Darby v. Cisneros
509 U.S. 137 (1993)
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Rule of Law:
Under § 10(c) of the Administrative Procedure Act (APA), federal courts may not require a litigant to exhaust available administrative remedies as a prerequisite to judicial review unless exhaustion is expressly mandated by a statute or an agency rule.
Facts:
- R. Gordon Darby, a real estate developer, utilized a plan devised by a mortgage banker to obtain single-family mortgage insurance from the Department of Housing and Urban Development (HUD) for multifamily rental projects.
- The plan was designed to circumvent HUD's "Rule of Seven," which limited mortgage insurance for investors with financial interests in seven or more rental properties in the same project.
- The plan involved using straw purchasers to apply for the mortgage insurance; after the loans closed, these purchasers would transfer the property titles back to Darby's company.
- Darby successfully obtained HUD-backed financing for three projects using this method.
- In 1988, due to a depressed rental market, Darby defaulted on the loans, making HUD liable for over $6.6 million in insurance claims.
- In 1989, HUD initiated administrative sanctions against Darby, first issuing a one-year limited denial of participation (LDP) in South Carolina, and later proposing to debar him from all federal nonprocurement transactions.
Procedural Posture:
- Darby's administrative appeals of a limited denial of participation (LDP) and a proposed debarment were consolidated and heard by a HUD Administrative Law Judge (ALJ).
- The ALJ issued an initial decision imposing an 18-month debarment on Darby.
- Under HUD regulations, this decision was final unless a party requested review by the Secretary of HUD within 15 days, an option neither Darby nor HUD exercised.
- Darby filed suit in the U.S. District Court for the District of South Carolina, challenging the debarment as unlawful under the APA.
- HUD moved to dismiss the suit, arguing Darby had failed to exhaust his administrative remedies by not seeking review from the Secretary.
- The District Court denied HUD's motion and later granted summary judgment for Darby.
- HUD, as appellant, appealed to the U.S. Court of Appeals for the Fourth Circuit.
- The Court of Appeals reversed, holding that the District Court should have dismissed the case because Darby failed to exhaust his administrative remedies.
- Darby, as petitioner, successfully petitioned the U.S. Supreme Court for a writ of certiorari.
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Issue:
Does the Administrative Procedure Act permit federal courts to impose a common-law exhaustion of administrative remedies requirement on a litigant when the relevant statute or agency regulations do not explicitly mandate it?
Opinions:
Majority - Justice Blackmun
No. Under the Administrative Procedure Act, federal courts cannot require a litigant to exhaust available administrative remedies as a prerequisite to judicial review where the statute and agency regulations do not mandate exhaustion. The plain language of § 10(c) of the APA (5 U.S.C. § 704) dictates when an agency action is final and ripe for judicial review. It explicitly provides that an agency action is final unless an agency rule requires an appeal to a superior authority and makes the initial decision inoperative pending that appeal. Congress's clear intent was to make the exhaustion requirement unambiguous; if courts could impose additional, judicially-created exhaustion requirements beyond what is specified, the statutory language of § 10(c) would be rendered meaningless and would become a 'trap for unwary litigants.' Therefore, the APA codifies and limits the exhaustion doctrine, and courts are not free to impose it as a matter of judicial discretion where an agency action is otherwise 'final' under the statute.
Analysis:
This decision significantly curtails the judiciary's discretion to impose common-law exhaustion requirements in cases governed by the Administrative Procedure Act. It establishes a clear, bright-line rule that unless a statute or agency regulation explicitly requires an intra-agency appeal, a party may seek judicial review of a final agency action without exhausting optional remedies. This holding streamlines the path to judicial review for litigants challenging agency decisions and reinforces the APA as a comprehensive statutory scheme that supplants, rather than merely supplements, related common-law doctrines. Future litigants and courts now have a definitive framework for determining when an agency decision is ripe for review, preventing the imposition of additional procedural hurdles not contemplated by Congress.
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