Mckee v. Bell-Carter Olive Co.

Opinion

Statement of the Case and of the Facts

On May 12, 1980, Ernest McKee, Jr. (hereafter plaintiff), filed an action against Bell-Carter Olive Company (hereafter defendant) alleging five causes of action: (1) breach of contract, (2) fraud, (3) price fixing in violation of the Cartwright Act (Bus. & Prof. Code, § 16700 et seq.), (4) conversion, and (5) breach of the implied covenant of good faith and fair dealing.

Plaintiff contends (1) the applicable statutory provisions provide only for punishment of the processor and do not afford a remedy to the grower and (2) that an available remedy need not be exhausted if irrelevant to a plaintiff’s claim. Plaintiff basically contests the availability of an administrative remedy in the first place and its adequacy, if available, to redress his injury. On these issues, we believe the trial court was correct in determining that an adequate administrative remedy was available to plaintiff.

Foundationally, it is beyond question that in California an adequate and available administrative remedy must be exhausted, barring certain exceptions, before a plaintiff will be permitted to seek judicial redress of his grievance or injury. This is the doctrine of exhaustion of administrative remedies, and in California failure to satisfy this doctrine is a jurisdictional defect. (Abelleira v. District Court of Appeal (1941) 17 Cal. 2d 280 , 292-293 [ 109 P.2d 942 , 132 A.L.R. 715 ].) The Supreme Court recently affirmed the doctrine in George Arakelian Farms, Inc. v. Agricultural Labor Relations Bd. (1985) 40 Cal.3d 654 , 661-662 [ 221 Cal.Rptr. 488 , 710 P.2d 288 ], (See also Hittle v. Santa Barbara County Employees Retirement Assn. (1985) 39 Cal.3d 374 , 384 [ 216 Cal.Rptr. 733 , 703 P.2d 73 ], in which the court stated, “ [tjhough the issue of exhaustion of administrative remedies is not raised by the parties, it is a condition to the court’s jurisdiction which must be addressed before turning to petitioner’s contentions” (citation omitted); Browning-Ferris Industries v. City Council (1986) 181 Cal.App.3d 852 , 859 [ 226 Cal.Rptr. 575 ].) Moreover, an available administrative remedy must be exhausted even if its availability is couched in permissive language. (See this court’s opinions in Morton v. Superior Court (1970) 9 Cal.App.3d 977 , 982 [ 88 Cal.Rptr. 533 ]; People v. Coit Ranch, Inc. (1962) 204 Cal.App.2d 52 , 58 [ 21 Cal.Rptr. 875 ].)

As the court noted in Kane v. Redevelopment Agency (1986) 179 Cal.App.3d 899 , 906, footnote 3 [ 224 Cal.Rptr. 922 ], “‘[T]he principal purpose of the doctrine of exhaustion of administrative remedies is to afford administrative tribunals the opportunity to decide in a final way matters within their area of expertise prior to judicial review. [Citation omitted.]’ [Citation omitted.]” A somewhat more expansive discussion of the rationale underlying the exhaustion doctrine appears in County of Contra Costa v. State of California (1986) 177 Cal.App.3d 62 , 73-74 [ 222 Cal.Rptr. 750 ], There the court stated in part: “The doctrine of exhaustion of administrative remedies, it has been held, is not a matter of judicial discretion but is. a

Thus, the first of two questions which must be addressed is the availability of an administrative remedy. Contrary to plaintiff’s contentions, it is clear the applicable statutory provisions do provide such an administrative remedy which encompasses resolution of disputes such as the one between plaintiff and defendant herein.

The regulation of processors of farm products comprises chapter 6 of division 20 of the California Food and Agricultural Code, starting with section 55401. The statutory framework encompasses not only licensing of processors and of agents but also codifies two procedures by which a producer or grower of farm products may recover payment for those products from the processor. Commencing with section 55631, the statute outlines the procedure for attachment and execution of a producer’s lien on farm products in the possession and control of the processor to the extent of the agreed price. The lien attaches at the time the product is delivered to the processor (§ 55632) and has preference over all other liens except those for labor claims or warehouseman’s liens. (§ 55633.) A producer may institute a lawsuit to enforce the lien (§ 55636) or may maintain a personal action to recover the underlying debt. (§ 55647.)

