier in Loper Bright overturning Chevron deference. In combination, the two cases may permit affected parties to challenge regulations upheld as lawful under Chevron. As the Solicitor General stated at argument, Corner Post “w[ill] magnify the effect of” overruling Chevron. According to one study, 60% of regulations were upheld at step two of Chevron, meaning that the court deferred to the agency’s interpretation of an ambiguous statute. Such decisions may be vulnerable to renewed challenges now that the interpretive rule they relied on has been undercut. Although the Court cautioned in Loper Bright that such precedents “are still subject to statutory stare decisis despite our change in interpretive methodology,” Loper Bright Op. at 34, it said only that the reversal of Chevron would not alone justify overruling such precedents. However, if other stare decisis considerations (such as the quality of the decision’s reasoning, the workability of the rule, or reliance on the decision) also would support reconsideration, it may be possible for affected parties to seek to have them overruled.

Although Corner Post provides injured life sciences stakeholders greater opportunity to challenge older regulations and other agency actions, there must still be final agency action for such a challenge to be possible. Corner Post does not alter the finality requirement and, in fact, expressly acknowledges it. An interesting potential corollary of Loper Bright is that potential litigants may now seek to challenge an agency’s own interpretation of what constitutes “final agency action” for purposes of finality and establishing (at least in part) when the statute of limitations begins to run. Critically, after Corner Post and Loper Bright, there may be room to challenge the Food and Drug Administration’s (FDA) long-held view that neither a complete response letter nor a warning letter comprises final agency action.¹

Because long-standing regulations and agency actions can now be challenged, life sciences industry stakeholders should now (1) reconsider previous assessments of the likelihood of a successful challenge — by the company, competitors, or other third parties — for potential vulnerability under Loper Bright and Corner Post, and (2) closely monitor such challenges, particularly in other jurisdictions, and evaluate how to handle conflicts across court decisions. Likewise, careful communication and legal strategies (e.g., filing amicus briefs) will be critical, especially if a successful challenge may materially impact their business and/or standing with regulators. For example, although amended recently, FDA regulations regarding intended use have been a core tenet of FDA regulatory oversight and enforcement for decades. Similarly, FDA regulations defining adequate and well-controlled studies are essential to certain product approval decisions and also play a role in evaluating promotional claims. Other FDA regulatory definitions and standards, such as those in the Orphan Drug Act regulations, may also be vulnerable to challenge, potentially significantly changing the expectations and strategies of current stakeholders. To the extent there are successful challenges to such core FDA regulations, they could significantly impact FDA’s regulatory and enforcement capabilities, as well as how stakeholders conduct their business.

Our team will continue to follow and report on developments in this area. Please contact any author of this Advisory or your regular Arnold & Porter contact if you have questions concerning how the Corner Post or Loper Bright decisions could affect your organization.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.