Opinion
B217965 No. BS115156 B210212 No. BC380056
09-16-2010
ADOLPH BANUELOS et al., Plaintiffs and Appellants, v. NORTH LOS ANGELES COUNTY REGIONAL CENTER, Defendant and Respondent.
Susan D. Salisbury for Plaintiffs and Appellants Adoph Banuelos, HortenciaBanuelos and April Banuelos.Fonda & Fraser, Christopher L. Smith for Defendant and Respondent North LosAngeles County Regional Center. (B217965)Edmund G. Brown, Jr., Attorney General, Douglas M. Press Senior AssistantAttorney General, Richard T. Waldow and Gregory M. Cribbs, Deputy AttorneysGeneral, for Defendant and Respondent California Department of DevelopmentalServices. (B217965)Fonda & Fraser, Christopher L. Smith and Daniel K. Dik, for Defendant andRespondent North Los Angeles County Regional Center, Marie Paul, Oscar Mendoza andBill Woods. (B210212)
Susan D. Salisbury for Plaintiffs and Appellants Adoph Banuelos, Hortencia Banuelos and April Banuelos.
Fonda & Fraser, Christopher L. Smith for Defendant and Respondent North Los Angeles County Regional Center. (B217965)
Edmund G. Brown, Jr., Attorney General, Douglas M. Press Senior Assistant Attorney General, Richard T. Waldow and Gregory M. Cribbs, Deputy Attorneys General, for Defendant and Respondent California Department of Developmental Services. (B217965)
Fonda & Fraser, Christopher L. Smith and Daniel K. Dik, for Defendant and Respondent North Los Angeles County Regional Center, Marie Paul, Oscar Mendoza and Bill Woods. (B210212)
APPEALS from two judgments of the Superior Court of Los Angeles County, David P. Yaffe, Judge (B217965) and Elizabeth Allen White, Judge (B210212). Affirmed.
PERLUSS, P. J.
Adolph Banuelos, doing business as Adolph Home, Banueloss wife, Hortencia Banuelos, and their adult daughter, April Banuelos (collectively the Banuelos family), appeal from the judgment entered after the trial court sustained without leave to amend the demurrer of the North Los Angeles County Regional Center (Regional Center) to the Banuelos familys complaint for tortious breach of contract and related claims arising out of Regional Centers termination of the Adolph Home as a Regional Center vendor (case No. B210212). The trial court found the Adolph Homes failure to fully exhaust its administrative remedies jurisdictionally barred its civil lawsuit.
Adolph Banuelos and Hortencia Banuelos have also separately appealed from the judgment entered in a subsequent (and related) proceeding after the court dismissed their petition for writ of mandate challenging the administrative decision and seeking to compel Regional Center and the California Department of Developmental Services (Department) to adopt regulations and hold new hearings in compliance with the requirements of the Administrative Adjudication Bill of Rights (Gov. Code, § 11425.10 et seq.) and due process (case No. B217965). The trial court ruled the Banueloses were barred, under the exhaustion of administrative remedies doctrine, from challenging the administrative findings in a mandate proceeding.
On October 14, 2009 we denied the parties stipulated request to "delay briefing and consolidate the appeals," but, finding good cause, ordered the appeals in case numbers B217965 and B210212 to be considered together.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Parties and Their Respective Roles under the Lanterman Developmental Disability Services Act
Regional Center is a private, nonprofit community agency established pursuant to the Lanterman Developmental Disabilities Services Act (Lanterman Act) (Welf. & Inst. Code, § 4500 et seq.) to assist the Department in providing Californias developmentally disabled residents with access to various support services. (See § 4620, subds. (a), (b).) Regional Center does not provide services directly but is charged with developing program plans for individuals with developmental disabilities (referred to as "consumers") and coordinating and securing care for them through a network of contracting service providers. (See §§ 4640-4648.1; Morohoshi v. Pacific Home (2004) 34 Cal.4th 482, 489.) The process of identifying and qualifying the providers from which services are purchased is known under the Lanterman Act as "vendorization." (See Morohoshi, at p. 489; § 4648, subd. (a)(3)(A) ["[v]endorization or contracting is the process for identification, selection, and utilization of service vendors or contractors, based on the qualifications and other requirements necessary in order to provide the service"].)
Statutory references are to the Welfare and Institutions Code unless otherwise indicated.
Section 4620, subdivision (a), provides, "[T]he state shall contract with appropriate agencies to provide fixed points of contact in the community for persons with developmental disabilities and their families, to the end that these persons may have access to the services and supports best suited to them throughout their lifetime. It is the intent of the Legislature in enacting this division that the network of regional centers for persons with developmental disabilities and their families be accessible to every family in need of regional center services. It is the further intent of the Legislature that the design and activities of regional centers reflect a strong commitment to the delivery of direct service coordination and that all other operational expenditures of regional centers are necessary to support and enhance the delivery of direct service coordination and services and supports identified in individual program plans."
Subdivision (b) of section 4620 provides, "The Legislature finds that the service provided to individuals and their families by regional centers is of such a special and unique nature that it cannot be satisfactorily provided by state agencies. Therefore, private nonprofit community agencies shall be utilized by the state for the purpose of operating regional centers."
