Opinion
NOT TO BE PUBLISHED
Super. Ct. No. 06CS00755
ROBIE, J.
In this administrative mandamus case, plaintiffs sought review of a decision by the Unemployment Insurance Appeals Board (the board) arising out of an assessment for adjusted unemployment insurance contributions. The trial court dismissed the writ petition on the ground (among others) that plaintiffs had failed to exhaust their administrative remedies. Finding no error, we will affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In October 2003, as the result of an investigation, the Employment Development Department (the department) determined that plaintiffs CPE PEO, Inc. and 12 associated business entities -- including Benedict Canyon Productions, Inc. -- were, in fact, one employing unit under sections 135.1 and 135.2 of the Unemployment Insurance Code. (We will sometimes refer to this as the unity of enterprise determination.) The department also determined that the businesses had engaged in a practice known as “SUTA dumping.” As explained in a recent case, “SUTA dumping ‘includes acts to manipulate state account numbers and the [unemployment insurance] experience rating process. When a low [unemployment insurance] rate is obtained, payroll from another entity with a high [unemployment insurance] tax rate is shifted to the account with the lower rate. The entity with the higher rate is then “dumped.” The entity inactivates the higher rated account and the charges are apportioned to the rest of the employers in the state. Such abusive schemes leave other employers making up for the unpaid tax. SUTA dumping is also referred to as state unemployment tax avoidance and unemployment tax rate manipulation.’” (American Employers Group, Inc. v. Employment Development Dept. (2007) 154 Cal.App.4th 836, 839.)
Benedict Canyon is now known as CPE HR, Inc. We will refer to this entity as CPE HR and to the other entities collectively as CPE PEO. When necessary, we will refer to all of the entities collectively as CPE.
All statutory references are to the Unemployment Insurance Code unless otherwise indicated.
As a result of the foregoing determinations, the department determined that all of the entities would be joined under a single account number effective January 1, 1993, and their unemployment insurance rate would be recalculated back to that date.
On November 17, 2003, the department issued a notice of assessment for the period from January 1, 1993, through September 30, 2003, in the amount of nearly $49.5 million, including adjusted unemployment insurance contributions, penalties, and interest.
In December 2003, CPE PEO filed a petition for reassessment under section 1222. At the same time, CPE HR filed its own petition for reassessment.
That section provides that “[w]ithin 30 days of service of any notice of assessment . . . any employing unit or other person given the notice . . . may file a petition for review or reassessment with an administrative law judge.” (§ 1222.)
In October 2004, the parties participated in a telephonic prehearing conference with the administrative law judge (ALJ). During that conference, the attorney for CPE PEO asserted his belief that “there are a number of procedural issues that, if resolved first, could save a lot of [the ALJ’s] time.” Specifically, he contended there were two “dispositive” issues, which were ultimately framed as follows: (1) “whether the Department can issue the notices of assessment failing the procedural steps that are set forth in [section] 1127.5, assuming those are required”; and (2) “whether the Department can go back to the dim past to issue the assessment,” i.e., beyond “the rating period, that was in effect at the time the assessment was issued.” (We will sometimes refer to the former issue as the procedure issue and the latter issue as the limitations issue.) The ALJ clarified that what counsel was “suggesting [was] that since those are legal arguments that, in fact, they should precede the presentation of the factual portion of the case because they can be presented . . . essentially on paper.” Counsel for the department asked if the ALJ’s decision on those threshold issues would be appealable without going forward with the hearing, and the ALJ agreed that “it really ought to be appealable” but admitted to “sort of adlibbing” on that point.
In November 2004, the parties filed their briefs on what CPE HR referred to as the “threshold jurisdictional issues.” CPE HR argued that the assessment “should be withdrawn because the [department] failed to satisfy the procedural requirements of Section 1127.5 . . . before issuing the Assessment” and that “pursuant to the limitations of Section 1036 . . . and Section 1036-2 of the [California Code of Regulations], the Assessment is invalid to the extent it applies to periods before the 2003 . . . rating period.” CPE PEO argued that “the entire notice of assessment should be invalidated and dismissed” because the department “failed to follow the proper procedures required before issuing a notice of assessment and improperly attempted a retroactive rate change in violation of [section] 1036.” The department, on the other hand, argued that section “1036 does not bar the Department from issuing the assessment . . . for the period January 1, 1993 - September 30, 2002; and the assessment was properly issued pursuant to [sections 135.1, 135.2, and 1127.5, subdivision (d)].”
