No. 96SC568Supreme Court of Colorado. En Banc.
May 18, 1998 As Modified on Denial of Rehearing June 22, 1998. Petition for Writ of Certiorari DENIED August 10, 1998.
Appeal from the District Court, City and County of Denver, Honorable Robert P. Fullerton, J.
Judgment reversed, and case remanded with directions.
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[EDITORS’ NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]Page 921
Gale A. Norton, Attorney General, Martha Phillips Allbright, Chief Deputy Attorney, General Richard A. Westfall, Solicitor General, Paul Farley, Deputy Attorney General, David Kaye, First Assistant Attorney General, Mark W. Gerganoff, Assistant Attorney General, State Services Section Denver, Colorado, for Petitioners.
King Isaacson, Scott E. Isaacson, Salt Lake City, Utah, Hutchison Neider Ward King, Richard Hutchison, Murray, Utah, for Respondents.
EN BANC
Justice BENDER delivered the Opinion of the Court.
preempts Colorado’s attorney fees statute, section 13-17-201, with respect to the award of attorney fees to a prevailing defendant on a section 1983 claim. The district court did not apply the appropriate standard when it denied the Department’s motion seeking attorneys fees as a result of the dismissal of the section 1983 claim. We return this case to the court of appeals with directions to remand it to the district court for dismissal and for a determination of whether the Department is entitled to an award of attorney fees as the prevailing defendant in a section 1983 claim under the standards set forth in 42 U.S.C. § 1988.
I.
[3] The Colorado Department of Revenue assesses an annual registration fee upon all commercial motor vehicles in Colorado. See 42-3-134 (13), 11 C.R.S. (1997). In 1989, the General Assembly changed the Department’s registration scheme, resulting in increased registration fees.[2]
Although the change became effective on January 1, 1990, the Department was unable to convert its billing system to implement the new fee
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schedule for all carriers. As a temporary measure, the Department charged interstate carriers the new higher registration fees, but charged intrastate carriers the lower 1989 fees until it was able to identify and calculate the new fees for the intrastate carriers. After the Department made the new calculations for the intrastate carriers, it billed them for the amounts owed. This process, known as “backbilling,” began in 1992.
[4] That year, the Department backbilled Golden’s through several letters requesting additional registration fees. The letters did not describe the procedures for disputing the bills, but did provide a telephone number to call with any questions. Golden’s refused to pay these bills. The Department responded by assessing penalties and interest and by refusing to issue 1993 licenses to Golden’s until it paid the disputed fees. [5] On January 21, 1993, Golden’s filed suit against the Department in Denver District Court. The amended complaint requested class certification and asserted that the Department’s backbilling violated due process protections embodied in the Colorado Administrative Procedure Act (“APA”),[3] equal protection,[4] 42 U.S.C. § 1983,[5] and ex post facto principles.[6] Golden’s also requested attorney fees and costs under 42 U.S.C. § 1988.[7] Golden’s paid the contested registration fees after it sought but was denied a preliminary injunction directing the Department to accept the 1993 application for registration renewal. [6] The Department filed a motion to dismiss under C.R.C.P. 12(b) for lack of jurisdiction, arguing that Golden’s failed to exhaust its administrative remedies. The Department also requested attorney fees and costs under section 13-17-201, 5 C.R.S. (1997), and alternatively under sections 13-17-101 to -106, 5 C.R.S. (1997).[8] Golden’s countered that it was not required to exhaust its administrative remedies because of various exceptions to the exhaustion doctrine. [7] On October 13, 1994,[9] the district court granted the Department’s motion to dismiss for lack of jurisdiction on the grounds that Golden’s failed to exhaust its administrative remedies. However, the district court denied the Department’s motion for attorney fees and costs, stating that attorney fees were not appropriate since Golden’s proceededPage 923
in district court with a “good-faith belief” that the district court possessed jurisdiction over its claims.[10]
[8] Meanwhile, on June 13, 1994, the Department issued a final order in an administrative proceeding concerning backbilled registration fees filed by another intrastate motor carrier, Chenoweth Construction Company. In that order, the executive director of the Department ruled that its backbilling procedures as applied to Chenoweth were consistent with statutory and constitutional due process. [9] On January 17, 1995, Golden’s appealed the district court’s dismissal of its complaint to the court of appeals. The court of appeals reversed the district court’s dismissal and remanded the case to the district court with directions to consider the merits of the claims. The court of appeals held that Golden’s was not required to exhaust its administrative remedies before filing its complaint because the complaint only raised questions of law that did not require agency expertise. The court of appeals also ruled that further appeal to the Department would have been futile based on the Department’s recent final determination involving the identical due process issue and the same challenge to the propriety of backbilling involved in the present case. The court of appeals affirmed the district court’s order denying attorney fees based on its disposition of the dismissal issue in favor of Golden’s. We granted certiorari to review the court of appeals’ decision.[11] II.
