Key Points

• In Corner Post, the U.S. Supreme Court held that the six-year statute of limitations for challenging an agency’s regulation begins when the action injures the challenger, rather than when the agency finalized the regulation, even if the agency finalized the regulation more than six years before the injury.
• Changing when to bring a facial challenge to void a regulation under the Administrative Procedure Act will significantly affect environmental regulations.
• Future challenges to a federal agency actions will be assessed under the Supreme Court’s new Loper Bright standard, which overrules “Chevron deference” and requires that courts exercise independent judgment when interpreting statutes rather than deferring to an agency’s interpretation.
• The Loper Bright decision will not directly affect whether and how courts defer to California agencies’ interpretations of California statutes. Those interpretations of state law remain subject to a similar but different standard referred to as “Yamaha deference”.

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Corner Post Changes When to Challenge Federal Regulations

The U.S. Supreme Court recently held in Corner Post, Inc. v. Board of Governors of the Federal Reserve System that the statute of limitations period for challenging an agency’s regulation begins when the regulation injures the challenger, rather than when the agency finalized its regulation. This new ruling opens the door for lawsuits bringing facial challenges to regulations that, until recently, were time-barred under the Administrative Procedures Act (APA).

The regulation in Corner Post was a 2011 rule from the Board of Federal Reserve System (Board) that had capped fees merchants paid to banks each time a debit card is used. Ten years later, two trade associations sued the Board under the APA to void the rule, which is called a “facial challenge.” The Board moved to dismiss the case, arguing that the APA’s six-year statute of limitations barred the action. In response, the trade associations added Corner Post, a truck stop that began operating in 2018. The district court and Eighth Circuit, however, held that the six-year statute of limitations began to run when the Board issued the rule in 2011. Since the trade association sued after 2017, the courts held the challenge was time barred.

But the Supreme Court disagreed. The Court found that the APA’s six-year statute of limitations does not begin to run until the rule injures the party challenging the rule. The opinion distinguishes between statutes of limitation (which begin to run when a plaintiff is injured) and statutes of repose (which begin to run on the agency’s last wrongful act). Since regulatory challenges under the APA involve a statute of limitations, the time to bring a regulatory challenge begins to run when the regulation injures the challenger—not when the agency finalizes the regulation. This ruling diverged from and overturns cases in the Ninth Circuit (which includes California) that challengers must bring facial challenges to a regulation within six years of when the agency finalized the regulation.

Though Corner Post involved a financial regulation, its holding will significantly affect federal environmental regulations. Regulations under the Endangered Species Act, for instance, may list protected species or designate areas as critical habitat that may not injure a party until many years after the regulation goes into effect. So too for regulations designating certain aquatic features as jurisdictional waters or authorizing certain permits under the Clean Water Act, and toxicology reviews led by the Environmental Protection Agency under the Clean Air Act. Under Corner Post, the affected parties may bring a facial challenge to the federal regulations though the federal agency finalized the regulation more than six years ago.

Loper Bright Changes Whether Federal Agencies Enjoy Deference to Statutory Interpretations

Challenges under Corner Post may work in tandem with another recent U.S. Supreme Court decision, Loper Bright Enterprises v. Raimondo. The Court in Loper Bright held that courts must exercise independent judgment when interpreting federal statutes, particularly when an agency has interpreted the statute governing its authority.

This decision overrules a 1984 decision, Chevron U.S.A. Inc. v. Natural Resources Defense Council, which required that courts defer to the agency’s reasonable interpretation of an ambiguous statute (known as “Chevron deference”). Under Loper Bright, a court may still consider an agency's reasonable interpretation of an ambiguous statute. And a court may give an agency’s interpretation more respect (or deference) when that interpretation reflects the agency’s expertise. The extent of that respect can vary, depending on when the agency interprets the statute or whether its interpretation is consistent over time, among other factors that may persuade a court. But in the end, as the Supreme Court explained, courts must interpret the statute itself. It cannot, as Chevron required, automatically defer to the agency’s interpretation.

Corner Post and Loper Bright Change Federal Law But Not California Law

While the Corner Post and Loper Bright decisions alter the landscape for challenging federal agency decisions, California law remains unchanged. The California Supreme Court, for instance, provided guidance 25 years ago for deciding whether and how courts defer to California agencies’ interpretations of California law. As the U.S. Supreme Court did in Loper Bright, the California Supreme Court in Yamaha v. State Board of Equalization explained that courts exercise independent judgment when interpreting ambiguous statutes. Courts may defer to agencies’ interpretations of those statutes, however, under certain circumstances. As in Loper Bright, California courts under Yamaha consider the agency’s expertise, and whether their interpretations are consistent over time, among other factors. But while Loper Bright is similar to this approach for agency deference, Loper Bright does not control whether and how courts should defer to California agencies’ interpretations of law.

These recent Supreme Court cases significantly change federal administrative law, particularly for environmental regulations. But as California’s robust state laws separately regulate the environment, the effects from these cases in California may be somewhat muted compared to other states. If you have any questions or concerns about whether or how these cases affect you, please contact our Environmental Law attorneys.