### FILED 

### MARCH 3, 2015 In the Office ofthe ClerkofCourt WA StateCourtofAppeals, Division III

INTHE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE ANNA CARLSON, ) ) No. 32309-9-III Appellant, ) ) 

### v. ) ) WASHINGTON STATE DEPARTMENT ) UNPUBLISHED OPINION OF SOCIAL AND HEALTH SERVICES, ) ) Respondent. ) KORSMO,J.

- Anna Carlson appeals from a decision remanding her administrative action for hearing due to failure toexhaustremedies. We affirm. FACTS 

### I Ms. Carlsonwas appointed as attorney-in-fact for herparents. Both orders of 

# I appointment allowed Ms. Carlsonto give giftsto herselfand expressly stated that any !fgifts were not a breach ofher fiduciary duties to herparents. Hermother lived in an 

## I f assisted living center and her father had multiple sclerosis andwas a Medicaid recipient. 

# I f The living center does not acceptMedicaidpayments. Itcosts $3,000per month, while 

# I r the mother's income was less than $2,000 permonth. To help coverthe deficit, Ms. { Carlson signed apromissory note for hermother. The note was notpaid, leading to a 

## i ! complaintbythe care center. 

# INo. 32309-9-III Carlson 

### v. D.S.HS.

Ms. Carlson transferred money from herparents' accounts totaling $8,075 in 2009, $4,825 in 2010, and $4,825 in 2011, to herself. She explainedthatthepayments were reimbursements for bills paid on behalfofherparents, payment for her actions as attorney-in-fact, or gifts from her parents. In late 2011, theAdult Protective Services (APS) division ofthe Department ofSocial and Health Services (DSHS) notified Ms. Carlson ofthe complaint and its beliefthat she had financially exploited a vulnerable adult based on her actions in takingher mother's money for her own instead ofpayingthe assisted living center. Ms. Carlson requested a hearingbefore the Office ofAdministrative Hearings and marshalled her evidence to the allegation. Prior to the hearing, she moved for summary judgment, arguing that as a matter oflaw gifting was permitted by the attorney appointments and could not constitute elder abuse. The Administrative Law Judge (ALJ) agreed with the argument and granted summaryjudgment, concluding as a matter oflaw thatthere was no elder abuse because the appointment permitted the gifting. DSHS appealed to the Board ofAdministrative Appeals (BOAA). The BOAA reversed, concluding that an attorney-in-fact could financially exploit a vulnerable adult

even while acting within the scope ofthe appointment. The BOAA remanded the matter for hearingto determine ifMs. Carlson had, in fact, exploited herparents. The remand order carried boilerplate language advising Ms. Carlsonthat she had a rightto seek

2No. 32309-9-111 Carlson v. D.S.H.S.

reconsideration or appeal the decision to superior court. Ms. Carlson exercised the latter option and soughtreview by the Kittitas County Superior Court. DSHS movedto dismiss the petition for review, arguing that Ms. Carlson had failed to exhaust her administrative remedies. After reviewing briefing and hearing oral argument, the superior court agreed that exhaustion ofremedies was required. It dismissedthe matterwithout prejudice and remanded for administrative hearing. Ms. Carlson then timely appealed to this court. ANALYSIS Ms. Carlson argues that exhaustion was not required in this case, fairness and practicalityjustify ignoring the exhaustion requirement, and that DSHS waived exhaustion by advising herthat she could seek superior court review. We address each of those three arguments in the order stated. Exhaustion Requirement Ms. Carlson first argues that exhaustion ofremedies is not required because she presents solely an issue oflaw that can be decided by a court. However, administrative hearings can resolve legal issues as well as factual ones, and administrative resolution of the case would develop the record and could conceivably forestall the need for this court to opine on the legal question. Theparties do not dispute the well understood standards governing this appeal, but only the application ofthose standards tothe facts ofthis case. When reviewing appeals 3No. 32309-9-III 

### Carlson v. 

### D.s'H.s'

from administrative agencies, the Court ofAppeals "sits in the sameposition as the superior court when reviewing an agency's decision." 

### Hunter v. 

### Univ. ofWash., 101 Wn. App. 283, 288, 2 P.3d 1022 (2000). This court views "the evidence and any reasonable inferences in the light most favorable to the party thatprevailed in thehighest forum exercising fact-finding authority." 

### Schofieldv. Spokane County, 96 Wn. App. 581,586, 980 P.2d 277 (1999). This court reviews alleged misinterpretations and misapplications oflawde novo. 

### Bullseye Distrib. LLCv. 

### Gambling Comm'n, 127 Wn. App. 231, 237, 110 PJd 1162 (2005). It is a basic principle ofadministrative law that an aggrieved party must pursue all administrative remedies before turning to the courts ifthe agency has the powerto grant the reliefsought. 

