U.S. Auto Club, Inc. v. Woodward

• Decision Date: 29 March 1984
• Docket Number: No. 2-283A35,2-283A35
• Parties: The UNITED STATES AUTO CLUB, INC., Defendant-Appellant, v. Wayne W. WOODWARD, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 1255

460 N.E.2d 1255

The UNITED STATES AUTO CLUB, INC., Defendant-Appellant, v. Wayne W. WOODWARD, Plaintiff-Appellee.

No. 2-283A35.

Court of Appeals of Indiana,

Second District.

March 29, 1984.

Henry C. Ryder, Roberts, Ryder, Rogers & Scism, Indianapolis, for defendant-appellant.

Belle T. Choate, Robert W. Hammerle, Indianapolis, for plaintiff-appellee.

RATLIFF, Judge, writing by designation.

STATEMENT OF THE CASE

The United States Auto Club, Inc. (USAC) appeals a judgment in the amount of $10,000 entered against it and in favor of Wayne W. Woodward pursuant to a jury verdict. We reverse.

FACTS

United States Auto Club, Inc. is a not-for-profit corporation which sanctions automobile races including the Indianapolis 500 mile race. Its function is to establish rules, license drivers, schedule races, and run races.

Woodward is the owner of a racing car which was entered in the 1979 Indianapolis 500. Woodward, by his own admission, is a "low budget" operator, and his car was an older car.

United States Auto Club, Inc. rules limit the amount of "boost" for turbo-charged Woodward's car, an older car, had been unable to attain satisfactory speeds for qualification for the 1979 race. According to Woodward's testimony, not only was his car unable to achieve suitable speed, it would not attain the maximum allowable boost of 60 inches. Rather, Woodward testified he was attaining only 56 inches of boost.

                engines, which varies according to the type of engine, in order to maintain competitive equivalency among the various types of racing engines employed in the Indianapolis 500.  The maximum allowable pressure or "boost" for Woodward's four cylinder Offenhauser engine in 1979 was 60 inches. 1  The engines are required to have a waste gate exhaust system which operates as a pressure relief valve in case the manifold pressure exceeds the maximum allowable pressure, in Woodward's case 60 inches
                

According to the rules, cars are allowed three qualification attempts for the 500 mile race. On Woodward's first attempt, his driver was able to attain speeds of between 179 and 180 miles per hour for two laps. Because these speeds obviously were too low to make the field, ² Woodward called off this attempt. Woodward then welded shut the end of his waste gate exhaust pipe. Such action had the effect of overriding the manifold pressure relief valve, increasing manifold pressure, and increasing speed. This alteration was not discovered in the pre-qualification car inspection prior to Woodward's second attempt. ³ The second qualification attempt was successful and Woodward's car qualified at an average speed of 184.6 miles per hour. Inspection of the car following the second attempt revealed the welded shut exhaust pipe. As a result, USAC officials disallowed Woodward's qualification run. The next day Woodward made his third attempt finishing with an average speed of 171 miles per hour which was not sufficient to make the field for the race.

Woodward's first two qualification attempts, including the disallowed one, were on Saturday of the last weekend of qualifications. Because there was no definite rule on the minimum allowable diameter of exhaust pipes, on Saturday night, USAC adopted a supplemental rule setting a minimum internal diameter of 1.470 inches. As a result of a protest hearing, eleven cars which had been bumped from the race by faster cars, and which had a third attempt remaining, were allowed to make qualification runs with 1.470 inch pipes. Two successfully qualified and 35 cars started the race in 1979. Woodward was not one of these cars granted another attempt with a 1.470 pipe. He made his third run, achieved two laps in the 181 miles per hour range, developed engine trouble, slowed to the 160 range, and finished with an average of 171 which was too slow to make the race.

Woodward filed protest of the disallowance of his successful qualification attempt on May 19. It was denied on May 21st. Woodward then filed this action rather than appealing the denial of his protest in accordance with USAC's internal administrative procedures. The trial court ruled that "in the interests of equity," Woodward should be allowed until 6:00 P.M. on May 25, 1979, ⁴ to file an appeal. He did so, and USAC ruled on his appeal and denied it the next day.

In this action, Woodward originally sought both injunctive relief and damages. The injunction count was dismissed and the Further relevant facts are stated in our discussion of the issues.

case proceeded to trial on the claim for damages which resulted in the verdict and judgment from which this appeal is taken. United States Auto Club, Inc. filed a motion to dismiss based upon Woodward's failure to exhaust internal administrative remedies and failure to perfect a proper appeal under those rules. This motion was denied. At the close of Woodward's evidence, and again at the close of all the evidence, USAC moved for judgment on the evidence based upon (1) Woodward's failure to exhaust administrative remedies, (2) his failure to post a proper bond as required by USAC rules, (3) his waiver of right to sue for damages pursuant to provisions of his entry, and (4) his release of USAC from any and all liability. These motions also were denied.