[10] We begin with a discussion of the doctrine of exhaustion of administrative remedies. This doctrine serves as a threshold to judicial review that requires parties in a civil action to pursue available statutory administrative remedies before filing suit in district court See Hoffman v. Colorado State Bd. of Assessment Appeals, 683 P.2d 783, 785
(Colo. 1984); Moschetti v. Liquor Licensing Auth., 176 Colo. 281, 285, 490 P.2d 299, 301 (1971); Denver-Laramie-Walden Truck Line, Inc. v. Denver-Fort Collins Freight Serv., Inc., 156 Colo. 366, 370, 399 P.2d 242, 243 (1965). If the parties fail to satisfy the exhaustion requirement, the district court is without jurisdiction to hear the action. See Horrell v. Department of Admin., 861 P.2d 1194, 1197 (Colo. 1993).
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will not rule on any claims until a court has decided this issue). In class actions, the unnamed class members need not exhaust administrative remedies so long as the named class plaintiff does so. See 1 Herbert B. Newberg Alba Conte, Newberg on Class Actions § 5.15, at 5-18 (3d ed. 1992).
[13] The court of appeals held that Golden’s is exempt from the exhaustion requirement because the issues presented in its amended complaint are solely questions of law and do not require factual determinations. However, our reading of the complaint reveals that Golden’s raises at least two factual questions. First, Golden’s alleged that “[d]efendants have not provided any explanation or justification to the Plaintiffs for additional amounts being billed for 1989 and 1991.” In addition, Golden’s stated that “[d]efendant’s action effectively modifies Plaintiff’s registration without providing due process of law as required by and in violation of C.R.S. 24-4-104 and 24-4-105.”[12] A resolution of these allegations necessarily requires factual determinations that must be made by the Department. Therefore, we hold that the court of appeals erred in ruling that an absence of factual issues in the complaint rendered Golden’s exempt from the exhaustion requirement. [14] The court of appeals held that exhaustion of administrative remedies would be futile because the Department announced its position on this issue in its “Final Determination” in the case involving Chenoweth Construction Company.[13] however, the decision to file a complaint was not based on the outcome in the Chenoweth case because Golden’s filed this lawsuit more than a year before that decision was announced. At the time that Golden’s filed its complaint in district court, Golden’s had no reason to believe that an administrative proceeding before the Department would be unsuccessful. Nevertheless, Golden’s chose to disregard the exhaustion requirement and file a complaint in district court. We will not excuse Golden’s failure to comply with the exhaustion requirement at the time of the filing of the complaint simply because subsequent developments suggest that a proceeding before the Department might be futile. Thus, we hold the court of appeals erred by concluding that Golden’s is exempt from the exhaustion requirement on the grounds of futility. [15] Golden’s asserts that it is exempt from the exhaustion requirement because two members of the class for which it seeks certification (intrastate motor vehicle carriers) presented their cases to the Department for administrative review.[14] Golden’s argues that requiring all of the potential class members to obtain administrative review would amount to a waste of time and resources. However, the class action exception to administrative review does not permit named plaintiffs to avoid the exhaustion requirement. This exception relieves the unnamed members of the class from administrative review when the named plaintiffs satisfy administrative requirements prior to filing suit and applies after the class has been certified by the court under C.R.C.P. 23. See Newberg Conte, supra, § 5.15, at 5-18; cf. Albemarle Paper Co. v. Moody, 422 U.S. 405, 414 n. 8, 95 S.Ct. 2362, 45 L.E.2d 280(1975) (stating that in the Title VII context, backpay may be awarded on a class basis without exhaustion of administrative procedures by the unnamed class members). Golden’s failed to exhaust its administrative remedies and, therefore, is not in a position to represent
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the putative class members. Thus, we reject the argument that its request for class certification exempts Golden’s from the exhaustion requirement.
