After Supreme Court Victory Opens Courthouse Doors, Corner Post Prevails on Remand In Challenge to Fed’s 2011 Debit Fee Regulation

The Supreme Court’s decision in Loper Bright was a landmark victory for the rule of law, due process, and the separation of powers. But it was not the only important administrative law decision in the 2023 Term. Following Loper Bright, Corner Post, Inc. v. Board of Governors of the Federal Reserve System opened up the courthouse doors to people newly harmed by old regulations, holding that Corner Post’s 2021 challenge to a 2011 debit-fee regulation known Regulation II was timely because the APA’s six-year statute of limitations starts to run when a party is first harmed by the regulation—as opposed to when the agency promulgates it—and Corner Post didn’t open for business until 2018. Corner Post’s challenge to the Fed’s regulation was then remanded to the district court to decide on the merits. This time, Corner Post also had the benefit of Loper Bright’s instruction that courts must independently interpret statutes without granting deference to an agency.  That appeared to matter.

District Court Ruling

Last week, on remand the district court granted Corner Post’s summary judgment motion, applying Loper Bright and concluding that Regulation II was beyond the agency’s power and thus unlawful. The result may have been different under Chevron. As the district court put it, “[w]hen this litigation began roughly fourteen years ago, the Parties were subject to the mire of Chevron deference.” Indeed, as the district court observed, the D.C. Circuit found in related litigation that the Fed’s debit-fee regulation rested on a “reasonable” interpretation of the statute that passed muster under Chevron.

But as the district court emphasized, Loper Bright “reinstituted courts’ proper role in statutory interpretation.” Quoting Marbury, the court added: “Courts—not agencies—emphatically and completely fill the role of saying ‘what the law is.’” And after Loper Bright, “[p]urported statutory ambiguities no longer change the legal calculus for how courts ought to review agency action.” The opinion’s discussion of Loper Bright’s impact on how courts interpret statutes and restored the judicial role under Article III to independently interpret the law continued. Citing and quoting Loper Bright, the district court observed that “[r]egardless of whether intentionality or lapse of mind created the supposed ambiguity, only courts hold the expertise and constitutional permission to resolve it. Accordingly, this Court—and not the Board—will determine the ‘best’ interpretation of the Durbin Amendment because courts hold the monopoly ‘[i]n the business of statutory interpretation’ and delineate the boundaries of an agency’s authority.”

Against this backdrop, the district court rejected the Fed’s argument that “Congress drafted the Durbin Amendment with the intention that the Board’s statutory interpretation would be reviewed deferentially,” agreeing with Corner Post that this was simply an attempt at “repackaging the defunct-Chevron deference under a different name.” It found that while Congress granted the Fed some discretion to regulate debit-card fees, the Durbin Amendment was not a “blank check” allowing the Fed to set whatever fees it wanted, rejecting the agency’s appeals to the statute’s purpose to justify its power claim. As the district court described it, “[t]he Durbin Amendment is akin to a funnel—it starts with a broad purpose and narrows to particular boundaries for the Board’s actions.” And the broad general and introductory statutory language is “not the Board’s permission slip to draft regulations with presumed deferential review.” Applying traditional canons of construction and independently analyzing the statute’s plain language and structure, the district court concluded that Regulation II exceeded the Fed’s authority under the Durbin Amendment and vacated it, finding it unnecessary to address Corner Post’s major questions and arbitrary and capricious arguments and staying its order pending appeal.

Reforms Making an Impact

Corner Post’s saga and recent victory illustrates that after Loper Bright and Corner Post ultra vires regulations reflecting agency statutory interpretations that could, at best, only be defended as “reasonable” under the now-discredited Chevron regime are not immune from judicial scrutiny merely because they have been on the books for a long time. Together, Loper Bright and Corner Post provide everyone harmed by stale regulations they believe to be unlawful with a meaningful pathway to get relief without first having to violate those regulations and risk an enforcement action or filing a rulemaking petition.