In the
United States Court of Appeals
For the Seventh Circuit

No. 00-1732

McArthur Ester,/*

Plaintiff-Appellant,

v.

Anthony J. Principi, Secretary of
Veterans Affairs,/**

Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 2681--James B. Zagel, Judge.

Argued November 3, 2000--Decided May 8, 2001


  Before Flaum, Chief Judge, Easterbrook and
Williams, Circuit Judges.

  Williams, Circuit Judge. McArthur Ester
claims that his former employer, the
Department of Veterans Affairs ("the
VA"), denied him a promotion in violation
of Title VII of the Civil Rights Act of
1964. The district court granted the VA
summary judgment on the ground that Ester
had failed to exhaust his administrative
remedies in a timely fashion, rejecting
Ester’s claim that the VA had waived any
such requirement by not asserting it in
administrative proceedings. We believe a
finding of waiver is appropriate,
however. Therefore, we reverse and
remand.

I

  In 1993, VA officials at Hines VA
Benefits Division Center posted an
announcement inviting applications for a
vacant Supervisory Computer Operator, GS-
12 position. Ester, who at the time
worked as a Supervisory Computer
Operator, GS-11, submitted an
application. On January 21, 1994, Ester
was notified that a female applicant had
been selected to fill the GS-12 position.

  Ester filed a timely informal complaint
with an EEO counselor at the VA, alleging
that sex discrimination and retaliation
for prior complaints of discrimination
were the reasons he did not receive the
promotion. Counseling failed to resolve
Ester’s complaint to his satisfaction,
and on March 17, 1994, Ester received a
"Notice of Final Interview with EEO
Counselor." Among other things, the
Notice informed Ester that he had 15 days
to file a formal complaint of
discrimination. Ester did not file a
formal complaint until April 19, 1994--33
days after he received the final
interview Notice. Nevertheless, the VA
accepted his complaint and initiated an
investigation.

  The EEO investigator assigned to look
into Ester’s complaint initially
concluded that Ester had been
discriminated against and recommended
sustaining Ester’s complaint. But after
the VA requested a supplemental
investigation, the investigator reversed
himself and recommended rejecting Ester’s
complaint. In both investigative reports,
the investigator specifically concluded
that Ester had met all procedural
requirements for filing a formal
complaint. Moreover, the VA never
asserted the untimeliness of Ester’s for
mal complaint as a reason for rejecting
his complaint, not even in its request
for a supplemental investigation, which
took issue with several aspects of the
investigator’s first report.

  On January 29, 1999, approximately 3
years after the EEO investigator
submitted his supplemental report, the VA
finally ruled on Ester’s formal
complaint. The agency rejected his claims
and issued Ester a right-to-sue letter.
The VA grounded its ruling entirely on
the merits of Ester’s claim; it made no
mention of the untimeliness of Ester’s
formal complaint.

  On April 23, 1999, Ester timely filed
suit in federal district court, alleging
that the VA had, in violation of Title
VII, refused to promote him because of
his sex and in retaliation for filing
complaints of discrimination regarding
previous employment actions. In its
answer to Ester’s complaint, the VA
asserted for the first time that, in
administrative proceedings, Ester had not
filed his formal complaint of
discrimination in a timely manner. The VA
then moved for summary judgment, arguing
that because he had not timely filed his
formal complaint, Ester had not properly
exhausted his administrative remedies. In
response, Ester argued, among other
things, that the VA had waived the
requirement that he timely file a formal
complaint by not asserting that
requirement as a defense in
administrative proceedings. Unpersuaded
by Ester’s waiver argument, or any of his
other arguments, the district court
granted the VA’s motion for summary
judgment. Ester now appeals and argues
that the district court erred in
rejecting his waiver argument.

II

  Federal employees who seek to assert
Title VII claims must exhaust the
administrative remedies available to them
in a timely fashion before they may
assert their claims in a lawsuit. 42
U.S.C. sec. 2000e-16(c); Brown v. Gen.
Servs. Admin., 

, 832 (1976);
Rennie v. Garrett, 

, 1059
(7th Cir. 1990). One administrative
remedy federal employees must pursue is
the filing of a formal complaint of
discrimination within 15 days of
receiving notice of the right to do so.
29 C.F.R. sec. 1614.106. Here, there is
no dispute that Ester failed to file his
formal complaint of discrimination within
15 days of receiving the required notice.
Because Ester thus failed to exhaust his
administrative remedies in a timely
fashion, a court would ordinarily dismiss
his Title VII claims without considering
the merits of the claims. See White v.
Bentsen, 

, 474-76 (7th Cir.
1994). However, ordinarily is not always.
The requirement that a federal employee
exhaust available administrative remedies
in a timely fashion is subject to the
doctrines of waiver, estoppel and
equitable tolling. Gibson v. West, 

, 993-94 (7th Cir. 2000).
Invoking the first of those doctrines,
Ester contends that the VA waived the
requirement that he timely file a formal
complaint by not asserting that
requirement as a defense in
administrative proceedings.

