Opinion
NOT TO BE PUBLISHED
APPEAL from the Superior Court of Riverside County No. RIC473028 John D. Molloy, Judge. Reversed with directions.
Reed Smith, Raymond A. Cardozo, Dennis Peter Maio; Lewis Brisbois Bisgaard & Smith, Arthur K. Cunningham; Charles F. Robinson, Jeffrey A. Blair, Christopher M. Patti, and Michael R. Goldstein for Plaintiff and Appellant.
James S. Link for Defendant and Respondent.
OPINION
RICHLI J.
The Regents of the University of California (the Regents) claim that Sarkis Joseph Khoury, a member of the faculty of the University of California, Riverside, violated written university policies by receiving outside income while on sabbatical. In this action, they seek to recover the amount of that income as compensatory damages, along with treble damages and civil penalties under the False Claims Act and punitive damages.
Other written university policies, however, essentially provide that the administration cannot discipline a faculty member for professional misconduct except by bringing him or her up on charges before the privilege and tenure committee (the Committee) of the Academic Senate. In light of these policies, the trial court ruled that the Regents had failed to exhaust their own internal administrative remedies. It therefore granted summary judgment in favor of Khoury and against the Regents.
We will hold that the applicable doctrine was not exhaustion of remedies, but rather primary jurisdiction. Under this doctrine, the trial court was required to stay the case until the Regents obtained a final determination by the Committee that Khoury had, in fact, improperly received outside income; then the Regents could return to court to seek damages.
I
FACTUAL AND PROCEDURAL BACKGROUND
A. The Allegations of the Complaint.
The Regents filed this action against Khoury in June 2007. Their complaint, as subsequently amended, included the following allegations.
Since 1984, Khoury has been a member of the faculty of the Graduate School of Management at the University of California, Riverside.
The Regents have adopted an “Academic Personnel Manual” (the Manual). The Manual “ha[s] the force and effect of [s]tate statute....” Moreover, compliance with the Manual is “a term and condition of employment.”
The Manual includes a sabbatical leave policy (the Sabbatical Policy) which, in general, provides that “faculty are permitted the privilege of periodic sabbatical leave at full salary and benefits. In return, the faculty member is not permitted to supplement their income from the host institution.”
Khoury allegedly violated the Sabbatical Policy by accepting a salary for teaching while on sabbatical leave, on three separate occasions:
(1) At the University of British Columbia (the UBC) in Canada during the 1988-1989 academic year;
(2) At Göteborg University in Sweden during the 1999-2000 academic year; and
(3) At the American University of Beirut in Lebanon during the 2003-2004 and 2004-2005 academic years.
Khoury also allegedly submitted sabbatical leave forms in which he made fraudulent statements to the effect that he would not be receiving any outside professional income during these sabbaticals.
The complaint asserted causes of action for violation of university policy, fraud, violation of the False Claims Act (Gov. Code, § 12650 et seq.), breach of contract, and breach of the implied covenant of good faith and fair dealing. The Regents prayed for the income that Khoury had improperly earned while on sabbatical, plus punitive damages and both treble damages and civil penalties under the False Claims Act.
B. The Facts as Shown in the Summary Judgment Motion.
Khoury, like other faculty members and university officers, was a member ex officio of the Academic Senate.
The Manual provided: “‘Safeguards against arbitrary or unjust disciplinary actions, including provision for hearings and appeals, are well established in the University. [¶]... [A]ctions of certain types, some of them disciplinary in character, may not be carried out without the opportunity of a prior hearing before, or without advance consultation with, “a properly constituted advisory committee of the [A]cademic Senate”....’”
It also provided: “‘The Academic Senate has established Committees on Privilege and Tenure.... One of the traditional roles of the [d]ivisional Committees on Privilege and Tenure is to conduct hearings on disciplinary charges initiated by the Chancellor... and make findings of fact and recommendations to the Chancellor regarding proposed disciplinary sanctions.’”
The Academic Senate bylaws provided: “‘No disciplinary sanctions for professional misconduct shall be imposed by the administration except in accordance with the procedures set forth below.’”
They then provided: “‘Upon a determination of probable cause..., the Chancellor shall initiate notice of proposed disciplinary action, which requires that the Chancellor prepare written charges to be submitted to the Chair of the Committee on Privilege and Tenure.... The typ[e]s of discipline that may be imposed on a member of the faculty are...: written censure, reduction in salary, demotion, suspension, denial or curtailment of emeritus status, and dismissal from the employ of the University.’” (Italics omitted.)