### CLEANv. City of Spokane, 133 Wn.2d 455,465,947 P.2d 1169 (1997). The Washington Administrative Procedure Act (APA) codifies the requirementby mandating thatjudicial review is available "only after exhausting all administrative remedies available within the agency whose action is being challenged, or available within any other agency authorized to exercise administrative review

...." RCW 34.05.534. This court reviews de novo the questions ofwhether administrativeremedies need be, and

were in fact, exhausted. 

### CostMgmt. Serv., Inc. v. 

### City of Lakewood, 178 Wn.2d 635, 641, 310 P.3d 804 (2013). A party exhausts administrative remedies when there is a final agency determination. 

### Rains v. 

### Dep'tof Fisheries, 89 Wn.2d 740, 744, 575 P.2d 1057 (1978). 4No. 32309-9-III 

### Carlson v. 

### D.S.HS.

WAC 388-71-0105-theDepartment ofSocial and Health Services chapter-defines "final finding" as: "Final finding" means the department's substantiated finding of abandonment, abuse, financial exploitation or neglect is upheld through the administrative appeal process specified in WAC 388-71-01205 through 388-71-01280, or is not timely appealed to the office ofadministrative hearings. The alleged perpetrator can appeal a final finding to Superior Court andthe Court ofAppeals underthe Administrative Procedure Act, chapter 34.05 RCW. WAC 388-71-01275 describes when the Adult Protective Services substantiated initial finding becomes a final finding: A substantiated initial finding becomes a final finding when: (1) The department gives the allegedperpetrator notice ofthe substantiated initial finding pursuant to WAC 388-71-01210 and the alleged perpetrator does not request an administrative hearing as set forth in WAC 388-71-01240; or (2) The ALJ dismisses the hearing following default orwithdrawal by the alleged perpetrator, or issues an initial order upholding the substantiated finding and the alleged perpetrator fails to file a request for review ofthe ALJ's initial decision with the department's board ofappeals consistent with the procedures contained in chapter 34.05 RCW and chapter 388-02 WAC; or (3) The board ofappeals issues a final orderupholdingthe substantiated finding when a request for review to the department's board ofappeals is made consistent with theprocedures contained in chapter 34.05 RCW and chapter 388-02 WAC. (4) The final finding will remain as substantiated in the department's records unless the final finding is reversed afterjudicial review. WAC 388-71-01275. Underthese definitions offinality, Ms. Carlson has not exhausted her administrative remedies. Initially, she successfully sought summaryjudgment, butthe 5No. 32309-9-III Carlson 

### v. D.S.H8.

agency reversed itself, overturning the grant ofsummaryjudgment and remandingthe matter for hearing. In essence, she is in the same position as ifhermotion for summary judgmenthad been denied in the first place. There is no "final determination" that would establish that Ms. Carlson has exhausted her administrative remedies under RCW 34.05.534 and WAC 388-71-01275. Nonetheless, she argues that the exhaustion requirement should be excused because her case presents (atthis point) solely a legal issue. The APA provides for limited exceptions to the exhaustion requirement. RCW 34.05.534 states in pertinent part: The court may relieve a petitioner ofthe requirement to exhaust any or all administrative remedies upon a showingthat: (a) The remedies wouldbepatently inadequate; (b) The exhaustion ofremedies would be futile; or (c) The grave irreparable harm that wouldresult from havingto exhaust administrative remedies would clearly outweigh the public policy requiring exhaustion ofadministrative remedies. As noted, whether a matter is an issue oflaw is not outlined as an exception to the exhaustion requirement in this statute. Notwithstanding this, at least one Washington

case has recognized that a reviewing court may choose to resolve an issue that is purely

an issue oflaw, and that "failureto exhaust administrative remedies does not necessarily preclude such resolution." RetailStore Emp. Union, Local 1001, et al. v. Wash. Surveying & RatingBureau, etal., 87 Wn.2d 887, 907 n.7, 558 P.2d 215 (1976)



### 6No. 32309-9-II1 

### Carlson v. 

### D.S.HS. (declining torequire exhaustion ofone legal issue, while requiring exhaustion ofother 

### • claims). Washington courts have identified several policy bases for the exhaustionrule: (1) insure againstpremature interruption ofthe administrativeprocess; (2) allow the agency to develop the necessary factual background on which to base a decision; (3) allow exercise ofagency expertise in its area; (4) provide for a more efficientprocess; and (5) protect the administrative agency's autonomy by allowing 

### itto correct its own errors and insuring that individuals were notencouraged to ignore its procedures by resorting to the courts. 