Should the Director fail to effect a settlement between the processor and the producer, he is empowered by section 55745 to notice a hearing for resolution of the dispute. At the hearing the Director has the power to “[a]dminister oaths, and take testimony,” “[i]ssue subpoenas requiring the attendance of witnesses before him, together with such books, memoranda, papers, and other documents, articles, or instruments as may be pertinent to the controversy as set forth in the complaint,” and “[c]ompel the disclosure by such witnesses of all facts known to them relative to the controversy.” (§ 55747.) At the conclusion of the hearing the Director may dismiss the complaint if he finds no violation, but if he is persuaded that the processor/licensee has violated any of the statutory provisions, the Director “may issue an order which suspends or revokes the processor’s license or places such license under such probationary terms and conditions as may be necessary to obtain compliance with the provisions of this chapter by such licensee.” (§ 55749.)

A detailed procedure for such hearings is set forth at sections 55781-55788, including a provision that the processor who chooses not to testify in his own behalf may nevertheless be called and examined as if under cross-examination. (§ 55787.) A similarly detailed statutory framework appears at sections 55841-55851 for the suspension or revocation of a processor’s license, and section 55851 provides: “Any order which suspends or revokes a license may, within the discretion of the director, be made conditional upon the settlement, adjustment, or satisfaction of the consequences of any violation which is specified, and the operation of such an order may be

Thus, plaintiff could have sought to resolve his payment dispute with defendant administratively by filing a complaint with the Director. Upon receiving such complaint, the Director is obligated to investigate and, if a resolution cannot be achieved, to bring both plaintiff/producer and defendant/processor to a hearing at which witnesses can be called and examined, documents can be ordered produced for examination, and testimony of the parties taken. Assuming at the end of such hearing plaintiff’s claim were deemed valid, the Director has the statutory power to suspend defendant’s processing license until such time as defendant pays to plaintiff the money plaintiff is due.

This precise procedure was utilized in Almaden-Santa Clara Vineyards v. Paul (1966) 239 Cal.App.2d 860 [ 49 Cal.Rptr. 256 ]. Upon its determination that Almadén had failed to pay one Vogel, a grape producer, in full and according to the terms of the contract, the Director issued an order suspending Almaden’s processing license. The trial court granted Almaden’s petition for a writ of mandate ordering the Director to set aside that order; the appellate court reversed and upheld the disciplinary action taken by the Director as the result of Almaden’s nonpayment for the grapes it obtained from Vogel. Noting a variety of enforcement or punitive measures available to the Director, the court stated in part: “[T]he clear legislative intention and purpose behind the above-mentioned sections is that the producers shall be assured full payment for their farm products, that the director has jurisdiction to take disciplinary action against processors for their failure to pay for such products regardless of any dispute between the processors and the producers over such alleged nonpayment, and that the director’s jurisdiction to take disciplinary action is not lost or diminished because of any dispute except in the single instance and under the conditions prescribed by section 1300.3 [now section 55742] where the dispute has been submitted to arbitration.” (Id. at pp. 870-871.)

Therefore, plaintiff’s arguments that these statutes provide only a punitive or exemplary remedy, not one relevant to his claim for monetary damages,

Nevertheless, sections 55749 and 55851 make clear that once the Director has determined a producer is entitled to payment from a licensed processor, the Director may indirectly compel compliance with such an order by conditioning suspension of the processor’s license upon payment of the money due the producer. Setting aside for the moment plaintiff’s claims for damages in excess of the contract price, resort to the statutory remedy would have sufficed to make plaintiff whole, i.e., to attain for him the properly computed contract price for his olives. Thus while the statutory procedure is facially punitive, its effect is to provide an administrative remedy clearly relevant to plaintiff’s claim. Notwithstanding the Director’s inability to directly order the payment of damages, the Director’s power to conditionally suspend a processor’s license until payment of reparations is made is the practical equivalent of such power and, in fact, the most power which can constitutionally be afforded the Director in light of the decision in Jersey Maid Milk Products Co. v. Brock, supra. The detailed procedure outlined by the statutes makes clear the Director’s power is more than mere investigatory power without any procedural mechanism by which the person aggrieved can obtain relief. (Cf. Rosenfield v. Malcolm (1967) 65 Cal.2d 559 , 565-568 [ 55 Cal.Rptr. 505 , 421 P.2d 697 ]; Lachman v. Cabrillo Pacific University (1981) 123 Cal.App.3d 941 [ 177 Cal.Rptr. 21 ].)

