3.4 Exhaustion and Preclusion

Updated 2017 by Jeffrey S. Gutman

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.

3.4.A. Overview

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.

3.4.B. Statutory Exclusion

Exhaustion of federal or state administrative remedies is required when Congress explicitly requires exhaustion as a prerequisite to bringing an action in federal court.3 Such an expression must be specific and clear.4 For example, 42 U.S.C. § 1997e(a), part of the Prison Litigation Reform Act, provides: “No action shall be brought with respect to prison conditions … until such administrative remedies are exhausted.” The Supreme Court has held that this language reflected Congress’ intent to require exhaustion in all cases and to eliminate any discretion to permit exceptions.5 However, the Supreme Court has held that, for exhaustion to apply, the administrative procedure must be "available," meaning that it is "capable of use."6 Such procedures are not available when: (1) prison officials are "unable or consistently unwilling" to provide a remedy to complaining inmates, (2) the procedures are so opaque or confusing that a reasonable prisoner cannot avail themselves of them, or (3) when prison officials prevent inmates from using the procedures through "machination, misrepresentation, or intimidation."7

The interpretive question in cases with an explicit exhaustion requirement is the breadth of the statutory exhaustion provision.8 For example, the Individuals with Disabilities Education Act provides that, “Nothing in [the IDEA] shall be construed to restrict or limit the rights, procedures, and remedies available under the Constitution, the [ADA], title V of the Rehabilitation Act [including §504], or other Federal laws protecting the rights of children with disabilities, except that before the filing of a civil action under such laws seeking relief that is also available under [the IDEA], the [IDEA’s administrative procedures] shall be exhausted to the same extent as would be required had the action been brought under [the IDEA].”9 The Supreme Court recently discussed that exhaustion requirement in Fry v. Napoleon Community Schools.10 In Fry, the Court held that the exhaustion requirement depends on whether the lawsuit that the government seeks to dismiss seeks the remedy available under the IDEA for the denial of a free appropriate public education. If the suit seeks redress for injuries unrelated to the denial of a free appropriate public education, the suit is not subject to the exhaustion requirement.11 Whether the suit does so depends on the substance of the claims, not on the labels or language used.12

 When Congress has required exhaustion, the next inquiry is whether the requirement is jurisdictional or non-jurisdictional.13 When the exhaustion requirement is framed in jurisdictional terms, the court lacks jurisdiction unless the plaintiff has exhausted its remedies. It is presumed that the exhaustion requirement is not jurisdictional, but the presumption may be overcome if the statute otherwise provides in "sweeping and direct" terms.14 Jurisdictional exhaustion, which is rooted in Congressional control over the jurisdiction of the federal courts, may not be waived and is not subject to any exceptions.15 Non-jurisdictional exhaustion, in contrast, is based on prudential considerations: "giving agencies the opportunity to correct their own errors, affording parties and courts the benefits of agencies' expertise, [and] compiling a record adequate for judicial review...."16 Exhaustion of administrative remedies is not required in cases of non-jurisdictional exhaustion when the interests in the petitioner in prompt review outweigh the government's prudential interests.17

 Without an explicit statutory requirement for exhaustion, “courts are guided by congressional intent in determining whether application of the doctrine would be consistent with the statutory scheme.”18 Thus, implied exhaustion requirements are often determined by resort to "sound judicial discretion," based on statutory interpretation and legislative history.19 In these circumstances, “courts play an important role in determining the limits of an exhaustion requirement and may impose such a requirement even where Congress has not expressly so provided.”20

Be careful when filing claims under several statutes. Exhaustion is sometimes excused when there is a constitutional challenge to the agency's administrative process.21 The agency may also waive a non-jurisdictional exhaustion requirement.22 Combining claims from a federal statute that does not require exhaustion with one that does have an exhaustion requirement can result in enforcement of an exhaustion requirement for both statutory claims.23   

3.4.C. Common-Law Duty of Exhaustion

When “Congress has not clearly required exhaustion, sound judicial discretion governs.”24 Exercise of this discretion involves balancing the interests of the plaintiff in accessing a federal forum promptly against the institutional interests advanced when exhaustion is required.25

The Supreme Court in McCarthy v. Madigan identified three circumstances which, if present, would weigh against requiring exhaustion. The first occurs when requiring exhaustion would unduly prejudice a subsequent court action, such as when the administrative process is either delayed or does not otherwise allow the plaintiff to avert irreparable harm.26 In Bowen v. City of New York, for example, the Court found that a class of social security disability insurance claimants would suffer irreparable injury if they were required to fully exhaust their administrative remedies with the Social Security Administration.27 Second, exhaustion is not required when the administrative remedy is shown to be inadequate or would be futile.28 Such might be the case when the agency is unable to grant an effective remedy or is unable to consider the issues presented.29 A number of cases, frequently in the IDEA context, hold that administrative remedies are inadequate when the plaintiffs claim systemic failures and seek system-wide relief.30 Moreover, exhaustion is not required when the challenge is to the agency procedures themselves.31 Third, the Court found a waiver of exhaustion appropriate when agency bias is shown.32 Applying these factors, the Court in McCarthy held that a federal prisoner did not have to exhaust the FBI's administrative remedy procedure before filing a Bivens action in federal court.33

3.4.D. Preclusion

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.

