Case Name: Frances Brahna DENBERG and Albert A. Denberg, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. UNITED STATES of America RAILROAD RETIREMENT BOARD and James L. Cowen, individually and as chairman of the United States of America Railroad Retirement Board, Defendants-Appellants
Court: United States Court of Appeals for the Seventh Circuit
Jurisdiction: United States
Decision Date: 1983-01-04
Citations: 696 F.2d 1193
Docket Number: No. 81-2386
Parties: Frances Brahna DENBERG and Albert A. Denberg, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. UNITED STATES of America RAILROAD RETIREMENT BOARD and James L. Cowen, individually and as chairman of the United States of America Railroad Retirement Board, Defendants-Appellants.
Judges: Before WOOD and POSNER, Circuit Judges, and FOREMAN, Chief Judge.
Reporter: Federal Reporter 2d Series
Volume: 696
Pages: 1193–1209

Head Matter:
Frances Brahna DENBERG and Albert A. Denberg, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. UNITED STATES of America RAILROAD RETIREMENT BOARD and James L. Cowen, individually and as chairman of the United States of America Railroad Retirement Board, Defendants-Appellants.
No. 81-2386.
United States Court of Appeals, Seventh Circuit.
Argued May 25, 1982.
Decided Jan. 4, 1983.
As Modified Jan. 5, 1983.
As Amended on Denial of Rehearing and Rehearing En Banc May 10, 1983.
Frank A. Rosenfeld, Dept, of Justice, Civ. Div., Washington, D.C., for defendants-appellants.
A. Raymond Randolph, Sharp, Randolph & Green, Washington, D.C., for plaintiffsappellees.
Before WOOD and POSNER, Circuit Judges, and FOREMAN, Chief Judge.
Honorable James F. Foreman, Chief Judge, United States District Court of the Southern District of Illinois, sitting by designation.

Opinion:
POSNER, Circuit Judge.
In 1975 Albert Denberg, whose wife Frances is a retired railroad worker, applied to the Railroad Retirement Board for spouse's benefits under the Railroad Retirement Act of 1974, 45 U.S.C. § 231 et seq. The Act provides that a husband is eligible for spouse's benefits only if he was receiving at least one half of his support from his wife at the time that she began receiving benefits. 45 U.S.C. § 231a(c)(3)(ii). There is no similar requirement if the applicant is a wife. Denberg's application was denied because he did not satisfy the one-half requirement. He could have appealed the denial to the Board's Bureau of Hearings and Appeals, see 20 C.F.R. § 260.4, and then to the Board itself, see 20 C.F.R. § 260.6, but instead he and his wife brought this suit in federal district court in 1976 challenging the differential treatment of husbands and wives under the statute as unconstitutional. (What standing his wife has to complain about the denial of benefits to him we do not understand, but we will not pursue the question because the answer would not affect our decision.) The suit was later certified as a class action, with Mr. Denberg as the class representative. The class consists of all husbands disentitled to spouse's benefits by virtue of section 231a(c)(3)(ii), whether or not like Denberg they made application to the Board.
While the case was pending in the district court, the Sixth Circuit, in Kalina v. Railroad Retirement Board, 541 F.2d 1204 (6th Cir.1976), held that section 231a(e)(3)(ii) was unconstitutional, and the Supreme Court affirmed summarily, 431 U.S. 909, 97 S.Ct. 2164, 53 L.Ed.2d 220 (1977), on the authority of Califano v. Goldfarb, 430 U.S. 199, 97 S.Ct. 1021, 51 L.Ed.2d 270 (1977), which had struck down a similar provision in the Social Security Act. After the Supreme Court's affirmance in Kalina, the main question left for decision in this case was how far back the plaintiffs could reach for benefits wrongfully denied them. The district court, in its final judgment, entered in June 1981, held they could reach back to April 7, 1974, one year before Mr. Denberg had filed his application. The court ordered that notice of its judgment be sent to the members of the class, telling them to file their claims with the Board no later than October 15, 1981. On October 1, the Board informed the court that 5,450 apparently meritorious claims had been received. The total amount due these claimants has not been calculated but the Board estimates that it could approach $60 million.
Since the statute was held unconstitutional by the Supreme Court in Kalina before the district court entered its judgment from which the government has appealed, section 1252 of the Judicial Code, which read in light of section 1291 gives the Supreme Court exclusive jurisdiction over appeals from any federal district court order holding an Act of Congress unconstitutional in a suit to which a federal agency is a party, is inapplicable. The judgment appealed from was not a judgment holding a statute unconstitutional — the statute had already been held unconstitutional by the Supreme Court in another case — but a judgment concerning the remedial consequences of the statute's unconstitutionality. Once the unconstitutionality of a statute has been authoritatively determined by the Supreme Court, there is no purpose in allowing an expedited appeal to the Court from a subsequent district court judgment merely premised on that determination.
