As a sanction resulting from a
possibly shady mortgage deal, Darby (a real estate developer) et.al were
banned by an Administrative Law Judge (ALJ) from participating in programs
for the Dept. of Housing and Urban Development (HUD) for 18 months.
Under HUD regulations, an
ALJ's determination "shall be final unless the Secretary
(Cisneros)...within 30 days of receipt of a request decides as a matter
of discretion to review the ALJ's finding..."
Instead of going to Cisneros
and requesting a review, or taking any further administrative review
within HUD, Darby sued for an injunction in Federal Court.
The Trial Court found for
Darby. HUD appealed.
The Appellate Court reversed.
The Appellate Court found
that Darby had not exhausted his options at HUD, and could not bring suit
in Federal Court.
The Doctrine of
Exhaustion says that if the primary
jurisdiction of a dispute is the
Agency, then all possible Agency procedures and decision-making must be
exhausted before the dispute can be appealed to a court.
The idea is that the courts
don't want to get involved if there is a chance that the Administrative
Agency can work it out internally. They only step in once there are no
more options available within the Agency.
The US Supreme Court reversed
the Appellate Court and found for Darby.
The US Supreme Court found
that Federal Courts cannot require that a plaintiff exhaust his
administrative remedies before seeking judicial review when exhaustion of
remedies is not required by either administrative rules or statute.
A close reading of the Administrative
Procedures Act (APA §704) (also referred to as §10(c)) said that unless an appeal to "superior
agency authority" is "expressly required by statute" or
when the agency requires an appeal "by rule and provides that the
administrative action is...inoperative" pending that review, then
the courts do not have to wait until a case has been exhausted.
The Court noted that the Doctrine
of Exhaustion still applies in all
cases not governed by the APA.
Basically, before this case it
was considered common knowledge that a person had to do everything they
possibly could within the Administrative Agency before being able to take
the case to a court. However, in this case, someone bothered to look and
see what the APA actually said
about exhaustion, and it was found that you only have to
follow the rule if the Agency Statute explicitly says that you must
exhaust all options before proceeding to court.
If there is nothing in the
Statute saying that you have to file every possible appeal within an
Agency before proceeding to court, you are free to proceed to court
whenever you like.
But, you still must have finality. So if an Agency makes a decision, but then
says that decision is not final until all possible appeals within the Agency have taken place
(aka exhaustion), then you
cannot go directly to court. On the plus side, until the decision is final it is inoperative.