Sometimes, law seems to make no sense. Why, for example, would the Supreme Court – busy these days with huge constitutional controversy — take an hour or so to listen to the legal gripe of a truck stop that sells gas and snacks beside the highway in Watford City, North Dakota (population 5,293)?
The seeming incongruity runs deeper: lower courts told the truck stop that the time it was allowed to sue the government ran out years before it even opened for business – in a dispute about its customers’ use of debit cards, a mere speck of purchases in the $4.9 trillion in Americans’ annual buying with those cards. And tiny Corner Post, Inc., is suing the giant Federal Reserve (“the Fed”), powerful overseer of the nation’s credit and monetary system.
This is truly a David vs. Goliath fight, and one can say that it is a nice illustration of the point that nobody is too small to try to take their case “all the way to the Supreme Court.” This case will be heard when the Justices return to the bench Tuesday; Monday was a legal holiday.
Tuesday’s first hearing: Corner Post, Inc., v. Board of Governors, Federal Reserve System The hearing begins at 10 a.m.
Background: A basic legal proposition, dating back to ancient Greece, is that someone accused of wrongdoing has a right not to have the dispute linger so long that memories fade or evidence is lost, compromising the ability to defend one’s self. The proposition is embodied in statutes of limitation – the time allowed to file a lawsuit.
As this case illustrates, it benefits the great (the Fed) as well as the small. But the case also shows how it can work a potential injustice (to a roadside store in small-town America).
This case also involves another legal proposition, dating back in America to 1793: the federal courts are not allowed to decide cases unless someone has suffered a genuine legal injury, some breach of their rights. In this case, Corner Post is claiming that it was injured by the Fed, but was barred from suing to protect itself by the way lower courts applied the time to sue.
Corner Post began operations in 2018. Seven years before, the Fed – carrying out a law passed by Congress in 2010 — adopted a rule that changed the way banks that issue debit cards charge fees to merchants whose customers use those cards to buy at retail (debit card purchases are paid for by taking money directly from a customer’s bank account, the same as getting cash from an ATM; by contrast, credit card purchases are added to a user’s debt to the card issuer, with payments due monthly).
Debit cards are very popular among American consumers. They use them 80 billion times a year, to buy things and to withdraw money from ATMs.
This case is about the fees that stores and others that accept debit cards for purchases pay to the banks that issued the cards. The fees are supposed to cover the cost of transferring money from the customer’s bank account to the merchant’s bank account.
Before 2010, the size of those transfer fees was set by Visa, Mastercard and other credit networks. The result was high transfer fees. In 2010, Congress stepped in, passing a law requiring the Federal Reserve to regulate those fees for debit card transactions with large banks. The law told the Fed to set “reasonable” fees, tied to the card-issuing banks’ cost of transfers.
Ultimately, the Fed sent the fee at 21 cents on every debit-card transaction – compared to the banks’ actual cost of 3.6 to 5 cents per transaction, according to critics of the final rule.
Claiming that the Fed rule produced huge profits for the banks, Corner Post joined in a challenge already pending in federal court by retail business groups in North Dakota. (Those groups have dropped out of the case, and only Corner Post took the dispute to the Supreme Court – giving the case a quite sympathetic opponent of the Fed rule.)
The lawsuit claimed that the rule violated the law passed by Congress because, the lawyers argued, the fee it set was not “reasonable” and overpaid the banks for transfers. As the case reaches the Supreme Court, that claim will not be decided by the Justices. Rather, the case is only about whether Corner Post missed its chance to sue the Fed.
Lower courts dismissed Corner Post’s claim, concluding that federal court law sets a six-year limit on when someone can sue a federal agency for causing a legal injury. The six years, the courts decided, started to run when the Fed formally put its rule into effect in 2011, meaning that the time to sue ran out in 2017 – one year before Corner Post went into business, and four years before Corner Post joined in the court challenge to the transfer fee of 21 cents.
Corner Post’s appeal to the Supreme Court argues that it was injured in a legal sense by the Fed rule when it started to accept debit cards for customer purchases in 2018, and had to start paying the transfer fee. The six-year period, it contended, was still open when it sued in 2021.
The Biden Administration’s Justice Department is defending the Fed rule, and the decision blocking Corner Post’s lawsuit. The Department argued that, if Corner Post is allowed to sue, that would mean that any newly opened business would be allowed to challenge a government rule years after it was adopted, when other businesses have been obeying the requirement for years. The federal appeals courts are split on the issue, leading the Justices to grant review.
The question before the Court: When does a legal injury occur from actions by an agency of the federal government? When does the six-year period to sue start: when the agency adopted the action, or later, when someone was harmed by it?
