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M.L. Johnson Family Properties, LLC v. Jewell

United States District Court, E.D. Kentucky, Southern Division, Pikeville

February 15, 2017

SALLY JEWELL, Secretary of the Interior, Defendant, and PREMIER ELKHORN COAL LLC, Intervenor Defendant.


          Amul R. Thapar United States District Judge

         The doctrine requiring parties to finish up their agency proceedings before coming to federal court is called exhaustion. It will be clear by the end of this Opinion that the doctrine deserves the name.

         M.L. Johnson Family Properties filed this suit while still involved in a related agency action. The targets of that complaint now argue that Johnson's eagerness-and failure to exhaust-deprives the Court of subject-matter jurisdiction. The exhaustion doctrine requires parties to receive a final agency decision before filing a complaint. Except when it doesn't. As it turns out, “mandatory” does not always quite mean mandatory. Nor does “final” always quite mean final. Answering this case thus requires figuring out just how mandatory exhaustion is here and whether Johnson has received a final-enough agency decision.

         I. Background

         Johnson, a company made up of five siblings, owns a majority interest in the surface area of some land in Virgie, Kentucky. R. 1 ¶¶ 6-7. The land has spawned a lot of litigation. The problem is that it sits on coal, coal that Premier Elkhorn Coal LLC would like to get. Elkhorn has leased the rights to the coal and received permission from one minority-interest landowner to mine it. R. 37 at 10. Armed with this consent, Elkhorn obtained a permit to begin surface mining on the tract. Id.

         Once Elkhorn broke ground, Johnson sued it and the Secretary of the Interior, hoping to stop Elkhorn's machines in their tracks. M.L. Johnson Family Properties, LLC v. Jewell, 27 F.Supp.3d 767, 768-70 (E.D. Ky. 2014). Because Elkhorn had not received Johnson's consent, the Court ordered it to stop pending an inspection by the Secretary. Id. at 773-75. Later, an arm of the Secretary-the Office of Surface Mining Reclamation and Enforcement (OSMRE)-inspected Elkhorn's permit, found it invalid, and issued a cessation order, which prohibited Elkhorn from mining the land any further. See R. 37 at 11-12.

         After the Johnson-Elkhorn dispute meandered a while through the agency's review system, OSMRE terminated the cessation order that had been blocking Elkhorn's machines. An administrative law judge (ALJ) from the Department of the Interior affirmed the decision. Id. at 13-15. Johnson appealed the ALJ's ruling to the Appeals Board, while also petitioning the Board to stay that ruling until it had resolved the appeal. Id. at 15. Days passed without action from the Board. Forty-five days after Johnson's deadline for taking the appeal, the Board had still taken no action. So Johnson sued the Secretary of the Interior in this Court. See R. 1; see also 43 C.F.R. § 4.21(b)(4) (“[The] Appeals Board shall grant or deny a petition for a stay pending appeal . . . within 45 calendar days of the expiration of the time for filing a notice of appeal.”). Johnson seeks the same relief here that it had sought from the agency: to vacate the ALJ's ruling and to have the cessation order reinstated. R. 1 at 7.

         After Johnson filed his federal court complaint, Johnson asked the Appeals Board to dismiss its agency appeal, arguing that the Board's jurisdiction over it ended with the forty-five-day wait. R. 37 at 15. The Board granted the request, but also took a moment to “correct Johnson's erroneous assertion that this Board's jurisdiction to rule on the Petition for Stay and the merits of its appeal ended when this Board did not rule” on Johnson's petition within forty-five days. R. 35-1 at 3 (internal quotation marks omitted). Johnson asked the Board to reconsider its reasoning, but again withdrew the motion. Id. Johnson believes the wait created a final-and therefore reviewable-agency action; the Secretary believes otherwise.