[16] We hold that the exceptions to the exhaustion requirement are inapplicable to the state law claims advanced by Golden’s. Thus, with respect to the state law claims, the court of appeals erred in ruling that Golden’s need not pursue its administrative remedies before filing its complaint in district court. III.
[17] The claim filed by Golden’s under 42 U.S.C. § 1983 requires a separate analysis.[15] Generally, exhaustion of administrative remedies is not a prerequisite to bringing an action under 42 U.S.C. § 1983. Se Patsy v. Board of Regents, 457 U.S. 496, 516 102 S.Ct. 2557, 73 L.Ed.2d 172
(1982). Whether this general rule applies in this case is irrelevant since the section 1983 claim is barred by the doctrine of comity,[16]
See National Private Truck Council, Inc. v. Oklahoma Tax Comm’n, 515 U.S. 582, 592, 115 S.Ct. 2351, 132 L.Ed.2d 509 (1995) (holding that “[w]hen a litigant seeks declaratory or injunctive relief against a state tax pursuant to § 1983 . . . state courts, like their federal counterparts, must refrain from granting federal relief under § 1983 when there is an adequate legal remedy”); Fair Assessment in Real Estate Ass’n v. McNary, 454 U.S. 100, 116, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981) (holding that federal courts may not entertain damages actions under section 1983 in state tax cases when state law furnishes an adequate legal remedy). Here, the claim under 42 U.S.C. § 1983 involved a challenge to a state tax, in circumstances where state administrative remedies were available to Golden’s. Thus, under controlling federal case law, the section 1983 claim was properly dismissed by the district court.[17] Hence, the court of appeals erred in reversing the district court’s dismissal of the section 1983 claim.
IV.
[18] Having concluded that the dismissal of all claims brought by Golden’s is proper, we turn to the issue of whether the district court erred in denying the Department’s motion for attorney fees. The Department asserted that it was entitled to mandatory attorney fees pursuant to section 13-17-201 based on the district court’s dismissal of the section 1983 claim.
[i]n all actions brought as a result of a death or injury to person or property occasioned by the tort of any person, where any such action is dismissed on motion of the defendant prior to trial under rule 12(b) of the Colorado rules of civil procedure.[20] § 13-17-201 13-17-201. The intent of the General Assembly in enacting section 13-17-201 was to discourage unnecessary litigation of tort claims. See Employers Ins. of Wausau v. RREEF USA FUND-II (Colorado), d Inc., 805 P.2d 1186, 1188 (Colo.App. 1991). The statute requires courts to award defendants reasonable attorney fees whenever an entire tort action, but not a single tort claim, is dismissed before trial pursuant to C.R.C.P. 12(b), regardless of whether the action was brought in good faith See First Interstate Bank v. Berenbaum, 872 P.2d 1297,
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1302 (Colo.App. 1993). Golden’s argues that section 13-17-201 does not apply to its section 1983 claim because under federal law the award of attorney fees in section 1983 actions is governed by 42 U.S.C. § 1988, which preempts the operation of section 13-17-201 under the doctrine of federal preemption. We agree with Golden’s argument.
