United States District Court, D. South Carolina, Florence Division
Bryan Harwell United States District Judge.
matter is before the Court on Defendants' motion to
dismiss made pursuant to Federal Rule of Civil Procedure
12(b)(1) and 12(b)(6). See ECF No. 26. The Court
grants Defendants' motion for the reasons set forth
factual and procedural history of this case and the
underlying administrative proceeding are fully set forth in
this Court's March 9, 2016 order. See ECF No.
25, available at 2016 WL 892661. In brief,
Tobaccoville USA, Inc. (“Tobaccoville”) holds a
tobacco products importer permit issued by the Alcohol and
Tobacco Tax and Trade Bureau
(“TTB”). Due to new regulations issued by TTB,
Tobaccoville had to reapply for a permit. TTB issued a
notice of contemplated disapproval of Tobaccoville's
permit application, and Tobaccoville contested the
contemplated disapproval by requesting a hearing before an
administrative law judge. Despite the ongoing administrative
proceeding, Tobaccoville has filed the instant action in this
Court against TTB and two individual defendants (collectively,
“Defendants”) seeking declaratory and injunctive
relief. Defendants have now filed a motion to
dismiss pursuant to Rule 12(b)(1) and Rule 12(b)(6) of the
Federal Rules of Civil Procedure. ECF No. 26. Tobaccoville
has filed a response in opposition (with exhibits), and
Defendants have filed a reply. See ECF Nos. 27 &
move to dismiss Tobaccoville's claims pursuant to both
Federal Rule of Civil Procedure 12(b)(1) (lack of subject
matter jurisdiction) and 12(b)(6) (failure to state a claim
upon which relief can be granted), arguing Tobaccoville has
failed to exhaust its administrative remedies. “There is
some uncertainty as to whether a failure to exhaust
administrative remedies is properly brought in a Rule
12(b)(1) motion, as a jurisdictional defect, or in a Rule
12(b)(6) motion for failure to state a
claim.” Temples v. U.S. Postal Serv., No.
3:12-cv-00034-JFA-SVH, 2012 WL 1952655, at *2 (D.S.C. May 8,
2012), adopted by, 2012 WL 1952299 (D.S.C. May 30,
2012). Notably, the United States Court of Appeals for the
Fourth Circuit “has characterized exhaustion as a
jurisdictional requirement” that is “more
properly addressed under Rule 12(b)(1), instead of Rule
12(b)(6).” Agolli v. Office Depot, Inc., 548
F. App'x 871, 875 (4th Cir. 2013) (citing Balas v.
Huntington Ingalls Indus., Inc., 711 F.3d 401, 406 (4th
Cir. 2013)). Moreover, Rule 12(b)(1) would appear to be the
more appropriate vehicle, given that Tobaccoville has
submitted various exhibits in support of its response in
opposition to Defendants' motion to dismiss. See
ECF Nos. 27-1 through 27-8; Goldfarb v. Mayor & City
Council of Baltimore, 791 F.3d 500, 506 (4th Cir. 2015)
(“When a defendant challenges subject matter
jurisdiction via a Rule 12(b)(1) motion to dismiss, the
district court may regard the pleadings as mere evidence on
the issue and may consider evidence outside the pleadings
without converting the proceeding to one for summary
judgment.”); Melendez v. Sebelius, 611 F.
App'x 762, 763 (4th Cir. 2015) (“Where a challenge
under Rule 12(b)(1) is raised to the asserted basis for
subject matter jurisdiction, the burden of proving the
asserted basis for jurisdiction falls on the
plaintiff.”). In any event, Tobaccoville's case
must be dismissed because it has not exhausted its
is a ‘long-settled rule of judicial administration that
no one is entitled to judicial relief for a supposed or
threatened injury until the prescribed administrative remedy
has been exhausted.'” Cavalier Tel., LLC. v.
