Source: https://www.povertylaw.org/clearinghouse/fpmd/chapter3/section4
Timestamp: 2019-04-25 05:19:43+00:00

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This section discusses the circumstances under which a prospective federal court plaintiff may be required to exhaust judicial or administrative remedies before filing an action in federal court, and the preclusion implications of having such remedies available or pursuing such remedies when they are not statutorily mandated.
To determine whether exhaustion is required, first examine the federal statute that provides the right sought to be enforced for explicit or implicit exhaustion requirements. If exhaustion is required, determine whether one of the recognized exceptions to exhaustion of remedies applies to the circumstances of the case. When exhaustion of remedies is not required, as in Section 1983 actions,1 consider whether to pursue, nevertheless, available local or state administrative remedies.2 This entails an assessment of the needs of the client, the certainty and speed of such relief, opportunities to obtain useful information for a subsequent judicial appeal, and the expense of litigation of a case through trial in federal court. Furthermore, and of particular importance, assess the possibility that pursuing such remedies will have claim or issue preclusive effect in any subsequent federal action. The prospect of litigating multiple federal claims or combining federal and state law claims, which have different exhaustion requirements, adds another layer of complexity to the assessment.
If exhaustion of judicial or administrative remedies is not required, the advocate has to assess whether to pursue such remedies voluntarily or to proceed with federal litigation. The reality of limited resources often strongly influences this decision. The cost of federal court discovery, hiring expert witnesses, and preparing the case for trial is often too high for legal services organizations. Administrative proceedings have financial advantages, such as free transcripts, agency experts, and may make exhausting a voluntary remedy a compelling choice. Often, the more complex decision is how the administrative proceeding can be utilized to best preserve an opportunity for later federal court review of the legal issues underlying the claim or agency action. Use of techniques such as the submission of Proposed Findings of Fact during the hearing process may help when the relatively quick and inexpensive administrative forum offers significant advantages, and the potential preclusion issues are deemed acceptable risks.
The preclusive effect of administrative determinations raises three basic questions: (1) When does administrative adjudication have the essential elements of adjudication?42 (2) What claim did the administrative agency resolve (and thus preclude from re-litigation)? (3) Did Congress by statute direct courts to apply preclusion?
The Eighth Circuit has followed the Ninth. In Plough v. West Des Moines Community School District, the Eighth Circuit concluded that both claim and issue preclusion applied to an unreviewed state agency determination.65 The plaintiff opposed a defense of claim preclusion in his Section 1983 action, contending that Elliott required issue preclusion only for fact-finding, and the state agency’s determination of a legal question (that his due process rights had not been violated) was not entitled to be given preclusive effect under federal law. The court concluded that plaintiff had a full and fair opportunity to litigate his claims in the administrative process, and, therefore, state law on claim preclusion should be applied to the questions of law as well as the findings of fact.
When (1) an issue of fact or law is (2) actually litigated and determined by (3) a valid and final judgment, and (4) the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.
Application of issue preclusion to federal litigation is probably most relevant to legal services practice when the fact finding of an administrative agency is proposed to be given preclusive effect in a subsequent Section 1983 action.72 The Court in University of Tennessee v. Elliott held that sound policy considerations warranted the application of issue preclusion to the fact-finding of administrative bodies acting in a judicial capacity to the same extent as the findings would receive in state court.73 As discussed above, Congress has the authority expressly or implicitly to limit the usual preclusive effect given to unreviewed agency decisions.74 If Congress does not limit enforcement of preclusion, the federal court applies state law preclusion doctrine.
1. For further discussion of exhaustion in the Section 1983 context, see Chapter 5.1.A.4 of this MANUAL.
2. Patsy v. Board of Regents, 457 U.S. 496, 501 (1982).
3. McCarthy v. Madigan, 503 U.S. 140, 144 (1991).
5. See Ross v. Blake, 136 S. Ct. 1850 (2016) (rejecting extra-textual "special circumstances" exception to Prison Litigation Reform Act's exhaustion requirement); Jones v. Bock, 549 U.S. 199, 212-14 (2007) (failure to exhaust is affirmative defense; inmates need not plead exhaustion in their complaints); Porter v. Nussle, 534 U.S. 516 (2002); Booth v. Churner, 532 U.S. 731 (2001). See also Woodford v. Ngo, 548 U.S. 81 (2006) (Prison Litigation Reform Act’s exhaustion requirement is not satisfied by filing untimely or procedurally defective administrative grievance or appeal).
