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■ Y.K.A. Industries, Inc. v. Redevelopment Agency of the City of San Jose, No. H031583

Appellant Y.K.A. Industries, Inc. (YKA) appeals from the trial court’s summary judgment in favor of the Redevelopment Agency of the City of San Jose[1] (Agency) and Nina Grayson, a City employee, on YKA’s cross-complaint.  In a single cause of action, YKA, a subcontractor on an Agency-approved housing project, alleged a claim against the Agency and Grayson for “deprivation of due process under color of state law” pursuant to 42 U.S.C. section 1983[2] (§ 1983) based on the Agency having asserted a prevailing wage violation against YKA in connection with the construction of the project.[3]  YKA sought general and punitive damages and statutory attorney fees.  The trial court granted the Agency and Grayson’s motion for summary judgment on the claim.  The court concluded that YKA had failed to exhaust mandatory judicial remedies—in the form of a petition for writ of mandate to compel the Agency to afford an evidentiary hearing—before filing a legal action for federal civil rights violations and that the doctrine of exhaustion of judicial remedies therefore barred the action.

            YKA appeals, contending that the Agency and Grayson failed to meet their burden on the motion of demonstrating their entitlement to summary judgment as a matter of law.  Because there is no evidence in the record of administrative proceedings that possessed a judicial character and yielded a result adverse to YKA that could have been the subject of review in mandate, and secondarily because the Agency and Grayson offered no evidence that YKA had failed to proceed in mandate even if the doctrine of exhaustion of judicial remedies were to apply, we agree and reverse.

A.        The Doctrine of Exhaustion of Judicial Remedies as Applied— Overview

            Inherent in the trial court’s ruling was the conclusion, based solely on the due-process violation component of YKA’s claim, that the specific cause of action against the Agency and Grayson was subject to the doctrine of exhaustion of judicial remedies.  The perfunctory application of this doctrine was argued by the moving parties, relying principally on Briggs v. City of Rolling Hills Estates (1995) 40 Cal.App.4th 637 (Briggs); Mobley v. Los Angeles Unified School Dist. (2001) 90 Cal.App.4th 1221 (Mobley); and DeCuir v. County of Los Angeles (1998) 64 Cal.App.4th 75 (DeCuir).

            The doctrine of exhaustion of judicial remedies, as explained by the court in Knickerbocker v. City of Stockton (1988) 199 Cal.App.3d 235, 240-244 (Knickerbocker), is distinct from the jurisdictional rule that requires exhaustion of administrative remedies before filing suit in certain circumstances.  “Rather, it is a form of res judicata, of giving collateral estoppel effect to the administrative agency’s decision, because that decision has achieved finality due to the aggrieved party’s failure to pursue the exclusive judicial remedy for reviewing administrative action.”[21]  (Briggs, supra, 40 Cal.App.4th at p. 646, fn. omitted; see also Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465, 484 (Westlake).)

            The doctrine of exhaustion of judicial remedies is invoked where there has been a quasi-judicial adjudication by an administrative tribunal, whether in the public or private context.  It requires a party aggrieved by such a decision to petition for relief in mandate in order to challenge the administrative action or findings before filing a legal action so as to prevent the adverse action or findings on issues actually litigated from taking on preclusive effect.  (McDaniel v. Board of Education (1996) 44 Cal.App.4th 1618, 1621; Westlake, supra, 17 Cal.3d at p. 484 [unless party to a quasi-judicial proceeding challenges adverse findings made in that proceeding through mandamus, those findings are binding in a later civil action]; Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 69-70 (Johnson) [FEHA action that challenges decision of quasi-judicial proceeding is barred unless plaintiff first challenged decision through mandamus]; Rojo v. Kliger (1990) 52 Cal.3d 65, 86 [doctrine of judicial exhaustion applies to situations involving public or private organizations whose quasi-judicial determination was the result of internal rules or regulations]; accord, Gupta v. Stanford University (2004) 124 Cal.App.4th 407, 411-412; Pomona College v. Superior Court (1996) 45 Cal.App.4th 1716, 1722-1731.)  Once an administrative decision has been issued, “provided that decision is of a sufficiently judicial character to support collateral estoppel, respect for the administrative decisionmaking process requires that the prospective plaintiff continue that process to completion, including exhausting any available judicial avenues for reversal of adverse findings.  [Citation.]  Failure to do so will result in any quasi-judicial administrative findings achieving binding, preclusive effect and may bar further relief on the same claims.  [Citation.]”  (McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, 113 (McDonald).)

