Administrative Law - Terri L. Carver

• Publication year: 1998

Administrative Lawby Terri L. Carver^*

I. Introduction

The Eleventh Circuit ruled on numerous administrative law issues in 1997, including exhaustion of administrative remedies, deference to agency legal interpretations, and the time period for appealing federal agency actions. The Eleventh Circuit also took a close look at the scope of an inspector general's subpoena powers and clarified the role of agency investigations versus inspectors general investigations.

The Eleventh Circuit decided several cases of first impression in 1997. In a case of first impression nationwide,¹ the Eleventh Circuit ruled that determining the amount of attorney fees in an administrative case was a collateral issue.² Therefore, the issue of attorney fees did not toll the time period for seeking judicial review of an administrative decision on the merits.³

The Eleventh Circuit also reviewed two cases of first impression within the circuit.⁴ First, the court held that a claimant who filed suit against an insolvent financial institution (later taken over by the Resolution Trust Corporation ("RTC")) was not required to exhaust administrative remedies when the defendant RTC initially elected to proceed with the suit.⁵ The claims procedures against insolvent financial institutions, as set forth in the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"),⁶ governed the court's decision.⁷ In the second case, the court ruled the legal standard for survivor's benefits under the Black Lung Benefits program was whether black lung disease "hastened" the miner's death.⁸ The court deferred to the agency's interpretation of its regulations on the Black Lung Benefits program.⁹

The court decided several cases involving exhaustion of administrative remedies. First, the Eleventh Circuit ruled plaintiffs need not exhaust state administrative remedies if the agency action is being challenged as a violation of federal law.¹⁰ Second, the court found the three-part test for a waiver of the exhaustion requirement was not met because plaintiff failed to prove exhaustion of administrative remedies would cause irreparable harm or be futile.¹¹ Finally, the court clarified that a third party cannot later challenge in court an agency decision that the original party did not appeal through the agency's administrative process.¹²

In two cases, the Eleventh Circuit refused to defer to agency statutory interpretations the court deemed inconsistent with the underlying statutes.¹³ However, the court did defer to agency regulatory interpretations as to commercial pilot qualifications,¹⁴ eligibility requirements in the Black Lung Benefits program,¹⁵ and Medicare reimbursement of bad debt claims.¹⁶

The Eleventh Circuit ruled the statutory time period for challenging an agency regulation did not apply if the plaintiff challenged the agency regulation as violative of the statute.¹⁷ The court also clarified that an agency did not engage in improper retroactive rule-making if it disallowed an old claim based on new information not available at the time the claim was paid.¹⁸

Finally, the Eleventh Circuit upheld Inspector General ("IG") subpoenas issued in a fraud investigation on disaster payments.¹⁹ The court distinguished the IG's subpoena powers from agency compliance audits that were the agency's prerogative.²⁰

II. Jurisdiction to Review Agency Actions

A. Exhaustion of Administrative Remedies

In Damiano v. FDIC,²¹ the Eleventh Circuit held that defendant RTC failed to give timely notice of administrative claims procedures to the plaintiff who sued an insolvent financial institution now in RTC receivership.²² Under FIRREA,²³ the RTC was deemed to have elected to proceed with the lawsuit; therefore, the plaintiff was not required to exhaust administrative remedies.²⁴

In 1990, plaintiff Irene Damiano filed an age discrimination suit against her former employer, Amerifirst Federal Savings & Loan Association ("Amerifirst"), prior to Amerifirst being declared insolvent.²⁵ The RTC was appointed the receiver of Amerifirst in March 1991.²⁶ Soon after its appointment as receiver, the RTC substituted itself as defendant in the age discrimination suit.²⁷ More than eight months passed before RTC raised the issue of plaintiff's failure to exhaust administrative remedies.²⁸ In 1994, the district court dismissed the case, holding that "FIRREA created a mandatory administrative exhaustion requirement for all claims, including those asserted in a pre-receivership lawsuit."²⁹ The district court ruled the plaintiff had "forfeited her claim by failing to exhaust her administrative remedies."³⁰

The Eleventh Circuit, in a case of first impression in the circuit,³¹ reversed the district court³² and held FIRREA did not impose a mandatory administrative exhaustion process for claims asserted in pre-receivership lawsuits.³³ "[T]he [FIRREA] statute does not provide for an automatic stay of all pre-receivership actions, pending exhaustion of the administrative process .... It specifically gives the receiver the right, but not the duty, to stay a pending action within the first ninety days of being appointed as receiver."³⁴

