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Committee Recommends Cautious Use of Issue Exhaustion Doctrine in Rulemaking Cases

| Aug 25, 2015 | Analysis

The “issue exhaustion” doctrine generally prevents parties to a lawsuit from raising issues in court that they did not raise during the administrative process. The doctrine comes into play both when an issue could have arisen in a quasi-judicial or adjudicator proceeding and also in a legislative rulemaking conducted by an agency. Yet if courts apply the issue exhaustion doctrine too strictly, might this sometimes preclude legitimate and important challenges to administrative overreach?

ThinkstockPhotos-179031780A committee of the Administrative Conference of the United States (ACUS) thinks so and has proposed a series of recommendations that urge courts to recognize the inapplicability of issue exhaustion in certain cases involving administrative rulemaking. ACUS is a federal agency dedicated to making recommendations to improve governmental processes. The committee’s proposed recommendation will be considered next month by the full Conference.

The committee’s draft recommendation is based on a report prepared by Jeffery S. Lubbers, a professor at Washington College of Law at American University and a former ACUS Research Director. Lubbers concluded that overbroad application of the issue exhaustion doctrine may work to the detriment of the rulemaking process.

Sometimes the application of the doctrine may lead, Lubbers reported, to information overload in agency proceedings because interested groups feel the need to file “‘shotgun’ comments in an effort to inoculate themselves from later issue-exhaustion defenses.” Moreover, he argued that issue exhaustion may limit judicial review of administrative action only to issues raised by well-resourced commenters. Since less-resourced commenters cannot afford to monitor and participate in every rulemaking that may affect them, the doctrine may operate as an “unjustifiable procedural barrier” to participation by “a diverse, pluralistic array of parties.”

The issue exhaustion requirement originates from the exhaustion-of-remedies doctrine. This common law doctrine prevents parties from seeking judicial review of agency action until they have pursued and “exhausted” all available administrative remedies—typically, appeals within the agency. It purportedly protects the integrity of the administrative system by allowing agencies to resolve their own errors before judicial involvement. It additionally lightens the burden of overworked courts by contributing a filter for “legitimate” claims and an additional barrier to review.

Issue exhaustion follows the same principles. Yet while it may be reasonable to restrict judicial review only to the issues presented before an agency in an adjudication because the dispute is between one distinct party and the agency, the legislative nature of an agency rulemaking proceeding, which can involve a large and diverse set of interests, makes issue exhaustion more worrisome. In a rulemaking, unspecified claims that arise later may be just as important and legitimate as claims identified in the notice-and-comment process; the former claims may well often fail to enter into the rulemaking process for justifiable reasons.

Lubbers’ report to ACUS – and the committee draft recommendation based on that report – does not propose an outright ban on application of the issue exhaustion doctrine in rulemaking cases. For example, Lubbers suggests that the issue exhaustion doctrine may make sense when litigants challenging a rule argue that the agency acted in an arbitrary and capricious manner, or when disputes arise about whether the agency made a proper decision based on the evidence presented. In these cases, issue exhaustion may “ensure that the agency has had the opportunity to bring its expertise on the issue before it comes to court.”

The draft ACUS recommendation would urge courts to keep a set of basic principles in mind when applying the issue exhaustion requirement in the context of rulemaking review. It would recommend considering the circumstances that led to a litigant’s failure to raise the issue during the administrative process. These circumstances may include the futility of raising the issue, the inability of the party to raise the issue, procedural requirements impeding the raising of the issue, and other extraordinary circumstances.

The draft recommendation further advises agencies to take these kinds of circumstances into account before raising issue exhaustion as a litigation defense.

ACUS will formally consider approving the draft recommendation at its upcoming plenary session on September 18, 2015.



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