The only other question we need consider is whether the district court had jurisdiction of the subject matter of this suit. Section 1337 of the Judicial Code, on which the district court relied for jurisdiction, gives the district courts original jurisdiction over "any civil action or proceeding arising under any Act of Congress regulating commerce . . " The Railroad Retirement Act is an act regulating commerce, Finnerty v. Cowen, 508 F.2d 979, 983 (2d Cir.1974), and this suit arises under the Railroad Retire- ment Act because it is a suit for benefits provided by the Act although it challenges the constitutionality of one of the Act's provisions. However, section 5(f) of the , Railroad Unemployment Insurance Act, 45 U.S.C. § 355(f), incorporated by reference into the Railroad Retirement Act of 1974, see 45 U.S.C. § 231g, provides that "any claimant . may, only after all administrative remedies within the [Railroad Retirement] Board have been availed of and exhausted, obtain a review of any final decision of the Board by filing a petition for review" in a federal court of appeals. Therefore, if 28 U.S.C. § 1337 gives the district court jurisdiction of this case, an applicant for railroad retirement benefits either can exhaust his remedies within the Board and then seek judicial review in a court of appeals under section 5(f) — the route taken by Kalina — or like Denberg can forget about his remedies within the Board and go directly into a district court under 28 U.S.C. § 1337 with, of course, a right of appeal to a court of appeals should he lose in the district court.
It would be surprising if Congress had wanted to give applicants for railroad retirement benefits such a choice. Cf. Oljato Chapter of Navajo Tribe v. Train, 515 F.2d 654, 660 (D.C.Cir.1975). A purpose to do so cannot be inferred from the general grant of jurisdiction in section 1337 of the Judicial Code, which so far as relevant here dates back to 1911 (see 36 Stat. 1093), long before the enactment of the first Railroad Retirement Act in 1934 (see 48 Stat. 1283); and in any event seems foreclosed by section 10(b) of the Administrative Procedure Act, 5 U.S.C. § 703. This section provides that "the form of proceeding for judicial review is the special statutory review proceeding relevant to the subject matter in a court specified by statute or, in the absence or inadequacy thereof, any applicable form of legal action . in a court of competent jurisdiction." In other words, if there is a special statutory review proceeding, it is exclusive. City of Rochester v. Bond, 603 F.2d 927, 935 (D.C.Cir.1979); S.Rep. No. 752, 79th Cong., 1st Sess. 44 (1945). There is one here — the proceeding in section 5(f) of the Railroad Unemployment Insurance Act.
The district court conceived section 5(f) differently: not as a specification of a section 10(b) "special statutory review proceeding" but as a requirement that administrative remedies be exhausted before the claimant can get judicial review. This distinction is relevant because the requirement of exhaustion is waived when exhaustion would be futile — when an applicant could not possibly get the initial denial of his application reversed within the agency. See, e.g., Continental Can Co., U.S.A. v. Marshall, 603 F.2d 590, 597 (7th Cir.1979). Exhaustion would have been futile here because the Railroad Retirement Board does not have the authority to declare statutes that it administers unconstitutional. Cf. Weinberger v. Salfi, 422 U.S. 749, 765-66, 95 S.Ct. 2457, 2466-67, 45 L.Ed.2d 522 (1975). But this conclusion does not, as the district court believed, eliminate section 5(f) as an obstacle to the district court's jurisdiction. The section does two things, and requiring exhaustion of administrative remedies is only one; the other is creating a special statutory review proceeding. See Weinberger v. Salfi, supra, 422 U.S. at 776, 95 S.Ct. at 2472, where this distinction is clearly stated. In a case like this where exhaustion of administrative remedies is futile, the initial decision of the agency denying benefits becomes the final decision to which section 5(f) refers, and the disappointed applicant can go directly to court for review of the denial. See id. at 766-67, 95 S.Ct. at 2467. But unless section 10(b) of the Administrative Procedure Act is to be ignored, it is to the court of appeals that he must go.
The plaintiffs admit in their brief that Mr. Denberg could have gone to the court of appeals directly after the denial of his application. There was no problem of "absence or inadequacy" of the special statutory review proceeding of section 5(f). They thus are asserting a right to choose whether to go to the district court or the court of appeals. But it is against common sense that a disappointed claimant should have a choice whether to seek judicial review in a district court with a right of appeal to the court of appeals, or in a court of appeals in the first place, see Sun Enterprises, Ltd. v. Train, 532 F.2d 280, 287 (2d Cir.1976); and section 10(b) of the Administrative Procedure Act makes clear that it is the latter forum, and the latter forum alone, in which review may be sought.
