Batcher v. Wilkie

• Decision Date: 11 September 2020
• Docket Number: 2019-2116
• Parties: John J. BATCHER, Claimant-Appellant v. Robert WILKIE, Secretary of Veterans Affairs, Respondent-Appellee
• Court: U.S. Court of Appeals — Federal Circuit

975 F.3d 1333

John J. BATCHER, Claimant-Appellant

v.Robert WILKIE, Secretary of Veterans Affairs, Respondent-Appellee

2019-2116

United States Court of Appeals, Federal Circuit.

Decided: September 11, 2020

Katherine A. Helm, Dechert LLP, New York, NY, argued for claimant-appellant. Also argued by Luke Reilly, Philadelphia, PA.

Joshua E. Kurland, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for respondent-appellee. Also represented by Ethan P. Davis, Claudia Burke, Robert Edward Kirschman, Jr.; Meghan Alphonso, Y. Ken Lee, Office of General Counsel, United States Department of Veterans Affairs, Washington, DC.

Before Dyk, Clevenger, and Hughes, Circuit Judges.

Hughes, Circuit Judge.

This case is about apportionment of a veteran's disability compensation benefits. The veteran, John J. Batcher, appeals a decision of the U.S. Court of Appeals for Veterans Claims upholding the Board of Veterans’ Appeals’ grant of such apportionment to his now ex-wife, Roberta Batcher, under 38 U.S.C. § 5307 and its implementing regulations. Mr. Batcher contends that by affirming this apportionment, the Veterans Court decision improperly superseded a preexisting state-court-sanctioned separation agreement absolving Mr. Batcher of all spousal maintenance obligations. Because Mr. Batcher's preclusion, preemption, and statutory construction arguments lack merit, we affirm.

I

A

Section 5307 of title 38 entitles certain dependents of veterans to "apportionment" of any compensation the veteran is receiving from the Department of Veterans Affairs (VA). 38 U.S.C. § 5307. With apportionment, the dependent(s) directly receive a portion of the veteran's compensation, which would otherwise go entirely to the veteran. As relevant here, § 5307 permits the VA Secretary to prescribe regulations for apportioning benefits "if the veteran is not living with the veteran's spouse." Id. § 5307(a)(2). As authorized, VA has prescribed two types of apportionment: general apportionment and special apportionment. 38 C.F.R. §§ 3.450, 3.451. General apportionment is available "[i]f the veteran is not residing with his or her spouse ... and the veteran is not reasonably discharging his or her responsibility for the spouse's ... support." 38 C.F.R. § 3.450(a)(1)(ii). Special apportionment, on the other hand, turns not on the veteran's degree of support but on the dependent's showing of hardship. "[W]here hardship is shown to exist," compensation may be "specially apportioned ... on the basis of the facts in the individual case as long as it does not cause undue hardship to the other persons in interest." Id. § 3.451. This appeal stems from the Board granting Ms. Batcher entitlement to special apportionment of Mr. Batcher's VA disability compensation benefits for the period when the two were still married but living separately.

B

Mr. Batcher served on active duty in the U.S. Army in the 1960s. In 1972, Mr. and Ms. Batcher married. Almost thirty years later, in 2001, they separated. In 2002, Mr. Batcher brought a Divorce Action in the Supreme Court of New York, Suffolk County (hereinafter "New York court"), which he later converted to a Separation Action. In March 2005, the New York court issued a Judgment of Separation ordering various stipulated terms, including that Mr. Batcher would pay Ms. Batcher $300 per month in spousal maintenance.

In September 2006, VA first granted Mr. Batcher service connection for various disabilities for which he began receiving monthly disability compensation. The following month, prompted in part by a contempt motion Ms. Batcher filed, the New York court held a hearing where both parties appeared with counsel. The court noted that the parties had reached a proposed settlement, which Ms. Batcher's counsel proceeded to read into the record (hereinafter "the 2006 Stipulation"). As relevant, the 2006 Stipulation read:

In settlement of the motions pending before the Court the parties stipulate and agree as follows:

On or before but in no case later than December 6, 2006 [Mr. Batcher] shall pay to [Ms. Batcher] the sum of $7,000 ....

In consideration therefore, all maintenance and health insurance and obligations owing from the plaintiff [Mr. Batcher] to [Ms. Batcher] shall cease.

J.A. 489. The New York court asked whether the $7,000 payment "would resolve the past maintenance, which is due and owing and future maintenance." J.A. 490. Ms. Batcher's counsel confirmed this was correct, and the parties also confirmed that the 2006 Stipulation would modify the 2005 Judgment of Separation, "resolv[ing] the issues with respect to maintenance." J.A. 492. After Mr. and Ms. Batcher's allocutions, the New York court "so-ordered" the 2006 Stipulation. Shortly thereafter, Mr. Batcher paid Ms. Batcher the agreed-to $7,000.