The Department is the state agency responsible for implementing the Lanterman Act and adopting regulations governing the vendorization process. (§ 4648, subd. (a)(3) (B) ["[t]he director shall adopt regulations governing the vendorization process to be utilized by the department, regional centers, vendors and the individual or agency requesting vendorization"], (C) ["(r)egulations shall include, but not be limited to: the vendor application process, and the basis for accepting or denying an application; the qualification and requirements for each category of services that may be provided to a regional center consumer through a vendor; requirements for emergency vendorization; procedures for termination of vendorization; [and] the procedure for an individual or agency to appeal any vendorization decision made by the department or regional center"].)
The Adolph Home is a licensed adult residential facility providing community residential services to developmentally disabled adults. It had been an authorized vendor pursuant to various contracts with Regional Center for 25 years when Regional Center terminated Adolph Homes vendorization in September 2007. Banuelos is the owner of the Adolph Home; Hortencia Banuelos is the Adolph Homes administrator; and April Banuelos is an Adolph Home employee.
The contracts are entered into by Regional Center on behalf of an individual consumer on the one hand, and the service provider, on the other hand, and, according to the allegations in the operative first amended complaint, are effective until replaced or terminated.
2. Regional Centers Termination of Adolph Homes Vendorization for Failing to Provide Regional Center Auditors with Access to Adolph Homes Records
Regional centers established under the Lanterman Act are statutorily required to monitor services provided by their service providers, including conducting fiscal reviews and audits of the providers records with or without prior notice. (§ 4648.1, subd. (a); see also § 4648.1, subd. (b) [Department and regional center staff involved in monitoring or auditing service provider "shall have access to... all related records, including books, papers, computerized data, accounting records, and related documentation"].) Under the implementing regulations adopted by the Department, a service providers vendorization may be terminated by the vendoring regional center if the service provider "has refused to make available any books and records pertaining to the vendored service, including those of the management organization, for audit, inspection or reproduction by the regional center, Department or authorized agency representative staff." (Cal. Code Regs., tit. 17, § 54370, subd. (b)(3).)
References to Regulation or Regulations are to title 17 of the California Code of Regulations.
In July 2007 Regional Center sent Adolph Banuelos notice of its intent to conduct an audit of Adolph Homes "personal and incidental funds" to "verify that [Adolph Homes] handling and accounting of [Regional Center] consumers personal and incidental funds are in accordance with Title 22, California Code of Regulations, Sections 80025 and 80026." Then, on August 27, 2007 Regional Center sent notice to Banuelos of its intent to terminate the Adolph Homes vendorization due to its refusal to provide Regional Centers fiscal auditor with access to the requested records. The notice of termination stated, "On July 16, 2007 you received written notification of [Regional
Sections 80025 and 80026 of title 22 of the California Code of Regulations address the procedures licensee/providers must follow to safeguard their consumers personal property, including cash resources and other valuables. (See, e.g., Cal. Code Reg., tit. 22, § 80026, subd. (h) ["[e]ach licensee shall maintain accurate records of accounts of cash resources, personal property, and valuables entrusted to his/her care...."
Centers] intent to conduct an audit of the P&I [personal and incidental] records maintained by your facility for the consumers who reside at the Adolph Home. With your cooperation, a partial audit was conducted at the Adolph Home on August 7, 2007 by Rowena De Guzman, [Regional Centers] [fjiscal [a]uditor. At the time of the audit, not all records were available for inspection. Ms. De Guzman requested to continue the audit on a subsequent date. Both Ms. De Guzman and you agreed that Ms. De Guzman would continue the audit on August 9, 2007.... [However,] [o]n August 8, 2007 your facility representative, April Banuelos, informed Ms. De Guzman that you would not permit her further access to facility records pending the results of a lawsuit." Regional Center advised Banuelos termination would not proceed if Banuelos corrected the violation.
On August 31, 2007 Banuelos replied to the notice in writing. Banuelos maintained he had provided all the records to the auditor on August 7, 2007, who, for personal reasons, was unable to conclude the audit on that day. Banuelos insisted he did not refuse to cooperate with auditors to complete the audit; he simply requested the audit take place after a "civil court hearing" on September 18, 2007. In light of Regional Centers notice of its intent to terminate the Adolph Homes vendor status, however, Banuelos agreed to make his records of Regional Center consumers available for inspection before September 18, 2007.
None of the parties has identified the basis for or otherwise explained the nature of this September 18, 2007 "civil court hearing." It appears, however, from the very limited record on appeal, that the hearing involved, at least in part, the Adolph Homes alleged wrongful retention of personal property of a former Adolph Home resident and Regional Center consumer.
On September 7, 2007 Regional Center advised Banuelos of its intent to proceed with the termination of the Adolph Homes vendorization. According to Regional Centers September 7, 2007 letter, Banuelos had not acted in accordance with his commitment in his August 31, 2007 letter to correct the violation and comply with the auditors request. Instead, on September 6, 2007 Banuelos had expressly refused to allow Regional Centers auditor access to Adolph Homes records.
