Wednesday, July 3, 2024
Although the statute of limitations for lawsuits involving federal regulations, as spelled out in the Administrative Procedure Act (APA), is six years, historically there has been a judicial split over when the limitations period should begin, with a majority ruling that it begins on the date of enactment, explained Matthew Luciani of Global Legal Law Firm.
In 2014 a group of merchants sued the Fed arguing the debit interchange cap it put in place to carry out the Durbin Amendment to the Dodd Frank Act was too high. But when put before the Supreme Court the High Court declined to take up the case.
Then, in 2018, a company opened a truck stop and convenience store in North Dakota. Three years later, in 2021, the company joined a lawsuit arguing the debit cap was unlawful. That lawsuit (Corner Post Inc. v. Board of Governors of the Federal Reserve) was dismissed by a district court in North Dakota because the six-year statute of limitations had expired. The district court's stance was upheld by a federal appeals court in 2022.
On July 1, 2024, however, the Supreme Court disagreed with those lower courts and sent the case back to be decided by a lower court. Its reasoning was that the limitations period does not begin to accrue until a company is injured by a regulation.
The Fed capped debit card interchange in 2011 at 21 cents per transaction plus 5 basis points (0.05 percent). Last year, the Fed announced it would lower the cap by about 30 percent.
While that move has been controversial, especially among banks, the Supreme Court's ruling lends credence to the Fed's decision to lower the cap, stated Matthew Luciani of Global Legal Law Firm.
"This is a significant holding because the statute of limitations would have previously expired based on the date of enactment," Luciani said. While other existing businesses may have been harmed by the Fed-set debit interchange cap for purposes of the APA, the statute of limitations for suing the Fed commenced once the regulation took effect. But a new business that opened and began accepting debit cards after enactment does not begin to incur injuries until the merchant opens for business, and that's when the statute of limitations clock starts for that business, Luciani explained.
"Logically, the limitations period makes sense because the business has not been injured by the regulation until it begins paying interchange fees," Luciani said. But it is significant because as the Supreme Court noted in its ruling "merchants who lose customers if they decline debit cards have little choice but to pay whatever the networks charged," he said. "In other words, the business likely knew of the damages it was about to incur upon opening and it opened for business anyway."
Not surprisingly, merchant groups praised the court's decision. "The Federal Reserve set the cap far higher than intended by Congress, and merchants like Corner Post have paid millions of dollars too much as a result," Stephanie Martz, chief administrative officer and general counsel at the National Retail Federation, said in a statement. "The harm is ongoing and hasn't been changed by the passage of time."
Luciani said the effects of the SCOTUS decision "could be sweeping because it could open the hypothetical 'floodgates' of litigation – a point that was raised in the dissenting opinion penned by Justices Ketanji Brown Jackson, Elena Kagan and Sonia Sotomayor. "[I]n one fell swoop, the Court has effectively eliminated any limitations period for APA lawsuits" the three justices wrote in their dissenting opinion. 
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