Declaratory judgment actions in administrative matters pose interesting problems: When does the statute of limitations accrue? When does a plaintiff have standing to bring the action? Does the doctrine of exhaustion of administrative remedies apply? A recent Arizona Court of Appeals opinion discusses these issues (for a Rules jurisdiction) in straightforward language in Canyon del Rio Investors, LLC v. Flagstaff, CV 10-0013 (May 24, 2011) [citations omitted]:
¶1 Canyon del Rio Investors, L.L.C. (“CDR”), brought claims against the City of Flagstaff for declaratory judgment and damages in connection with a zoning dispute. The superior court ruled that the claims were barred by the statute of limitations. We hold: (1) damage claims arising out of municipal zoning decisions do not ripen — and the statute of limitations does not begin to run — until the plaintiff exhausts its administrative remedies; and (2) though declaratory judgment claims may be brought before related damage claims become ripe, no statute of limitations begins to run against such claims until administrative remedies have been exhausted.
The Court distinguishes between when a justiciable controversy arises for purposes of standing in declaratory judgment actions and when the statute of limitations begins to run for damages claims.
¶17 The City argued, and the trial court agreed, that CDR’s claims accrued more than one year before its lawsuitbecause it was fully aware of its injuries and discovered or should have discovered they were caused by the City’s actions no later than May 2004, when it first submitted a notice of claim to the City. CDR contends the statute of limitations for its declaratory judgment claims did not begin to run until an actual controversy arose between it and the City, which it asserts occurred when the City rejected its application for Parcel R in 2007. We reject both positions. …
(Don’t you love opinions where the court rejects both sides’ arguments?)
¶20 The time when a breach or injury occurs is the earliest time that a coercive claim can accrue and a limitations period can begin to run. “Until a breach [has] actually occurred there [is] nothing upon which appellants could base a suit and necessarily the statute of limitations could not be set in motion prior to the accrual of a cause of action.” We have, therefore, recognized that a “distinction exists between the point in time when a justiciable controversy arises which permits the filing of a declaratory relief action, and when an action accrues for purposes of a period of limitations.”
The Court then looks at the doctrine of exhaustion of administrative remedies.
¶22 In general, plaintiffs who fail to exhaust administrative remedies are barred from seeking relief from the courts. Damage actions against municipalities arising out of administrative decisions are subject to the exhaustion requirement. But it has long been held that exhaustion is not a prerequisite to an action for declaratory relief from an allegedly invalid zoning ordinance. Taking considerations of justiciability, exhaustion, and limitations together, we hold that a claim for declaratory judgment concerning a zoning ordinance cannot be time-barred if it is brought before a related damage action accrues or within the applicable statutory period after it does.
¶23 A contrary holding — that the statute of limitations begins to run against declaratory judgment claims as soon as the plaintiff becomes aware of a justiciable controversy — would serve only to encourage unnecessary litigation. Under such a rule, a prudent developer faced with discouraging comments from municipal staff would be compelled to bring a swift action for declaratory judgment or face a limitations bar. By permitting such actions to be brought at any time before the expiration of the limitations period for a damage action, putative litigants are free to attempt to resolve issues through the administrative process without placing their legal rights at risk. We conclude that this approach is consistent with the goal of the doctrine of administrative remedies.
Special Thanks to Ted McClure at the Administrative Law Professor Blog for sharing this post