            The purpose underlying the doctrine of exhaustion of judicial remedies is to prevent an aggrieved party from being able to avoid the preclusive effects of an adverse administrative action by simply foregoing the right to judicial review by failing to proceed in mandate.  If the party initially pursues a claim in an administrative forum in which the party has an adequate opportunity to litigate disputed issues, the party will suffer preclusive effects of an adverse decision or findings in a later action if it fails to seek judicial review of the administrative decision in state court through mandamus.  (Miller v. County of Santa Cruz (9th Cir. 1994) 39 F.3d 1030, 1033-1034, fn. 3 [failure to challenge upholding of employment termination by county civil service commission by proceeding in mandate precluded later civil rights claim because res judicata and collateral estoppel principles afforded preclusive effect to commission’s findings]; Misischia v. Pirie (9th Cir. 1995) 60 F.3d 626, 628-629.)

            But there are conditions or predicates to the doctrine’s application.  These are that there must have been a prior administrative proceeding and that proceeding must have possessed the requisite judicial character such that res judicata or collateral estoppel principles may be fairly invoked against a claimant in a later action.  A prior decision precludes relitigation of an issue under the doctrine of collateral estoppel only if two prongs of that doctrine are met.  First, five threshold requirements must be satisfied:  “ ‘First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding.  Second, this issue must have been actually litigated in the former proceeding.  Third, it must have been necessarily decided in the former proceeding.  Fourth, the decision in the former proceeding must be final and on the merits.  Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding.  [Citations.]  The party asserting collateral estoppel bears the burden of establishing these requirements.’  [Citation.]”  (Pacific Lumber Co. v. State Water Resources Control Bd. (2006) 37 Cal.4th 921, 943 (Pacific Lumber).)  If all of these threshold requirements of collateral estoppel are met, the analysis determining whether that doctrine applies to give preclusive effect then looks to “ ‘the public policies underlying the doctrine before concluding that [it] should be applied in a particular setting.’  [Citation.]”  (Id. at p. 944; State Board of Chiropractic Examiners v. Superior Court (Arbuckle) 45 Cal.4th 963, 974-978 [exhaustion of judicial remedies does not apply collateral estoppel principles to bar later action where statute provides parallel, independent remedy in the form of action for damages].)

            If these two prongs of the collateral estoppel test are both satisfied, then the doctrine of exhaustion of judicial remedies may be applied to give preclusive effect to a decision of an administrative agency if the prior proceedings and decision “possess a judicial character.  [(People v. Sims (1982) 32 Cal.3d 468, 479.)]  For an administrative decision to have colleteral estoppel effect, it and its prior proceedings must possess a judicial character.  Indicia of proceedings undertaken in a judicial capacity include a hearing before an impartial decision maker; testimony given under oath or affirmation; a party’s ability to subpoena, call, examine, and cross-examine witnesses, to introduce documentary evidence, and to make oral and written argument; the taking of a record of the proceeding; and a written statement of reasons for the decision.  [Citation.]”  (Pacific Lumber, supra, 37 Cal.4th at p. 944; State Board of Chiropractic Examiners v. Superior Court, supra, 45 Cal.4th at pp. 975-976 [writ review of adverse administrative decision is generally required before pursuing other remedies and if proceeding possessed requisite judicial character, then the decision will be binding in later civil action].)

            The doctrine of exhaustion of judicial remedies may apply in many contexts, among them actions for civil rights violations where there has been a prior adjudicative determination by an agency involving a plaintiff’s claimed violation of the same primary right.  (Swartzendruber v. City of San Diego (1992) 3 Cal.App.4th 896, 903-904, 909, [failure of police officer to challenge decision of city civil service commission to uphold discharge by mandamus precluded later-asserted action in tort and for federal civil rights violations as plaintiff was bound by unreviewed administrative findings involving same primary right], disapproved of on another ground in Johnson, supra, 24 Cal.4th at p. 72.)