Plaintiff relies heavily on Shernoff v. Superior Court (1975) 44 Cal.App.3d 406 [ 118 Cal.Rptr. 680 ] and Greenberg v. Equitable Life Assur. Society (1973) 34 Cal.App.3d 994 [ 110 Cal.Rptr. 470 ]. However, the holdings in those cases are not dispositive here. In both of those cases the appellate court found the administrative remedy provided by Insurance Code section 790.09 irrelevant to an independent action for damages against an insurance company. Insurance Code section 790.09 is part of the Unfair

Moreover, to the extent Shernoff, supra, and Greenberg, supra, hold that an administrative remedy which does not provide for the recovery of damages is irrelevant in an action for monetary recovery, the continuing viability of these two cases is questionable in light of the Supreme Court’s decision in Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465 [ 131 Cal.Rptr. 90 , 551 P.2d 410 ]. There, a doctor whose staff privileges had been revoked by the hospital brought an action for damages based on various traditional torts. The doctor was not seeking reinstatement to the hospital. Nevertheless, the Supreme Court concluded that a plaintiff in those circumstances would be required to exhaust available administrative remedies, even private, nonstatutory ones, based on numerous policy considerations. Those include (1) the possible elimination or mitigation of damages by exhaustion of administrative remedies, (2) deference to the expertise of the administration’s quasi-judicial tribunal and, (3) “[f]inally, even if the absence of an internal damage remedy mak[ing] ultimate resort to the courts inevitable [citation omitted], the prior administrative proceeding will still promote judicial efficiency by unearthing the relevant evidence and by providing a record which the court may review.” (Id. at p. 476.) This court followed Westlake Community Hosp. v. Superior Court, supra, in Wilkinson v. Norcal Mutual Ins. Co. (1979) 98 Cal.App.3d 307 , 317 [ 159 Cal.Rptr. 416 ],

Therefore we conclude that section 55741 et seq. provides an available administrative remedy to plaintiff, an olive producer who contends that defendant, a processor as statutorily defined, failed to compensate him in accordance with the terms of their contract.

II.

Having determined that plaintiff had available to him an administrative remedy, the trial court would have no jurisdiction to proceed with plaintiff’s

The key to this question is found at section 55437, part of the general provisions governing the division. Denominated “Cumulative remedies; conflicting laws,” the statute provides, “The rights, remedies, and penalties which are provided for in this chapter are in addition to any other rights, remedies, or penalties which are provided for by law, and any acts or parts of acts in conflict therewith are hereby repealed.” (Italics added.) We are not persuaded by defendant’s characterization of this clause as a “savings clause,” because as plaintiff has pointed out, a specific “savings clause” is found at section 55439. However, given the strong presumption in favor of administrative remedies which is apparent in California decisional law, it is not enough to merely point to section 55437, denominate plaintiff’s administrative remedy cumulative, and end the matter in plaintiff’s favor. However, resort to appropriate decisional law does bear out that result.

We begin with Flores v. Los Angeles Turf Club (1961) 55 Cal.2d 736 [ 13 Cal.Rptr. 201 , 361 P.2d 921 ], in which the Supreme Court considered an individual’s challenge to his exclusion from a race track based on a statute permitting exclusion of persons deemed to be of immoral character or whose activities were detrimental to the sport. In determining that the statute also provided an administrative remedy which the plaintiff had failed to exhaust (Bus. & Prof. Code, § 19561.5, now Bus. & Prof. Code, §§ 19572 and 19573), the Supreme Court rejected the plaintiff’s argument that the administrative remedy was only cumulative and not exclusive. The court distinguished Jewett v. City Transfer & Storage Co. (1933) 128 Cal.App. 556 , 559 [ 18 P.2d 351 ], and Estate of Ward (1932) 127 Cal.App. 347 , 354 [ 15 P.2d 901 ], on which the plaintiff relied. In Jewett the court had concluded the common law warehouseman’s lien for unpaid storage charges was cumulative to the statutory right afforded under the Warehouse Receipts Act

A recent case highlights the distinction between a statutory remedy which does not codify an existing common law right and is therefore, at least initially, exclusive, and a statutory remedy which is cumulative to a common law cause of action. In Karlin v. Zalta (1984) 154 Cal.App.3d 953 [ 201 Cal.Rptr. 379 ] a class of plaintiffs sought recovery of damages from various physician’s organizations and insurance companies for increased medical care costs incurred by plaintiffs because of defendants’ inflation of medical malpractice premium rates. The court rejected plaintiffs ’ reliance on Shernoff v. Superior Court, supra, 44 Cal.App.3d 406 , and Greenberg v. Equitable Life Assur. Society, supra, 34 Cal.App.3d 994 , since those cases arose under the Unfair Practices Act. That act also provided the administrative remedy afforded did not relieve or absolve the insurer of civil liability which might attach based on the sorts of misleading, deceptive, and fraudulent conduct proscribed by the act.