6. Ross, 136 S. Ct. at 1858-59.
8. For example, in Equal Employment Opportunity Commission v. Lutheran Social Services, 186 F.3d 959 (D.C. Cir. 1999), the D.C. Circuit wrestled with the question whether a Civil Rights Act provision providing that a recipient of a subpoena “may petition” the agency to revoke the subpoena required the recipient to so petition. In a 2-to-1 decision, the Court concluded that it did not. Id. at 965.
9. Individuals with Disabilities Education Act, 20 U.S.C. §§ 1415(l).
10. Fry v. Napoleon Community Schools, 137 S. Ct. 743 (2017).
13. Avocados Plus, Incorporated v. Veneman, 370 F.3d 1243, 1247 (D.C. Cir. 2004).
16. Marine Mammal Conservancy, Incorporated v. U.S. Department of Agriculture, 134 F.3d 409, 414 (D.C. Cir. 1998).
17. Avocados Plus, 370 F.3d at 1247 (finding exhaustion non-jurisdictional) For cases wrestling with the distinction in situations where there are circuit splits, see Dawson Farms, LLC v. Farm Service Agency, 504 F.3d 592 (5th Cir. 2007) and Ace Property and Casualty Insurance Company v. Federal Crop Insurance Corporation, 440 F.3d 992 (8th Cir. 2006). See also Hettinga v. United States, 560 F.3d 498 (D.C. Cir. 2009). The Supreme Court has also wrestled frequently with the scope of exhaustion when 42 U.S.C. § 405(g), which governs judicial review of Department of Health and Human Services benefit determinations. See Shalala v. Illinois Council on Long-Term Care, 529 U.S. 1 (2000); Bowen v. Michigan Academy of Family Physicians, 487 U.S. 667 (1986); Heckler v. Ringer, 466 U.S. 602 (1984); Mathews v. Eldridge, 424 U.S. 319 (1976); Weinberger v. Salfi, 422 U.S. 749 (1975).
18. Patsy v. Board of Regents, 457 U.S. 496, 502, n.4 (1982).
19. McCarthy v. Madigan, 503 U.S. 140, 144 (1991).
20. Alacare Incorporated v. Baggiano, 785 F.2d 963, 966 (11th Cir. 1986) (quoting Patsy, 457 U.S. at 501).
21. Barry v. Barchi, 443 U.S. 55, 63 n.10 (1979); Kreschollek v. Southern Stevedoring Company, 78 F.3d 868, 875 (3d Cir. 1996).
22. Heckler v. Day, 467 U.S. 104, 110 n.4 (1984); Mathews v. Diaz, 426 U.S. 67, 72-73 (1970); Weinberger v. Salfi, 422 U.S. 749, 765-77 (1975).
23. Cave v. East Meadow Union Free School District, 514 F.3d 240 (2d Cir. 2009) (student with Rehabilitation Act, ADA and § 1983 claims must exhaust IDEA remedies); Babicz v. School Board of Broward County, 135 F.3d 1420 (11th Cir.), cert. denied, 525 U.S. 816 (1998) (student filing claims under Rehabilitation Act, ADA and IDEA must exhaust IDEA remedies when IDEA relief is available).
24. McCarthy, 503 U.S. at 144. Such is the case in which there is only a regulatory exhaustion requirement. See Equal Employment Opportunity Commission v. Bashas' Incorporated, 2009 U.S. Dist. LEXIS 97736 at *12 (D. Ariz. Sept. 30, 2009).
26. McCarthy, 503 U.S. at 146-47; Coit Independence Joint Venture v. Federal Savings and Loan Insurance Corporation, 489 U.S. 561 (1989).
27. Bowen v. City of New York, 476 U.S. 467 (1986). The court noted that a “severe medical setback” might result from the “trauma of having disability benefits cut off” and “the ordeal of having to go through the administrative appeal process:” Id. at 483.
28. McCarthy, 503 U.S. at 147-48; Honig v. Doe, 484 U.S. 305, 327 (1988); Durand v. Hanover Insurance Group, Incorporated, 560 F.3d 436 (6th Cir. 2008) (ERISA claim); Porter v. Board of Trustees of Manhattan Beach Unified School District, 307 F.3d 1064, 1070 (9th Cir. 2002) (IDEA claim).
29. See, e.g., Taylor v. Vermont Department of Education, 313 F.3d 768, 790 (2d Cir. 2002).
30. See McQueen v. Colorado Springs School District No. 11, 488 F.3d 868, 874-75 (10th Cir. 2007); Handberry v. Thompson, 446 F.3d 335, 343 (2d Cir. 2006); J.S. v. Attica Central Schools, 386 F.3d 107, 113-14 (2d Cir. 2004).