On September 11, 2007 Regional Center delivered another letter to Banuelos officially terminating Adolph Homes vendorization. The September 11, 2007 letter stated the termination decision was based on Adolphs Home refusal to produce its records to Regional Center for an audit. The letter noted that, on September 6, 2007, Banuelos had told Regional Center controller, Kim Rolfes, that consumers funds were being "hidden" from Regional Center and she would not be given access to records. In addition, Regional Center also alleged a number of other violations, including, among other things: (1) Hortencia Banuelos had been "unresponsive" to repeated requests for her participation in the development of a "Plan of Correction" to address the "substantial inadequacies" identified in the services of the facility; (2) Adolph Home had refused to comply with a July 2, 2008 Corrective Action Plan, "which cited substantial inadequacies related to deficiencies and irregularities in the handling of consumer cash resources," "as evidenced by the withholding of personal and incidental cash funds relating to" a former consumer upon his discharge from Adolph Home; and (3) Adolph Home failed to submit a special incident report regarding the hospitalization of another consumer, identified as "C.N." in July 2007, who was also found in September 2007 to have "severe" skin ulcers all over the back of his body. (See § 4856 [regional centers required to monitor service provider for program effectiveness and may impose sanctions, remove consumers from a providers facility and terminate a providers vendorization based on noncompliance with Department standards].) The termination letter advised Banuelos of his right to file an appeal of the termination decision with Regional Centers executive director in accordance with the applicable regulations governing such administrative appeals.
3. Banueloss Administrative Appeal to the Executive Director of Regional Center—The First Level of Administrative Appeal
If vendorization is terminated for noncompliance under Regulation section 54370, the service provider "may file an appeal with the director of the vendoring regional center within 30 days after the receipt of written notification" by the regional center of its intent to terminate the service providers vendorization. (Reg. § 54380, subd. (a)(2) [vendor "may appeal any of the following actions to the director of vendoring regional center," including noncompliance with requirements of Reg. § 54370].) "Within 15 days after receipt of the appeal, the director of the vendoring regional center or his or her designee shall review the appeal to determine whether it contains" all the required information specified in subdivision (a) of Regulation 54382. (Reg. § 54382, subd. (c); see also Reg. § 54382, subd. (b) [appeal must identify action being appealed, state specific basis for appeal, and include all supporting documentation and other information necessary to substantiate and/or justify the appeal].)
"The director of the vendoring regional center or his or her designee shall render a [written] decision on the appeal within 60 days after receipt of all required and/or requested information." (Reg. § 54382, subd. (c).) "If the appellant does not appeal the decision to the Director of the Department pursuant to section 54384 of these regulations, it shall be deemed final, and the vendoring regional center shall send a copy of the decision to all regional center(s) utilizing the service." (Reg. § 54382, subd. (e).)
On September 24, 2007 Banuelos filed an appeal with George Stevens, the executive director of Regional Center, contesting each of the reasons for termination provided in Regional Centers September 11, 2007 letter. As to the accusations concerning his noncompliance with audit requirements, Banuelos reiterated he did not deny access to records, but simply sought to postpone the audit until after September 18, 2007 "due to the limited time available due to trial activities."
On September 27, 2007 Banueloss lawyer, Susan Salisbury, sent a letter to the executive director of Regional Center purporting to "augment the appeal filed by her client." Salisburys letter advised Regional Centers director that the Adolph Home had always been willing to provide documentation to the auditor upon reasonable notice. Salisbury accused Regional Center of terminating Adolph Homes vendorization in retaliation for Banueloss reporting of physical abuse in 2005 by another vendor who happened to be friendly with Marie Paul, a Regional Center employee. Salisbury also disputed allegations that consumer funds were being hidden from Regional Center or that
Adolph Home was involved in the mistreatment of any of its residents, including C.N. Salisbury enclosed with her letter Adolph Homes consumer records relating to C.N.
On December 19, 2007 Stevens issued his written decision denying Banueloss appeal on the merits. Stevens found: (1) A partial audit had been conducted on August 7, 2007 by Regional Center auditor De Guzman; (2) Banuelos agreed that De Guzman could complete her audit on a subsequent date; (3) on August 13, 2007 April Banuelos informed De Guzman that no further access to Adolph Records would be permitted "pending the results of a lawsuit"; (4) although Banuelos had agreed in his August 31, 2007 letter to allow inspection of his facilitys records, he withdrew that offer on September 6, 2007, telling Regional Centers controller Kim Rolfes he would not permit any inspection of his records until after his civil court hearing; (5) Banuelos had indicated to Rolfe he was "hiding funds" from Regional Center; (6) it was apparent to Rolfe that Banuelos was not going to allow Regional Center access to complete its audit of Adolph Home.
As support for his findings, Stevens referred to the source material, including the many letters and documentation provided by Banuelos, as well as interviews with Rolfe and De Guzman.
Stevens expressly refrained from making any findings with respect to the other bases for termination identified in the September 11, 2007 letter, explaining the additional issues were "immaterial" "given the decision to proceed with the termination of vendorization" following Banueloss refusal to provide access to his facilitys fiscal records.
