“The doctrine of exhaustion of administrative remedies requires a party to use all available administrative procedures for relief and to proceed to a final decision on the merits before the appropriate administrative agency prior to resorting to the courts. Indeed, a party must show that it has made a full presentation to the administrative agency upon all issues of the case and at all prescribed stages of the administrative proceedings. The California Supreme Court has repeatedly stated that with limited exceptions, when an adequate administrative remedy is provided by statute, resort to that forum is a “jurisdictional” prerequisite to judicial consideration of the claim by a court.
However, courts differ regarding the nature and effect of the “jurisdictional” requirement. Some courts have expressed the view the failure to exhaust an administrative remedy is truly a jurisdictional rather than procedural defect. The better view seems to be the failure to exhaust an administrative remedy is not truly jurisdictional in the sense of depriving a court of fundamental or subject matter jurisdiction, but rather should be viewed merely in the nature of a condition precedent or an affirmative defense that can be waived if not timely asserted by the defendant.
The exhaustion doctrine is grounded on concerns favoring administrative autonomy (i.e., courts should not interfere with an administrative determination until the administrative agency has reached a final decision) and judicial efficiency (i.e., overworked courts should decline to intervene in an administrative dispute unless absolutely necessary).
When a statute makes an administrative remedy mandatory, the court will generally not hear the matter until administrative remedies have been exhausted. When a statute makes an administrative remedy discretionary, the plaintiff usually has the option to exercise the administrative remedy or proceed directly to court. When a statute is silent on whether an administrative remedy is mandatory or discretionary, the question is determined by the court through interpretation of the relevant statute, evaluation of the role the administrative procedures play in development of the record, examination of the nature of the judicial proceedings, and other factors.
When there is a reasonable question as to whether an administrative remedy applies in a particular case, the administrative agency should normally be given an opportunity to determine the issue in the first instance. However, plaintiffs need not exhaust their remedies before a local agency if they have exhausted their remedies under state law.
Examples of when the exhaustion doctrine has been invoked to bar a court proceeding include: Actions involving agricultural rules or regulations. Actions involving zoning restrictions. Actions involving savings and loan associations. Actions involving insurance rules and regulations. Actions involving public employee discipline or employment conditions. Actions involving environmental laws. Actions involving licenses or permits. Actions involving the Fair Employment and Housing Act. Actions involving auto dealers and franchise laws.
The exhaustion requirement is not met by merely initiating the prescribed administrative procedures, but requires a party go through the entire proceeding to a final decision on the merits of the entire controversy before resorting to the courts for relief. Before a plaintiff may seek judicial review that plaintiff must show a full presentation to the administrative agency was made upon all issues of the case and at all prescribed stages of the administrative proceedings. However the right to petition for judicial review of a final decision of an administrative agency is not necessarily affected by a party’s failure to file a request for reconsideration or rehearing before the agency.
Although a plaintiff is not normally required to anticipate and plead around the defense of exhaustion of remedies, when it is clear from the face of the pleading that the plaintiff has an obligation to exhaust administrative remedies, the plaintiff should plead satisfaction of this requirement.
The defense of failure to exhaust administrative remedies should be raised at the earliest opportunity. The defense may be raised by demurrer, answer, summary judgment motion, motion in limine, motion for nonsuit, motion for new trial, or motion for judgment notwithstanding the verdict.
Some courts have held the defense is waived if no timely objection is made. Other courts have held that because the defense is jurisdictional, it may be raised at any time, even for the first time on appeal.
The plaintiff bears the burden of establishing exhaustion of administrative remedies or an exception to the requirement.
The doctrine of exhaustion of administrative remedies has not hardened into inflexible dogma; it is excused when its pursuit would be futile, idle, useless, or result in irreparable harm. Exceptions to the exhaustion requirement include the following: When there is a challenge to the constitutionality of an administrative agency or its procedures. When it would be futile, idle or useless to pursue the administrative remedy. When the administrative remedy is inadequate, for example, when the administrative procedure is too slow to be effective. When no effective administrative remedy exists. When irreparable harm would occur from denial of judicial relief. When the administrative agency decision-maker is biased. When the claim involves important questions of public policy.”
[California Civil Courtroom Handbook & Desktop Reference [certain citations omitted]]
