                                                                           FILED
                            NOT FOR PUBLICATION                             OCT 18 2010

                                                                       MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



ARNOLD SCHIMSKY, as Trustee of The               No. 08-56983
Ann P. Shimsky Trust and representative
of Ann P. Shimsky, deceased,                     D.C. No. 3:07-cv-02432-H-LSP

              Plaintiff - Appellant,
                                                 MEMORANDUM *
  v.

UNITED STATES OFFICE OF
PERSONNEL MANAGEMENT and
THC-ORANGE COUNTY INC., doing
business as Kindred Hospital San Diego,

              Defendants - Appellees.



                    Appeal from the United States District Court
                      for the Southern District of California
                     Marilyn L. Huff, District Judge, Presiding

                      Argued and Submitted October 7, 2010
                              Pasadena, California

Before: FISHER and BYBEE, Circuit Judges, and STROM, District Judge.**




        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
              The Honorable Lyle E. Strom, Senior United States District Judge for
the District of Nebraska, sitting by designation.
      Arnold Schimsky appeals the district court’s dismissal of his complaint

against the United States Office of Personnel Management (“OPM”). In his

complaint, Schimsky sought to recover benefits under the Federal Employees

Health Benefits Act. Because Schimsky did not exhaust administrative remedies

prior to filing his action, the district court dismissed the complaint for lack of

subject matter jurisdiction. On appeal, Schimsky argues the district court erred in

dismissing rather than staying his action. We agree and remand to the district court

with instructions to stay the action pending exhaustion of administrative remedies.1

      We review the district court’s dismissal for lack of subject matter

jurisdiction de novo. Snell v. Cleveland, Inc., 316 F.3d 822, 825 (9th Cir. 2002)

(per curiam). Additionally, where exhaustion is non-jurisdictional, we review the

district court’s decision to dismiss an action for failure to exhaust administrative

remedies for abuse of discretion. Pension Benefit Guar. Corp. v. Carter & Tillery

Enters., 133 F.3d 1183, 1187 (9th Cir. 1998).

      Contrary to the district court’s determination, the exhaustion requirement in

this case was non-jurisdictional because it was created by agency regulations and

was not mandated by statute. See id. (“[W]hen . . . the exhaustion requirement is



      1
      If the parties wish to pursue court-facilitated mediation, we will consider a
motion to stay the mandate.

                                            2
created by agency regulations, the decision whether to require exhaustion is a

matter for district court discretion.” (quoting Kobleur v. Grp. Hosp. & Med. Servs.,

954 F.2d 705, 711 (11th Cir. 1992))); cf. Kucana v. Holder, 130 S. Ct. 827, 831

(2010) (holding that a statutory jurisdiction-stripping provision applied only to

“[agency] determinations made discretionary by statute, [and not] to

determinations declared discretionary by the [agency itself] through regulation”).

Accordingly, the district court had discretion to stay rather than dismiss the action.

      Schimsky filed his action on December 31, 2007, the day before the statute

of limitations was set to expire for some of his claims. Schimsky did not exhaust

administrative remedies because he had not yet received a denial of coverage from

Blue Cross. Without a denial of coverage, Schimsky could not commence the

administrative review process.2 See 5 C.F.R. § 890.105(a). Yet if Schimsky

waited for a denial of coverage, the statute of limitations would have run out for

some of his claims. See id. § 890.107(d)(2). Under these circumstances, the



      2
        At oral argument, OPM raised 5 C.F.R. § 890.105(e)(1)(iii) for the first
time and argued that Schimsky was not diligent because he could have treated Blue
Cross’s failure to issue an initial coverage decision within 120 days as a denial of
coverage. Because OPM failed to raise this argument either in its brief or before
the district court, it has been waived. Butler v. Curry, 528 F.3d 624, 642 (9th Cir.
2008). We note, however, that by its plain language, the regulation refers to
review of a denied claim, not to OPM review of a claim that has not yet been
denied.

                                           3
district court erred by dismissing rather than staying the action pending exhaustion

of administrative remedies. See Pension Benefit Guar. Corp., 133 F.3d at 1187

(“[P]articularly where a statute of limitations problem might develop, [a stay

pending exhaustion] may represent the best accommodation of the competing

interests.” (quoting Morrison-Knudsen Co. v. CHG Int’l, Inc., 811 F.2d 1209,

1223 (9th Cir. 1987))) (emphasis in original); accord Sharber v. Spirit Mountain

Gaming Inc., 343 F.3d 974, 976 (9th Cir. 2003) (per curiam). Accordingly, we

reverse the judgment of the district court and remand with instructions to stay the

action pending Schimsky’s exhaustion of his administrative remedies.

      REVERSED and REMANDED.




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