Virginia Elec. & Power Co., 303 F.3d 316, 322 (4th
Cir. 2002) (quoting Myers v. Bethlehem Shipbuilding
Corp., 303 U.S. 41, 51 (1938)). “In other words,
‘[w]here relief is available from an administrative
agency, the plaintiff is ordinarily required to pursue that
avenue of redress before proceeding to the courts; and until
that recourse is exhausted, suit is premature and must be
dismissed.'” Id. (alteration in original)
(quoting Reiter v. Cooper, 507 U.S. 258, 269
(1993)). “The exhaustion requirement serves many
purposes, not the least of which are to allow an agency the
opportunity to use its discretion and expertise to resolve a
dispute without premature judicial intervention and to allow
the courts to have benefit of an agency's talents through
a fully developed administrative record.” Thetford
Properties IV Ltd. P'ship v. U.S. Dep't of Hous.
& Urban Dev., 907 F.2d 445, 448 (4th Cir. 1990)
(internal citation omitted).
is required where Congress explicitly mandates it.
Cavalier, 303 F.3d at 322. “Even where the
statutory requirement of exhaustion is not explicit, courts
are guided by congressional intent in determining whether
application of the doctrine would be consistent with the
statutory scheme.” Id. “Thus, every
exhaustion inquiry begins with a look at congressional intent
and the relevant statutory scheme.” Barnes v.
Int'l Amateur Athletic Fed'n, 862 F.Supp. 1537,
1542 (S.D. W.Va. 1993).
administrative regulations provide for three levels of
administrative review, as summarized in Defendants'
motion to dismiss. See ECF No. 26-1 at 3 (citing 27
C.F.R. §§ 71.78, 71.107, 71.116). First, an
administrative law judge (“ALJ”) conducts a
hearing on the permit application and recommends a decision
to the TTB Officer. 27 C.F.R. § 71.78. The Officer then
makes an initial decision on whether the permit should be
issued; if the Officer concludes the permit should be issued,
the application is approved. Id. § 71.107.
However, if the Officer contemplates disapproval, the Officer
serves the ALJ's recommendation on the applicant, informs
the applicant of the contemplated disapproval, and affords
the applicant the ability to submit proposed findings and
conclusions or exceptions to the recommendation. Id.
The Officer then reviews the applicant's submission and
makes the initial decision. Id. If the Officer does
not approve the application, the applicant may appeal to the
TTB Administrator, who makes the final
decision. Id. § 71.116. Significantly,
the regulations provide that “[a]n appeal to the
Administrator is required prior to application to
the Federal courts for review.” Id. §
71.115 (emphasis added).
time Defendants filed their motion to dismiss (April 18,
2016), an ALJ had already conducted a hearing on March 2 and
3, 2016, and was in the process of recommending a decision to
the TTB Officer. See ECF No. 26-1 at 3. Defendants
noted that even assuming the ALJ proposed adverse action on
Tobaccoville's permit application, Tobaccoville still had
to proceed through two more levels of administrative
review-via the Officer and the Administrator-before it could
seek judicial review by this Court. Id. at 4.
response to Defendants' motion to dismiss, Tobaccoville
does not dispute that administrative proceedings are ongoing.
See ECF No. 27. However, Tobaccoville argues:
This case meets a well-recognized exception to the general
rule that a district court should dismiss litigation prior to
a final administrative decision in a regulatory matter. . . .
The Constitutional issues presented in this case are such
that Tobaccoville's interest in prompt access to judicial
review, under normal judicial process, outweighs the
government's interest in efficiency or administrative
autonomy. Furthermore, the actions of TTB below clearly
indicate that the TTB pre-determined its denial of
Tobaccoville's import permit, rather than conducting an
impartial investigation and review.
Id. at 1. Tobaccoville justifies these arguments by
citing McCarthy v. Madigan, 503 U.S. 140 (1992),
wherein the United States Supreme Court extensively discussed
the general principles of exhaustion and limited exceptions
thereto. See 503 U.S. at 144-49. The Supreme Court
stated, “[A]dministrative remedies need not be pursued
if the litigant's interests in immediate judicial review
outweigh the government's interests in the efficiency or
administrative autonomy that the exhaustion doctrine is
designed to further.” Id. at 146. The Supreme
Court then outlined “three broad sets of circumstances
in which the interests of the individual weigh heavily
against requiring administrative exhaustion”; those
circumstances include: (1) when requiring exhaustion may
unduly prejudice subsequent court action; (2) when an
agency's remedy may be inadequate; and (3)
“where the administrative body isshown to
be biased or has otherwise predetermined the issue before
it.” Id. at 146-48 (emphasis ...