4. Adolph Homes Unsuccessful Attempt to Appeal to the Department—Second Level of Administrative Appeal
If the findings in the first level of appeal are adverse to the service provider, the provider may file appeal to the "Director of the Department within 15 days after receipt of the written decision" by the director of the vendoring regional center. (Reg. § 54384, subd. (a).) Although directed to the Department, "[t]he appeal must be filed with the director of the vendoring regional center who shall forward the appeal to the Director of the Department" after determining the appeal contains all the information required by the regulations. (Ibid.) To be complete, the appeal must be in writing and include "(1) All information submitted to the vendoring regional center pursuant to section 54382 (a) of these regulations; [¶] (2) A copy of the vendoring regional centers decision; and [¶] (3) A statement of the issue(s), facts, documentation, and supporting authority identifying why the appellant believes the decision of the director of the vendoring regional center should be reversed by the Director." (Reg. § 54384, subd. (b).)
"Within 15 days after receipt of the appeal, the director of the vendoring regional center or his or her designee shall ensure that the appeal includes all information required" under this regulation and "forward the appeal to the Director. The vendoring regional center shall not forward an incomplete appeal or an appeal filed after the time specified unless the appellant establishes good cause pursuant to section 54388 of these regulations." (Reg. § 54384, subd. (c).) "If additional information is required, the Director of the Department or the Directors designee shall request the information from the appellant or the regional center." (Reg. § 54384, subd. (d)(2).) "The decision of the Director is the final administrative decision." (Reg. § 54384, subd. (g).)
The regulations further provide that, as to both levels of administrative review, the appeal "shall be decided only on the documents submitted. There shall be no oral testimony or argument; however, the vendoring regional center and the appellant may hold an informal conference at any time to discuss or resolve disputed issues." (Reg. § 54390.)
On January 2, 2008 Banuelos sent a letter directed to Stevens at Regional Center. The letter, entitled "Directors decision regarding the appeal of the vendorization termination of Adolph Home," read, on "August 9, 2007 Rowena De Guzman of the [Regional Center] visited the Adolph Home Facility in order to review the financial records in accordance with several accusations made by [employees at Regional Center]. [¶]Upon her review she noted that the home was in accordance with regulations. The only inaccuracies found[] were small calculations. Upon exit, she addressed the corrections needed. She requested a follow up for she could not complete the review as she was late for a birthday affair. [¶] It is true that we requested the meeting be made [after] the court date of September 18. Unfortunately, Ms. Guzman and other [Regional Center] staff demanded that the review precede the court date. Yes, I did inform her that she or others would be subpoenaed. It was necessary that it be made known to higher authority for nothing was being resolved. [¶] Numerous times I had requested meetings/hearings with my lawyer, my clients and their families to address the issues at hand. Alas, [Regional Center] denied every request and forwarded the allegations to Community Care Licensing. Note that on each investigation made by both the Woodland Hills and Monterey Park Licensing divisions, no deficiencies were cited."
The letter also identified the nine separate reasons for termination articulated in Regional Centers September 11, 2007 and insisted that Stevens address each of those accusations. In his January 2, 2008 letter Banuelos did not seek a formal hearing, assert the fact-finding process utilized by Regional Centers director in the first-level administrative appeal was unconstitutional or otherwise improper or claim the termination decision was retaliatory or discriminatory.
On January 14, 2008 Stevens advised Banuelos in writing that it appeared his January 2, 2008 letter was seeking "reconsideration of [Regional] Centers decision or a further response. Please be informed that the decision rendered in my letter dated December 19, 2007 is the regional centers final decision regarding your vendor appeal. [¶] According to [Regulation section 54384], you must include a statement of issue(s), facts, documentation and supporting authority identifying why you believe the regional centers decision should be reversed in order for an appeal to be submitted to the Director of the Department of Developmental Services. This information is missing and, therefore, I am unable to forward your appeal. Upon receipt of the aforementioned information, your appeal will be forwarded to the department as required by regulation," provided the appeal is timely or good cause is shown for the late submission.
Banuelos did not immediately respond. Two weeks later, however, on January 28, 2008, Banuelos sent another letter to Stevens, claiming the appeal was "complete." This letter did not challenge Stevenss December 19, 2007 findings directly.
Instead, it expressly addressed the reasons for termination identified in Regional Centers September 11, 2007 letter.
On February 4, 2008 Regional Center advised Banuelos that, in light of Banueloss failure to timely appeal the December 19, 2007 decision to the Department, Stevenss decision had become final.
On February 12, 2008 Banuelos forwarded to the Department all of the letters and documentation it had sent to Regional Center in connection with the termination of its vendorization in an attempt to appeal Regional Centers decision.
On March 10, 2008 the Department rejected the purported appeal on the ground it was untimely, and, in any event, was incomplete because it did not include "supporting authority identifying why you believe the regional centers decision to terminate vendorization due to your refusal to allow access to books and records for auditing purposes should be reversed by the Director."