         The Secretary of the Interior now moves for judgment on the pleadings. R. 35. “[W]hat really is at issue here, ” however, “is a jurisdictional challenge to the allegations in the complaint.” Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007). According to Rule 12, the Court must dismiss this case if it lacks subject-matter jurisdiction. Fed.R.Civ.P. 12(h)(3). The Secretary-and Elkhorn, who has intervened as a defendant-argue that Johnson came to this Court too early. R. 35; R. 36. As such, they say, the Court has no jurisdiction over Johnson's complaint. R. 35-1 at 5-9; R. 36-1 at 4-6.

         A party can challenge a federal court's jurisdiction in two ways. A facial challenge “questions merely the sufficiency of the pleading, ” i.e., the party argues that, even taking the alleged facts as true, they fail to establish subject-matter jurisdiction. Gentek, 491 F.3d at 330. A factual challenge, by contrast, “raises a factual controversy, ” i.e., the party disputes the alleged facts and argues that the real ones do not establish federal jurisdiction. Id. The challenge here is facial. Everyone agrees on the salient fact: that Johnson filed suit before voluntarily dismissing his agency appeal. The parties just disagree on what this fact means. The Secretary and Elkhorn argue that it deprives this Court of jurisdiction. Johnson argues that it does not.

         II. Discussion

         Surface-mining disputes fall under the Surface Mining Control and Reclamation Act (“SMCRA”). SMCRA's judicial-review provision allows courts to review “[a]ny order or decision issued by the [Interior] Secretary.” 30 U.S.C. § 1276(a)(2). But SMCRA also provides remedies from within the Department of the Interior itself. Miners and landowners may ask the agency to review any “order [issued] by the Secretary” or any “modification, vacation, or termination” of an order that affects their rights. Id. § 1275(a)(1); see also Id. § 1275(c) (permitting temporary relief from an order). Thus, landowners looking to halt an unlawful surface-mining project can do so either in court or through the agency.

         But the Secretary and Elkhorn argue that landowners must go to the agency first, exhausting their opportunities to get relief from the Secretary before heading into court. See R. 35-1 at 5-6; R. 36-1 at 5-6. Until then, the defendants argue, the Secretary has issued no final “order, ” and a court therefore has nothing to review. See R. 35-1 at 5-6; R. 36-1 at 6.

         They do have a point: “In most cases, a failure to exhaust administrative remedies is fatal to a suit in federal court.” See Kentucky v. United States ex rel. Hagel, 759 F.3d 588, 599 (6th Cir. 2014). The so-called exhaustion requirement directs parties to seek relief from the relevant agency-if that agency can provide the relief-before seeking it in federal court. A litigant has exhausted its opportunities for administrative relief when the agency has reached a final decision on its claims. See Weinberger v. Salfi, 422 U.S. 749, 763-64 (1975). Thus, heading to court, a litigant must wait for the agency to give it a final decision.

         But the exhaustion requirement is not one size fits all. Different statutes will sport different styles. Some are more strict, some more loose. Some permit judges to let the hem out a little, by applying an exception to the requirement; some do not. See, e.g., Hagel, 759 F.3d at 598 (distinguishing between stricter and looser requirements). To determine whether Johnson has filled out SMCRA's exhaustion requirement, therefore, the Court must take its measure. Doing so requires the Court to ask three questions.

         A. Is SMCRA exhaustion mandatory or merely jurisprudential?

         In most cases, exhaustion is a “prudential, court-created doctrine.” Perkovic v. INS, 33 F.3d 615, 619 (6th Cir. 1994). Courts create the doctrine in the interests of three groups affected by any given dispute. First, the parties themselves. Some problems “require [the] application of special expertise” to resolve. McKart v. United States, 395 U.S. 185, 194 (1969). Judges know something about the law, but next to nothing about surface mining. The exhaustion doctrine keeps problems before the proper problem solvers, allowing the agency to apply its expertise without judicial “interfere[nce].” Id. The second group is the courts. If the case does make it to federal court, “judicial review may be hindered by the failure of the litigant to allow the agency to make a factual record, ” id.-so it benefits the court to let the agency build the record. And third, Congress. When Congress grants an agency certain powers, it likely does not want to come back and see those powers sitting on a shelf, unused. To prevent such disuse, courts have “fashion[ed]” rules-like the exhaustion requirement-to channel disputes through the administrative schemes that Congress has made especially for them. McCarthy v. Madigan, 503 U.S. 140, 144 (1994). Thus, before a dispute leaves the belly of the administrative state, courts will often require it to gestate within the agency for an appropriate time.

