
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                              _________________________          No. 96-1460                         ASTRID L. PORTELA-GONZALEZ, ET AL.,                               Plaintiffs, Appellants,                                          v.                            SECRETARY OF THE NAVY, ET AL.,                                Defendants, Appellees.                              _________________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                 [Hon. Jaime Pieras, Jr., Senior U.S. District Judge]                                          __________________________                              _________________________                                        Before                               Torruella, Chief Judge,                                          ___________                           Selya and Stahl, Circuit Judges.                                            ______________                               _______________________               Alex  Gonzalez, with whom  Gonzalez & Vilella  was on brief,               ______________             __________________          for appellants.               Isabel Mu oz Acosta, Assistant  United States Attorney, with               ___________________          whom Guillermo  Gil, United  States Attorney,  was on  brief, for               ______________          appellees.                               _______________________                                    March 26, 1997                               _______________________                    SELYA,  Circuit  Judge.   In  this  appeal,  plaintiff-                    SELYA,  Circuit  Judge.                            ______________          appellant  Astrid  L.  Portela-Gonzalez  (Portela)  challenges  a          summary judgment entered  in favor  of the Navy.1   Although  our          reasoning differs in  one salient respect  from that employed  by          the court below, we affirm the  judgment.  See Hachikian v. FDIC,                                                     ___ _________    ____          96  F.3d 502, 504 (1st  Cir. 1996) (explaining  that an appellate          court  is not committed to  the trial court's  rationale, but may          affirm on any alternative ground made manifest by the record).           I.  BACKGROUND          I.  BACKGROUND                    The  facts  essential   to  our   review  are   largely          uncontested.    Portela worked  for  nearly  three decades  as  a          civilian employee  at the Roosevelt  Roads Naval  Station.   From          1985 forward, she occupied  the position of sales manager  at the          Navy Exchange.    She had  an unblemished  employment record  and          achieved consistently high performance ratings.                    On  December 14,  1989, Portela  placed 28  articles of          clothing on layaway at  the Exchange, 25 of which  were clearance          sale  items  (known  colloquially  as  "red  tag"  items).    The          anticipated purchase price of the merchandise was $484.10.   When          the Exchange slashed  the prices of  all red tag items  even more          drastically  during  the  post-Christmas lull,  Portela  spied an          opportunity   for   increased  savings,   canceled   her  layaway          arrangement   (paying  a   $5.00  penalty),   and  simultaneously                                        ____________________               1Portela's  husband,  Juan  Enrique  Del  Valle,  and  their          conjugal partnership  are also  plaintiffs; the Secretary  of the          Navy and the Naval Resale and Services Support Office (NRSSO) are          additional  defendants.  For simplicity's sake, we treat the case          as involving only Portela and the Navy.                                          2          repurchased the articles she had removed from layaway status  for          a price of $330.79.  Portela contends that these machinations did          not  transgress any policy, rule, or  regulation of the Exchange;          the Navy contends otherwise.          II.  THE AFTERMATH          II.  THE AFTERMATH                    On April  9, 1990, L.H.  Arcement, Jr., the  Officer in          Charge (OIC) of the Navy Exchange,  suspended Portela without pay          pending  anticipated disciplinary  action.   On May  29, Arcement          notified Portela  that she would  be terminated for  "applying an          unauthorized 40% price reduction to red tagged clothing items you          had  placed on  layaway in  violation of  the Exchange's  layaway          policy,  resulting  in  a  loss  to  the  Exchange of  $197.32."2          Pursuant to the  controlling administrative procedure,  contained          in a Secretary of the  Navy Instruction (SECNAVINST), the  letter          informed Portela  of the  charges against  her  and outlined  her          procedural rights.                    Portela contested the proposed disciplinary action.  On          June  22,   1990,  the  OIC  overrode   Portela's  grievance  and          terminated her employment  as of July 3, 1990.   