CPE PEO argued that the attempted retroactive rate change justified dismissal of the entire assessment because “all of the assessments proposed against the Taxpayers [that we have collectively identified as CPE PEO] relate to rating periods [that] ended prior to the notice of assessment.”
In July 2005, the ALJ issued a decision on the threshold issues. On the procedure issue, the ALJ determined that an employer is entitled to petition for review of a unity of enterprise determination by the department before the department issues an assessment based on that determination. Because that did not happen here, the ALJ concluded “the Department issued its notice of assessment prematurely and prematurely ordered the petitioner[s] to use another employer account number for reporting wages.” On the limitations issue, the ALJ determined that “section 1036 does not prohibit the Department from an assessment based on a unity of enterprise theory.” Accordingly, the ALJ set aside the assessment but ordered that the matter would “proceed as a petition for review of [the] unity of enterprise finding pursuant to . . . section 1127.5.”
CPE appealed the ALJ’s decision on the limitations issue to the board. The department appealed the ALJ’s decision on the procedure issue.
In March 2006, the board issued its decision on the appeals. The board noted that the department was appealing “those portions of the [ALJ]’s decisions which set aside the assessment and held the petitioner[s] must first be given the opportunity to petition for review [of] the unity of enterprise finding before an assessment may be issued based on the unity of enterprise finding.” The board noted that CPE was appealing “those portions of the [ALJ]’s decisions which allow the department to go back as far as it wants in its unity of enterprise finding and the corresponding assessment where fraud or intent to evade is alleged.” The board affirmed the ALJ’s decision on both issues, thereby setting aside the assessment and allowing the matter to proceed as a petition for review of the unity of enterprise finding.
On May 24, 2006, CPE commenced this proceeding by filing a petition for writ of administrative mandate in the superior court. CPE framed the issue as “whether an unlimited statute of limitations applies or whether the statute of limitations contained in . . . section 1036, as it stood prior to 2004, applies.” CPE sought a writ commanding the board to “set aside that portion of its . . . decision incorrectly imposing an unlimited statute of limitations” and to “issue a new decision directing [the department] to adhere to the statute of limitations mandated by both . . . section 1036 (as it stood during the relevant time period) and Title 22 of the California Code of Regulations section 1036-2.”
In September 2006, the board and the department filed a demurrer to the writ petition, asserting that the court lacked jurisdiction because CPE had failed to exhaust administrative remedies and because, under section 32 of article XIII of the California Constitution and sections 1241 and 1851, “[t]he exclusive means of obtaining judicial review of state tax controversies is a post-payment, and post-claim for refund, complaint for refund filed in the superior court.”
In opposition to the demurrer, CPE argued (among other things) that the demurrer was untimely and that therefore the board and the department had waived their arguments that CPE failed to exhaust administrative remedies and that judicial review was available only through a refund action.
The superior court concluded the demurrer was untimely and also concluded (on the merits) that the arguments of the board and the department were not bars to the court’s “fundamental subject matter jurisdiction.” The court directed the board and the department to file an answer to the writ petition within 15 days. In their answer, the board and the department denied CPE’s allegation that all available administrative remedies had been exhausted and also asserted failure to exhaust administrative remedies as an affirmative defense. They also asserted as an affirmative defense that the proceeding was barred by section 32 of article XIII of the California Constitution and sections 1241 and 1851.
In December 2006, the superior court issued its ruling in the case, finding that “the petition should be dismissed because Petitioners have failed to exhaust their administrative remedies, because section 32 of article XIII of the California Constitution and . . . section 1851 bar this proceeding, and because Petitioners have an adequate remedy at law.” In January 2007, the court entered judgment against CPE denying the writ petition. Thereafter, CPE filed a timely notice of appeal.