31. Gibson v. Berryhill, 411 U.S. 564, 575 (1973).
32. McCarthy, 503 U.S. at 148-49.
33. A common fourth exception is where the litigant raises a colorable constitutional claim that is collateral to her substantive claim of entitlement. See Clarinda Home Health v Shalala, 100 F.3d 526 (8th Cir. 1996); see also Bowen v. City of New York, 476 U.S. 467 , 483, 485 (1986); Mathews v. Eldridge, 424 U.S. 319 (1976).
34. Taylor v. Sturgell, 553 U.S. 880, 128 S. Ct. 2161, 2179-80 (2008).
35. Allen v. McCurry, 449 U.S. 90, 96 (1980).
36. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985).
37. Kremer v. Chemical Construction Corporation, 456 U.S. 461, 466 (1982).
38. Migra v. Warren City School Board of Education, 465 U.S. 75 (1984). In Migra, the Supreme Court discussed the difference between two distinct branches of the res judicata doctrine: “Issue preclusion refers to the effect of a judgment in foreclosing relitigation of a matter that has been litigated and decided. This effect is referred to as direct or collateral estoppel. . . . Claim preclusion refers to the effect of a judgment in foreclosing litigation of a matter that never has been litigated, because of a determination that it should have been advanced in an earlier suit. Claim preclusion therefore encompasses the law of merger and bar.” Id. at 77. See also Taylor, 128 S. Ct. at 2170-72 (2008).
39. Kremer, 456 U.S. at 461.
40. University of Tennessee v. Elliott, 478 U.S. 788, 794 (1986).
41. The general rule of res judicata is found in Section 24 of the Restatement (Second) of Judgments (1982). Generally, a final judgment on the merits precludes the same parties or parties in privity with them from litigating the same claim in a subsequent lawsuit. Claim preclusion bars the relitigation in federal court of both claims subject to a final state court judgment and of claims which were not raised in state court.
43. Taylor v. Messmer, 2010 U.S. Dist. LEXIS 11003, 2010 WL 607089 (W.D. Pa. Feb. 9, 2010), citing Reed v. Amax Coal Company, 971 F.2d. 1295, 1300 (7th Cir. 1992). See also Kleenwell Biohazard Waste v. Nelson, 48 F.3d 391, 394-95 (9th Cir.) cert. denied, 515 U.S. 1143 (1995); Hall v. Marion School District, 31 F.3d 183, 191-92 (4th Cir. 1994).
44. Goldberg v. Kelly, 397 U.S. 254 (1970).
45. Johnson v. County of Nassau, 411 F. Supp. 2d 171 (E.D.N.Y. 2006) is a recent example of a court struggling with this question in the context of the preclusive effect of a no discrimination finding by the New York State Division of Human Rights on subsequent §§ 1981 and 1983 claims. See also Clark v. Alexander, 85 F.3d 146 (4th Cir. 1996), holding that implementation of the Goldberg due process requirements ensured an adequate Section 8 certificate termination hearing. However, rather than give the hearing fact-finding issue preclusive effect in a later appeal to federal court, the court of appeals held that deference should be given to the findings: the fact-finding should be reviewed under a substantial-evidence standard and not be given preclusive effect.
46. B & B Hardware, Incorporated v. Hargis Industries, Incorporated, 135 S. Ct. 1293, 1309 (2015) (quoting Montana v. United States, 440 U.S. 147, 164 n.11 (1979)).
47. Restatement (Second) of Judgments § 24 (1982).
48. Churchill v. Star Enterprises, 183 F.3d 184, 194 (3d Cir. 1999). In a recent case not involving the preclusive effect of administrative findings, the Supreme Court nevertheless returned to the topic of claim preclusion in Whole Woman's Health v. Hellerstedt, 136 S. Ct. 2292 (2016). The Court held that the plaintiff's unsuccessful pre-enforcement facial challenge to a Texas abortion clinic statute requiring clinic physicians to have admissions privileges with a local hospital did not preclude an as-applied post-enforcement challenge. Id. at 2305-07. It was not the same claim, particularly because subsequent factual developments, such as the resulting closure of many abortion clinics due to the restrictions, gave rise to a new constitutional claim. That evolving impact cast a new light on the asserted undue burden caused by the restriction not yet present at the time of the pre-enforcement litigation.
