The U.S. Constitution confers authority on Congress to "ordain and establish" courts "inferior" to the Supreme Court. When Congress exercises its power under the Constitution and creates a lower court, it identifies a class of cases that the court may hear. We commonly refer to the class of cases a court may hear as its "subject matter jurisdiction."
In some lower courts, such as the U.S. Court of International Trade (CIT), Congress has authorized interested parties to challenge final actions rendered by federal agencies. Under well-established administrative law principles, interested parties may not raise new arguments on appeal and, instead, must "exhaust" their administrative remedies with the federal agency before seeking judicial review. For disputes before the CIT, Congress has adopted this exhaustion requirement (among others) by statute. See 28 U.S.C. § 2637(d) ("In any civil action not specified in this section, the Court of International Trade shall, where appropriate, require the exhaustion of administrative remedies.").
In China Kingdom (Beijing) Import & Export Co. v. United States, the U.S. Court of Appeals for the Federal Circuit ("Federal Circuit") addressed an issue at the cross-section of subject matter jurisdiction and exhaustion: does a federal court retain subject matter jurisdiction over a dispute if the party challenging the agency action failed to exhaust its administrative remedies? Yes, says the Federal Circuit.
In an opinion joined by Judges Dyk and Chen, Judge Wallach acknowledged that the Federal Circuit improperly suggested in at least three prior decisions that "the requirement to exhaust administrative remedies" has "jurisdictional effect," perhaps based in part on unclear statements that appeared in various decisions from the Supreme Court of the United States. Slip Op. at 15. Nevertheless, Judge Wallach noted...