California Supreme Court Holds that Administrative Findings Have Collateral Estoppel Effect on Whistleblower

A quick note on Murray v. Alaska Airlines, Inc. (August 23, 2010) --- Cal.Rptr.3d ----, 2010 WL 3292968. On certification from the Ninth Circuit Court of Appeals, the California Supreme Court considered the following question:

Should issue-preclusive effect be given to a federal agency's investigative findings, when the subsequent administrative process provides the complainant the option of a formal adjudicatory hearing to determine the contested issues de novo, as well as subsequent judicial review of that determination, but the complainant elects not to invoke his right to that additional process, and the agency's findings and decision thereby become a final, nonappealable order by operation of law?

Slip op. at 1. The answer? Yes.

We conclude that under the particular facts and procedural posture of this case, Murray may be precluded from relitigating the factual issue of causation against Alaska in his state court wrongful termination action, removed to federal court on grounds of diversity jurisdiction. Although without doubt, Murray's claims
would have been more fully litigated in the prior ... administrative proceeding had he invoked his right to a formal hearing before an ALJ, he never did so. Under California law, however, the dispositive issue of causation was nonetheless “actually litigated” in the administrative proceeding once the matter was “properly raised” by Murray's [administrative] complaint, along with his written statements and other supporting documentation, and then “determined” by the Secretary in her written findings and order. Moreover, Murray's “fail[ure] to obtain the requisite judicial review of [the] adverse administrative finding” available to him under the “internal remedies” provided by the AIR21 whistleblower statute further supports our conclusion that the Secretary's adverse finding on causation, embodied in a final order, may be afforded preclusive effect.

Slip op. at 10. The lesson appears to be this: If you start with an administrative action, it may be better to follow it as far as possible, rather than abandon it and turn to court. That being siad, I would caution against reading too much into this case, which deals with a very specific and unique administrative scheme.