5. The Banuelos Familys Complaint
On October 31, 2007 the Banuelos family filed a lawsuit in Los Angeles County Superior Court (case No. BC380056). The operative first amended complaint alleged claims against Regional Center and its employees for "tortious breach of contract in violation of public policy" (brought by Banuelos only); intentional interference with prospective economic advantage (brought by all plaintiffs); unfair business practices (brought by all plaintiffs) discrimination and retaliation (brought by all plaintiffs) in violation of the Unruh Act (Civ. Code, § 52.1 et seq.); and retaliation in violation of the Elder Abuse and Dependent Adult Civil Protection Act (§ 15601 et seq.) (brought by all plaintiffs). Each of the claims, except for the Unruh Act discrimination claim, was based on Regional Centers alleged wrongful termination of the Adolph Homes vendorization. The discrimination claim alleged Regional Center had wrongfully given the Adolph Home "a level three vendor" classification rather than the higher "level four" vendor classification given to similarly situated vendors, based on the Banueloses national origin and Banueloss physical disability.
On May 15, 2008 the trial court sustained Regional Centers demurrer to the Banuelos familys complaint without leave to amend on the ground they had failed to exhaust their administrative remedies by raising these claims in a timely appeal to the Department. The court also ruled that Banueloses could not bring a complaint for damages relating to the termination of Adolph Homes vendorization without first exhausting judicial remedies in a mandate proceeding. The court entered judgment in favor of Regional Center.
6. The Petition for Writ of Mandate
On June 5, 2008 Banuelos, doing business as Adolph Home, and his wife filed a petition for writ of mandate under Code of Civil Procedure section 1094.5 challenging the findings made in the first-level administrative appeal. The petition also sought a traditional writ of mandate under Code of Civil Procedure section 1085 to compel Regional Center and the Department to hold new hearings that complied with the Administrative Procedure Act (APA) (Gov. Code, §§ 11400-11470.50) and due process. Banuelos claimed he was excused from exhausting his administrative remedies, and in any event, had been prevented from exhausting his administrative remedies by Stevenss unlawful refusal to forward his January 2, 2008 "appeal" to the Department.
The trial court (a different trial judge from the judge who had heard the tortious breach of contract action) dismissed the petition on exhaustion grounds, finding the Banueloses had failed to raise their claims in a proper appeal to the Department. In its written order dismissing the petition, the trial court stated, "A court cannot grant relief on any question of law or fact that was not initially presented at the administrative level. [Citation.] It was never contemplated that a party to an administrative hearing can withhold any evidence or argument available to him, make only a perfunctory showing in the administrative hearing, and thereafter obtain an unlimited trial de novo, on expanded issues, in the reviewing court. [Citation.] [¶]... Petitioners have produced no evidence that shows" they complied with the administrative appeal requirements. "Petitioners were advised by the regional center that their attempted appeal to the Director of the Department of Developmental Services was deficient, and they failed thereafter to present a timely appeal that contained the required information or to request permission for additional time to do so. At least they provide no evidence to the court that they did either of those things. [¶] Petitioners now attempt to complain to the court that the hearing conducted by the director of the regional center was not fair, but the court cannot consider those contentions because they were first not presented to the Director of the Department of Developmental Services."
CONTENTION
The Banueloses contend they were excused from exhausting their administrative remedies for a variety of reasons. Accordingly, the trial court erred in dismissing their complaint and their petition for writ of mandate on exhaustion grounds.
DISCUSSION
1. Exhaustion of Administrative Remedies Is a Jurisdictional Prerequisite to Seeking Judicial Relief
"In general, a party must exhaust administrative remedies before resorting to the courts." (Coachella Valley Mosquito and Vector Control Dist. v. California Public Employment Relations Bd. (2005) 35 Cal.4th 1072, 1080) (Coachella Valley); see Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 292 ["[i]n 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 not a matter of judicial discretion, but is a fundamental rule of procedure... binding upon all courts." (Campbell v. Regents of University of California (2005) 35 Cal.4th 311, 321; Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 70 ["[e]xhaustion of administrative remedies is a jurisdictional prerequisite to resort to the courts"].)
An administrative remedy is exhausted only upon "termination of all available, nonduplicative administrative review procedures." (Coachella Valley, supra, 35 Cal.4th at p. 1080; see also California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1148.) The exhaustion doctrine requires presentation to the administrative agency of the entire controversy between the parties. (Jonathan Neil & Assoc., Inc. v. Jones (2004) 33 Cal.4th 917, 933; see Bleeck v. State Board of Optometry
(1971) 18 Cal.App.3d 415, 432 [exhaustion requires "full presentation to the administrative agency upon all issues of the case and at all prescribed stages of the administrative proceedings"].)
The 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)."" (City of San Jose v. Operating Engineers Local Union No. 3. (2010) 49 Cal.4th 597, 609; Campbell v. Regents of University of California, supra, 35 Cal.4th at p. 322 [exhaustion "rule has important benefits: (1) it serves the salutary function of mitigating damages; (2) it recognizes the quasi-judicial tribunals expertise; and (3) it promotes judicial economy by unearthing the relevant evidence and by providing a record should there be a review of the case"].)
There are exceptions to the exhaustion doctrine. (Coachella Valley, supra, 35 Cal.4th at p. 1080.) For example, exhaustion is excused when ""the administrative remedy is inadequate [citation]; where it is unavailable [citation]; or where it would be futile to pursue such a remedy."" (UnnamedPhysician v. Board of Trustees (2001) 93 Cal.App.4th 607, 620.)