49. Lubrizol v. Exxon Corporation, 929 F.2d 960, 963 (3d Cir. 1991). The formulations used by the courts differ somewhat from case to case. The Ninth Circuit, for example, looks at four factors to determine the identity of claims: "(1) whether the two suits arise out of the same transactional nucleus of facts; (2) whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (3) whether the two suits involved infringement of the same right; and (4) whether substantially the same evidence is presented in the two actions." ProShipLine Incorporated v. Aspen Infrastructures, 594 F.3d 681, 688 (9th Cir. 2010). In the Eleventh Circuit, "if a case arises out of the same nucleus of operative facts, or is based upon the same factual predicate, as a former action, ... the two cases are really the same 'claim' or 'cause of action' for purposes of res judicata." Griswold v. County of Hillsborough, 598 F.3d 1289, 1293 (11th Cir. 2010).
50. The Supreme Court directed the lower courts to assume that Congress intended the presumption of preclusive effect of administrative findings to apply unless Congress indicated otherwise. Astoria Federal Savings v. Solimino, 501 U.S. 104, 108 (1991). That indication, however, need not be clear and precise. Id. (language of Age Discrimination in Employment Act implies that Congress intended administrative findings not to have preclusive effect).
51. University of Tennessee v. Elliott, 478 U.S. 788 (1986).
52. Id. at 795-96; see also Caver v. City of Trenton, 420 F.3d 243, 259 (3d Cir. 2005). Some of the recent cases on this point deal with the preclusive effect of administration claims brought under the Sarbanes-Oxley Act. See Stone v. Instrumentation Laboratory Company, 591 F.3d 239 (4th Cir. 2009); Tice v. Bristol-Myers Squibb Company, 325 F. App'x 114 (3d Cir. 2009).
54. Gjellum v. City of Birmingham, 829 F.2d 1056 (11th Cir. 1987).
56. Dionne v. Mayor and City Council of Baltimore, 40 F.3d 677, 682 (4th Cir. 1994).
59. Dionne, 40 F.3d at 684. Edmundson v. Borough of Kennett Square, 4 F.3d 186, 192-93 (3d Cir. 1993) (constitutional determinations by administrative agency have no preclusive effect).
60. Waid v. Merrill Area Public School, 91 F.3d 857 (7th Cir. 1996) (overruled in part on other grounds in Fitzgerald v. Barnstable School Committee, 555 U.S. 246, 129 S. Ct. 788 (2009)).
63. Miller v. County of Santa Cruz, 39 F.3d 1030 (9th Cir. 1994), cert. denied, 515 U.S. 1160 (1995).
65. Plough v. West Des Moines Community School District, 70 F.3d 512 (8th Cir. 1995).
66. B & B Hardware, Incorporated, 135 S. Ct. at 1303.
67. See Parklane Hosiery Company v. Shore, 439 U.S. 322 (1979) (offensive); Blonder-Tongue Laboratories, Incorporated v. University of Illinois Foundation, 402 U.S. 313 (1971) (defensive).
68. See Allen v. McCurry, 449 U.S. 90, 94-95 (1980).
69. Taylor v. Sturgell, 553 U.S. 880, 128 S. Ct. 2161 (2008).
70. Id., 128 S. Ct. at 2172-73.
71. Id., 128 S. Ct. at 2176.
72. See University of Tennessee v. Elliott, 478 U.S. 788 (1986).
73. B & B Hardware, Incorporated, 135 S. Ct. at 1303; University of Tennessee, 478 U.S. at 798-99. Federal courts give the same preclusive effect to the decisions of state administrative agencies as the state itself would, subject to the procedural requirements of the Due Process Clause. Kremer v. Chemical Construction Corporation, 456 U.S. 461, 481-82 (1982).
74. See, e.g., B & B Hardware, Incorporated, 135 S. Ct. at 1305 (nothing in Lanham Act bars application of issue preclusion); Kosakow v. New Rochelle Radiology Associates, 274 F.3d 706, 728-29 (2d Cir. 2001) (no evidence that Congress intended to limit preclusion under Family and Medical Leave Act).
75. See Burkybile v. Board of Education, 411 F.3d 306, 312 (2d Cir. 2005) (since plaintiff had fair opportunity to litigate in administrative proceeding, findings of fact are given preclusive effect in subsequent § 1983 claim). Kosakow offers a particularly careful and thoughtful examination of these issues with respect to the Family Medical Leave Act and New York preclusion law. Kosakow concluded that the federal plaintiff did not have an adequate opportunity in the administrative hearing to litigate whether the decision to terminate her employment was made for legitimate business reasons. See also Swineford v. Snyder County, 15 F.3d 1258 (3d Cir. 1994) (unemployment compensation hearing). Unreviewed unemployment compensation hearing decisions are ordinarily not given preclusive effect because of the limited legal issues addressed and the particular nature of the forum.
76. See, e.g., Dias v. Elique, 436 F.3d 1125, 1129-31 (9th Cir. 2006).

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