In 1995, the then-dean of the graduate school of management charged Khoury with violating the Sabbatical Policy by augmenting his income during his sabbatical at the UBC (misconduct that is also alleged in the Regents’ complaint in this action).
In October 1995, the Committee held a hearing on this charge. Khoury did not deny receiving $30,000 Canadian from the UBC. It was his position, however, that $20,000 of this was “summer money” — i.e., money paid for work done during summer vacation. The Sabbatical Policy did not prohibit the receipt of summer money. He also claimed that the other $10,000 was reimbursement for legitimate expenses, and such reimbursement was not “income” within the meaning of the Sabbatical Policy. The Committee concluded that the dean had failed to carry his burden of proof.
The chancellor set aside the Committee’s decision and disciplined Khoury by reducing him in rank. Khoury filed a petition for writ of mandate. The trial court granted the writ and ordered the Regents to reinstate Khoury.
The Regents claim that, thereafter, they discovered new evidence that Khoury had, in fact, violated the Sabbatical Policy while at the UBC.
C. Khoury’s Motion for Summary Judgment.
Khoury filed a motion for summary judgment. In it, he argued that the Regents had failed to exhaust internal contractual remedies as set forth in the Manual.
In opposition, the Regents argued that “[t]he doctrine of exhaustion is inapplicable under the circumstances here, where it is the employer that is seeking a damages remedy against the employee.” They largely addressed exhaustion of contractual remedies; for example, they relied on Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465, a case dealing with exhaustion of contractual remedies. However, they captioned their argument, “The doctrine of exhaustion of administrative remedies does not apply in this instance.” (Capitalization omitted, italics added.) They also cited Morton v. Superior Court (1970) 9 Cal.App.3d 977, which deals with exhaustion of administrative remedies.
They also argued that they did not have a contract with Khoury. They do not reiterate this argument on appeal.
In Khoury’s reply, he argued again that the Regents had failed to exhaust contractual remedies. However, he added that “even if the law of contracts is not applicable, ” the complaint was barred by failure to exhaust administrative remedies. (Capitalization omitted.)
The trial court granted the motion. It reasoned, in part, that “one important purpose of the exhaustion doctrine is to provide proper recognition to the expertise of an organization’s quasi-judicial tribunal. The Committee..., not the courts, should be permitted in the first instance to balance the competing interests of the parties and adjudicate the conflicting claims concerning the proper construction and application of the University’s policies.... Even if the absence of an internal damage remedy makes ultimate resort to the courts inevitable, the prior administrative proceeding will still promote judicial efficiency by unearthing the relevant evidence and providing a record that the court may review.” It therefore entered judgment against the Regents and in favor of Khoury.
II
DISCUSSION
“We review de novo a trial court’s grant of summary judgment.... [Citation.] A trial court may only grant a motion for summary judgment if no triable issues of material fact appear and the moving party is entitled to judgment as a matter of law. [Citations.] The evidence must be viewed in the light most favorable to the nonmoving party. [Citation.]” (Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610, 618.)
“[T]he exhaustion doctrine... consists of at least three distinct strands, justified by somewhat different rationales. First, when a statute and lawful regulations pursuant thereto establish a quasi-judicial administrative tribunal to adjudicate statutory remedies, the aggrieved party is generally required to initially resort to that tribunal and to exhaust its appellate procedure. ‘As Witkin explains: “The administrative tribunal is created by law to adjudicate the issue sought to be presented to the court. The claim or ‘cause of action’ is within the special jurisdiction of the administrative tribunal, and the courts may act only to review the final administrative determination. If a court allowed a suit to be maintained prior to such final determination, it would be interfering with the subject matter jurisdiction of another tribunal.”’ [Citation.]
“Second, the exhaustion doctrine has been applied when a private or public organization has provided an internal remedy. [Citation.] Whereas the exhaustion requirement in the first category is based on a discernment of legislative intent, the second category is more a matter of judicial policy: ‘The reason for the exhaustion requirement in this context is plain.... “[W]e believe as a matter of policy that the association itself should in the first instance pass on the merits of an individual’s application rather than shift this burden to the courts. For courts to undertake the task ‘routinely in every such case constitutes both an intrusion into the internal affairs of [private associations] and an unwise burden on judicial administration of the courts.’ [Citation.]”’ [Citation.] In this context, the ‘exhaustion of administrative remedies furthers a number of important societal and governmental interests, including: (1) bolstering administrative autonomy; (2) permitting the agency to resolve factual issues, apply its expertise and exercise statutorily delegated remedies; (3) mitigating damages; and (4) promoting judicial economy.’ [Citation.]