The Navy advised          Portela of her right to appeal this decision and she proceeded to          do so.  Her first  appeal was heard pro forma by the OIC who, not                                              ___ _____          surprisingly, affirmed  his original  determination.   Her second          appeal culminated in a  full evidentiary hearing, following which                                        ____________________               2While simple  arithmetic indicates  that this figure  is in          the  vicinity of 40% of  the original purchase  price, the record          sheds  no further light  on its genesis.   We need  not probe the          point, however, because Portela does not challenge the amount.                                          3          Michael F. O'Brien, the Commanding Officer of the Roosevelt Roads          Naval Station, upheld her termination.                    Portela  pursued  the  appellate  process to  the  next          level.    On  March  25,  1991,  Rear  Admiral  H.D.  Weatherson,          Commander of the NRSSO, headquartered at Staten Island, New York,          affirmed her  termination.  This decision informed Portela of her          right  to  take  a  final  administrative appeal  to  the  Deputy          Assistant Secretary of the Navy, Civilian Personnel Policy, Equal          Employment Opportunity  Office, in Washington, D.C.   Rather than          pursue this fourth level of administrative redress, Portela filed          suit.                    After some preliminary  skirmishing, not relevant here,          the  district  court  addressed  the Navy's  motion  for  summary          judgment.  The  court ruled  that Portela had  failed to  exhaust          available  administrative remedies  but  nonetheless reached  the          merits of her suit  in the exercise of its  perceived discretion.          See Portela Gonzalez v. Secretary of Navy, 913 F. Supp. 122, 126-          ___ ________________    _________________          28 (D.P.R.  1996).  Portela's victory  proved ephemeral, however,          as  the  court concluded  that  the Navy's  actions  were neither          arbitrary nor capricious.  See id. at 128.  This appeal ensued.                                     ___ ___          III.  DISCUSSION          III.  DISCUSSION                    We  agree   with  the   district  court   that  Portela          impermissibly failed to exhaust  her administrative remedies.  We          disagree,  however,  that  the   court  had  discretion,  in  the          circumstances  of this case,  to relieve her  of the  onus of her          omission.                                          4                             A.  The Exhaustion Doctrine.                             A.  The Exhaustion Doctrine.                                 _______________________                    Starkly  contoured, the exhaustion  doctrine holds that          "no  one is  entitled  to  judicial  relief  for  a  supposed  or          threatened injury until the prescribed administrative  remedy has          been exhausted."  Myers v. Bethlehem Shipbuilding Corp., 303 U.S.                            _____    ____________________________          41, 50-51 (1938).   In  practice, the doctrine  has softer  edges          than this  language implies.  See Kenneth Culp Davis & Richard J.                                        ___          Pierce,  Jr., II Administrative Law  Treatise   15.2,  at 307 (3d                           ______________ ___  ________          ed.  1994).   Although exhaustion  of administrative  remedies is          absolutely  required  if  explicitly  mandated by  Congress,  see                                                                        ___          McCarthy v. Madigan, 503  U.S. 140, 144 (1992), courts  have more          ________    _______          latitude in  dealing with exhaustion questions  when Congress has          remained  silent, see  Darby v.  Cisneros, 509  U.S.  137, 153-54                            ___  _____     ________          (1993); McCarthy, 503 U.S. at  144.  In such purlieus, the  court                  ________          of  first instance possesses a modicum of discretion to relax the          exhaustion  requirement.   See  Salus  v.  GTE Directories  Serv.                                     ___  _____      ______________________          Corp., 104 F.3d 131, 138 (7th Cir. 1997).          _____                    The  Court's  opinion in  McCarthy  is  integral to  an                                              ________          understanding  of the  parameters of  this discretion.   Although          recognizing that the  exhaustion doctrine ordinarily  "serves the          twin purposes of protecting  administrative agency authority  and          promoting judicial efficiency," and,  thus, should customarily be          enforced, the Court identified "three broad sets of circumstances          in which  the interests of  the individual weigh  heavily against          requiring administrative exhaustion."  