  This court has not yet addressed when an
agency’s failure to assert an available
exhaustion defense in administrative
proceedings should constitute waiver of
such a defense in a subsequent lawsuit.
And, the courts of appeals that have
considered the issue have not produced
uniform results. One circuit has adopted
a rule that requires an agency to make an
explicit finding of timeliness, before
accepting that the agency has waived a
timeliness defense. See Rowe v. Sullivan,

, 191 (5th Cir. 1992). While
another has determined that an agency
waives a timeliness defense when it makes
a finding of discrimination. See Boyd v.
United States Postal Serv., 

,
414 (9th Cir. 1985). We decline to follow
either circuit. Instead, we conclude that
when an agency decides the merits of a
complaint, without addressing the
question of timeliness, it has waived a
timeliness defense in a subsequent
lawsuit. Accord Bowden v. United States,

, 438-39 (D.C. Cir.
1997)./1

  We believe this position is more
consistent with the Supreme Court’s
holding in United States v. L. A. Tucker
Truck Lines, Inc., 

, 37 (1952)
("[O]rderly procedure and good
administration require that objections to
the proceedings of an administrative
agency be made while it has opportunity
for correction in order to raise issues
reviewable by the courts."). In L. A.
Tucker, the Supreme Court affirmed the
sound principle that any objections not
made before the administrative agency are
subsequently waived before the courts.
Id. Inasmuch as we understand that rule
to parallel the rule that appellate
courts will not review arguments that
were not raised in the trial courts, see
generally Massachusetts, Dep’t of Pub.
Welfare v. Sec’y of Agric., 

,
523 (1st Cir. 1993) ("The doctrine of
procedural default in the administrative
context is analogous to the established
rule that appellate courts will not
entertain arguments which could have
been, but were not, raised in the trial
court."), we see no reason to apply the
rules differently to plaintiff and
agency.

  To the contrary, strong policy
considerations compel us toward the
equal-application conclusion we reach
today. First, the values of judicial
economy, agency autonomy, accuracy and
the need for a well-developed record for
review, are all served by requiring
objections--even those objections
possessed by the agency itself--to be
raised in the agency proceeding. See
McKart v. United States, 

,
193-95 (1969) (discussing policy reasons
for application of the doctrine of
exhaustion of remedies). We decline to
adopt a rule that encourages an agency to
overlook and leave completely undeveloped
allegations that a particular complaint
is untimely. Even more than the
difficulty an agency’s failure to assert
a timeliness defense in its own
proceeding causes subsequent courts, it
creates a significant prejudice to
plaintiffs who suddenly must defend a
claim of untimeliness never before
raised.

  Second, longstanding Supreme Court
precedent demands that administrative
agencies fully state the reasons for
their action. See SEC v. Chenery Corp.,

, 196 (1947). If an agency
indeed believes that a particular
complaint is untimely, then the agency
needs to state that reason as the one (or
as one of many) for its administrative
action. Cf. NLRB v. P*I*E Nationwide,
Inc., 

, 518 n.16 (7th Cir.
1991) ("[T]he deference given to an agen
cy is not granted freely, it is
purchased; the agency must exercise its
touted expertise and ’explain the
rationale and factual basis for its
decision.’"). Although this is not
theordinary Chenery case, we are not
entirely adopting the Chenery rule. We
take from Chenery, because it maintains
persuasive force, the principle that an
agency must stand on the reasons actually
stated for its action.

  Third, in deciding the question of
waiver along federal/agency lines we
believe instructive the decisions on
waiver along federal/state lines. And, on
federal habeas corpus review, the Supreme
Court has required the last state court
rendering a judgment to make a "plain
statement" of any adequate and
independent state ground (e.g.,
procedural default), before federal
courts will be precluded from addressing
the federal questions presented. Harris
v. Reed, 

, 265 (1989). As the
Court stated in Ylst v. Nunnemaker, 

 (1991), "[s]tate procedural bars
are not immortal . . . . [they may expire
i]f the last state court to be presented
with a particular federal claim reaches
the merits." Id. at 801. We decline to
extend to administrative procedural
default an immortal status; timely filing
of administrative claims of
discrimination is not necessary to
preserve our jurisdiction, and a
plaintiff’s failure to do so may be
waived if the agency reaches the merits
without addressing the procedural
default.

  In this case, the VA ruled on the merits
of Ester’s claims without addressing
Ester’s failure to timely file his formal
complaint. We therefore conclude that the
VA waived its right to argue that Ester
failed to timely exhaust the
administrative remedies available to him.

III

  For the foregoing reasons, the judgment
of the district court is Reversed and the
case is Remanded for further proceedings.

FOOTNOTES

/* On appeal, both parties have stated the
plaintiff’s first name as Macarthur, but the
district court record reveals that the
plaintiff’s first name is actually McArthur.

/** Pursuant to Fed. R. App. P. 43(c)(2), we have
substituted Anthony J. Principi, the current
Secretary of Veterans Affairs, for the original
named defendant, Togo D. West, Jr., the former
Secretary of Veterans Affairs.

/1 We do not, however, reject the well-settled rule
that agencies do not waive a timeliness defense
merely by accepting and investigating a discrimi-
nation complaint. See Bowden, 106 F.3d at 438;
Boyd, 752 F.2d at 414; Oaxaca v. Roscoe, 

, 390 (5th Cir. 1981). Nor does our rule
prevent an agency from deciding the merits of a
complaint at the risk of losing a timeliness
objection; the agency is free to find the com-
plaint untimely, and nonetheless proceed to
address the merits of the case.