            In Briggs, the Agency and Grayson’s leading case here, the plaintiffs brought an action for civil rights violations under section 1983 after the city, through its planning commission and city council, required that they remove an unapproved patio deck that intruded on a neighbor’s privacy as a condition to the city’s issuance of a permit allowing plaintiffs to build a substantial addition to their house.  The plaintiffs did not seek review through administrative mandamus of this condition to the permit, which had been issued after the plaintiffs had submitted to the city’s administrative process that included public hearings before the planning commission and an appeal to the city council.  The court of appeal affirmed the trial court’s grant of summary judgment because the plaintiffs’ section 1983 claim, which was based on the allegation that the city had wrongfully deprived them of the right to use their property by imposition of the contested condition, was precluded by their failure to have sought judicial review of the administratively imposed condition.  This failure resulted in the plaintiffs later being estopped from pursuing their civil rights claim by collateral attack in a later independent civil action.  (Briggs, supra, 40 Cal.App.4th at pp. 645-648; see also City of Santee v. Superior Court (1991) 228 Cal.App.3d 713, 718-719 [builder’s action against city was precluded by failure to challenge through mandamus city’s revocation of occupancy permit based on unfulfilled condition of that permit].)

            In DeCuir, on which the Agency and Grayson also rely, the plaintiff alleged that the county’s examination process for a civil service position as a district attorney was unfair and resulted in him achieving a low exam score and not being selected for the position.  The examination was given under the county’s civil service commission rules, which included an internal procedure for review of administrative decisions that the plaintiff invoked.  The procedure included a provision authorizing the commission to either hold an evidentiary hearing or make a decision on the merits based on a review of written materials submitted by the parties.  After unsuccessful exhaustion of that procedure, and ultimately being denied a second hearing, plaintiff filed an action for money damages against the county, bypassing any challenge to the administrative process or decision by proceeding in mandamus.  (DeCuir, supra, 64 Cal.App.4th at pp. 76-79.)

            After the plaintiff in DeCuir obtained a jury verdict, the defendants appealed, contending that his exclusive form of judicial review was a proceeding in mandamus, not a jury trial, because mandamus is the proper method of obtaining judicial review of most agency decisions.  The court of appeal agreed, concluding that although a proceeding in administrative mandamus under section 1094.5 would not have been properly available because plaintiff, who was bound by the civil service rules, had no absolute right to a hearing before the commission under those rules,[22] his remedy was a proceeding in ordinary or traditional mandamus under section 1085 in order to compel the commission to exercise its discretion to grant the hearing he had sought.  (DeCuir, supra, 64 Cal.App.4th at pp. 80-83.)  In other words, the commission’s discretionary denial of a hearing under the applicable civil service rules was itself a reviewable determination but through traditional, as opposed to administrative, mandamus.  (Id. at pp. 82-83; Cf., Las Virgenes Educators Assn. v. Las Virgenes Unified School Dist. (2001) 86 Cal.App.4th 1, 6-7; Friends of the Old Trees v. Department of Forestry & Fire Protection (1997) 52 Cal.App.4th 1383, 1391-1392 [so long as agency is required by law to accept and consider evidence from interested parties before making its decision, section 1094.5’s hearing requirement is satisfied]; Kirkpatrick v. City of Oceanside (1991) 232 Cal.App.3d 267, 279 [administrative mandate will lie where hearing is not explicitly required by law but compelled by due process considerations].)  The plaintiff in DeCuir thus could not bypass judicial review of the civil service commission’s decision without avoiding issue or claim preclusion in a later action for damages involving the same primary right as a result of that unchallenged decision having become final.  (DeCuir, supra, 64 Cal.App.4th at p. 83.)

            In Mobley, also cited by the Agency and Grayson, the plaintiff, a subcontractor, brought suit against a school district, the state Department of Labor Standards Enforcement (DLSE), and four individuals in a dispute about his alleged failure to have paid prevailing wages to his workers on a public works school construction project.[23]  Although the dispute was initiated by actions of the labor compliance unit of the school district, it was later determined against the plaintiff by a hearing officer for the DLSE under administrative procedures set out in the California Code of Regulations.[24]  The plaintiff then filed suit, seeking damages for due process and civil rights violations and relief in mandate.  The trial court ultimately sustained demurrers to the complaint on various grounds, including that the petition for relief in mandate to compel a hearing before the DLSE was barred by the statute of limitations.  (Mobley, supra, 90 Cal.App.4th at pp. 1224-1231.)