McCarthy, 503 U.S. at 145,                                                 ________          146.                                          5                    First,  a court  may  consider relaxing  the rule  when          unreasonable or  indefinite delay  threatens unduly  to prejudice          the subsequent bringing of a judicial action.  See id. at 146-47.                                                         ___ ___          And,  relatedly,  if the  situation  is such  that  "a particular          plaintiff  may  suffer  irreparable  harm  if  unable  to  secure          immediate judicial consideration of his claim," exhaustion may be          excused even though  "the administrative decisionmaking  schedule          is otherwise reasonable and definite."  Id. at 147.                                                  ___                    Second, McCarthy acknowledges that  it sometimes may be                            ________          inappropriate for a court to require exhaustion if a  substantial          doubt  exists about  whether  the agency  is  empowered to  grant          meaningful redress.   See id. at 147-48, 154;  see also Gibson v.                                ___ ___                  ___ ____ ______          Berryhill,  411  U.S.  564, 574  n.14  (1973).    An agency,  for          _________          example,  may  lack  authority  to  grant  the   type  of  relief          requested.  See, e.g.,  McNeese v. Board of Educ.,  373 U.S. 668,                      ___  ____   _______    ______________          675 (1963).                    Finally, McCarthy teaches that the  exhaustion rule may                             ________          be relaxed where there  are clear, objectively verifiable indicia          of administrative taint.  Thus, if the potential decisionmaker is          biased or can be  shown to have predetermined the  issue, failure          to exploit  an available  administrative remedy may  be forgiven.          See McCarthy, 503 U.S. at 148.          ___ ________                           B.  Application of the Doctrine.                           B.  Application of the Doctrine.                               ___________________________                    Congress has excluded Navy Exchange  personnel from the          strictures of the  Administrative Procedure Act,  see 5 U.S.C.                                                               ___          2105(c),  and  has not  otherwise  mandated  that such  employees                                          6          always  must  exhaust  administrative  remedies  as  a  condition          precedent to  suit.   Accordingly, Portela's admitted  failure to          exercise the  final level  of available administrative  review is          not  necessarily fatal to her  claim; the effect  of her omission          depends  instead upon whether  the circumstances of  her case can          justify that omission.                    1.  The Availability of Fourth-Level  Review.  We start                    1.  The Availability of Fourth-Level  Review.                        ________________________________________          this phase  of our  analysis by addressing  Portela's halfhearted          argument,  raised for  the first  time on  appeal, that  a fourth          level  of review was not in fact  available to her.  The argument          is bogus.                    The facts are as  follows.  The original administrative          procedure, SECNAVINST 5300.22A, did not mention a fourth level of          review.  On November 15, 1989, however, the Secretary of the Navy          promulgated SECNAVINST 5300.22B,  directing subordinate  commands          to implement it within  120 days.  The new  regulation (5300.22B)          explicitly canceled the old regulation (5300.22A).  Nevertheless,          on January 24, 1990, the  Director, Officer of Civilian Personnel          Management,  granted an  extension  to the  NRSSO, deferring  the          effective date of SECNAVINST 5300.22B until July 15, 1990.  Thus,          the notice of  suspension issued to Portela on April 9, 1990, the          notice of proposed disciplinary  action issued to her on  May 29,          1990,  and  the  notice of  decision  dated  June  22, 1990,  all          referenced SECNAVINST 5300.22A as the controlling regulation.                    From  that  point  forward,  however,  Portela  clearly          understood    indeed,  urged    that  SECNAVINST 5300.22B,  which                                          7          unarguably  contains a  fourth  level  of administrative  review,          governed her case.   She mentioned it in her second appeal, dated          August  12, 1990,  and  at the  ensuing  evidentiary hearing  her          counsel insisted that 5300.22B, rather than  5300.22A, controlled          her  case.   While  the  hearing  officer  did  not rule  on  the          question,   the  ultimate   decisionmaker  at  that   level  (the          Commanding Officer of the Roosevelt Roads Naval Station) accepted          Portela's  argument  and  reviewed   the  hearing  transcript  in          accordance with SECNAVINST 5300.22B.  