The question whether the exhaustion doctrine applies in a given case is subject to de novo review. (Citizens for Open Government v. City of Lodi (2006) 144 Cal.App.4th 865, 873 ["[w]e apply a de novo standard of review to the legal question of whether the doctrine of exhaustion of administrative remedies applies in a given case"]; accord, Center for Biological Diversity v. County of San Bernadino (2010) 185 Cal.App.4th 866, 890.)
2. The Trial Court Properly Dismissed The Banueloses Petition for Writ of Mandate on the Ground the Banueloses Failure To Exhaust Administrative Remedies Was Not Excused
The Banueloses acknowledge that a timely appeal was not filed with the Department as required under Regulation 54384, subdivision (a). However, they contend they are excused from having to pursue the second level of administrative appeal because the Lanterman Acts implementing regulations, which require both the first and second level administrative appeals to be decided solely on documents submitted by both sides (see Reg. § 54390 ["an appeal made pursuant to sections 54380 through 54386 of these regulations shall be decided only on the documents submitted"]) deprived them of their right to a full hearing with the attendant rights to confront and cross-examine witnesses in violation of the Administrative Adjudication Bill of Rights and their right to due process under the United States and California Constitutions.
An administrative writ of mandate is appropriate to challenge administrative findings on the ground the petitioner was deprived of a fair hearing in the administrative proceeding. (Code Civ. Proc., § 1094.5, subd. (b).) Although the Banueloses devote much of their appellate briefs to the argument they were deprived of a full and fair hearing at both the first and second level of administrative review, they never raised any of these challenges to procedural fairness in the administrative appeal process at either the first level of administrative appeal, which Banuelos properly completed, or the second-level, which they failed to properly pursue. As a result, they are precluded under the exhaustion doctrine from seeking judicial relief on those grounds in a Code of Civil Procedure section 1094.5 mandate proceeding. (See Anton v. San Antonio Community Hosp. (1977) 19 Cal.3d 802, 826 [plaintiff foreclosed under exhaustion doctrine from arguing hearing committee was "biased" and failed to afford him even "minimal due process" protections because he never raised those claims at administrative hearing];
Banuelos also insists he was prevented from properly completing the appeal by the actions of Stevens, Regional Centers executive director. We address this contention on pp. 20-21, below.
Gutkin v. University of Southern California (2002) 101 Cal.App.4th 967, 978 [plaintiffs claim administrative remedy deprived him of procedural due process does not excuse his failure to pursue administrative remedy; the point of exhaustion doctrine is to allow the trial court to review, in a petition for writ of administrative mandate under Code Civ. Proc., § 1094.5, "whether there was a fair trial"]; Pomona College v. Superior Court (1996) 45 Cal.App.4th 1716, 1729-1730; see also Cal. Admin. Hearing Practice (Cont.Ed.Bar 2d ed. 2009) § 7.14, pp. 356-357 ["As in civil trials, a party must make a proper objection to any claimed denial of a fair hearing at the administrative level to preserve the question for review. Parties may challenge any aspect of a hearing as procedurally inadequate under applicable constitutional and statutory provisions...."].)
The Banueloses arguments are not a model of clarity. They assert the regulations delegating decisionmaking authority to the regional center directors in the first-level administrative appeal violate the APA. Yet they also assert that Regional Center is a private entity, which, if true, would not subject it to the APA unless it was properly considered a "quasi-public entity" (see Gov. Code, § 11410.60), a classification the Banueloses dispute. What is clear is that it was the Banueloses responsibility to raise each of these arguments in the administrative hearing. Their failure to do so runs afoul of the exhaustion doctrine and, accordingly, precludes judicial review of those issues.
The Banueloses alternatively contend, while they may be barred from challenging the procedural fairness of the administrative decision in a Code of Civil Procedure section 1094.5 administrative mandamus action, under Code of Civil Procedure section 1085 they are entitled to relief to compel the Department to adopt new regulations for a hearing that comports with due process. (See, e.g., Unnamed Physician v. Board of Trustees, supra, 93 Cal.App.4th at pp. 619, 621 [although "failure to exhaust administrative remedies prevents appellant from seeking relief through administrative mandamus (Code Civ. Proc., § 1094.5) which provides judicial review of final administrative proceedings," party may proceed in "traditional mandate" (Code Civ. Proc., § 1085) on ground the regulations themselves violate due process; "party is excused from exhausting administrative remedies where the challenge is to the constitutionality of the administrative agency itself or the agencys procedure"]; see also
ibid. [inadequate remedy is an exception to exhaustion doctrine; "[a] remedy is not adequate if it does not square with the requirements of due process"].)
A threshold requirement to a substantive or procedural due process claim is the showing of a liberty or property interest protected by the Constitution. We have recognized that "[a] contract with a state entity can give rise to a property right protected under the Fourteenth Amendment," provided the contract can only be terminated by the state for cause. (See Benn v. County of Los Angeles (2007) 150 Cal.App.4th 478, 489 (Benn) ["[a] contract with a state entity can give rise to a property right protected under the 14th Amendment" if (a) contract confers extreme dependence in the case of welfare benefits, or permanence in the case of tenure or (b) the contract itself includes a provision that the state entity can terminate the contract only for cause]; see generally Logan v. Zimmerman Brush Co. (1982) 455 U.S. 422, 430-431 [102 S.Ct. 1148, 71 L.Ed.2d 265] [citing examples].)