In some types of matters, it may be appropriate to proceed to federal court. For instance, it may be necessary to first seek preliminary injunctive relief in federal court in order to preserve the status quo or to resolve an issue about administrative process before going through a voluntary administrative remedy. The deferential standard of review of agency decisions has to be factored into the desirability of administrative proceedings in advance of federal court litigation. Finally, because final state court judgments or administrative decisions may have preclusive effect in subsequent federal litigation, voluntary exhaustion has potential dangers when there is a fair likelihood of losing on the administrative level. Preclusion is an affirmative defense that must be pled and proven by the defendant.34

3.4.D.1. Claim Preclusion

In 28 U.S.C. § 1738, the full-faith and credit statute, Congress “required all federal courts to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so.”35 Federal courts apply state preclusion law to determine whether a state court judgment precludes a subsequent federal suit.36 The Supreme Court has since held that final state court judgments bar Title VII actions37 and actions brought under 42 U.S.C. § 1983.38 State court judgments affirming administrative decisions similarly have preclusive effect under Section 1738.39

The preclusive effect of unreviewed administrative decisions is not governed by Section 1738.40 Section 83(1) of the Restatement (Second) of Judgments outlines the basic principles:

If the administrative adjudication has the essential elements of an adjudication, and preclusion is consistent with the scheme of remedies, then a valid and final administrative determination by an administrative tribunal has the same effects under the rules of res judicata, subject to the same exceptions and qualifications, as a judgment of a court.41

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 first question—the required degree of formality to the administrative hearing—is relevant to both claim and issue preclusion (discussed infra). When the agency engages in a trial-type proceeding, the resulting findings of fact are likely to have preclusive effect. Features of a trial-type proceeding include the following safeguards:

(1) opportunity for representation by counsel; (2) pretrial discovery; (3) the opportunity to present memoranda of law; (4) examinations and cross-examinations at the hearing; (5) the opportunity to introduce exhibits; (6) the chance to object to evidence at the hearing; and (7) final findings of fact and conclusions of law.43

These safeguards go beyond the minimum due process requirements identified in Goldberg v. Kelly.44 There is little consistency as to whether proceedings with fewer safeguards may have preclusive effect.45 The Supreme Court has focused not on whether there are different procedures employed by the agency and by the court to resolve the issue before them but on whether there is "reason to doubt the quality, extensiveness, or fairness" of the procedures used by the agency.46

The second question concerns when a claim brought in a first action is sufficiently similar to one sought to be brought later in federal court to require preclusion. Section 24 of the influential Restatement of Judgments defines the “same” claim as one arising out of the same transaction or series of transactions. “Transactions,” in turn, “are to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties’ expectations or business understanding or usage.”47 Put more practically, whether a second lawsuit is based upon the same claim litigated in a prior action “turns on the essential similarity of the underlying events giving rise to the various claims.”48 To determine whether causes of action are sufficiently similar to apply preclusion,“[c]ourts consider the similarity of the acts complained, the material factual allegations in each suit and the witnesses and documentation required to prove each claim.”49

The third question to apply in determining the preclusive effect of administrative determinations is whether Congress has required courts to apply preclusion to implement a particular statute. Congress may, by statute, overturn the presumptive application of preclusion of administrative determinations.50 The leading case on this point is University of Tennessee v. Elliott.51 In Elliott, the university fired an African American employee. He appealed the decision administratively, claiming that the termination was racially motivated. The administrative law judge disagreed. Elliott then filed a Title VII and Section 1983 suit in federal court. The university argued that the administrative law judge’s findings precluded re-litigation of the discrimination issue. The Court held that the language of the statute reflected Congress’ intent that unreviewed state administrative proceedings had no preclusive effect on Title VII claims.52 The Court, however, found no evidence of such intent in Section 1983. Moreover, the Court found, giving preclusive effect to administrative fact-finding in Section 1983 actions advances repose, conserves resources, and promotes federalism.53

Even when all the requirements for claim preclusion appear to be satisfied, some courts do not apply it when important federal rights are at stake. For example, in Gjellum v. City of Birmingham, a Medicaid case, the Eleventh Circuit decided that the federal common law of preclusion did not require application of state claim preclusion rules to unreviewed state administrative decisions in a subsequent Section 1983 suit:54