Throughout the remainder of          the  administrative  process,  both  sides proceeded  under  that          regulation.3                    We do  not aspire  to add  hues to a  rainbow.   By its          terms, SECNAVINST  5300.22B applies  here.  And,  moreover, since          Portela consistently argued for its application during the latter          stages  of the administrative process, she cannot now be heard to          complain  that   the  agency  surrendered  to   her  exhortation.          Equitable  doctrines  of  estoppel  apply in  administrative  and          judicial  fora, see generally Davis  & Pierce, supra,     13.1 to                          ___ _________                  _____          13.5,  and  a party  cannot take  one  position in  an underlying          administrative proceeding  and then  disclaim it in  a subsequent          suit arising out of the agency proceedings.  Cf. Patriot Cinemas,                                                       ___ ________________          Inc. v. General Cinema  Corp., 834 F.2d 208, 212 (1st  Cir. 1987)          ____    _____________________                                        ____________________               3We cite two episodes which confirm this conclusion.  In her          third-level  notice of  appeal,  Portela  stated  expressly  that          "[t]his appeal arises under SECNAVINST 5300.22B."  By like token,          in  resolving  that  appeal   adversely  to  Portela,  the  NRSSO          commandant  specifically  informed  Portela  of her  right  to  a          fourth-level appeal under SECNAVINST 5300.22B.                                          8          (explaining that  the doctrine of judicial  estoppel "precludes a          party  from asserting a position in one legal proceeding which is          contrary to a position it has already asserted in another").                    2.   The Futility  Exception.   The only  question that                    2.   The Futility  Exception.                         _______________________          remains is whether Portela's  failure to mount the final  rung of          the administrative ladder is fatal to the court case.  She argued          below  that the  court should  excuse her  omission, asseverating          that a final appeal to the Deputy Assistant Secretary of the Navy          would have been a  futile gesture because it would  have resulted          in an automatic affirmance of her dismissal.   In theory, this is          a  good argument.  Consistent  with the exceptions  limned by the          McCarthy Court,  we  have  recognized  the  inappropriateness  of          ________          requiring  exhaustion when  further agency  proceedings  would be          futile.   See, e.g., Pihl v. Massachusetts Dep't of Educ., 9 F.3d                    ___  ____  ____    ____________________________          184,  190  (1st Cir.  1993);  Christopher W.  v.  Portsmouth Sch.                                        ______________      _______________          Comm.,  877  F.2d   1089,  1095  (1st  Cir.  1989);   Ezratty  v.          _____                                                 _______          Commonwealth of P.R., 648 F.2d 770, 774 (1st Cir. 1981).          ____________________                    But  the futility  exception is  not available  for the          asking.    Reliance on  the  exception in  a  given case  must be          anchored in demonstrable reality.  A pessimistic prediction  or a          hunch   that  further   administrative  proceedings   will  prove          unproductive is not enough to sidetrack the exhaustion rule.  See                                                                        ___          Christopher W., 877 F.2d  at 1095-96; see also Gilbert v. City of          ______________                        ___ ____ _______    _______          Cambridge, 932 F.2d 51, 61 (1st Cir. 1991) (admonishing that "the          _________          mere possibility,  or even the probability,  that the responsible                                          9          agency may deny [a]  permit should not  be enough to trigger  the          [futility exception]").  Accordingly,  "[a]n essential element of          the claim of futility . . . is  that all reasonable possibilities          of   adequate   administrative  relief   have   been  effectively          foreclosed."        Tucker    v.    Defense     Mapping    Agency                              ______          _____________________________          Hydrographic/Topographic  Ctr., 607  F. Supp. 1232,  1243 (D.R.I.          ______________________________          1985).  Indeed, the  Seventh Circuit has held that  claimants who          seek  safe harbor under the futility exception "must show that it          is certain that their claim will be denied on appeal,  not merely          that they doubt an  appeal will result in a  different decision."          Smith v.  