Here, the RTC clearly knew of plaintiff's pending age discrimination suit because it substituted itself as the successor party in the lawsuit within a month of its receivership appointment.³⁵ Yet, more than eight months passed before RTC protested plaintiff's failure to exhaust administrative remedies.³⁶ The Eleventh Circuit held:

[The RTC] elected to proceed with this lawsuit judicially by failing to timely insist on the use of its administrative processes. To hold otherwise would be to allow the RTC to ignore a lawsuit of which it clearly was aware and in which it had intervened, thus luring the claimant to assume that the RTC [wa]s ready to deal with it as a litigant, while "[i]n reality, . . . the receiver l[ay] in ambush, awaiting expiration of the administrative deadline so that it [could] dispose of the claim without consideration of its merits."³⁷

The court noted that subject matter jurisdiction of pending pre-receivership lawsuits, such as plaintiff's age discrimination lawsuit, "vested" at the time it was filed with the court.³⁸ The receivership did not disturb the district court's jurisdiction.³⁹ The FIRREA pre-receivership provisions were in sharp contrast to the FIRREA post-receivership claims process,⁴⁰ which imposed a mandatory administrative process prior to suit as a jurisdictional prerequisite.⁴¹

In Tallahassee Memorial Regional Medical Center v. Cook,⁴² the Eleventh Circuit held the plaintiffs' failure to exhaust state administrative remedies in challenging Medicaid hospital reimbursements could not bar a 42 U.S.C. Sec. 1983 claim alleging a violation of federal law.⁴³ Plaintiffs⁴⁴ challenged Florida's failure to reimburse them for care of adolescent psychiatric patients after inpatient care was no longer required but prior to patients' placement in outpatient alternative treatment facilities.⁴⁵ Plaintiffs said reimbursement was required by the Boren Amendment,⁴⁶ under the federal Medicaid program.⁴⁷ The court agreed.⁴⁸

The court rejected Florida's argument that plaintiffs had not exhausted the state's administrative appeals process on reimbursements.⁴⁹ "[A] claim under 42 U.S.C. Sec. 1983 cannot be barred by a plaintiff's failure to exhaust state remedies with respect to unreviewed administrative actions .... The courts . . . have found this rule applies with equal force to cases under the [Boren] Amendment."⁵⁰

The Eleventh Circuit clarified the criteria for a waiver of the jurisdictional prerequisite to exhaust administrative remedies, in Cray ton v. Callahan.⁵¹ In Cray ton, plaintiffs alleged the Social Security Administration had a duty to determine if applicants to the Social

Security Disability Insurance ("SSDI") program were mentally retarded, even if mental retardation was not the basis of the initial disability application.⁵²

The Eleventh Circuit noted the federal SSDI statute set forth two jurisdictional prerequisites for judicial review of agency decisions.⁵³ "First, the individual must have presented a claim for benefits to the Secretary. Second, the claimant must have exhausted the administrative remedies. This means claimant must have completed each of the steps of the administrative review process unless exhaustion has been waived."⁵⁴ In this case, plaintiffs had not completed the administrative process prior to filing suit alleging an SSDI violation.⁵⁵

The Eleventh Circuit applied a three-part test to determine if the exhaustion requirement had been or should be waived: "(1) are the issues entirely collateral to the claim for benefits; (2) would failure to waive cause irreparable injury; and (3) would exhaustion be futile."⁵⁶ The Eleventh Circuit affirmed the district court's findings⁵⁷ that plaintiffs failed to prove exhaustion of administrative remedies would cause irreparable harm or be futile.⁵⁸

After reviewing three United States Supreme Court cases on waiver of the administrative exhaustion requirement,⁵⁹ the Eleventh Circuit summarized the "rules" regarding exhaustion of administrative remedies as follows:

The agency may always waive the exhaustion requirement. It may be held to have done so by failing to challenge the sufficiency of the allegations in plaintiffs' complaint .... Exhaustion may be excused when the only contested issue is constitutional, collateral to the consideration of claimant's claim, and its resolution therefore falls outside the agency's authority .... Exhaustion may be impractical and inconsistent with the exhaustion principles when a judicial determination has been made that the agency's procedure is illegal.⁶⁰

The Eleventh Circuit modified the district court's dismissal with prejudice to dismissal without prejudice to allow plaintiffs to seek judicial review once they had exhausted administrative remedies.⁶¹

In Bama Tomato Co. v. United States Department of...