When a lawsuit is filed, courts must first resolve preliminary legal issues before they ever consider evidence or reach the merits of the dispute. Courts must resolve these issues to decide whether they may hear the case at all. One such issue, jurisdiction, establishes that a plaintiff has filed their suit in the correct court. Another, “standing,” requires a plaintiff to prove a direct, personal stake in the outcome of the case.
Courts also consider whether plaintiffs have completed, or “exhausted,” all other legally required steps to resolve their dispute before filing suit. Known as the “exhaustion of administrative remedies doctrine,” it requires that plaintiffs go through certain administrative processes before being allowed to access Article 3 federal courts This article examines the exhaustion doctrine, illustrates how it works in practice, and highlights key exceptions that may allow cases to continue even when administrative remedies have not been fully exhausted. Individuals attempting to challenge agency actions must be aware of this requirement and its potential effect on their suit.
Background
Administrative agencies are governmental bodies created to issue regulations and run programs in a variety of fields. Agricultural producers interact with administrative agencies like the Environmental Protection Agency (EPA), the Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS). When a plaintiff challenges the action of an administrative agency in court, they are asking for “judicial review” of the challenged action. Federal courts are granted authority to conduct a judicial review of agency actions by the Administrative Procedure Act (APA).
However, the APA does not grant federal courts unlimited authority to review agency actions. In fact, judicial review is only available in certain circumstances. First, agency actions may be reviewed if the statute under which the action takes place includes a provision giving courts authority to hear the review. For example, under the Clean Water Act, any person “against whom a civil penalty is assessed” may obtain judicial review of the penalty in a U.S. District Court or U.S. Court of Appeals. When a statute contains a clause allowing for judicial review or does not otherwise prohibit judicial review, it is considered “reviewable by statute.” This path to the federal court system is more direct under this provision because the agency action may be reviewed without going through additional administrative steps. However, in situations where the statute does not directly provide that actions are reviewable, agency actions and determinations may still be reviewed. Eventually.
Final Agency Actions & Exhaustion
Secondly, the APA allows for judicial review of “final agency actions.” In Bennett v. Spear, the Supreme Court defined “final agency action” as “the consummation of the agency’s decision-making process” and not “of a merely tentative or interlocutory nature.” The Court further explained that “the action must be one by which rights or obligations have been determined, or from which legal consequences will flow.” The Court’s definition in Bennett provides some guidance, but determining what constitutes a “final agency action” for a specific agency can prove difficult.
For example, consider a plaintiff who has been found ineligible for participation in ARC or PLC, or had an FSA loan application denied. At that point, she has been issued an adverse decision, or “a program decision by an employee, officer, or committee of FSA that is adverse to the participant.” She may choose to appeal that adverse decision, and her appeal will go to the National Appeals Division, or NAD. NAD is an appellate body within USDA, and NAD decision makers are employees of USDA. NAD has authority to hear appeals of “adverse decisions” issued by many USDA agencies, including FSA. To learn more about NAD, click here.
As an example, in Kroskob v. U.S. Dept. of Agriculture the plaintiffs were denied a loan restructure plan by FSA. The Kroskobs appealed this decision to NAD, which determined that incorrect information had been submitted to FSA and remanded the case with an order to gather more information. NAD did not rule on the merits of the Kroskobs’ claim. FSA gathered the information and once again denied their restructure request. At this point, the Kroskobs requested an informal hearing with FSA, but did not appeal the decision to NAD. Instead, they appealed the case directly to the federal court. The district court dismissed the case, which was then appealed to the 10th Circuit. The appellate court held that the dismissal was proper because the case challenged “ongoing agency action for which no final determination has been made.” Specifically, “for the Kroskobs to seek relief in federal court, they must appeal FSA’s decision to NAD. If they are dissatisfied with NAD’s determination, at that time the Kroskobs may either bring an action in federal court, or seek formal review from NAD’s Director, which also can be challenged in federal court.” Only after obtaining a determination on the merits from a NAD hearing officer, are plaintiffs able to reach the “consummation” of FSA’s decision making process.
On the environmental front, consider the case of CTM Holdings, LLC v. U.S. Dept of Agriculture. There, the plaintiff was sent a letter by the Natural Resources and Conservation Service (NRCS). The letter notified the plaintiff of the process to request review of a wetlands determination. Plaintiff did not request further administrative review, but instead-four months later- filed its complaint in the District Court. The court noted that plaintiff’s actions seemed to indicate an intent to comply with the FSA determination, rather than appeal it, and that- most importantly- plaintiff did not request a further review in accordance with the letter’s instructions. Instead, “the fundamental issue here is that the Court has no ‘agency action, findings, and conclusions’ to review.” Because the plaintiff failed to exhaust available remedies, the court reasoned that there was no final agency action eligible for judicial review. To learn more about that case, click here.
Contrast that with U.S. Army Corps of Engineers v. Hawkes Co., Inc., where respondent Hawkes Co. Inc (Hawkes) applied for a CWA Section 404 permit that would allow dredge and fill actions to take place during peat mining. Subsequently the Corps issued a jurisdictional determination that a portion of the property contained a WOTUS, and as such would be subject to the requirements of the Clean Water Act. Hawkes disagreed, filing an action for judicial review with the federal district court. The District Court held that a jurisdictional determination was not final agency action, while the Court of Appeals disagreed and reversed. The case was appealed to the Supreme Court, which considered, in part, whether a jurisdictional determination is a “final agency action.” There, the Court reasoned that a jurisdictional determination is “issued after extensive factfinding by the Corps regarding the physical and hydrological characteristics of the property… and is typically not revisited if the permitting process moves forward.” Further, the determination remains valid for a period of five years and is only revised based on “new information.” In other words, according to the Court, the “Corps for all practical purposes ‘has ruled definitively’ that respondents’ property contains jurisdictional waters.” Unlike CTM holdings, where the plaintiff had an option to request review but failed to do so there was no further administrative process that Hawkes could take part in. Without further available remedies for respondents to exhaust, the action was “final” and available for judicial review.
Similar State Requirements
While this article has focused on exhaustion requirements in place for federal agency action, it is important to remember that individual states may also impose exhaustion requirements for certain actions. For example, under Iowa’s Administrative Procedure Act, judicial review is only available for plaintiffs who have “exhausted all adequate administrative remedies.” Additionally, Iowa’s APA requires the plaintiff to be “aggrieved or adversely affected by any final agency action.” Likewise, the Texas Government Code allows for judicial review when a person has “exhausted all administrative remedies available within a state agency and who is aggrieved by a final decision in a contested case.” Exhaustion is not exclusive to federal courts and may be required for state agency actions as well.
Conclusion
Even before a court will consider the facts of the case, it will look at preliminary issues to determine if that case can be heard in that court with those parties. One of those issues is the doctrine of exhaustion. Because a plaintiff’s failure to exhaust administrative remedies may lead to a swift dismissal, plaintiffs should exercise caution and seek legal counsel before making decisions about agency actions that may have an impact on their operations.
To visit the USDA’s National Appeals Division website, click here.
To learn about the NAD appeal process, read this National Agricultural Law Center publication.
To learn more about administrative law generally, visit NALC’s Administrative Law Reading Room, here.