P worked for nearly three decades as a civilian employee at the Roosevelt Roads Naval Station. P was the sales manager at the Navy Exchange. She had an unblemished employment record and achieved consistently high-performance ratings. P 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, P canceled her layaway arrangement (paying a $5.00 penalty) and simultaneously repurchased the articles she had removed from layaway status for a price of $330.79. D suspended P without pay pending anticipated disciplinary action. D notified P 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.' P was terminated and appealed. P pursued the appellate process through 3 iterations. All appeals were denied. P was informed of the right to appeal to the Deputy Assistant Secretary of the Navy, Civilian Personnel Policy, Equal Employment Opportunity Office, in Washington, D.C. P did not pursue this fourth level of administrative redress. P sued D in court. The court ruled that P had failed to exhaust available administrative remedies but nonetheless reached the merits of her suit. The court concluded that D's actions were neither arbitrary nor capricious. P appealed.