DISCUSSION
I
There Was No Waiver Of The Defenses At Issue Here
CPE first argues that the superior court “erred in considering” the board’s and the department’s “administrative remedies and prepayment relief defenses” because they waived those “defenses by failing to timely respond to the Writ Petition.” We disagree.
Subdivision (a) of section 430.80 of the Code of Civil Procedure (hereafter, CCP section 430.80(a)) provides that “[i]f the party against whom a complaint . . . has been filed fails to object to the pleading, either by demurrer or answer, that party is deemed to have waived the objection unless it is an objection that the court has no jurisdiction of the subject of the cause of action alleged in the pleading or an objection that the pleading does not state facts sufficient to constitute a cause of action.” Expressly relying on that statute, CPE argues that because the administrative remedies and prepayment relief defenses do not involve subject matter jurisdiction, those defenses had to be raised in a timely response to the writ petition. CPE also argues that (as the superior court determined) the demurrer filed by the board and the department was untimely.
The first fatal flaw in CPE’s arguments is its reliance on CCP section 430.80(a) in this mandamus proceeding. That statute is contained in title 1 of part 2 of the Code of Civil Procedure (Code Civ. Proc., § 307 et seq.), which governs “civil actions.” More specifically, CCP section 430.80(a) is contained in title 6 of part 2 (Code Civ. Proc., § 420 et seq.), which governs the pleadings in civil actions. “The judicial remedy of mandamus[, however,] is not a civil action, but a special proceeding of a civil nature, which is available for specified purposes and for which the code provides a separate procedure.” (Wenzler v. Municipal Court (1965) 235 Cal.App.2d 128, 131-132.) CPE points to no statute comparable to CCP section 430.80(a) contained in the statutes governing mandamus. (See Code Civ. Proc., § 1084 et seq.) Thus, CPE’s argument fails at the outset.
Even if we were to assume for the sake of argument that CCP section 430.80(a) did apply in this mandamus proceeding, CPE’s argument is still fatally flawed because the argument rests entirely on the untimely demurrer filed by the board and the department and fails to account for their answer. CCP section 430.80(a) treats defenses other than lack of subject matter jurisdiction and failure to state a cause of action as waived if those other defenses are not raised “by demurrer or answer.” (Italics added.) Here, the answer filed by the board and the department clearly and repeatedly raised the administrative remedies and prepayment relief defenses, both in the form of affirmative defenses and (in the case of failure to exhaust administrative remedies) as denials to the allegations of CPE’s petition. Moreover, there appears to be no question that the answer was timely filed. As the superior court observed, under Code of Civil Procedure section 1089, where the return to a petition for writ of mandate “is by demurrer alone, the court may allow an answer to be filed within such time as it may designate.” (Code Civ. Proc., § 1089.) In its ruling of October 20, 2006, the superior court gave the board and the department 15 days to file their answer to the writ petition. The answer appears to have been filed on or about October 31. Moreover, CPE makes no attempt to show that the answer was untimely. Because the board and the department raised their administrative remedies and prepayment relief defenses in a timely filed answer, CPE’s argument that they waived those defenses is without merit.
II
CPE Has Not Exhausted Its Administrative Remedies
“Generally, where an adequate administrative remedy is provided by statute or rule of an administrative agency, ‘relief must be sought from the administrative body and this remedy exhausted before the courts will act.’ [Citation.] The requirement of exhaustion of the administrative remedy is ‘a jurisdictional prerequisite to resort to the courts.’ [Citations.] ‘“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. Accordingly, the exhaustion of an administrative remedy has been held jurisdictional in California.”’” (Williams v. Housing Authority of Los Angeles (2004) 121 Cal.App.4th 708, 722.)