Blue Cross & Blue Shield United, 959 F.2d 655, 659 (7th          _____     _______________________________          Cir. 1992).4                    Portela  cannot surmount  this  hurdle.   The claim  of          futility   is  merely   a  self-serving   pronouncement   in  the          circumstances of  this case.  The evidence is uncontradicted that          the Deputy Assistant Secretary  is an impartial official  who has          reversed termination decisions affecting Navy  Exchange personnel          in  the  past.    Though   the  prognosis  for  Portela's  unused          administrative  appeal may  have been  poor and  her expectations          modest,  neither  courts  nor  litigants are  allowed  to  equate          pessimism with futility.   See  Hodges v. Callaway, 499 F.2d 417,                                     ___  ______    ________          424  (5th Cir. 1974).  Because there  is nothing in the record to                                        ____________________               4For  our part, we are tempted to set the benchmark slightly          below absolute certainty, cf.  Gilbert, 932 F.2d at 61  ("To come                                    ___  _______          within the exception, a  sort of inevitability is required:   the          prospect  of refusal must be  certain (or nearly  so)."), but the          case  at hand  does not  require us to  choose between  these two          formulations.                                          10          suggest  that Portela's lack of success at the previous levels of          review necessarily signified that the final level of review would          be  an  empty  gesture,  her  failure  to  exhaust  an  available          administrative  remedy  cannot be  overlooked  on  the ground  of          futility.                    3.   The District Court's Rationale.  To this point, we                    3.   The District Court's Rationale.                         ______________________________          are in agreement with the court below.  See Portela, 913 F. Supp.                                                  ___ _______          at  126-27  (declaring  that  alleged  futility  did  not  excuse          Portela's nonexhaustion).  After finding the plaintiff's futility          argument futile, however, the district  judge nonetheless elected          to  relax  the  exhaustion  requirement "[i]n  the  interests  of          minimizing cost and delay in the judicial system and avoiding the          waste  of resources."   Id. at  127.   The judge  reasoned that a                                  ___          perceived waste  of  resources, in  and  of itself,  can  justify          excusing  nonexhaustion of  administrative  remedies.   We  think          not.5                    Were  we  to adopt  the  lower  court's reasoning,  the          resulting exception would swallow the exhaustion rule in a single          gulp.  Once  an aggrieved party has brought suit,  forcing her to          retreat  to any  unused administrative appeal  potentially wastes                      ___                                        ____________________               5To  be  sure, we  stated  in Ezratty  that  "[s]ometimes to                                             _______          require exhaustion  will not only  waste resources but  also work          severe harm  upon  a litigant."    648 F.2d  at  774.   Taken  in          context, this  statement is  entirely compatible with  the "undue          prejudice/irreparable   harm"   consideration  outlined   by  the          McCarthy Court in its discussion of the first potential exception          ________          to the exhaustion rule.  503 U.S. at 146-47.  In the case at bar,          there is no  hint that taking  an appeal to the  Deputy Assistant          Secretary would have caused Portela irreparable harm or otherwise          seriously prejudiced her rights.                                          11          resources.   The  Supreme Court has  disavowed such  a resupinate          approach.  In McKart  v. United States, 395 U.S. 185, 193 (1969),                        ______     _____________          the Court  explained that a  "primary purpose" of  the exhaustion          doctrine  is  "the avoidance  of  premature  interruption of  the          administrative  process."      Consequently,  it   is   generally          inefficient to permit a  party to seek judicial recourse  without          first exhausting her  administrative remedies.   See id. at  194.                                                           ___ ___          Following this train of thought, the Court has concluded that, by          and large,  concerns regarding  efficiency militate in  favor of,          rather  than  against,  strict  application   of  the  exhaustion          doctrine.  See  McCarthy, 503 U.S.  at 145;  McKart, 395 U.S.  at                     ___  ________                     ______          195;  see also Ezratty, 648  F.2d at 774  (acknowledging that the                ___ ____ _______          exhaustion  doctrine "serves  interests of  accuracy, efficiency,          agency autonomy and judicial economy").                    