ISSUES

The issues raised in this appeal, which we have restated, are:

1. Was Woodward precluded from pursuing an action in the courts by reason of his failure to exhaust his internal administrative remedies under USAC rules and to comply with USAC's rules concerning an appeal bond?

2. Was Woodward precluded from recovering damages in the trial court by the provisions of the waiver of damages provision in his entry application and by his release?

DISCUSSION AND DECISION

It is our opinion that Woodward's action for damages was barred both by his failure to exhaust internal administrative remedies and failure to comply with USAC rules prior to instituting this action, and by the terms of his waiver of the right to seek damages and his release of USAC. Although reversal may be predicated upon either issue, we will discuss and determine both of the issues presented.

Issue One

It is a general rule of administrative law that until a party exhausts available administrative remedies, courts have no jurisdiction to grant relief. Northside Sanitary Landfill, Inc. v. Indiana Environmental Management Board, (1984) Ind.App., 458 N.E.2d 277 (trans. pending); Drake v. Indiana Department of Natural Resources, (1983) Ind.App., 453 N.E.2d 293; Evans v. Stanton, (1981) Ind.App., 419 N.E.2d 253. This rule has been applied to private associations as well as governmental agencies. The Supreme Council of the Order of Chosen Friends v. Forsinger, (1890) 125 Ind. 52, 25 N.E. 129; Randolph v. Leeman, (1957) 129 Ind.App. 134, 146 N.E.2d 267, trans. den. (1958); 3 I.L.E., Associations, Clubs, & Societies, Sec. 9 (1978); 6 Am.Jur.2d Associations and Clubs Sec. 29 (1963). An exception to the rule exists where a member is suing an association for damages for wrongful expulsion. Terrell v. Palomino Horse Breeders of America, (1980) Ind.App., 414 N.E.2d 332; ⁵ 6 Am.Jur.2d Associations and Clubs Sec. 42 (1963).

There are indeed other exceptions to the rule requiring exhaustion of administrative remedies. Northside Sanitary Landfill. One of these is futility. Id. In fact, Woodward argues he should not be held to the strict application of the rule requiring exhaustion of administrative remedies because such would have been futile. For reasons hereinafter stated, we do not agree.

Thus, we hold Woodward was required to follow those internal administrative procedures prescribed by USAC's rules. This is so because by the express language of his Official Entry Blank Woodward accepted and agreed to be bound by USAC's rules in the following language:

"It is hereby understood and agreed by the undersigned that the car described above and driver named are to appear at the 63rd Annual International 500-Mile Sweepstakes as provided in the rules of the United States Auto Club, and the Approved Supplementary Regulations are hereby made a part of this contract."

Record at 320. Therefore, he was required, both by the terms of his contract and the general rule of law, to exhaust his internal administrative remedies under USAC rules prior to seeking relief from the courts. Indeed, the exhaustion requirement has been held applicable to USAC rules and procedures. STP Corporation v. United States Auto Club, Inc., (S.D.Ind.1968) 286 F.Supp. 146.

When Woodward's successful qualification run on Saturday, May 19th was disallowed, under USAC rules he was required to file a protest of that ruling with the Chief Steward. (USAC Rules, 1979, Part XI, pp. 56-57, Plaintiff's Exhibit # 1, Record at 324). Woodward did file a written protest, as required, which was heard by the Chief Steward on Monday, May 21st, and denied by him on that same date. Woodward was present when the denial of his protest was announced. The next step in the administrative procedure under USAC rules is to appeal the ruling on the protest to a three member court of appeals. The rules provide:

"12.2. Form of Appeal and Appeal Fee--An Appeal must be forwarded to the office of Director of Competition by midnight three days after the rendering of a penalty or other decision, ..."

(USAC Rules for 1979, Part XII, Sec. 12.2, p. 58, Plaintiff's Exhibit # 1, Record at 324.)

Under the plain language of the rules, Woodward had until midnight on Thursday night to forward an appeal to the Director of Competition. He did not do so. Instead, on Friday, May 25th, he filed this action in court. The court heard his request for preliminary injunction the same day, and "in the interest of equity" granted Woodward until 6:00 P.M. on May 25th to file his appeal and ordered USAC to rule on his appeal by noon on May 26, 1979. Record at 204-05. Following this direction, Woodward filed his appeal, the USAC appeal court held it and denied it...