         But this is the judiciary's choice. If “Congress has not clearly required exhaustion, sound judicial discretion governs” just how much exhaustion to require. Dixie Fuel Co. v. Comm'r of Soc. Sec'y, 171 F.3d 1052, 1059 (6th Cir. 1999) (quoting McCarthy, 503 U.S. at 144). The doctrine is only prudential, after all, helping courts decide whether hearing a case would be a good idea. Since courts created the doctrine, they can do with it what they like. Specifically, they “can craft prudential exceptions.” Hagel, 759 F.3d at 598. If, for example, exhaustion would be futile-because failure before the agency is foregone and a return to it like the Charge of the Light Brigade-a court can choose to hear an unexhausted claim. See Coomer v. Bethesda Hosp., Inc., 370 F.3d 499, 505 (6th Cir. 2004).

         Sometimes, Congress makes a court's life easier by explicitly putting an exhaustion requirement in the statute. See, e.g., Hoogerheide v. IRS, 637 F.3d 634, 639 (6th Cir. 2011) (construing 26 U.S.C. § 7433). And Congress gets what it wants. Rather than prudential, therefore, statutory exhaustion requirements are mandatory.

         The distinction matters. Both types of exhaustion requirements flow from the statute, just in different ways. If a statute constructs a remedial scheme, courts require parties to exhaust it because that is prudent. If a statute has a sentence that requires parties to exhaust, courts require them to do so because it is mandatory. As a result, mandatory exhaustion requirements have much less give. “[T]he courts lack discretion to waive” requirements that Congress puts in its statutes. Id. Courts therefore may not “craft prudential exceptions” when an exhaustion requirement comes from the specific words of a statute rather than from general principles of prudent judging. See Booth v. Churner, 532 U.S. 731, 741 n.6 (2001) (“[W]e will not read futility or other exceptions into statutory exhaustion requirements where Congress has provided otherwise.”); McCarthy, 503 U.S. at 144 (“Where Congress specifically mandates, exhaustion is required.”).[1]

         So the first question is whether, under SMCRA, the Court should require Johnson to exhaust administrative remedies as a matter of judicial prudence, or whether it must require exhaustion as a matter of Congressional will.

         1. What Congress has said

         The first place to look is at what Congress actually wrote. Congress provided judicial review for the kind of adjudication at issue here in SMCRA's Section 1276. See 30 U.S.C. § 1276(a)(2). And nowhere in that section did Congress mention exhaustion. Compare this to Section 7433 of the Internal Revenue Code (which the Sixth Circuit interpreted in Hoogerheide), where Congress explicitly placed a “[r]equirement that administrative remedies be exhausted.” 26 U.S.C. § 7433(d).

         Clearly, Congress knows how to tell courts to require exhaustion. In SMCRA, it did not. Thus, it would seem that SMCRA exhaustion is not mandatory: Courts should require exhaustion not because Congress told them to, but for their own jurisprudential reasons.

         2. What the Sixth Circuit has said

         In two cases, however, the Sixth Circuit appears to have read the statute differently. In Shawnee Coal Company v. Andrus, the court held that parties are “required to exhaust [the] administrative remedies” available under SMCRA “before obtaining judicial review.” 661 F.2d 1083, 1092 (6th Cir. 1981). Then in Southern Ohio Coal Company v. OSMRE, the court followed Shawnee and went on to explain that this requirement is the will of Congress: “SMCRA unambiguously requires resort to the prescribed administrative review process before seeking judicial review.” 20 F.3d 1418, 1425 (6th Cir. 1994). According to these two holdings, then, SMCRA exhaustion is mandatory: a creature of the statute itself.

         3. ...

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