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.
Footnote
1. Cf 21 C.F.R. § 10.45(d) (specifying when certain final decisions by the FDA Commissioner constitute final agency action (e.g., on a Citizen Petition)).
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