National Organization of Veterans' Advocates, Inc., and Paralyzed Veterans of America v. Secretary of Veterans Affairs
Docket: 02-7357
Court: Court of Appeals for the Federal Circuit; January 9, 2003; Federal Appellate Court
Petitioners National Organization of Veterans' Advocates, Inc. (NOVA) and Paralyzed Veterans of America (PVA) challenge the validity of 38 C.F.R. § 20.1106, following revisions made by the Department of Veterans Affairs (VA) in response to the Federal Circuit's prior decision in NOVA I. In that case, the court determined that the January 2000 revision of 38 C.F.R. § 3.22 was arbitrary and capricious due to inconsistencies with 38 C.F.R. § 20.1106, leading to a remand instructing the VA to conduct rulemaking consistent with specific options. The court found that the VA failed to align the regulations or explain exclusions regarding reopenings for new and material evidence, necessitating another remand for further proceedings. Additionally, the court continues to stay the processing of certain applications that would be denied under the currently applied VA standards.
The background of the case outlines the statutory and regulatory framework governing dependency and indemnity compensation (DIC) benefits for surviving spouses of veterans. It highlights that basic DIC benefits under 38 U.S.C. § 1311(a)(1) are available regardless of the veteran's disability benefit status. However, increased DIC benefits under 38 U.S.C. § 1311(a)(2) and § 1318 require proof of the veteran's total disability status for a specified duration prior to death. The court addresses two key issues: whether survivors can file new claims for DIC benefits after the veteran's death despite prior claims being unfiled or denied, and whether denied total disability claims can be reopened posthumously in the context of DIC claims.
The regulations interpreting the benefits under 38 U.S.C. § 1311(a)(2) and § 1318 were inconsistent despite the similarity in statutory language. For § 1311(a)(2) benefits, the regulations allowed the submission of new claims based on the entire record, including new evidence from the surviving spouse, as established in Hix v. Gober. Conversely, the § 1318 benefits regulations permitted reopening claims only for clear and unmistakable error (CUE) and did not allow new claims to be filed regardless of prior determinations. In NOVA I, the court ruled that the inconsistent interpretations could not coexist and mandated the Department to either clarify its reasoning for the differing interpretations or harmonize the regulations. Upon remand, the Department concluded that both statutes should be interpreted similarly and acknowledged § 1318 regulations as the correct interpretation. However, the Department did not amend the § 1311(a)(2) regulations to align with § 1318 but instead revised the § 20.1106 regulation to specify that claims under § 1311(a)(2) should not disregard prior determinations, without incorporating exceptions outlined in the § 1318 regulations.
NOVA and PVA filed a timely petition challenging the validity of a final rule, with jurisdiction for review based on 38 U.S.C. § 502. The review follows the Administrative Procedure Act (APA) standard under 5 U.S.C. § 706. The petitioners argue that the contested statutes are clear and the regulations inconsistent, but prior rulings (NOVA I) determined that the statutory language is ambiguous, thus precluding relitigation of statutory interpretation under Chevron's first step. The Department contends it has not changed its interpretation of § 1311(a)(2), a claim that is also rejected based on previous rulings.
The core issue is whether the Department erred during the remand process, which requires determining if the statute unambiguously forbids the Agency's interpretation and, if not, whether the interpretation exceeds permissible bounds. Four specific questions arise:
1. The Department's ability to interpret "entitled to receive" in § 1311(a)(2) and § 1318 identically is affirmed, with adequate explanation provided.
2. The Department is also found to correctly interpret the sections to bar new claims not filed during a veteran's lifetime or denied without reopening, despite some lack of clarity in its explanation.
3. Although the Department reexamined statutory language and found clarity where ambiguity was previously identified, it did not fully adhere to its obligations under Chevron’s second step. Nonetheless, it has adequately addressed other aspects of the interpretation process.
