Disabled American v. Sec. of Veterans Affairs

• Decision Date: 01 May 2003
• Docket Number: No. 02-7316.,No. 02-7304.,No. 02-7305.,02-7304.,02-7305.,02-7316.
• Citation: 327 F.3d 1339
• Parties: DISABLED AMERICAN VETERANS and Veterans of Foreign Wars of the United States, Petitioners, and National Organization of Veterans' Advocates, Inc., Petitioner, and Paralyzed Veterans of America, Petitioner, v. SECRETARY OF VETERANS AFFAIRS, Respondent.
• Court: U.S. Court of Appeals — Federal Circuit

327 F.3d 1339

DISABLED AMERICAN VETERANS and Veterans of Foreign Wars of the United States, Petitioners, and National Organization of Veterans' Advocates, Inc., Petitioner, and Paralyzed Veterans of America, Petitioner, v. SECRETARY OF VETERANS AFFAIRS, Respondent.

No. 02-7304.

No. 02-7305.

No. 02-7316.

United States Court of Appeals, Federal Circuit.

DECIDED: May 1, 2003.

COPYRIGHT MATERIAL OMITTED

Ronald L. Smith, Disabled American Veterans, of Washington, DC, argued for petitioner Disabled American Veterans and Veterans of Foreign Wars of the United States. Of counsel on the brief was Donald E. Purcell.

Kenneth M. Carpenter, Carpenter Chartered, of Topeka, KS, for petitioner National Organization of Veterans' Advocates, Inc.

Michael P. Horan, Paralyzed Veterans of America, of Washington, DC, argued for petitioner Paralyzed Veterans of America. With him on the brief was Lawrence B. Hagel, General Counsel.

Martin F. Hockey, Jr., Senior Trial Counsel, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for respondent. With him on the brief was David M. Cohen, Director. Of counsel on the brief were Richard J. Hipolit, Deputy Assistant General Counsel, and Michael J. Timinski, Staff Attorney, Department of Veterans Affairs, of Washington, DC.

Before NEWMAN, GAJARSA, and LINN, Circuit Judges.

GAJARSA, Circuit Judge.

Disabled American Veterans ("DAV"), Veterans of Foreign Wars of the United States ("VFW"), National Organization of Veterans' Advocates, Inc. ("NOVA"), and Paralyzed Veterans of America ("PVA") (collectively "petitioners") petition for review of regulations promulgated by the Department of Veterans Affairs ("VA"), 38 C.F.R. §§ 19.9, 19.31, 20.903, 20.1304 (2002), that permit the Board of Veterans' Appeals ("Board") to obtain evidence, clarify the evidence, cure a procedural defect, or perform any other action essential for a proper appellate decision in any appeal properly before it without having to remand the appeal to the agency of original jurisdiction ("AOJ") for initial consideration and without having to obtain the appellant's waiver. Petitioners challenge the regulations under 38 U.S.C. § 502 as arbitrary, capricious, an abuse of discretion, and not in accordance with various statutory provisions, including 38 U.S.C. §§ 5103, 7104, 7109.

We hold that 38 C.F.R. § 19.9(a)(2) is invalid because, in conjunction with the amended rule codified at 38 C.F.R. § 20.1304, it allows the Board to consider additional evidence without having to remand the case to the AOJ for initial consideration and without having to obtain the appellant's waiver. That is contrary to the requirement of 38 U.S.C. § 7104(a) that "[a]ll questions in a matter which ... is subject to decision by the Secretary shall be subject to one review on appeal to the Secretary." Moreover, we hold that 38 C.F.R. § 19.9(a)(2)(ii), which requires the Board "to provide the notice required by 38 U.S.C. [§]5103(a)" and "not less than 30 days to respond to the notice," is invalid because it is contrary to 38 U.S.C. § 5103(b), which provides the claimant one year to submit evidence. We hold, however, that the other rules challenged by petitioners are valid because they are not arbitrary, capricious, or contrary to law. Thus, we grant-in-part and deny-in-part the petitions for review, and we remand for further proceedings consistent with this opinion.

I. BACKGROUND

A claim for VA benefits is initially decided by an AOJ, usually a VA regional office. See 38 U.S.C. § 7105(b)(1), (d)(1) (2000); 38 C.F.R. § 20.3(a) (2002). A claimant may appeal an adverse AOJ decision to the Secretary of Veterans Affairs ("Secretary"). 38 U.S.C. § 7104(a) (2000) ("All questions in a matter which ... is subject to decision by the Secretary shall be subject to one review on appeal to the Secretary."); 38 C.F.R. § 20.101(a) (2002). By statute, final decisions on such appeals are made by the Board. 38 U.S.C. § 7104.

A claimant initiates appellate review by filing a Notice of Disagreement ("NOD") with the AOJ. 38 U.S.C. § 7105(a); 38 C.F.R. §§ 20.200, 20.300 (2002). The NOD is a written communication from the veteran expressing dissatisfaction or disagreement with an adjudicative decision of the VA. 38 C.F.R. § 20.201; see Collaro v. West, 136 F.3d 1304, 1308 (Fed.Cir.1998). After a claimant files a NOD, the AOJ must prepare a Statement of the Case ("SOC"), which includes a summary of pertinent evidence in the case, a citation to pertinent laws and regulations, a discussion of how those laws and regulations affect the decision, and a summary of the reasons for the decision. 38 U.S.C. § 7105(d)(1); 38 C.F.R. § 19.29 (2002); see Maggitt v. West, 202 F.3d 1370, 1375 (Fed. Cir.2000).

