Darby v. Cisneros
509 U.S. 137 (1993)

  • As a sanction resulting from a possibly shady mortgage deal, Darby (a real estate developer) et.al were banned by an Administrative Law Judge (ALJ) from participating in programs for the Dept. of Housing and Urban Development (HUD) for 18 months.
    • Under HUD regulations, an ALJ’s determination “shall be final unless the Secretary (Cisneros)…within 30 days of receipt of a request decides as a matter of discretion to review the ALJ’s finding…”
  • Instead of going to Cisneros and requesting a review, or taking any further administrative review within HUD, Darby sued for an injunction in Federal Court.
  • The Trial Court found for Darby. HUD appealed.
  • The Appellate Court reversed.
    • The Appellate Court found that Darby had not exhausted his options at HUD, and could not bring suit in Federal Court.
    • The Doctrine of Exhaustion says that if the primary jurisdiction of a dispute is the Agency, then all possible Agency procedures and decision-making must be exhausted before the dispute can be appealed to a court.
      • The idea is that the courts don’t want to get involved if there is a chance that the Administrative Agency can work it out internally. They only step in once there are no more options available within the Agency.
  • The US Supreme Court reversed the Appellate Court and found for Darby.
    • The US Supreme Court found that Federal Courts cannot require that a plaintiff exhaust his administrative remedies before seeking judicial review when exhaustion of remedies is not required by either administrative rules or statute.
    • A close reading of the Administrative Procedures Act (APA §704) (also referred to as §10(c)) said that unless an appeal to “superior agency authority” is “expressly required by statute” or when the agency requires an appeal “by rule and provides that the administrative action is…inoperative” pending that review, then the courts do not have to wait until a case has been exhausted.
      • The Court noted that the Doctrine of Exhaustion still applies in all cases not governed by the APA.
  • Basically, before this case it was considered common knowledge that a person had to do everything they possibly could within the Administrative Agency before being able to take the case to a court. However, in this case, someone bothered to look and see what the APA actually said about exhaustion, and it was found that you only have to follow the rule if the Agency Statute explicitly says that you must exhaust all options before proceeding to court.
    • If there is nothing in the Statute saying that you have to file every possible appeal within an Agency before proceeding to court, you are free to proceed to court whenever you like.
    • But, you still must have finality. So if an Agency makes a decision, but then says that decision is not final until all possible appeals within the Agency have taken place (aka exhaustion), then you cannot go directly to court. On the plus side, until the decision is final it is inoperative.