Several years later, in December 2010, following Mr. Batcher's relocation, a Pennsylvania state court issued a Divorce Decree formally divorcing the Batchers.

Meanwhile, in April 2008, Ms. Batcher had filed a VA claim for apportionment of Mr. Batcher's disability compensation benefits. VA notified Mr. Batcher and requested his financial information in order to assess whether apportionment would cause him undue hardship. Mr. Batcher responded, objecting to apportionment solely on the grounds that the 2006 Stipulation "precluded [Ms. Batcher] from making any and all future claims for maintenance or support against [him]." J.A. 580.

In August 2009, the VA regional office denied Ms. Batcher's claim for apportionment—despite her demonstrated financial need—based on the 2006 Stipulation. The regional office reasoned that by entering the 2006 Stipulation, Ms. Batcher had "voluntarily renounced any maintenance or support from [Mr. Batcher] including future claims." J.A. 555, 558. Ms. Batcher filed a Notice of Disagreement. The regional office maintained its denial of apportionment in June 2010, stating again that the 2006 Stipulation and $7,000 payment resolved all past and future maintenance obligations. Ms. Batcher then appealed to the Board of Veterans’ Appeals.

In December 2015, after first remanding for the regional office to comply with certain procedural requirements, the Board granted Ms. Batcher special apportionment from the date of her claim until the date of her divorce—that is, from April 2008 to December 2010. The Board recounted the various state court proceedings and found that there was "inadequate objective evidence" to determine whether Mr. Batcher was reasonably discharging his support responsibility during the claim period for purposes of general apportionment under 38 C.F.R. § 3.450. J.A. 26–28. But the Board found that the evidence did support special apportionment under 38 C.F.R. § 3.451 because Ms. Batcher had shown a hardship—with expenses exceeding her income and reported periods of homelessness—and Mr. Batcher had not shown any hardship of his own, having failed to provide any financial information when he had the opportunity. With these criteria met, the Board granted Ms. Batcher entitlement to special apportionment of Mr. Batcher's disability compensation for the period up to the couple's divorce. Mr. Batcher appealed that decision to the Veterans Court.¹

A divided panel of the Veterans Court affirmed the Board's decision to grant apportionment. Batcher v. Wilkie , 31 Vet. App. 138 (2019). Mr. Batcher argued only that Ms. Batcher had waived her right to seek apportionment by entering the New York court-ordered 2006 Stipulation and accepting the $7,000 lump sum payment in lieu of future maintenance payments. Id. at 144. The panel majority disagreed, holding that "a domestic relations separation agreement sanctioned by a state court ... plays no role in VA's determination of entitlement to special apportionment." Id. at 140. "To the extent that such an agreement purports to preclude a veteran's spouse from seeking apportionment of a veteran's VA benefits, the veteran's remedy to make himself or herself whole lies with the state court." Id. The Veterans Court reasoned that "[w]hether Ms. Batcher contracted away her right to file a claim for special apportionment in exchange for adequate consideration from Mr. Batcher ... is a matter of contract law best decided by a state court." Id. at 144. Thus, Mr. Batcher's remedy lay in state court where he could sue for breach of contract or seek modification of the separation agreement—not with VA. Id. at 145.

Dissenting Judge Greenberg would have held that Ms. Batcher was not entitled to apportionment because she became Mr. Batcher's ex-spouse before the Board decided the claim, and the apportionment statute does not apply to ex-spouses. Id. at 146. Further, he felt that Ms. Batcher should not have been permitted to obtain a "modification of a properly entered state sanctioned contract ... by the misuse of a VA order." Id. at 147.

The Veterans Court entered judgment against Mr. Batcher on May 20, 2019. Mr. Batcher timely appealed to this court. We have jurisdiction under 38 U.S.C. § 7292.

II

"Our jurisdiction to review Veterans Court decisions is limited by statute." Sullivan v. McDonald , 815 F.3d 786, 788 (Fed. Cir. 2016). We review de novo the Veterans Court's interpretation of statutes and constitutional provisions. Wanner v. Principi , 370 F.3d 1124, 1128 (Fed. Cir. 2004). And we "may set aside any regulation or interpretation thereof if we find it: (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (2) contrary to constitutional right, power, privilege, or immunity; (3) in excess of statutory jurisdiction, authority, or limitations, or in violation of a statutory right; or (4) without observance of procedure required by law." Sullivan , 815 F.3d at 789 (citing 38 U.S.C. § 7292(d)(1) ).

We agree with the Veterans Court's framing of the central issue as "whether and to what extent a separation agreement sanctioned by a state court during divorce proceedings affects a spouse's...