“EXHAUSTION OF REMEMDIES” IS NOT ALWAYS REQUIRED BEFORE AN AGENCY ACTION CAN BE CHALLENGED IN COURT; HERE THE CHALLENGE INVOLVED A PURE QUESTION OF LAW (SECOND DEPT).

The Second Department noted that the “exhaustion of remedies” rule does not apply to administrative actions where, as here, an agency’s action is challenged as either unconstitutional or beyond the agency’s power. Here petitioners alleged the respondent NYC Water Board overcharged for excess water consumption. That agency’s procedure was properly reviewed by the court (but the argument was ultimately rejected):

… “[E]xhaustion of administrative remedies is not required where an agency’s action is challenged as either unconstitutional or beyond its grant of power, or when resort to an administrative remedy would be futile, or when its pursuit would cause irreparable injury” … . This is because while review of some claims “hinges upon factual issues reviewable at the administrative level [which] must first be addressed to the agency so that a necessary factual record can be established” … , other claims present “a circumstance where the issue to be determined is purely a question of law” … . To the extent the fifth cause of action sought a declaration that the Water Board is acting in contravention of an established statutory scheme for setting rates for excess water consumption, exhaustion was not required … , and the court should not have dismissed that portion of the fifth cause of action on those procedural grounds. Matter of Town of Carmel v New York City Water Bd., 2026 NY Slip Op 03680, Second Dept 6-10-26

Practice Point: This decision presents an example of when a court challenge to an agency action does not trigger the “exhaustion of remedies” requirement. Here the challenge presented a pure question of law which did not require the development of a factual record at the agency level.