Public Comment May Not Give Rise to an Exhaustion of Administrative Remedies Requirement

Hill RHF Housing Partners, L.P. v. City of Los Angeles (2021) 12 Cal.5th 458

The City of Los Angeles (Defendant) was sued by Hill (Petitioners) over the establishment of two business improvement districts ("BIDS"), which are governed by a statutory scheme under Proposition 218. Following the statutory scheme, prior to the establishment of the BIDs, public hearings with public comment periods were conducted. In the trial court, the Defendant stated that the Petitioners failed to address issues asserted in the lawsuit during the public approval hearings, and the trial court denied the Petitioners' claims on the merits.

Based on the merits, the Court of Appeal declined to address the Petitioners' claims due to the Petitioners failure to exhaust their administrative remedies. However, the Supreme Court reversed by explaining that the Petitioners had not exhausted their extrajudicial remedies by failing to raise their concerns during the public approval hearings. The Court explained that infer an “issue exhaustion” requirement where one is not explicitly stated, the statutory scheme must include a “clearly defined machinery for the submission, evaluation and resolution of complaints by aggrieved parties.”

Proposition 218 does not have an exhaustion requirement. In addition, it does not require an agency creating a BID to resolve issues raised during the public comment period. The Court held that the mere inclusion of a public comment requirement in Proposition 218 was insufficient to infer an issue exhaustion requirement. As such, the Court reversed and remanded the case for further consideration on the merits.

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