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A Better Partnership
September 19, 2014

MSC to Consider Whether Failure to Exhaust Administrative Remedies under the Construction Code Act Precludes Judicial Review of Related Constitutional Claims

The Michigan Supreme Court will hear oral arguments on the application for leave to appeal in Michigan Association of Homebuilders v. City of Troy, No. 149150, regarding whether home builders must exhaust the administrative remedies provided by the Construction Code Act before bringing an action against the City of Troy.  The issue is complicated by the fact that the home builders claims include constitutional challenges under the Headlee Amendment.  The Court of Appeals affirmed dismissal of the case, finding that the plaintiff failed to exhaust all available administrative remedies, as is required before a trial court may review the case.
 
The dispute arose after the City of Troy contracted with Safe Built of Michigan to perform construction-code services that had previously been performed by the city’s building department.  Under the contract, the city would pay a percentage of the building department fees associated with Safe Built’s services while retaining the remaining portion of the fees.  This arrangement prompted the Michigan Association of Home Builders to file suit alleging that the city’s building department fees violated Section 22 of the State Construction Code Act MCL 125.1522 by generating a revenue surplus that the city was depositing into its general fund for general purposes, while also violating the Headlee Amendment to the Michigan Constitution, as this depositing of funds constituted an unlawful tax increase under that amendment. Const. 1963 Art IX §§25-34.
 
The Court of Appeals dismissed the case for lack of subject-matter jurisdiction, finding that the Construction Code Act contained administrative remedies for a party seeking redress from an enforcing agency’s noncompliance with the act, and that plaintiffs were required to exhaust those remedies before the trial court could review their case.  Additionally, the Court of Appeals held that because the alleged constitutional violation was intermingled with issues properly before an administrative agency, plaintiffs were not excused from this requirement.  The Court affirmed the decision of the trial court and dismissed the case for lack of subject matter jurisdiction without addressing the merits of the claim.

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