Confining judicial review to the courts of appeals is not some mindless, irksome technicality that we should try to construe our way around. It is the use of the district courts to review administrative action that does not make sense when there is review jurisdiction in the courts of appeals. Not only are the district courts trial rather than review courts; but to allow someone seeking judicial review of administrative action to get that review in the district court with a right of appeal to the court of appeals is to give him two judicial reviews of administrative action. That is too much, except in very special circumstances, as when the administrative proceeding is informal and the record of that proceeding has to be reconstructed in the judicial review proceeding before the judicial review proper can begin. See, e.g., Susquehanna Valley Alliance v. Three Mile Island Nuclear Reactor, 619 F.2d 231, 241 (3d Cir.1980); Edgewater Nursing Center, Inc. v. Miller, 678 F.2d 716, 718 (7th Cir.1982). That would be a case of "inadequacy" of the special statutory review proceeding. 5 U.S.C. § 703. It is not a problem here. The very reason that administrative remedies do not have to be exhausted in this case is that Mr. Denberg's challenge to the denial of his application is based on a pure issue of constitutional law that the agency considers beyond its competence to decide.
It is therefore not surprising that the courts, with or without mention of section 10(b) of the Administrative Procedure Act, have held repeatedly that when Congress provides for review jurisdiction in the courts of appeals, their jurisdiction is exclusive. See, e.g., Whitney Nat'l Bank v. Bank of New Orleans & Trust Co., 379 U.S. 411, 422, 85 S.Ct. 551, 558, 13 L.Ed.2d 386 (1965); Oling v. Air Line Pilots Ass'n, 346 F.2d 270, 276 (7th Cir.1965); Gardner v. State of Alabama, Dept. of Pensions & Security, 385 F.2d 804, 810 (5th Cir.1965); Investment Co. Inst. v. Board of Govs. of Fed. Reserve System, 551 F.2d 1270, 1278-80 (D.C.Cir.1977); Independent Cosmetic Mfrs. & Distribs., Inc. v. HEW, 574 F.2d 553, 554-56 (D.C.Cir.1978); City of Rochester v. Bond, supra, 603 F.2d at 934-35; Compensation Dept. Five, United Mine Workers of America v. Marshall, 667 F.2d 336, 340 (3d Cir.1981); Columbia Power Trades Council v. United States Dept. of Energy, 671 F.2d 325, 326 (9th Cir.1982); City of Peoria v. General Elec. Cablevision Corp., 690 F.2d 116, 122 (7th Cir.1982); Davis, Administrative Law Treatise § 23.03-1 (1982 Supp.). As this court stated recently in holding that district court jurisdiction to review administrative action would not lie under 28 U.S.C. § 1337 where a statute conferred review jurisdiction on the courts of appeals, "It is well established that a special statute vesting jurisdiction in a particular court cuts off the jurisdiction other courts might otherwise have under a more general statute." Assure Competitive Transport., Inc. v. United States, 629 F.2d 467, 471 (7th Cir.1980). And where it is unclear whether review jurisdiction is in the district court or the court of appeals the ambiguity is resolved in favor of the latter, see Rockford League of Women Voters v. Nuclear Regulatory Comm'n, 679 F.2d 1218, 1221 (7th Cir.1982), as it should be in light of the general considerations discussed above, see Currie & Goodman, Judicial Review of Federal Administrative Action: Quest for the Optimum Forum, 75 Colum.L.Rev. 1, 16-19 (1975). Here there is no ambiguity.
The plaintiffs argue that if Denberg and the other plaintiffs could not have obtained judicial review in district court, where a class action is possible, the courts of appeals would have been inundated with more than 5,000 separate review proceedings rather than a single appeal from the district court's judgment in the class action. But of the 5,450 class members who apparently have meritorious claims under the district court's judgment, only 15, including Mr. Denberg, applied to the Board for benefits. The avalanche of claims was triggered by the notice sent out by the district court; there would have been no such notice, and no avalanche, without the district court suit. And even if there had been 5,000 or more separate filings in the courts of appeals, the vast majority of these would have been stayed to await the decision in the handful that would have been actively litigated. Also, since a class action is a voluntary procedure and any member of the class can if he wants opt out of the class action and bring his own suit, it was not clear in the beginning that only one district court suit would be brought.
