CONTRACT CLAIM DOES NOT REQUIRE EXHAUSTION OF REMEDIES

July 13, 2004

Steven P. Garmisa
Hoey & Farina Attorney
garmisa@hoeyfarina.com
1-888-425-1212

In a case filed by the Village of South Elgin alleging that conduct by Waste Management of Illinois violated obligations imposed by the Kane County Board for a waste-transfer facility -- and breached a separate agreement with the village -- a trial judge dismissed the complaint, concluding that South Elgin failed to exhaust its administrative remedies.

Deciding there was no obligation to exhaust administrative remedies on the contract claim, the Appellate Court reversed and remanded, giving the village an opportunity to cure technical defects in its complaint. Village of South Elgin, 2004 WL 1237993 (2d Dist., May 28).

Here are some highlights of Justice R. Peter Grometer's opinion (with various omissions not noted in the quoted text):

"The doctrine of exhaustion of remedies helps establish a proper relationship between the court system and administrative bodies. Generally, a party aggrieved by an administrative action must first pursue all available administrative remedies before resorting to the courts. The purpose of the doctrine is to allow administrative bodies to develop a factual record and to permit them to apply the special expertise that they possess. Exhaustion also minimizes interruption of the administrative process. Moreover, the aggrieved party might succeed before the administrative body, obviating the need for judicial involvement, thereby conserving judicial resources.

"The doctrine applies only when an agency has exclusive jurisdiction over an action. If the courts and an agency enjoy concurrent jurisdiction over a matter, the doctrine of primary jurisdiction applies instead.

"Circuit courts are courts of general jurisdiction and, outside of a few exceptions, have jurisdiction over all justiciable matters. The legislature may, however, define the jurisdiction of circuit courts in the limited field of administrative review.

"If the legislature does intend to divest the circuit courts of jurisdiction over some matter, it must do so explicitly. Thus, we must examine relevant legislative enactments and determine who has jurisdiction to hear the action that plaintiff has instituted."

According to the village, Waste Management of Illinois failed to comply with the requirements of a resolution that was enacted by the Kane County Board, acting under the authority granted to the board by section 39.2(a) of the Illinois Environmental Protection Act.

Grometer agreed that the board resolution, concerning "siting procedures" for a waste-transfer station, "clearly falls within section 39.2(g)'s grant of exclusive jurisdiction to local governmental entities. Accordingly, before plaintiff may resort to the court system regarding defendant's alleged non-compliance with the resolution, plaintiff must exhaust its potential administrative remedies.

"Plaintiff's claim that an agreement existed between it and defendant presents a different question. This claim does not involve a right arising under the act or from an action of the Kane County Board. Instead, it stems from an alleged contract. Accordingly, the pertinent question is whether plaintiff had to exhaust its contract claim before proceeding in the Circuit Court.

"An action on a contract is, of course, a traditional common-law cause of action. Hence, plaintiff's claim that defendant breached the terms of a contract does not arise under any provision of the act. To ascertain whether plaintiff was required to exhaust this claim before the Kane County Board prior to bringing it in a court, we must consider whether the legislature intended to deprive the circuit court of jurisdiction over such claims in section 39.2(g) of the act.

"[S]ection 39.2(g) states that, 'The siting approval procedures, criteria and appeal procedures provided for in this act ... shall be the exclusive siting procedures and rules and appeal procedures for facilities subject to such procedures.' Again, we are confronted with a question of statutory interpretation and turn to the plain language of the statute.

"By its plain language, section 39.2(g) concerns itself with the siting approval procedures and criteria set forth in the act. A contract, existing independently of the act, is not part of the process of approving a siting decision. Although they may affect defendant's ability to utilize the Woodland site for a transfer station, defendant's obligations under the alleged contract with plaintiff are collateral to the issue before the Kane County Board regarding whether it would be appropriate to permit a transfer facility at the Woodland site in accordance with the requirements of the act.

"Because section 39.2(g)'s plain language indicates that the legislature intended to vest the county board with jurisdiction to hear only matters specified in the act, we conclude that it did not intend that matters such as actions based on contracts, even if they actually could affect siting, be heard exclusively before the county board.

"Analogous situations arise in another area where the exhaustion doctrine is frequently invoked. Often, collective bargaining agreements contain grievance procedures, and an employee is required to exhaust these procedures before commencing an action in court. See Cessna v. City of Danville, 296 Ill.App.3d 156, 165 (1998) ('It is well-settled that an employee subject to a collective bargaining agreement must at least attempt to exhaust contractual remedies before resorting to a judicial remedy').

"In Burgess v. Chicago Sun-Times, 132 Ill.App.3d 181 (1985), the court considered whether an employee had to exhaust any remedies he had under a collective bargaining agreement before instituting a retaliatory discharge action. The Burgess court ruled that exhaustion was not required, reasoning that 'a cause of action for retaliatory discharge is now recognized in Illinois independent of any contract remedy the employee may have based on [a] collective bargaining agreement.'

"Just as the plaintiff in Burgess was not required to exhaust remedies because his cause of action was based on something outside the collective bargaining agreement, plaintiff bases its claim to relief on a contract independent of anything set forth in the act.

"Case law from other jurisdictions supports our conclusion that plaintiff need not exhaust administrative remedies before instituting an action on its alleged contract with defendant. In Town of Surfside v. County Line Land Co., 340 So.2d 1287 (Fla. 1977), a real estate developer sued to enjoin the Town of Surfside from operating a dump that, the developer alleged, constituted a nuisance. The trial court granted the injunction, ordering in part that the town comply with certain environmental regulations. Surfside argued that the developer failed to exhaust administrative remedies, as required by a Florida statute.

"On appeal, the court rejected this argument, observing that, 'The fallacy in this argument is that [the developer] is not suing to enjoin the violation of [an environmental regulation] of the Department of Pollution Control, but rather instituted this action based upon its common-law right to abate a nuisance.'

"Similarly, in the present case, plaintiff's contract theory is not based on an alleged violation by defendant of the Kane County resolution. Rather, it is based on an alleged independent agreement between the parties. We find it of no moment that Surfside involved a nuisance action while the instant case involves a contract claim; both are independent common-law actions.

"A federal case, applying Maryland law, presented a situation significantly similar to that in the case before us. Under Maryland law, like the law of this state, an agency has exclusive jurisdiction where the legislature so specifies.

"In Mardirossian v. Paul Revere Life Insurance Co., 286 F.3d 733 (4th Cir. 2002), the plaintiff alleged an oral contract under which the defendant was to provide insurance to the plaintiff. The District Court dismissed the cause because the plaintiff had failed to exhaust remedies before the Maryland Department of Insurance.
"The court of appeals was uncertain as to whether a common-law cause of action existed for the wrong alleged by the plaintiff.

Accordingly, it vacated and remanded, directing the District Court to certify to the Maryland Court of Appeals a question as to whether a cause of action existed outside of the state's insurance code. If so, the District Court would have concurrent jurisdiction.

"Thus, Mardirossian teaches that where a common-law scheme exists independent of a statutory scheme administered by an agency and the legislature has not otherwise limited the courts' jurisdiction, the court system has jurisdiction over the subject matter of the dispute. Under such circumstances, the exhaustion doctrine does not apply.

"We therefore conclude that although plaintiff cannot advance a claim based on defendant's purported failure to comply with the terms of the Kane County resolution without first exhausting its administrative remedies, exhaustion is no bar to its contract claim."

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