[21] We note that federal preemption is grounded in the Supremacy Clause and voids the applicability of a state statute to the extent that the statute conflicts with federal law. See Brubaker v. Board of City Comm’rs, 652 P.2d 1050, 1055 (Colo. 1982). 42 U.S.C. § 1988 permits a prevailing defendant in a section 1983 suit to recover attorney fees only when the plaintiff’s suit “was vexatious, frivolous, or was brought to harass or embarrass the defendant.” Hensley v. Eckerhart, 461 U.S. 424, 429n. 2, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) (citing H.R. Rep. No. 94-1558, at 7 (1976)). However, Colorado’s statute, section 13-17-201, provides for the mandatory award of attorney fees to prevailing defendants upon the court’s dismissal of a tort action under C.R.C.P. 12(b). Since section 13-17-201 mandates the award of attorney fees to a prevailing defendant, while 42 U.S.C. § 1988 permits an award of attorney fees to a prevailing defendant in limited circumstances, the Colorado statute conflicts with federal law. See Moran v. City of Lakeland, 694 So.2d, 886, 887 (Fla.Dist.Ct.App. 1997). Thus, we hold that 42 U.S.C. § 1988
preempts the operation of section 13-17-201, as to the section 1983 claim in this case. We hold that the award of attorney fees to a prevailing defendant in a section 1983 claim brought in Colorado courts is governed by the federal standards contained in 42 U.S.C. § 1988. [22] Under 42 U.S.C. § 1988, a prevailing defendant may recover fees only upon a finding that the plaintiff’s action was “frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith.” Hughes v. Rowe, 449 U.S. 5, 14, 101 S.Ct. 173, 66 L.Ed.2d 163 (1980), citing Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978); Anthony v. Baker, 767 F.2d 657, 659 (10th Cir. 1984). The plaintiff’s action must be “meritless in the sense that it is groundless or without foundation.”Hughes, 449 U.S. at 14, 101 S.Ct. 173. [23] The district court did not address the § 1988 factors in its denial of the Department’s motion for attorney fees. The district court’s finding that Golden’s brought this action with “a good-faith rational belief that this court had jurisdiction to hear the matter” is insufficient under these circumstances to deny an award of attorney fees to the Department under section 1988 as a result of the dismissal of the section 1983 claim. “Good faith is not a special circumstance justifying denial of attorney fees under section 1988.” Anthony v. Baker, at 667. The district court must make findings as to whether the section 1983 claim was frivolous, vexatious, unreasonable, groundless, or made in bad faith as required by 42 U.S.C. § 1988. The attempt by Golden’s to assert a section 1983 claim for damages contravenes controlling precedent and is a factor to consider in determining whether the Department is entitled to an award of attorney fees as a prevailing defendant under 42 U.S.C. § 1988. Hence, we hold that the district court applied the wrong standard in denying an award of attorney fees to the Department as a result of the dismissal of the section 1983 claim.
V.
[24] To summarize, we hold that the district court lacked jurisdiction to hear state law claims since Golden’s failed to exhaust its administrative remedies before filing in district court. We hold that 42 U.S.C. § 1988
preempts Colorado’s attorney fees statute, section 13-17-201, regarding the award of attorney fees to a prevailing defendant on a section 1983 claim. The district court did not apply the appropriate legal standard to the Department’s motion for an award of attorney fees resulting from the dismissal of the section 1983 claim. We reverse the court of appeals and we return this case to that court for dismissal and for a determination of whether the Department is entitled to an award of attorney fees as the prevailing
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defendant in a section 1983 claim under the standards set forth in 42 U.S.C. § 1988.
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.
In any action or proceeding to enforce a provision of section . . . 1983 . . . of this title . . . the court, in its discretion, may allow the prevailing party . . . reasonable attorney’s fees as part of the costs.
to -106 was not preserved on appeal.
(1) Whether a challenge to an uncodified agency procedure for implementing a recently enacted law is factual in nature, requiring the exhaustion of administrative remedies.
(2) Whether section 13-17-201, 5 C.R.S. (1997), mandates an award of reasonable attorney fees on the record in this case.