This view  is steeped in real-world  wisdom.  Insisting          on exhaustion  forces parties to take  administrative proceedings          seriously,  allows  administrative  agencies  an  opportunity  to          correct their  own errors,  and potentially  avoids the  need for          judicial  involvement  altogether.     Furthermore,  disregarding          available  administrative  processes thrusts  parties prematurely          into overcrowded courts and  weakens an agency's effectiveness by          encouraging end-runs around it.   See McCarthy, 503 U.S.  at 145;                                            ___ ________          McKart, 395 U.S. at 195.          ______                    4.  The Bottom Line.  To sum up, the futility exception                    4.  The Bottom Line.                        _______________          is  unavailable to  Portela  and the  district court's  professed          reason  for  excusing  her  failure  to  exhaust   administrative                                          12          remedies  neither passes muster on its own terms nor falls within          any  of the  hallmark  McCarthy exceptions.6   Those  conclusions                                 ________          dictate  the result  we  must  reach.    The  plaintiff  left  an          available administrative  remedy untapped and the  record in this          case, howsoever  construed,  reveals no  sufficiently  excusatory          circumstances to warrant spurning that remedy.                    First,  there  is  no indication  that  full exhaustion          would have  caused undue prejudice, irreparable  harm, or unusual          hardship of any  sort.   Although Portela had  already pursued  a          fairly lengthy administrative process, it  had moved celeritously            the pavane  began when the OIC  terminated Portela's employment          as  of July 3, 1990, and  ended when the NRSSO,  in the person of          Rear  Admiral Weatherson,  denied her  penultimate administrative          appeal on March  25, 1991    and the  Deputy Assistant  Secretary          would have been required  to respond to her final  appeal "within          60  calendar days of receipt of the official record."  SECNAVINST          5300.22B Ch.V (9)(d)(3).  Second, the agency (here, the Navy) was          fully capable of granting all  the relief that Portela originally          sought,  namely,  reinstatement, reassignment,  and  quashing the          charges against her.  Third, there is no meaningful indication of          any institutional bias.  Fourth, the plaintiff has not identified          any  other  special  circumstance warranting  relaxation  of  the                                        ____________________               6We  do  not  suggest  that  the  three  exceptions  to  the          exhaustion  rule delineated  by  the McCarthy  Court comprise  an                                               ________          exclusive compendium.   But to  the extent that  other exceptions          appropriately may lie, they must be on a  par with the exceptions          described by the  Court.  As  explained in the  text, the  record          here  contains nothing  which suggests  a  plausible basis  for a          further exception.                                          13          exhaustion  rule, and  our  careful perlustration  of the  record          reveals none.   It follows  that the district  court should  have          dismissed  the complaint for failure of  the plaintiff to exhaust          available administrative remedies.          IV.  CONCLUSION          IV.  CONCLUSION                    It may  seem hypertechnical to  some that a  person who          believes herself aggrieved by  agency action must jump  through a          series of  hoops before she can  seek out a judicial  forum.  But          long-recognized concerns  regarding agency autonomy  and judicial          efficiency  weigh  heavily   in  favor   of  requiring   complete          exhaustion  of administrative  remedies.   When all  is said  and          done, our  system of justice  depends on litigants'  adherence to          well-defined rules.  Where, as here, a party decides unilaterally          to forsake those rules, she does so at her peril.                    We need go no further.  The short of it is that Portela          lacked a legally sufficient  reason for leaping prematurely  to a          judicial venue.   Thus, the district court should  have dismissed          her complaint  for  failure to  exhaust available  administrative          remedies.  In the end, however,  the district court's error is of          no moment; though the court entered judgment in favor of the Navy          on  an inappropriate ground, the Navy  is nonetheless entitled to          judgment.                    Affirmed.                    Affirmed.                    ________                                          14