### CostMgmt. Serv., 178 Wn.2d at 642. All ofthe policy bases for the rule requiring Ms. Carlsonto exhaust her administrative remedies listed above favor exhaustion here: (l) "insure againstpremature interruption ofthe administrative process"-ifthe superior court had accepted the case at the time Ms. Carlsonhad requested, it would have resulted in a premature interruption of the administrativeprocess-namely, the agency had not had the opportunity to conduct a hearing; (2) "allowthe agency to develop the necessary factual background on which to base a decision"-this can only be done ifa hearing is conducted; (3) "allow exercise of agency expertise in its area"-the agency is in a position to interpret the financial exploitation statute, particularly inproviding guidance on when assets maybeused for other than the owner's personal care; (4) "provide for a more efficientprocess"-ifthe superior court and this court were to rule againstMs. Carlson's interpretation, she would have to participate in the agency hearing, at whichpoint the agency might resolve the 7No. 32309-9-III Carlson 

### v. D.S.HS.

case on factual grounds, possibly leading to another round ofappeals; (5) "protect the administrative agency's autonomy by allowing it to correct its own errors and insuring that individuals were not encouraged to ignore its procedures by resorting to the courts"-this is quite precisely whatthe agency in this case is attempting to do here: correct its own error involving the summaryjudgment. Notwithstanding the statutory requirements and thepolicy reasons, the primary question in exhaustion cases remains "whetherthe reliefsought can be obtained through

an available administrative remedy; ifso, the party seeking reliefmust first seekrelief through the administrativeprocess." CostMgmt. Serv., 178 Wn.2d at 642. In the present case, the reliefsought by Ms. Carlson canbe obtainedthrough an available administrative remedy. She could very well prevail at the administrative hearing. Additionally, policy reasons favor exhaustion in the presentcase. The exhaustion rule "is founded upon the beliefthat thejudiciary should give proper deference to that bodypossessing expertise in areas outside the conventional expertise of judges." Citizens for Mount Vernon v. City of Mount Vernon, 133 Wn.2d 861,866,947 P.2d 1208 (1997). At its heart, this casepresents the question ofwhen, ifever, gifting is permissible when

an estate has less income than currently is needed for monthly expenses. Can gifting be part ofan estate plan even though assets also will be needed for anticipated care expenses? Is it appropriate to make gifts when care bills remain unpaid? Competing



### 8No. 32309-9-III Carlson 

### v. D.SH.S

interests must bebalanced, requiring a financial analysisjustifyingthe action. Agency expertise can inform these decisions in the event of judicial review. We conclude that thatthe trial court correctly determined that exhaustion of administrative remedies was appropriate in this instance. The administrative process will inform, ifnot obviate, futurejudicial review. This is not one ofthe very rare cases in whichthe exhaustionrequirement should bewaived. Fairness andPracticality Ms. Carlson also argues that considerations of"fairness and practicality" require thatthe exhaustion requirementnot be applied to her case. Havingprogressed this far, she sees no need to expend attorney fees at the administrative level only toreturn to the courts for resolution ofher legal claim. She also fears that she may continue to prevail with the ALJ only to be remanded by the BOAA, condemningher, like Sisyphus, to endless administrative toil. Although wehave carefully considered her claims, we need only briefly address them because the previous analysis largely covers these concerns. As already noted, we believe that this is a case appropriate for resolution by administrative hearing after allowing DSHS to attempt toprove its case and allowing Ms. Carlsonto defend that

9No. 32309-9-III Carlson v. D.S.H.S.

action and assert her authority underthe appointment. I She can still present her argument and any appeal wouldprogress on a full record to the benefit ofboth parties. Although the case has progressed to this point as a result ofher own actions in attempting to win by early knockout, she is not withoutremedy in the unlikely event the

case does fall into the repetitious pattern she fears. The first two exceptions to the exhaustion requirementpermitjudicialreview when the administrativeremedies are inadequate or exhaustion wouldbe futile. RCW 34.05.534. A failure ofthe administrative process to resolve an action would appear to satisfy one orboth ofthese exceptions. We do not believe she would be stuck in an infinite administrative loop. Accordingly, Ms. Carlson'spracticality and fairness argument does nottrump the statutory requirements setby the legislature. Waiver Finally, Ms. Carlson contends that DSHS waived the exhaustion requirement when it notified her that she could seek further review in superior court. Notice of statutory rights does not constitute a waiver ofother statutory requirements. The notice in question read:

1 While we do not express any opinion onthe merits ofher legal argument, we do note that courts seldom adopt absolutist rules, particularly where those rules wouldbe in derogation ofa statute. Ifthe facts ofthis case had shown that Ms. Carlsonpaid herself $10,000 perhour or had gifted all ofherparents' assets to herselfand paid none oftheir expenses, we suspect that she would not be asserting this sameposition. We also highly doubt that a court would acceptthe absolutist argument under those facts. 10No. 32309-9-III Carlson v. D.S.H.S.