            After an exhaustive analysis of the constitutionality of California’s prevailing wage statutes and regulations affecting public works as considered and upheld by the United States Supreme Court in Lujan v. G & G Fire Sprinklers, Inc. (2001) 532 U.S. 189, the court of appeal in Mobley concluded that the plaintiff could maintain a petition for writ against the DLSE to compel a hearing to determine whether a prevailing wage violation had occurred.  (Mobley, supra, 90 Cal.App.4th at pp. 1232-1245.)  The court emphasized that the U.S. Supreme Court in Lujan, citing due process concerns, had required some form of post-deprivation relief to a subcontractor after an awarding body on a public works project had directed the withholding of funds from the subcontractor by the general contractor in accordance with the prevailing wage law.  (Id. at p. 1245.)  The court did not determine the plaintiff’s ultimate and substantive right to writ relief but concluded that his complaint that he had not received a due-process hearing from the DLSE before the highest penalty was assessed for his alleged prevailing-wage violation was properly pursued by ordinary mandamus, and that the petition was not barred by the shorter statute of limitations applicable to administrative mandamus.  (Ibid.)

            What all of these cases that concern the doctrine of exhaustion of judicial remedies (to varying degrees) demonstrate, including Briggs, DeCuir, Mobley, and Miller as relied on by the Agency and Grayson,[25] is that the doctrine is applied in settings—unlike here, as we conclude below—in which there has been an adjudicatory, quasi-judicial decision in accordance with established public or private procedures—through statute, regulation, or contract.  These cases also demonstrate that the purpose of the doctrine’s application is to afford “proper respect” to those procedures by “precluding a party from circumventing the established process for judicial review of such decisions” by failing to file a petition for relief in mandate before resorting to legal action.  (Johnson, supra, 24 Cal.4th at p. 70, citing Westlake, supra, 17 Cal.3d at p. 484.)  Moreover, in these cases in which the doctrine of exhaustion of judicial remedies was applied—unlike here, as we conclude below—the prior administrative proceedings possessed the requisite “judicial character” such that they yielded decisions or findings that could later be given preclusive effect.  (Pacific Lumber, supra, 37 Cal.4th at p. 944; State Board of Chiropractic Examiners v. Superior Court, supra, 45 Cal.4th at pp. 975-976.)

            The predicates to the doctrine’s application are therefore the existence or availability of an administrative process possessing a judicial character and a quasi-judicial adjudication, finding, or action adverse to the plaintiff produced therefrom.  The doctrine is applied by giving preclusive effect in a later lawsuit concerning claimed violations of the same primary right to such adverse quasi-judicial, adjudicatory findings and decisions.  If there is no available or established administrative process possessing a judicial character or no quasi-judicial decision or adjudicatory findings to which to give preclusive effect in a particular case, the purpose of the doctrine cannot be served, its res judicata or collateral estoppel function cannot be used as a sword or shield, and the doctrine thus cannot be applied to bar a later action on this basis.  The Agency and Grayson cite no authority for the application of the doctrine to factual settings in which there was no demonstrated available adjudicatory process, let alone one possessing a judicial character, and no formal quasi-judicial decision or findings to which to subscribe preclusive effect in a later action so as to bar it.  And we have found none.

■ ■ HELD:

In a due process action involving the assertion of a prevailing wage violation, trial court's grant of summary judgment on the grounds that plaintiff failed to exhaust mandatory judicial remedies is reversed where: 1) there is no evidence in the record of administrative proceedings that possessed a judicial character and yielded a result adverse to plaintiff that could have been the subject of review in mandate; and 2) defendant offered no evidence that plaintiff failed to file a petition for relief in mandate even if the doctrine of exhaustion of judicial remedies were to apply.
Y.K.A. Indus. v. Redevelop. Agency of San Jose -C056832- 4/28/09 CA6
Y.K.A. Indus. v. Redevelop. Agency of San Jose -C056832- 4/28/09 CA6

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