Under the foregoing principles, the superior court was correct -- CPE has not exhausted its administrative remedies. The board’s decision “allow[ing] the department to go back as far as it wants in its unity of enterprise finding and the corresponding assessment where fraud or intent to evade is alleged” did not finally resolve the administrative proceeding underlying this mandamus proceeding. Although the board set aside the assessment as premature (a decision that was favorable to CPE and therefore provided no basis for CPE to seek mandamus relief), the board allowed the matter to proceed as a petition for review of the department’s unity of enterprise finding. If CPE prevails on that petition at the administrative level, then the matter will be over without any need for CPE to seek mandamus relief. If not, then presumably the department will issue a new notice of assessment, and CPE will be entitled to seek review of that assessment by filing another petition for reassessment under section 1222. Assuming CPE does not prevail on that petition, CPE’s remedy is set forth in subdivision (d) of section 1178, as follows: “Following a final decision denying a petition for reassessment . . . the employing unit or other person which was a party to the petition may file a claim for refund upon payment of the amount of the assessment, including interest and penalties, and thereafter may pursue all administrative and judicial review rights accorded in Article 11 (commencing with Section 1221) and Article 12 (commencing with Section 1241).”
While it may be that the board will adhere to the decision it has already made on the limitations issue throughout the remainder of the administrative process available to CPE, that fact does not permit CPE to step out of that process now to obtain a court determination on the limitations issue. Under the exhaustion doctrine, court involvement must await the finality of the entire administrative process -- not just the finality of the board’s decision on the limitations issue -- otherwise we would “be interfering with the subject matter jurisdiction of another tribunal.” (Williams v. Housing Authority of Los Angeles, supra, 121 Cal.App.4th at p. 722.)
CPE contends it is not required to complete all administrative proceedings before seeking writ review because “[a]pplicable case law demonstrates that, when a party seeks to compel an administrative agency to comply with mandated statutory procedures, writ review is permissible even if all administrative proceedings have yet to be completed.” (Underlining omitted.) CPE is mistaken because it misreads the cases on which it relies. The cases CPE cites stand for the proposition that where a statutory deadline is directory rather than mandatory, any delay beyond the deadline is remediable by a petition for writ of ordinary mandamus to compel the decision maker to perform its duty. (See Kaiser Foundation Hospitals v. Superior Court (2005) 128 Cal.App.4th 85, 105; Board of Education v. Sacramento County Bd. of Education (2001) 85 Cal.App.4th 1321, 1332.) Obviously that proposition has no application here.
CPE also contends that “[a] well-recognized exception to the administrative exhaustion requirement applies when a party challenges a state agency’s ‘wholesale’ or ‘overarching’ refusal to follow the law.” That exception does not apply here, however. This is not a case like Knoff v. City etc. of San Francisco (1969) 1 Cal.App.3d 184 where the plaintiffs sought “to bring about examination and correction of wholesale deficiencies in the San Francisco assessment situation which reasonably require[d], not the adjustment of some specific assessments or the recovery of taxes paid upon them, but the examination of all assessments and the adjustment of those which require[d] such action and c[ould] legally be reached.” (Id. at p. 199.) This is also not a case like Venice Town Council, Inc. v. City of Los Angeles (1996) 47 Cal.App.4th 1547, where the plaintiffs sought “review of the City’s overarching policies in implementing the requirements of the Mello act and s[ought] to correct the City’s interpretation of its responsibilities under that statute.” (Id. at p. 1567.) Here, CPE sought review of the board’s alleged failure to apply the correct “statute of limitations” in connection with the department’s unity of enterprise determination with respect to CPE alone. Under the exhaustion doctrine, CPE must exhaust all of the administrative procedures available to it before it can seek judicial review of the limitations issue. CPE’s belated attempt to avoid that requirement by recharacterizing this case as one involving “wholesale deficiencies” or “overarching policies” is not persuasive.
For the foregoing reasons, we conclude the trial court acted properly in dismissing CPE’s writ petition.
CPE has asked us to take judicial notice of a writ petition the department filed against the board in the superior court in July 2007, arguing that the petition “directly contradict[s] [the department’s and the board’s] argument in their Opposition Brief that no provision of the [Unemployment Insurance Code] permits writ review of a controversy involving unemployment insurance contributions.” Because the department’s writ petition has no bearing on our conclusion that CPE failed to exhaust its administrative remedies, we deny CPE’s request for judicial notice.
DISPOSITION
The judgment is affirmed. The department and the board shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a).)
We concur, HULL, Acting P.J., CANTIL-SAKAUYE, J.