The threshold procedural requirements for litigating decisions made by California municipalities are critically important, and failure to meet such requirements generally leads to harsh results. These issues were on full display in Los Globos Corporation v. City of Los Angeles, __ Cal.App.5th __ (2017), a recent decision of the Second District Court of Appeal, published on November 20, 2017, which highlights the importance of exhausting administrative remedies within the generally short statutes of limitation provided in state and local law.

The case arose out of a dispute over several issues regarding the operation of the Los Globos nightclub, including whether the club was required to have a permit to operate a “dance hall” and whether the club had a valid certificate of occupancy for dancing on the first floor of its two-story building. City inspectors eventually confiscated the club’s occupancy load cards and certificate of occupancy, without a public hearing. Under relevant provisions of the Los Angeles Municipal Code, the club had 15 days to appeal the “revocation, suspension, or denial” to a board of building and safety commissioners.

The Court began its analysis with a lengthy explanation of the exhaustion of administrative remedies doctrine, which is well-established in California law. “In brief, the rule is that where an administrative remedy is provided by statute, relief must be sought from the administrative body and this remedy exhausted before the courts will act.” The rule is considered a “jurisdictional prerequisite” to litigation, and it is binding upon all courts.

The rule serves several functions, including (1) allowing the agency an opportunity redress the alleged wrong without resorting to costly litigation, (2) serving to reduce the scope of the litigation or possibly avoid litigation, (3) providing a more economical and less formal forum to resolve disputes and providing an opportunity to mitigate damages, and (4) promoting the development of a more complete factual record that allows the administrative agency implicated in the claim an opportunity to apply its expertise, both of which assist later judicial review.

The administrative remedies exhaustion rule has certain limited exceptions, including an exception where the administrative agency does not provide an adequate remedy. The administrative remedy also must comply with due process. In addition, there is an exception to the exhaustion requirement where it is futile to pursue the administrative remedy.

The club did not allege to have exhausted administrative remedies with the City or that it was otherwise exempt from the exhaustion requirement. Instead, the club claimed that it was denied due process and could not avail itself of any such remedies because the City’s failure to hold a hearing was improper and there was, therefore, nothing to appeal.

Given the jurisdictional nature of the exhaustion rule, the Court had no trouble holding that the club’s failure to exhaust prior to filing suit in superior court barred the club from pursuing its claims. Because the club failed to comply with this threshold requirement and the pleading could not be cured by an amendment, the Court held that the trial court did not abuse its discretion in sustaining the City’s demurrer.

While the exhaustion doctrine appears fairly simple—persons aggrieved by municipal decisions must file timely administrative appeals before the courts will have the power to act—it is plainly a potential trap for the unwary. Failing to exhaust is considered to have the effect of establishing the propriety and finality of a municipality’s decision.