J & N REALTY, INC.

Administrative Remedies Must Be Exhausted before Filing a Suit  

When considering a complaint or writ petition, it is imperative to ensure that the client has exhausted administrative remedies.  Exhaustion of remedies is a generally applicable procedural prerequisite to superior court review, and failure to exhaust administrative remedies can subject a case to demurrer and dismissal.  If an administrative remedy is available to resolve a dispute, that remedy must be exhausted before courts will act.  The failure to exhaust administrative remedies will bar court intervention in cases in which administrative remedies are available and incomplete, including actions for damages and tort claims. 

The California Supreme Court views exhaustion of administrative remedies as a fundamental rule that “is not a matter of judicial discretion, but is a fundamental rule of procedure.”  The Supreme Court also provides an explanation of why administrative remedies must be exhausted before superior court action: The rule has important benefits: (1) it serves the salutary function of mitigating damages; (2) it recognizes the quasi-judicial tribunal’s expertise; and (3) it promotes judicial economy by unearthing the relevant evidence and by providing a record should there be a review of the case. 

The exhaustion requirement has been upheld even when the administrative agency cannot provide the precise relief sought in the judicial action.  Even if the statute sought to be enforced by the administrative agency is challenged upon constitutional grounds, completion of the administrative remedy has been held to be a prerequisite to equitable relief.  While there is authority for the argument that the exhaustion doctrine is inapplicable when constitutional or jurisdictional issues or questions of law are raised, this argument is not followed in California.  Here, the law strictly requires exhaustion of administrative remedies, unless a limited exception applies. 

The doctrine of exhaustion requires more than the initiation of prescribed administrative procedures.  They must be pursued to their conclusion before seeking judicial intervention.  An administrative decision only attains the requisite administrative finality when the agency has exhausted its jurisdiction and possesses no further power to reconsider or rehear the claim.  Until a public agency makes a final decision, the matter is not ripe for judicial review.  It is important to note that even the decision of an administrative law judge (ALJ) is generally not final, because the administrative agency must review the ALJ’s decision and determine whether it will adopt, amend, or reject that decision.  The final decision is rendered by the administrative agency, generally by its director or designated agent, following review of the ALJ’s decision. 

It is prudent for counsel to review copies of the administrative decisions relating to the dispute, because government actions may involve several preliminary decisions and notice letters that could erroneously be construed as final decisions.  A final decision letter usually indicates its finality in clear terms, whereas preliminary decision letters will generally list the administrative review procedures that remain.  Many final administrative agency decisions specify that further review can be obtained by filing a petition or complaint in superior court.  Attaching a copy of the final decision to a petition or complaint is a sensible way of preempting exhaustion issues. 

Exceptions 

The limited exceptions to the exhaustion requirement do not apply to an administrative remedy that is a statutorily specified jurisdictional prerequisite.  Exceptions may apply when 1) the agency indulges in unreasonable delay, 2) the subject matter lies outside the administrative agency’s jurisdiction, 3) pursuit of an administrative remedy would result in irreparable harm, 4) the agency is incapable of granting an adequate remedy, and 5) resort to the administrative process would be futile because it is clear what the agency’s decision would be.  Unreasonable agency delay sufficient to excuse exhaustion has been found when the administrative hearing process came to a stop without a final decision.  The petitioner submitted evidence demonstrating that an administrative hearing commission would not go further “pending civil action.”  The lack of agency jurisdiction exception to the exhaustion requirement applied in a case in which the Department of Social Welfare and the State Social Welfare Board had no power to supervise or control the administration of indigent relief and had no jurisdiction to consider complaints relating to the adequacy of indigent relief allowed by the county.  Since the disputed matter was outside of the agency’s jurisdiction, there was no requirement for the agency to decide the matter before superior court review.  

Irreparable harm was found to excuse the exhaustion requirement when a superior court plaintiff was put in the position of choosing to obey conflicting federal and state laws while awaiting an administrative decision.  Since there would be irreparable noncompliance with the law in the interim, exhaustion was not required.  The inability of an agency to grant an adequate remedy excused the exhaustion requirement; the court found that the only available nonstatutory administrative remedy was a “manifestly defective hearing.”  Finally, the futility exception will apply only if the petitioner can positively state that the administrative agency has declared what its ruling will be in a particular case.  Overwhelming agency precedent on a particular issue is insufficient.  The showing of futility must relate to the particular case before the court.  These narrow exceptions to nonstatutory administrative remedies demonstrate that courts will generally require exhaustion. 

California law makes it clear that failure to obtain a final administrative decision before filing a case in court could subject the case to an early demurrer or court dismissal sua sponte.  Clients generally assume that the trial courts that they see on television and read about online are the natural starting point and proper forum to redress their grievances.  However, a favorable administrative agency decision may obviate the need for a court hearing.  While clients may not appreciate the additional level of quasi-judicial review that they must go through before reaching the courts, they rely on their counsel to understand the proper way to litigate their claims.