In contrast, the area in which the plaintiff’s claim arose in Karlin, the setting of premium rates, was an area governed by the McBride Act (Ins. Code, § 1850 et seq.) which “comprised] a pervasive and self-contained system of administrative procedure for the monitoring both of insurance rates and the anticompetitive conditions that might produce such rates.” (Karlin v. Zalta, supra, at p. 983.) Unlike situations in which the statutory and common law remedies are cumulative, leaving the plaintiff free to choose the remedy he prefers, there was no common law cause of action providing monetary damages for illegal price-fixing such as the McBride Act effected in the insurance industry. The administrative remedy provided by the act was exclusive, not cumulative, particularly in light of the expertise the administrative agency could bring to bear on the plaintiff’s grievance. Thus, the plaintiff in Karlin v. Zalta, supra, was jurisdictionally required to exhaust her administrative remedies before resorting to the courts. Although defendant in the instant case might argue that the common law did not provide for the suspension of a food processor’s license, the basis for the statutory provision, i.e., the need to insure payment to producers for the food they supply to be processed, can be satisfied by a common law action for breach of contract, one requiring little, if any, particularized agency expertise.

The court concluded the employee’s complaint “does not depend upon a private right of action implied by OSH A, but upon a right of action which existed independent of OSHA and which, we conclude, the Legislature did not intend to destroy.” (Hentzel v. Singer Co., supra, at p. 303.) Drawing in part on the failure of Labor Code section 6312 to constitute a comprehensive system of administrative enforcement “indeed, it provides for no administrative remedy, other than the maintenance by an administrative agency of a lawsuit on behalf of the complaining employee” (ibid..), the court found no legislative intent to preclude an employee from bringing a suit on his own behalf. The court compared the provisions of Cal-OSHA to those under the Fair Employment and Housing Act (Gov. Code, § 12900 et seq.), as well as certain remedial provisions available to employees who suffer discrimination as a result of filing a claim under workers’ compensation. (He ntzel v. Singer Co., supra, 138 Cal.App.3d at p. 303, fn. 9.) Because these other statutes encompassed power in the director to remedy the underlying problem, i.e., to enforce a solution that would restore to the complaining party all he had lost, the court noted that “exhaustion of remedies . . . may well be required.” (Ibid.)

There is, of course, a distinction between an administrative remedy which can make a plaintiff whole again without the award of damages and one which cannot directly compensate the plaintiff for the economic losses he has suffered. However, it is necessary to keep in mind the underlying policies which are advanced by the exhaustion of administrative remedies doctrine. In Kane v. Redevelopment Agency, supra, 179 Cal.App.3d 899 , the court noted: “. . . such a balancing of competing factors typifies difficult questions

However, when a statute, even one establishing an administrative framework, merely codifies a cause of action recognized and maintainable at common law, many of those policy considerations diminish in significance. For example, the instant case is one arising from breach of contract, with additional allegations of fraud, breach of the implied covenant of good faith and fair dealing, and conversion, all of which frequently arise in actions for breach of contract by virtue of thorough pleading. Going one step further, the value of the contract depends upon determination of what constituted the market price for olives in 1978. There is nothing in the instant complaint that differs in any way from breach of contract actions depending on determination of market price which arise in the judicial system day in and day out. Moreover, as plaintiff has pointed out, if a processor chooses to ignore an order that he pay a producer according to the terms of a disputed contract and, despite loss of a license, the processor refuses to pay, a court will have to spend time on this matter when the plaintiff seeks a judgment he can enforce. Even if it can be resolved fairly simply based on the agency’s prior adjudication, the case must still enter the judicial pipeline, one of the results the exhaustion doctrine was intended to avert.

The trial court made little comment on plaintiff’s contention that his administrative remedy was cumulative to that afforded by other statutes and/ or the common law. Noting that the language “does not expressly provide

Having found that plaintiff’s complaint is cumulative to the state administrative scheme set out under the Food and Agricultural Code, there is no need to address plaintiff’s arguments that he is in some manner exempt from the requirement that he exhaust his administrative remedy.

The judgment is reversed. Plaintiff shall recover his costs on appeal.

Hanson (P. D.), Acting P. J., and Best, J., concurred.

A petition for a rehearing was denied December 2,1986, and respondent’s petition for review by the Supreme Court was denied February 25, 1987.