In Jamgotchian v. Ferraro, published February 26, 2024, the 9th Circuit Court of Appeals reversed the district court's dismissal of the plaintiff's complaint under 42 U.S.C. section 1983. The plaintiff wished to race a thoroughbred racehorse. California law requires that all thoroughbreds racing in the state be registered with a private organization, the Jockey Club of New York. The Jockey Club refused to register the horse, because it concluded the horse's name violated a rule. When the plaintiff sought to enter the horse in a California race, the stewards of the racecourse denied entry, because the horse was not registered with the Jockey Club. The plaintiff appealed the stewards' decision to the California Horse Racing Board, a state agency. Among his claims was that the stewards' enforcement of the Jockey Club registration requirement, prescribed in California Business & Professions Code section 19416, was viewpoint discrimination that was impermissible under the 1st Amendment. The agency affirmed the stewards' decision. It also offered commentary on the constitutional claim. But the agency found that it lacked jurisdiction to decide the constitutional claim, because the California Constitution bars state agencies from declaring a statute unconstitutional or refusing to enforce a statute on constitutional grounds unless an appellate court has made that determination. The decision advised the plaintiff that a California superior court would have authority to address the constitutional claim. The plaintiff did not seek review of the decision in a California court via a petition for administrative mandamus. Instead, he filed this suit against the stewards and the agency members, and presented his constitutional claim. The district court ruled that the agency had considered the constitutional claims and rejected them; and that because the plaintiff had not sought review of the decision in state court, the agency decision precluded the section 1983 lawsuit.
The appellate court disagreed. A state agency decision does not have preclusive effect in federal court unless the state administrative proceeding was conducted with sufficient safeguards to be equated with a state court judgment. The proceeding must satisfy the requirements of fairness outlined in United States v. Utah Construction & Mining Co. (1966)384 U.S. 394. The second prong of the Utah Construction requirements is that the agency resolve disputed issues of fact properly before it. That prong encompasses disputed issues of law as well. Only if an agency proceeding satisfies the Utah Construction factors does a court determine whether state law would give the agency decision preclusive effect. Here, the agency's decision did not meet the second prong of Utah Construction, because the constitutional question at issue in the lawsuit was not "properly before" the agency and the agency therefore did not and could not resolve it. The agency's extra-jurisdictional thoughts on the constitutional questions were irrelevant. Because the agency lacked jurisdiction to determine the plaintiff's constitutional claims, the decision did not have preclusive effect. Past circuit cases had held that where a plaintiff had the opportunity to seek state court review of an administrative agency decision and did not obtain it, the agency's decision could have preclusive effect. But in those cases, the agency proceedings met the Utah Construction requirements. Because this proceeding did not, it did not have preclusive effect.
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