“Third, courts have required ‘exhaustion of “external” administrative remedies in a variety of public contexts.’ [Citation.] In such cases, although the legislative intent to resort in the first instance to administrative remedies is not entirely clear, courts have required exhaustion when they ‘have expressly or implicitly determined that the administrative agency possesses a specialized and specific body of expertise in a field that particularly equips it to handle the subject matter of the dispute....
“In addition to the above three categories, we have recognized in some cases that although exhaustion is not required, the doctrine of ‘primary jurisdiction’ of administrative agencies... should be invoked to require resort to an administrative agency to resolve issues within its particular area of expertise.... [E]xhaustion and primary jurisdiction are ‘two closely related concepts [citation]. “Both are essentially doctrines of comity between courts and agencies. They are two sides of the timing coin: Each determines whether an action may be brought in a court or whether an agency proceeding, or further agency proceeding, is necessary.” [Citation.] [¶]... “‘Exhaustion’ applies where a claim is cognizable in the first instance by an administrative agency alone; judicial interference is withheld until the administrative process has run its course. ‘Primary jurisdiction, ’ on the other hand, applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.” [Citations.]’ [Citation.]
“‘The policy reasons behind the two doctrines are similar and overlapping. The exhaustion doctrine is principally grounded on concerns favoring administrative autonomy (i.e., courts should not interfere with an agency determination until the agency has reached a final decision) and judicial efficiency (i.e., overworked courts should decline to intervene in an administrative dispute unless absolutely necessary). [Citations.]... [T]he primary jurisdiction doctrine advances two related policies: it enhances court decisionmaking and efficiency by allowing courts to take advantage of administrative expertise, and it helps assure uniform application of regulatory laws. [Citations.]
“‘No rigid formula exists for applying the primary jurisdiction doctrine [citation]. Instead, resolution generally hinges on a court’s determination of the extent to which the policies noted above are implicated in a given case. [Citations.] This discretionary approach leaves courts with considerable flexibility to avoid application of the doctrine in appropriate situations, as required by the interests of justice.’ [Citation.]” (Jonathan Neil & Associates, Inc. v. Jones (2004) 33 Cal.4th 917, 930-932 (Jonathan Neil).)
In Jonathan Neil, the Supreme Court concluded that, even though the parties had framed the issue as whether exhaustion of administrative remedies was required (Jonathan Neil, supra, 33 Cal.4th at pp. 923, 929), the issue was really primary jurisdiction. (Id. at p. 933.) It explained: “Both [the plaintiff’s] suit for breach of contract and the [defendants’] cross-claim for breach of the covenant of good faith and fair dealing and fraud are originally cognizable in court. The Insurance Commissioner has no authority to decide these common law claims, but can only make a determination regarding some of the issues in the case. Nor can we discern in [the relevant statutory scheme] an absolute statutory bar to prosecuting such claims absent a prior administrative determination.” (Ibid.)
On the other hand, the court continued, “the case for invoking the primary jurisdiction of the Insurance Commissioner is compelling. The issues raised in the [defendants’] cross-complaint directly implicate the regulatory authority and expertise of the Insurance Commissioner.” (Jonathan Neil, supra, 33 Cal.4th at p. 934.) “Furthermore, ... ‘concerns for uniformity in application of the complex insurance regulations here involved, strongly militate in favor of a stay to await action by the Insurance Commissioner....’ [Citation.]” (Ibid.)
Much the same is true here. The Regents’ statutory and common law claims are originally cognizable in court. As the Regents argue, the Committee merely has jurisdiction to hold hearings on disciplinary charges and to impose disciplinary sanctions. Discipline, for this purpose, is defined as written censure, reduction in salary, demotion, suspension, denial or curtailment of emeritus status, and dismissal. The Committee has no authority to adjudicate the Regents’ statutory and common law claims or to award the Regents any damages or civil penalties; it can only determine some of the issues in the case. The Manual does not expressly bar the Regents from prosecuting such claims without a prior determination by the Committee.
On the other hand, the application of the Sabbatical Policy directly implicates both the authority and the expertise of the Committee; so does the concern that the Sabbatical Policy be uniformly applied. It is also significant that the Manual entrusts disciplinary determinations to the Committee in order to provide “[s]afeguards against arbitrary or unjust disciplinary actions....” The Regents should not be allowed to make an end run around these safeguards by taking a claim based on the Sabbatical Policy directly to court.