Both Regional Center and the Department appear to concede the existence of a protected property interest. (But cf. Benn, supra, 150 Cal.App.4th at pp. 490-491 [nonprofit corporation that provided foster care services pursuant to contracts with county had no protected property interest in contract; contracts permitted county to terminate contracts at any time "for convenience"].) However, even assuming the Banueloses had a constitutionally protected property interest in their vendor contract, the contention they are necessarily entitled to the full protections of a formal hearing, including the right to confront and cross-examination witnesses, is utterly without merit. (See Mathews v. Eldridge (1976) 424 U.S. 319, 334-335 [96 S.Ct. 893, 47 L.Ed.2d 18] ["[d]ue process is flexible and calls for such procedural protections as the particular situation demands"]; Saleeby v. State Bar (1985) 39 Cal.3d 547, 565 ["A formal hearing, with full rights of confrontation and cross-examination is not necessarily required. [Citation.] What must be afforded is a "reasonable" opportunity to be heard."].)
In deciding what process is constitutionally required in a given situation, the United States and California Supreme Courts have identified four relevant factors for consideration: (1) the private interest that will be affected by the official action; (2) the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; (3) the governments interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail; and (4) the dignitary interest in enabling people to present their side of the story before a responsible government official. (Mathews v. Eldridge, supra, 424 U.S. at p. 333; accord, People v. Allen (2008) 44 Cal.4th 843, 862-863.)
We have serious doubt the Banueloses could demonstrate a due process violation based simply on the absence of a live hearing in this case, which involves the Banueloses economic interests in contracting with Regional Center and not more generally the Adolph Homes license or ability to continue to operate as a residential care facility. (See, e.g., Mathews v. Eldridge, supra, 442 U.S. at p. 333 [submission of written evidence, rather than formal hearing with opportunity to confront and cross-examine witnesses, did not violate due process in case involving termination of disability benefits]; accord, Marvin Lieblein, Inc. v. Shewry (2006) 137 Cal.App.4th 700, 722 [written evidence sufficient to satisfy due process in case involving pharmacists exclusion from Medi-Cal program].) Nonetheless, we need not reach that question because, apart from identifying the interests they claim give rise to a protected property right, the Banueloses have not presented any argument (in either their appellate briefs challenging the dismissal of their petition for writ of mandate or in their appellate briefs challenging the dismissal of their complaint) or evidence directed to the particular factors the United States and California Supreme Courts have repeatedly identified as being pertinent to the procedural due process analysis. Accordingly, the Banueloses have forfeited that claim on appeal. (See People v. Stanley (1995) 10 Cal.4th 764, 793 ["[E]very [appellate] brief should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration"]; see also Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979 ["[t]his court is not required to discuss or consider points which are not argued or which are not supported by citation to authorities or the record"].)
Finally, the Banueloses contend they made every effort to exhaust their administrative remedies by appealing Stevenss decision and were thwarted in that effort by Stevenss refusal to forward their appeal to the Department. (See Reg. § 54384, subd. (c) [second-level appeal must be filed with director of vendoring regional center who shall forward appeal to Department provided appeal is complete and complies with subd. (b) of this regulation].) At the threshold, if the Banueloses were correct, the remedy for this error is not a court hearing retrying the propriety of the termination of the Adolph Homes vendorization, as the Banueloses suggest, but issuance of the writ of mandate under Code of Civil Procedure section 1085 to compel the director of Regional Center to perform the ministerial act of forwarding the January 2, 2008 "appeal" to the director of the Department for review. (See Conlan v. Bonta (2002) 102 Cal.App.4th 745, 752 [traditional mandate available to challenge agencys failure to perform act required by law rather than conduct or result of administrative hearing]; see also Friends of the Old Trees v. Dept. of Forestry and Fire Protection (1997) 52 Cal.App.4th 1383, 1389 ["[q]uasi-legislative acts are ordinarily reviewed by traditional mandate" whereas "quasi-judicial acts are reviewed by administrative mandate"].) More importantly, Banueloss January 2, 2008 letter did not trigger the mandatory duty to forward an appeal to the director of the Department because the purported appeal was not complete and did not satisfy Regulation 54384, subdivision (b)s requirements.
First, Banueloss January 2, 2008 letter, directed to Stevens rather than the Department, does not even purport to be an appeal of the first-level administrative decision. Second, the letter does not satisfy the regulatory requirements for a complete appeal, namely, that the material submitted include a statement of facts, issues, and supporting authority identifying why the claimant believes the first level administrative findings are wrong. Instead, the letter urges Stevens to reconsider his ruling and reach the other issues identified in Regional Centers September 11, 2007 termination letter. As the trial court observed, the Banueloses had every opportunity to correct the deficiency after Stevens notified them of it on January 4, 2008. Yet, they waited two weeks and then, without requesting additional time, on January 28, 2008 merely filed the same documents, albeit this time with additional arguments disputing the "findings" identified in the termination letter rather than the findings actually made in the December 19, 2007 first-level administrative decision. On its face, the January 2, 2008 letter (which, as discussed, makes no mention of any issues of procedural unfairness) is woefully inadequate to constitute a proper appeal. Simply stated, there is no basis in this record to find Stevens erred in failing to forward the January 2, 2008 letter to the Department.
