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Exhaustion of Administrative Remedies

A litigant should exhaust any prescribed administrative remedies available before seeking judicial review.  Where relief is available from an administrative agency, the plaintiff is ordinarily required to pursue that avenue of redress before proceeding to the courts. Until that recourse is exhausted, the suit is premature and must be dismissed[i].

For instance, in Reiter v. Cooper, 507 U.S. 258 (U.S. 1993), Petitioner shippers sought review of the decision from the United States Court of Appeals for the Fourth Circuit.  This reversed the decision of the district court and held that the unreasonable practice defense did not have to be referred first to the Interstates Commerce Commission in a suit brought by respondents, a motor carrier and others, to collect tariff rates.  Respondents sued petitioners to collect undercharges on shipments made by respondents. On appeal, respondents argued that payment of the tariff rate was a prerequisite to litigating the rate reasonableness issue. The court held that petitioners could assert a claim under 49 U.S.C.S. § 11705(b) (3), before payment, but after their shipments were delivered.  Respondents argued that the doctrine of primary jurisdiction required petitioners initially to present their unreasonable-rate claims to the Interstate Commerce Commission rather than to a court.  The Court held that the Commission’s interpretation that the law did not grant the Commission any initial jurisdiction with respect to the award of reparations but instead, shippers recourse must be to the courts, which would refer the issue of rate reasonableness to the Commission was a reasonable interpretation of the statute, and hence a binding one.  The Court remanded the case because neither the appeals court or the district court made the express determination required under Fed. R. Civ. P. 54(b), for entry of a separate judgment on respondents’ claims.  The Court reversed the judgment of the appeals court, and remanded the case for further proceedings.

Moreover, the basis for a judicially imposed issue-exhaustion requirement, even in the absence of a statute or agency regulation requiring issue exhaustion, is analogous to the rule that appellate courts do not consider arguments not raised before trial courts.

In Thomas v. Barnhart, 469 F. Supp. 2d 228 (D. Del. 2007), Plaintiff social security claimant sought review, pursuant to 42 U.S.C.S. §§ 405(g) and 1381, of the final decision of defendant Commissioner of Social Security denying the claimant’s application for disability insurance benefits and supplemental security income under Title II and Title XVI of the Social Security Act (Act), 42 U.S.C.S. §§ 401- 433, 1381- 1383f. Both parties moved for summary judgment.  The claimant alleged disability due to fibromyalgia and lower back pain. On appeal, the claimant alleged that the Admonistrative Law Judge(ALJ) erred in (1) failing to find that the claimant’s fibromyalgia was not a severe impairment; (2) failing to properly evaluate the claimant’s pain and credibility; and (3) failing to give proper weight to the opinion of the claimant’s treating physician.  The court found that the ALJ did not find that the claimant’s fibromyalgia was a severe impairment; however, the ALJ did not deny benefits at this stage of the evaluation and continued on to step five considering other impairments whose affects on the claimant were essentially the same as those that would have been found if the ALJ had found that the claimant’s fibromyalgia was severe.  Next, the court found that the ALJ’s evaluation of the claimant’s subjective complaints of pain was supported by substantial evidence. Finally, the court found that although the treating physician was the claimant’s family physician, he was not a specialist and none of the specialists who treated the claimant opined that the claimant was so severely limited as to be disabled.  The Commissioner’s motion was granted.  The claimant’s motion was denied. The decision of the Commissioner was affirmed.

The exhaustion rule serves a legitimate state interest in requiring parties to exhaust administrative remedies before proceeding to court, thereby preventing an overworked court from considering issues and remedies that were available through administrative channels.  It also encourages the use of more economical and less formal means of resolving disputes and is credited with promoting accuracy, efficiency, agency autonomy, and judicial economy.

In the words of Justice Stone, in Hansberry v. Lee, 311 U.S. 32, 41-42, 85 L. Ed. 22, 61 S. Ct. 115 (1940) well known as a student and teacher of Equity: “The class suit was an invention of equity to enable it to proceed to a decree in suits where the number of those interested in the subject of the litigation is so great that their joinder as parties in conformity to the usual rules of procedure is impracticable.  In such cases where the interests of those not joined are of the same class as the interests of those who are, and where it is considered that the latter fairly represent the former in the prosecution of the litigation of the issues in which all have a common interest, the court will proceed to a decree.”  However, Class members whose interests are antagonistic in fact to, or even “potentially conflicting” with, the interests of the ostensibly representative parties cannot be bound, consistent with the requirements of due process to an adjudication taken in their name. Hansberry v. Lee, supra.  Where courts discern that the interests of the plaintiffs are in significant part antagonistic to those of the class he purports to represent, they decline to entertain the action as a class action[ii].