The Regents argue that an administrative agency is not required to exhaust its own remedies. Even though we have shifted the focus from exhaustion to primary jurisdiction, we still must consider this argument. Indeed, one of the cases on which the Regents rely, State by Pollution Control Agency v. United States Steel Corp. (1976) 307 Minn. 374 [240 N.W.2d 316], actually rejected exhaustion on other grounds (id. at pp. 379-380), but then went on to reject the application of the primary jurisdiction doctrine on precisely this ground: “[W]here the administrative agency entrusted with the regulation of a particular subject matter is involved in the judicial proceeding, as here, the concerns underlying the doctrine of primary jurisdiction are obviated.” (Id. at p. 380.)
Similarly, in United States v. Any and All Radio Station Transmission Equip. (6th Cir. 2000) 204 F.3d 658, the court stated: “[T]he doctrine [of primary jurisdiction] does not apply when the specially competent agency is itself the plaintiff. [Citations.] Indeed, ... a[n] agency’s decision to pursue a judicial remedy rather than an administrative one speaks volumes about its views regarding the necessity of administrative expertise. [Citations.]” (Id. at p. 664.)
The difference here, however, is that the “specially competent agency” is the Committee, not the Regents. Although the Regents adopted the Manual, the Manual makes the Committee the fact finder and the decisiomaker, at least in the first instance. Basically, the Regents surrendered some of their quasi-judicial power to the Committee. Thus, the Regents are not the administrative agency that has primary jurisdiction.
Admittedly, the Committee’s job is merely to “make findings of fact and recommendations to the Chancellor regarding proposed disciplinary sanctions.” In the prior administrative proceedings concerning Khoury’s receipt of $30,000 Canadian from the UBC, the chancellor rejected the Committee’s decision. Khoury, however, filed a petition for writ of mandate; the court reversed the chancellor’s decision and essentially reinstated the Committee’s decision. Thus, even though the Regents (through the chancellor) evidently do play some role in the disciplinary procedure, the Committee’s involvement is still a significant check on their power. And again, this is consistent with the provision of the Manual that the Committee is to serve as a safeguard against arbitrary or unjust disciplinary actions. For this reason, the Regents should not be allowed to bypass a Committee determination.
Because the applicable doctrine is primary jurisdiction and not exhaustion, the fact that the Committee could not adjudicate the Regents’ statutory and common law claims or award damages is irrelevant. If and when there is a final determination by the Committee that Khoury did violate the Sabbatical Policy, the Regents would be entitled to come back to court and to seek other remedies based on that determination.
Finally, at oral argument, counsel for Khoury objected that our holding would conflict with decisions requiring employees of the Regents to exhaust administrative remedies. (E.g., Campbell v. Regents of University of California (2005) 35 Cal.4th 311, 321-322; Edgren v. Regents of University of California (1984) 158 Cal.App.3d 515, 520-523.) But this does not follow. As already discussed, “‘“‘[e]xhaustion’ applies where a claim is cognizable in the first instance by an administrative agency alone.... ‘Primary jurisdiction’... applies where a claim is originally cognizable in the courts....” [Citations.]’ [Citation.]” (Jonathan Neil, supra, 33 Cal.4th at pp. 931, italics omitted.) Precisely because it is well established that, under specified circumstances, employees of the Regents must exhaust their administrative remedies, it is clear that those employees’ claims are not originally cognizable in the courts. The Regents’ claims are distinguishable, because we agree with the Regents that their claims are originally cognizable in the courts.
Somewhat surprisingly, both sides have taken the position that the doctrine of primary jurisdiction does not apply. Khoury is evidently concerned precisely because, if the Regents prevail in the administrative proceedings, they could come back to court and seek additional remedies.
The trial court therefore erred solely by entering judgment against the Regents. Under the doctrine of primary jurisdiction, the appropriate procedure was to order the action stayed, unless and until the Committee decides the relevant issues that are within its jurisdiction and that decision becomes final. (Jonathan Neil, supra, 33 Cal.4th at pp. 936-937.)
III
DISPOSITION
The judgment is reversed. The trial court is directed to stay all proceedings unless and until the Committee renders a final decision on any and all issues in this action that are within its jurisdiction.
We concur: McKINSTER Acting P.J., KING J.