Significance: The sheer size of the debit-card industry — $4.9 trillion in transactions in the most recent year calculated, representing 80 billion transactions – makes this a very important case. But it is especially important to small Mom and Pop stores, like Corner Post, because it costs them 21 cents on every transaction, cutting into already-thin profit margins.
Because the Court, at this stage, will not be ruling on the legality of the Fed’s rule, this case is not yet likely to have an effect on the large banks to whom the transfer-fee rule applies. Once the Court decides on the time-to-sue, lower courts can then go ahead and rule on any court challenges that remain available.
The legal issue that Corner Post is raising should be fairly easy for the Justices to decide. The answer depends on what Congress had in mind when it specified the six-year time limit to sue federal agencies; that involves only a question of what “injury” means, in a legal sense.
If Corner Post were to lose, newly opened small retailers would face the enormous task of learning all of the federal rules that were adopted before they opened their doors.
Tuesday’s second hearing: Bissonnette and Wajnarowski v. LePage Bakeries Park Street, LLC and others The hearing is scheduled for one hour and will begin as soon as the debit-card hearing ends.
As in the first hearing, this case involves a down-to-earth controversy, dealing with the on-the-job rights of two truck drivers who carry baked goods from warehouses to grocery stores. They work for Flowers Foods, Inc., a large company that sells nationwide a line of baked goods, including the famous brand-named Wonder Bread. (One of the first loaves of sliced bread to be available in the U.S., Wonder Bread has been on the market for 103 years.)
Facts of this case: Two drivers who own their own trucks and work full-time for Flowers Foods in Connecticut sued the company and some of its affiliates. Neal Bissonnette and Tyler Wajnarowski are not employees of the company; it treats them as independent contractors. Their lawsuit objected to that designation, and argued that the company had violated state and federal wage laws by failing to pay them for working overtime and by charging them for the privilege of working for Flowers Foods.
The company moved to take the dispute to arbitration, citing a clause in the contract under which its drivers worked. Arbitration – a concept that frequently returns to the Supreme Court in disputes like this one – is supposed to be a less expensive, out-of-court process by an independent decision-maker and is often touted as fair to both sides. Workers, however, often complain that it favors employers, who have an unequal advantage over individual workers. Workers often prefer to take their chances before juries in courtrooms.
The drivers in this case objected to compelled arbitration, relying on an exemption written into the Federal Arbitration Act (first passed in 1925). The clause says that seamen, railroad workers, and others “engaged in foreign or interstate commerce” are exempt from a legal duty to let disputes go to an arbitrator.
That clause has come up in the Court three times in recent years, with the Justices declaring, among other findings, that the exemption only applies to workers who are actively engaged in transporting goods in commerce. It is what the workers do, not the kind of company employing them, that defines who is exempt from arbitration, according to the Court’s rulings.
In this case, however, lower courts made the exemption industry-specific. A federal judge in Connecticut ruled that the two drivers were not exempt from arbitration, finding them to be workers in “the bakery industry” and not “the trucking industry.” A federal appeals court agreed, deciding that the two drivers were not working in the transportation industry when they carried baked goods to stores.
Relying on the fact that federal appeals courts are now split on the question, the drivers appealed their case to the Supreme Court, and the Justices agreed to sort out the controversy.
The question before the Court: Are commercial truck drivers exempt from arbitration of workplace disputes when they transport goods from warehouses to retailers?
Significance: It is one of the ironies of history that, when Congress first endorsed the idea of arbitration of commercial disputes 99 years ago, it wrote in an exemption for workplace disputes because labor unions were opposed to that kind of out-of-court method of settling their claims to job rights. In fact, Herbert Hoover, who was then the U.S. Secretary of Commerce, championed the workers’ exemption.
But, in modern times, many of the lawsuits seeking to take advantage of that exemption involve workers, trying to protect their rights. Indeed, that is why these two truck drivers are pursuing an exemption, believing it will compromise their claims against Flowers Foods.
This case is of major significance, both for workers and for management, because the Justices have the opportunity – once again – to further clarify the scope of mandatory resolution of workplace disputes outside of the courts.
The Justices will only decide the exemption issue, and not whether these two drivers’ workplace rights have been violated by the company. That issue will be resolved when the decision clarifies which forum is to decide the drivers’ claims.
The Court will broadcast “live” the audio (no video) of these hearings on its homepage, supremecourt.gov To listen, click on “Live Audio” and follow the prompt when the courtroom scene appears lower on the page. The audio also will be available, under the title of each case, on C-Span TV at this link: cspan.org/supremecourt