In any event, jurisdictional lines should not be drawn on a case by case basis. If jurisdiction lies in the district court only when a big saving in judicial resources would result, and in the court of appeals when it would not, the Denbergs of this world will have no clear idea in which court to seek judicial review of adverse agency action. In addition, a case by case approach would involve a complete judicial rewriting of the review statutes, 5 U.S.C. § 703 and 45 U.S.C. § 355(f). Jurisdiction has to be all in the district court or all in the court of appeals. And there is no reason to think the former choice will in general be more sparing of judicial resources than the latter, since giving the district court review jurisdiction creates two levels of judicial review.
In holding that it had jurisdiction, the district court cited only one case, Finnerty v. Cowen, supra, also a suit under 28 U.S.C. § 1337 against the Railroad Retirement Board. The Second Circuit's very brief discussion of the jurisdictional question treats section 5(f) as merely requiring exhaustion of administrative remedies, which as in the present case would have been futile. See 508 F.2d at 984. Finnerty is somewhat different from the present case because the plaintiff there was not complaining that benefits had been denied her; she was complaining that the Board was not paying her as much as she was entitled to; and the court may have thought that this type of Board action was not a "final decision" reviewable through the section 5(f) procedure. In any event, the premise of the jurisdictional analysis in Finnerty was demolished a year later by Weinberger v. Salfi, supra, which distinguished the exhaustion from the jurisdictional function of statutes that prescribe the method of judicial review of agency action. See 422 U.S. at 766, 95 S.Ct. at 2467.
We conclude that the district court did not have jurisdiction over Mr. Denberg's claim. It remains to consider whether it had jurisdiction over the claims of class members who unlike Denberg never filed applications with the Board and therefore could not have sought judicial review of the Board's denial of their applications in a court of appeals under section 5(f). Since the district court never had jurisdiction over the claim of the class representative, Mr. Denberg, it had no jurisdiction over the class action either even if the claims of some of the members of the class were within its jurisdiction. Jurisdiction cannot be obtained retroactively. See Mansfield, Coldwater & Lake Michigan Ry. v. Swan, 111 U.S. 379, 381-82, 4 S.Ct. 510, 511, 28 L.Ed. 462 (1884); People of State of Illinois v. General Elec, Co., 683 F.2d 206, 209 (7th Cir.1982). If the court did not have jurisdiction over the Denbergs' action when it was filed, it did not have jurisdiction to certify the action as a class action under Fed.R.Civ.P. 23(c)(1) two years later. If Mr. Denberg's claim had been within the jurisdiction of the district court when the complaint was filed and the class action certified, and later had been paid or otherwise mooted, the class action might have survived with Denberg as the class repre sentative. See United States Parole Comm'n v. Geraghty, 445 U.S. 388, 398, 100 S.Ct. 1202, 1209, 63 L.Ed.2d 479 (1980). But there is no authority for allowing a class action to continue if the complaint when filed was not within the jurisdiction of the district court.
But to stop with this observation would encourage the filing of a new class action with a different class representative, and as we think it clear that the district court would have no jurisdiction over such an action we shall place our denial of jurisdiction over the class action on a somewhat broader ground. Section 5(f) as we said earlier has two functions — to provide a procedure for judicial review and to require (where appropriate) exhaustion of administrative remedies. No purpose would have been served by requiring Mr. Denberg to appeal the denial of his application for benefits to the appellate tribunals within the Board; therefore he was not required to do so. But it does not follow that he was not required to file an application for benefits in the first place. That was not a futile step on the path to eventual judicial review. The Board was entitled to an opportunity to determine whether Mr. Denberg was entitled to benefits apart from any statutory disqualifications that the Board was bound to impose regardless of constitutional doubts. See Rosenthal & Co. v. Bagley, 581 F.2d 1258, 1260 (7th Cir.1978). It might have turned out that Mr. Denberg was not the husband of a retired railroad worker, or was otherwise ineligible on grounds unrelated to how much support he received from his wife. The power to make these determinations is in the Board rather than the district court or any other court.
Thus the exhaustion requirement of section 5(f) was applicable to this case to the extent of requiring anyone who wanted to get judicial review of the dependency requirement in the Railroad Retirement Act to apply to the Board for retirement benefits and to obtain from the Board a decision on his application. We think this point is conceded all around: the district court itself required exhaustion of administrative remedies to this limited extent though not in the form prescribed by section 5(f). The court did not try to determine which members of the class were entitled to benefits, but instead ordered the Board to make that determination; in effect it made the class members who had not applied to the Board do so. But this is not the method of exhausting administrative remedies that the statute prescribes. The claimant must go to the Board first and if he is turned down appeal the decision within the Board or if that would be futile to the court of appeals. At no time is he supposed to be in the district court.
The judgment of the district court is reversed with directions to dismiss the complaint for lack of subject-matter jurisdiction.
So Ordered.