The Department determined that the purpose of Dependency and Indemnity Compensation (DIC) benefits under § 1318 is to provide ongoing support to survivors of veterans who were totally disabled and relied on VA disability compensation. Historically, DIC was only available for service-connected deaths until 1978, when Congress expanded eligibility to include non-service-connected deaths if the veteran had been rated totally disabled for at least ten years prior to death. The Department rejected a commenter’s suggestion to allow new claims for veterans who had never applied for VA benefits, arguing this would undermine the statute's intent. Additionally, the Department noted the challenges of assessing a deceased veteran's disability rating retroactively, which would complicate evidence gathering and effective date determinations. Consequently, the Department interpreted the statutes to exclude new claims filed after a veteran's death if no claim had been filed or if a claim was denied without the possibility of reopening. However, the Department permitted claims aimed at reopening previously denied claims, as failing to do so would render the statutory language meaningless. Under the Chevron framework, the Department's interpretation was deemed reasonable and consistent with congressional intent, leading to judicial deference to this interpretation against posthumous new claims for DIC benefits.
The Department's interpretation of the statutes regarding the reopening of total disability claims has been found insufficiently explained. While the Department asserts that claims can be reopened under Clear and Unmistakable Error (CUE), it has not justified why other grounds for reopening, such as new and material evidence, are excluded. The ruling references the overruled case of Hayre v. West and emphasizes that the statutory framework allows for reopening claims based on new and material evidence. Therefore, the case mandates a remand for further proceedings where the Department must consider various interpretations of sections § 1311 and § 1318, make a rational selection among them, and provide a cogent explanation for its choice.
Additionally, the Department failed to reconcile the regulations under § 1311(a)(2) with those under § 1318, contrary to the remand order. Although the Department was encouraged to interpret the "entitled to receive" language consistently, it did not amend the relevant regulations to ensure consistency. The only change made was to include benefits under § 1311(a)(2) in the exceptions, leaving the regulations inconsistent and failing to comply with the prior mandate.
The amendment fails to clarify two critical issues for interested parties: (1) the implications of not applying for benefits before a veteran's death, which prevents new claims, and (2) the applicability of prior adjudications under the amended § 20.1106. Specifically, it does not indicate whether survivors can claim clear and unmistakable error (CUE) in past Board decisions as permitted under § 3.22, nor does it address potential grounds for reopening previous determinations. The Department of Veterans Affairs has not adequately reconciled the regulations per the existing statutory provisions. Consequently, the new regulation cannot be upheld and requires vacating and remanding for further rulemaking to achieve this reconciliation.
Additionally, a stay on proceedings regarding claims for Dependency and Indemnity Compensation (DIC) benefits under § 1318 is confirmed, as previously directed in NOVA I. The Department can continue processing certain claims that are not barred under its interpretation of the statutes. However, claims under § 1311(a)(2) and § 1318 that seek to reopen based on new and material evidence are stayed pending further determination of the statutes' interpretations. The matter is remanded for expedited rulemaking without costs.
Section 20.1106 outlines the Board of Veterans' Appeals' procedures, stating that survivor claims for death benefits will be determined independently of prior decisions made during the veteran's lifetime, with exceptions for benefits under 38 U.S.C. § 1318 and cases of forfeiture due to treason or subversive activities. Section 3.22 restricts eligibility for Dependency and Indemnity Compensation (DIC) benefits, defining "entitled to receive" as applicable only if the veteran had a service-connected disability rated totally disabling at death, despite not receiving compensation for several specified reasons, including payments to dependents, offsetting debts, unreceived applications due to clear and unmistakable error, and others. The prior version of § 3.22 allowed a broader interpretation of entitlement. The revised regulation limits DIC benefits eligibility to seven specific exceptions and requires reopening claims only for clear and unmistakable error. It is noted that the Department cannot create regulations based solely on a supposed obligation from statutory language, as per the Chevron doctrine. The agency must engage in its own interpretation of ambiguous statutes rather than asserting that its regulations are dictated by Congress.