We conclude that the importance of the federal rights at issue, the desirability of avoiding the forcing of litigants to file suit initially in federal court rather than seek relief in an unreviewed administrative proceeding, and the limitations of state agencies as adjudicators of federal rights override the lessened federalism concerns implicated outside the contours of the full faith and credit statute. In addition, claim preclusion, unlike issue preclusion, does not create a risk of inconsistent results in this context after Elliott because claim preclusion seeks to prevent litigation of issues that were not adjudicated before the state agency.55

In Dionne v. Mayor and City Council of Baltimore, a case challenging an adverse employment decision on procedural due process grounds, the Fourth Circuit agreed with this reasoning.56 The court observed that the plaintiff could not have raised constitutional law theories or sought broader remedies available under Section 1983 before the local administrative agency.57 The court concluded that the state court system could not have served as an adequate and unitary alternative forum for the assertion of all theories and remedies.58 As a result, applying claim preclusion to unreviewed state agency determinations would discourage plaintiffs from pursuing the generally cheaper and more efficient route of seeking an administrative remedy in order to preserve their federal rights.59

The Seventh Circuit has agreed with the Eleventh Circuit’s analysis of the limits to enforcing preclusion. In Waid v. Merrill Area Public Schools, the Seventh Circuit reviewed a teacher’s suit brought under Section 1983 and Title IX of the Education Amendments Act of 1972 and held that claim preclusion did not prevent bringing the Title IX claim after going through a state administrative proceeding.60 The Seventh Circuit concluded, based upon its examination of the state agency’s limited jurisdiction, that claim preclusion did not apply because “it is clear that she could not have consolidated all of her claims in a single lawsuit.”61 If the state administrative forum were adequate in allowing all claims to be brought, state preclusion law, the opinion suggests, could be applied. However, the Seventh Circuit also cited the Eleventh Circuit’s decision in Gjellum for the proposition that deference to state administrative process and state preclusion law is limited when that would impair enforcement of federal rights.62

On the other hand, other courts have expanded application of the preclusion doctrine beyond findings of fact to encompass preclusion of subsequent litigation of conclusions of law. In Miller v. County of Santa Cruz, the Ninth Circuit held that unreviewed state agency determinations were entitled to be given preclusive effect in subsequent Section 1983 litigation.63 The Ninth Circuit recognized that, based upon its assessment of the adequacy of the state administrative forum, it was going farther than the Supreme Court required federal courts to go in Elliott:

Elliott requires us to give preclusive effect, at a minimum, to the fact finding of state administrative tribunals. We have gone further, however, and held that “the federal common law rules of preclusion described in Elliott  extend to state administrative adjudications of legal as well as factual issues, even if unreviewed, so long as the state proceeding satisfies the requirements of fairness outlined in [United States v. Utah Construction and Mining Co., 384 U.S. 394, 422 (1966)].”64

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.

3.4.D.2. Issue Preclusion

The Restatement (Second) of Judgments, Section 27, on which the Supreme Court relies,66 provides:

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.

The Supreme Court has approved application of the federal common law principle of issue preclusion to litigation of federal claims between parties as well as expansion to non-mutual defensive and offensive use of issue preclusion.67 However, the Court has declined to employ issue preclusion when the party against whom it was asserted did not have a “full and fair opportunity to litigate the issue” in the earlier case.68

 Most recently, the Court explored this issue in a case involving "virtual representation," a doctrine in tension with the notion that one is not bound by a judgment in a case in which they have not been made a party.69 Taylor v. Sturgell involved successive FOIA suits for the same documents by two different plaintiffs. The Court identified six exceptions to the rule against non-party preclusion: agreement to be bound, presence of a legal relationship between the party to be bound and the party to the judgment, the party bound was "adequately represented" by a party, the non-party assumed control over the litigation, relitigation by proxy and when a statute precludes relitigation.70   The Court rejected expansion of these categories to include a seventh - virtual representation.  Indeed the Court emphasized the limited scope of the "adequate" representation to require 1) alignment of the interests of the non-party and her representative; 2) the representative party or the court protected the interests of the non-party and 3) sometimes notice of the original suit to those alleged to be represented.71

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.

Such applications of preclusion are highly fact-dependent and not susceptible to generalization. Typically litigated questions are whether the issues decided administratively are the same as those at stake in the subsequent federal case, whether the applicable administrative process afforded the party potentially subject to preclusion a full and fair opportunity to litigate,75 and whether the burden of proof in the administrative hearing is the same as that applied in a subsequent Section 1983 case.76

Updated 2017 by Jeffrey S. Gutman