3. The Trial Court Did Not Err in Sustaining Regional Centers Demurrer Without Leave To Amend
The trial court (in case No. B210212) sustained Regional Centers demurrer to the Banuelos familys complaint on the ground the Banueloses had failed to fully exhaust their administrative (as well as their judicial) remedies. In addition to the justifications for failure to exhaust their administrative remedies offered in connection with their appeal from the dismissal of their petition for writ of mandate—arguments rejected in the preceding section of this opinion—the Banuelos family contends they should have been allowed to proceed with their complaint because the administrative remedy was inadequate since it did not permit recovery of damages or attorney fees and did not afford them the opportunity to conduct discovery. That contention is meritless: An administrative remedy is considered inadequate when "the agency lacks the authority to hear the complaint, not when the administrative procedures arguably limit the remedy the agency may award." (Campbell v. Regents of University of California, supra, 35 Cal.4th at pp. 322-323.)
On appeal from an order dismissing an action after the sustaining of a demurrer, we independently review the pleading to determine whether the facts alleged state a cause of action under any possible legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) We give the complaint a reasonable interpretation, "treat[ing] the demurrer as admitting all material facts properly pleaded," but do not "assume the truth of contentions, deductions or conclusions of law." (Aubry, at p. 967; accord, Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) We liberally construe the pleading with a view to substantial justice between the parties (Code Civ. Proc., § 452; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081; see Kotlar v. Hartford Fire Ins. Co. (2000) 83 Cal.App.4th 1116, 1120.)
"Where the complaint is defective, "[i]n the furtherance of justice great liberality should be exercised in permitting a plaintiff to amend his [or her] complaint."" (Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at p. 970.) Leave to amend may be granted on appeal even in the absence of a request to amend the complaint in the trial court. (Id. at p. 971; see Code Civ. Proc., § 472c, subd. (a).) We determine whether the plaintiff has shown "in what manner he [or she] can amend [the] complaint and how that amendment will change the legal effect of [the] pleading." (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) "[L]eave to amend should not be granted where... amendment would be futile." (Vaillette v. Firemans Fund Ins. Co. (1993) 18 Cal.App.4th 680, 685; see generally Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 373-374.)
The Banuelos familys Unruh Act claim alleging discrimination in the Adolph Homes classification is unrelated to the termination of its vendorization. Although not specifically addressed by the Banuelos family in their appeal, the demurrer to this cause of action was also properly sustained because any challenge to the vendor classification must first be raised in a proper administrative appeal. (See Regs., §§ 57940, 57941 [providing for administrative appeal process concerning assigned reimbursement rates].)
Similarly without merit is the Banueloses unsubstantiated contention that any appeal to the Department would have been futile. There is no evidence in this record that the Department had in any way indicated what its ruling on the merits would have been had an appeal been properly pursued or that the Department inevitably affirms the decisions reached by a regional center. (See Sea & Sage Audubon Society, Inc. v. Planning Com. (1983) 34 Cal.3d 412, 418 [futility exception is very narrow and will not apply unless petitioner can ""positively state that [agency] has declared what its ruling will be in a particular case"" (italics omitted)].)
Finally, the Banuelos family contends the hearing process afforded under the regulations was not of a sufficient "quasi-judicial character" to make the administrative decision binding in a later proceeding. This argument—whatever other flaws it may have—confuses the concepts of exhaustion of administrative remedies and exhaustion of judicial remedies. The former is a jurisdictional prerequisite to bringing a civil lawsuit; the latter is an aspect of the doctrine of collateral estoppel, governing the preclusive effect of the administrative decision. (See Johnson v. City of Loma Linda, supra,
24 Cal.4th at pp. 69-70 [The "requirement of exhaustion of judicial remedies is to be distinguished from the requirement of exhaustion of administrative remedies. [Citation.] Exhaustion of administrative remedies is a jurisdictional prerequisite to resort to the courts. [Citation.] Exhaustion of judicial remedies, on the other hand, is necessary to avoid giving binding effect to the administrative agencys decision, because that decision has achieved finality due to the aggrieved partys failure to pursue the exclusive judicial remedy for reviewing administrative action"]; accord, Runyon v. Board of Trustees of the California State University (2010) 48 Cal.4th 760, 773; Y.K.A. Industries, Inc. v. Redevelopment Agency of the City of San Jose (2009) 174 Cal.App.4th 339, 355.)
The trial court sustained the demurrer without leave to amend primarily on the ground the Banuelos family had failed to exhaust their administrative remedies, a jurisdictional bar to consideration of their complaint. Having failed to demonstrate that they were excused from exhausting their administrative remedies, the Banuelos family cannot show the trial courts order sustaining the demurrer without leave to amend was improper.
DISPOSITION
The judgments in case numbers B217965 and B210212 are affirmed. The Department and Regional Center are to recover their costs on appeal.
PERLUSS, P. J.
We concur:
ZELON, J.
JACKSON, J.