To complete the appeal to the Board, the claimant is required to file a Substantive Appeal with the AOJ within sixty days from the date the SOC is mailed. 38 U.S.C. § 7105(d)(3); 38 C.F.R. § 20.202 (2002). The AOJ then certifies the appeal to the Board and notifies the appellant that the appellate record has been transferred to the Board. 38 C.F.R. §§ 19.35, 19.36 (2002). A claimant appealing to the Board, that is, an "appellant," id. § 20.3(c), may submit additional evidence to the AOJ after initiating the appeal. See id. § 19.37 (2002). If the AOJ receives additional pertinent evidence or the SOC is otherwise inadequate with respect to the statutory requirements, the AOJ must prepare a Supplemental Statement of the Case ("SSOC"). Id. §§ 19.31(b)(1), 19.37(a), 20.1304. An SSOC informs the appellant of any material changes in, or additions to, the information included in the SOC or any prior SSOC. Id. § 19.31(b)(1).

On August 6, 2001, the VA published a notice of proposed rulemaking to permit the Board to obtain evidence, clarify the evidence, cure procedural defect, or perform any other action essential for a proper appellate decision in any appeal properly before it without having to remand the appeal to the AOJ, and invited public comments on the proposed rules. Board of Veterans' Appeals: Obtaining Evidence and Curing Procedural Defects Without Remanding, 66 Fed.Reg. 40,942 (Aug. 6, 2001). On January 23, 2002, the VA published the final rules, which were effective February 22, 2002, and applicable to appeals for which the NOD was filed on or after February 22, 2002, as well as to appeals pending at the Board, the United States Court of Appeals for Veterans Claims, or this court on that date. Board of Veterans' Appeals: Obtaining Evidence and Curing Procedural Defects Without Remanding, 67 Fed.Reg. 3099-3100 (Jan. 23, 2002).

Before the challenged regulations took effect, if the Board accepted evidence not already considered by the AOJ, either submitted to the Board by the appellant or referred to the Board by the AOJ, the VA's regulations required the Board to refer such evidence to the AOJ for review and preparation of an SSOC unless the appellant (or representative) waived in writing initial consideration by the AOJ or the Board could grant the benefits sought. 38 C.F.R. § 20.1304(c) (2001). The January 23, 2002, final rule eliminated that provision. 38 C.F.R. § 20.1304 (2002) (eliminating waiver requirement).

As a result of the amendments made by the final rule, the Board may accept or obtain evidence not considered by the AOJ when the AOJ decided the claim being appealed and consider that evidence in making its decision without referring that evidence to the AOJ for initial consideration or obtaining the appellant's waiver. 38 C.F.R. §§ 19.9(a)(2), 20.1304 (2002). The Board may also consider law not considered by the AOJ when it decided the claim being appealed, without remanding the case to the AOJ for initial consideration of the law. Id. § 19.9(b)(2). Because the Board may obtain or accept evidence and consider it without referring it to the AOJ for initial consideration, no SSOC relating to such evidence need be issued. Id. § 20.903. Petitioners timely seek review of the challenged rules, and we have jurisdiction to review the validity of the regulations challenged here pursuant to 38 U.S.C. § 502.

II. DISCUSSION

A. Standard of Review

This court directly reviews petitions under 38 U.S.C. § 502 in accordance with the standard of review in the Administrative Procedure Act ("APA"). See Nat'l Org. of Veterans' Advocates, Inc. v. Sec'y of Veterans Affairs, 314 F.3d 1373, 1378 (Fed.Cir.2003). The APA requires the reviewing court to "decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action." 5 U.S.C. § 706 (2000); Liesegang v. Sec'y of Veterans Affairs, 312 F.3d 1368, 1372 (Fed.Cir.2002). Where a finding of fact or a discretionary action is involved, the APA requires the reviewing court to set aside agency actions that are:

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(B) contrary to constitutional right, power, privilege, or immunity;

(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; [or]

(D) without observance of procedure required by law....

5 U.S.C. § 706(2)(A)-(D). "This review is `highly deferential' to the actions of the agency." See Disabled Am. Veterans v. Gober, 234 F.3d 682, 691 (Fed.Cir.2000) (quoting LeFevre v. Sec'y of Veterans Affairs, 66 F.3d 1191, 1199 (Fed.Cir.1995) (quoting Ethyl Corp. v. Envtl. Prot. Agency, 541 F.2d 1, 34 (D.C.Cir.1976))), cert. denied, 532 U.S. 973, 121 S.Ct. 1605, 149 L.Ed.2d 471 (2001).

The first inquiry under 5 U.S.C. § 706, in which we interpret the meaning of relevant statutes, is governed by the standards established by the Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). In Regions Hospital v. Shalala, the Supreme Court explained:

Under the formulation now familiar, when we examine...