IfYou Disagree with the Judge's Review Decision or Order and Want it Changed, You Have the Right to: (1) Ask the Review Judge to reconsider (rethink) the decision or order (10 day deadline): (2) File a Petition for Judicial Review (start a Superior Court case) and ask the Superior CourtJudge to review the decision (30 day deadline). Clerk's Papers at 19. Although the language does imply that Ms. Carlson may seek review from the superior court, as is her statutory right, she does not explain how such boilerplate language could waive the statutory requirement that administrative remedies be exhausted. Ms. Carlson cites Weinberger v. Salji, 422 U.S. 749, 763-67, 95 S. Ct. 2457, 45 L. Ed. 2d 522 (1975) and Mathews v. Eldridge, 424 U.S. 319, 326-28, 96 S. Ct. 893,47 L. Ed. 2d 18 (1976) to support her contention that an administrative agency can waive the exhaustion ofremedies requirement. Those cases do not aid her. Salji was an action challengingthe Social Security Act's duration-of-relationship eligibility requirements for surviving wives and stepchildren ofdeceased wage earners. The United States Supreme Court concluded that "final decision" was not defined by the statute, and that whether a matter had reached a final decision was left to the discretion of the secretary. Because the agency did not challenge the sufficiency ofthe allegations of exhaustion in the widow's complaint, the court interpreted "this to be a determination by him that for the purposes ofthis litigation the reconsideration determination is 'finaL'"

11No. 32309-9-111 Carlson 

### v. D.S.HS.

422 U.S. at 767. The courtthen concluded that the exhaustion requirement was satisfied. Id. In Eldridge, Mr. Eldridge did not exhaust the full set ofinternal-review procedures provided, but asserted that the exhaustion requirement should be waived in his case becausehe was raising a deprivation ofbenefits issue and that an erroneous termination would damage him in a way not compensablethrough retroactive payments. The court recognized thatthe secretary ofthe Social Security Department "may waive the exhaustion requirement ifhe satisfies himself, at any stage ofthe administrative process, that no further review is warranted either becausethe internal needs ofthe agency are fulfilled or because the reliefthat is sought is beyond his powerto confer." Id. at 330. The court also recognized that other "cases may arise where a claimant's interest in having aparticularissue resolvedpromptly is so great that deference to the agency's judgmentis inappropriate." Id. at 330. TheEldridge court concludedthe request for benefits constituted a final decision for purposes of42 U.S.C. 

### § 405(g). Thepresent case is distinguishable from those cases on several grounds. First, itis distinguishable because, as discussed above, WAC 388-71-01275 lays out several layers ofreview before a substantiated finding becomes a final finding for purposes ofreview, unlike the ambiguous language of42 U.S.C. 

### § 405(g), (h), which did not even define "final decision." Additionally, in Sa/fi, the court found waiver where two levels of review had beenpursued and the agency did not challenge whether exhaustion was 12No. 32309-9-111 Carlson 

### v. D.S.HS.

satisfied. Here, DSHS does challengeMs. Carlson's lack ofexhaustion. Also, in both Salfi and Eldridge the parties were challenging the constitutionality ofthe statutory scheme or agency action, an issue notraised here. Further, Mr. Eldridgeraised an issue that demonstrated inadequate remedies and irreparable harm, both ofwhich are exceptions to the exhaustion requirement in Washington. RCW 34.05.534(3)(a) and (c). We believe this case is more like Cunningham v. RailroadRetirementBoard, 392 F.3d 567 (3d Cir. 2004). There the issue was whetherMs. Cunningham exhausted her administrative remedies when she failed to timely file an administrative appeal from a denial ofbenefits. She argued that the Railroad Retirement Board waived the exhaustion requirement when a cover letter, sent along with a decision, inadvertently advised herthat she'" may seekjudicial review ofthe Board's opinion by filing a petition for review with

an appropriate United States court ofappeals.'" Id. at 578. The court declinedto find waiver in such a case asserting that it was "notin a position to ignore thejurisdictional prerequisite of[the statute] on account ofthe cover letter mailed by the RRB." Id. at 579. Similar to Cunningham, here RCW 34.05.534 requires a final agency determination priortojudicialjurisdiction. WAC 388-71-01275 defines what is "final" for purposes ofRCW 34.05.534. The cover letterhere simply does notpermit this court to ignore thejurisdictionalprerequisite ofRCW 34.05.534. The authority on which Ms. Carlson relies is not apropos.

13No. 32309-9-111 Carlson v. D.S.HS.

Thejudgment ofthe superior court is affirmed and the matterremanded for administrative hearing. A majority ofthe panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public recordpursuantto RCW 2.06.040. 

# 7 (fOfsmo, J. WE CONCUR:

Lawrence-Berrey J.

14