Requirements of administrative issue exhaustion are largely creatures of statute.  The doctrine of exhaustion of administrative remedies is one among related doctrines that govern the timing of federal court decision-making of paramount importance to any exhaustion inquiry is congressional intent.  Thus, where Congress specifically mandates, exhaustion is required, and where Congress has not clearly required exhaustion, sound judicial discretion governs.  Therefore, where a statute requires exhaustion of administrative remedies a court has no jurisdiction to review an interlocutory order and the exhaustion requirement is not a matter for the court’s discretion.  Conversely, a litigant seeking judicial review of a final agency action under the Administrative Procedure Act need not exhaust available administrative remedies unless exhaustion is expressly required by statute or agency rule[iii].

Litigants may not, by refusing or neglecting to submit issues of fact to administrative agencies, bypass them, and call upon the courts to determine matters properly determinable originally by the agencies.  For instance, If a Social Security claimant fails to request review from the Social Security Appeals Council, there is no “final decision” and no judicial review in most cases[iv].  In administrative law parlance, such claimant may not obtain judicial review because he or she has failed to exhaust administrative remedies.

Exhaustion does not merely require the plaintiff to initiate the prescribed administrative procedures, but also to pursue them to their appropriate conclusion and await their final outcome before seeking judicial intervention.  While a person need not carry out the order of an administrative agency in order to pursue the administrative remedy to the end,the mere fact that an order is being enforced does not necessarily establish that the administrative process has been completed so as to permit judicial relief.The classic example of failure to exhaust an administrative remedy is the failure to appeal from an administrative decision to a higher tribunal within the administrative system.

A party does not exhaust its administrative remedies just because an agency has denied its motion to dismiss a complaint.  The refusal to reconsider issuance of the complaint does not render the complaint a definitive action for which judicial review is available.

Failure to exhaust administrative remedies is generally an affirmative defense subject to waiver.  It may be held to have been waived if not raised in the trial court.  An agency may expressly waive the exhaustion requirement before the reviewing court.  Ordinarily, the responsible official has discretion to decide when to waive the exhaustion requirement; however, cases may arise where a claimant’s interest in having a particular issue resolved promptly is so great that deference to the agency’s judgment is inappropriate or a court of equity may waive the requirement where the claimant makes a strong showing of compelling circumstances to justify such a waiver.

In cases where exhaustion of administration remedies is not required by statute, the exhaustion requirement is discretionary with the courts.  Failure to exhaust remedies is not an absolute bar to judicial consideration and must be applied in each case with an understanding of its purposes and of the particular administrative scheme involved. Judicially excusing the requirement may also occur when:

  • available remedies provide no genuine opportunity for adequate relief;
  • irreparable injury may occur without immediate judicial relief;
  • administrative appeal would be futile; or
  • the plaintiff raises a substantial constitutional question which could not be resolved through the administrative process[v].

Administrative agencies have neither the power nor the competence to pass on the constitutionality of statutes.  However, the exhaustion requirement is not rendered inoperable solely by the fact that a party applying for judicial relief urges that there has been a violation of constitutional rights.  If relief may be granted on nonconstitutional grounds, the necessity of deciding constitutional issues may be avoided and exhaustion may be required.  However, if recourse to the administrative process is insufficient to fully and satisfactorily protect the constitutional rights in question, exhaustion is not required.  In the latter instance a strong showing both of the inadequacy of the prescribed administrative procedure and of impending harm are necessary to justify the short-circuiting of the administrative process.

An administrative agency cannot pass on the constitutionality of the legislation under which it acts so that a party seeking a review of the constitutionality of an agency’s enabling legislation need not exhaust its administrative remedies. Exhaustion of administrative remedies also may not be required where an agency ordinance or rule is attacked as unconstitutional on its face[vi].

[i] Reiter v. Cooper, 507 U.S. 258 (U.S. 1993)

[ii] Phillips v. Klassen, 502 F.2d 362, 366 (D.C. Cir. 1974)

[iii] Volvo GM Heavy Truck Corp. v. United States DOL, 118 F.3d 205, 209 (4th Cir. Va. 1997)

[iv] Smith v. Astrue, 2008 U.S. Dist. LEXIS 90594 (W.D. Pa. Nov. 6, 2008)

[v]Waste Connections, Inc. v. Okla. Dep’t of Envtl. Quality, 2002 OK 94 (Okla. 2002)

[vi] Sedlock v. Bd. of Trs., 367 Ill. App. 3d 526 (Ill. App. Ct. 3d Dist. 2006)

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