Gossett v. Czech, 06-16973.

• Decision Date: 09 September 2009
• Docket Number: No. 06-16973.,06-16973.
• Citation: 581 F.3d 891
• Parties: Paul GOSSETT, Plaintiff-Appellant, v. Al CZECH, Trust Officer, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

581 F.3d 891

Paul GOSSETT, Plaintiff-Appellant, v. Al CZECH, Trust Officer, Defendant-Appellee.

No. 06-16973.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 4, 2009.

Filed September 9, 2009.

Paul Gossett, pro se plaintiff-appellant.

Charles C. Lifland, Jeremy Maltby, and A. Patricia Klemic, O'Melveny & Myers LLP, Los Angeles, CA, amicus curiae in support of plaintiff-appellant Paul Gossett.

Tanya L. Jackson, UCLA School of Law Ninth Circuit Clinic, Los Angeles, CA, amicus curiae in support of plaintiff-appellant Paul Gossett.

Edmund G. Brown, Jr., Attorney General of the State of California, and Harry T. Gower, Deputy Attorney General, San Francisco, CA, for the defendant-appellee Al Czech.

Appeal from the United States District Court for the Northern District of California, William H. Alsup, District Judge, Presiding. D.C. No. CV-04-03523-WHA.

Before: WILLIAM A. FLETCHER, RICHARD R. CLIFTON and MILAN D. SMITH, JR., Circuit Judges.

MILAN D. SMITH, JR., Circuit Judge:

Paul Gossett (Gossett), a committed inmate at Napa State Hospital (the Hospital), appeals from the district court's summary judgment order in his 42 U.S.C. § 1983 action alleging that Al Czech (Czech), the Trust Officer of the Hospital, unlawfully took a portion of his Department of Veterans Affairs (VA) benefits each month and applied the money to partially defray the cost of Gossett's care at the Hospital. Gossett claims this reimbursement violated the statutory provision that makes benefits earned by United States military veterans "exempt from the claims of creditors." 38 U.S.C. § 5301(a)(1). Gossett also claims on appeal that Czech violated certain conditions and specified procedures contained in the regulations implementing this statute. See 38 C.F.R. §§ 13.58, 13.71. We affirm and hold that 38 U.S.C. § 5301(a)(1), when read in combination with pertinent regulations such as 38 C.F.R. § 13.71, does not prohibit direct payments of VA benefits to a state hospital for ongoing veteran patient care.

FACTUAL AND PROCEDURAL BACKGROUND

Paul Gossett is a military veteran who is entitled to receive VA benefits. In 1982, Gossett was found not guilty of murder by reason of insanity and was committed to a state psychiatric hospital by court order. Gossett was transferred to the Hospital, where he is currently detained, in September of 1996.

In 1997, the VA found Gossett mentally incompetent to manage his own affairs. The VA appointed Czech to serve as Gossett's legal custodian and entered into a fiduciary agreement providing that the Hospital would be reimbursed from VA benefits for the costs it incurs as a result of Gossett's care. Since the agreement has been in effect, Czech has been using Gossett's VA funds to provide Gossett a monthly stipend for groceries and sundries and to partially reimburse the Hospital for the costs of Gossett's care.

On July 15, 2004, Gossett brought this action under 42 U.S.C. § 1983 in the United States District Court for the Northern District of California, claiming that Czech's use of his VA benefits to reimburse the Hospital was unlawful under various federal and statutory laws.¹ The Complaint sought to "permanently enjoin the said state hospitals and their personnel from any future misappropriation of funds, to seek punitive damages, declaratory relief, and any other relief that is just, equitable and proper." Czech moved for summary judgment, claiming that he used Gossett's funds "in a manner authorized and required by federal and state law, in particular 38 C.F.R. section 13.71 and by California Health and Welfare Code section 7275, as well as by Departmental policy," and that his actions were proper under Washington State Department of Social and Health Services v. Keffeler, 537 U.S. 371, 123 S.Ct. 1017, 154 L.Ed.2d 972 (2003), a case involving state use of Social Security (SS) benefits as reimbursement for costs incurred in caring for eligible foster children.

The district court granted Czech's motion for summary judgment and dismissed Gossett's claim. The court extended the logic of the Supreme Court's Keffeler ruling to veterans' benefits, and held that a "representative payee's" use of VA funds for support of the beneficiary does not violate Section 5301(a)(1). Gossett appeals.

JURISDICTION AND STANDARD OF REVIEW

This court has jurisdiction under 28 U.S.C. § 1291. We review a grant of summary judgment de novo. See Aguilera v. Baca, 510 F.3d 1161, 1167 (9th Cir.2007).

DISCUSSION

I

The Veterans' Benefits Act (VBA), Pub.L. No. 85-56, 71 Stat. 83 (1957) (codified as amended at 38 U.S.C. § 301 et seq.), contains a provision that limits the availability of VA benefits for the payment of certain types of claims:

Payment of benefits due or to become due under any law administered by the Secretary shall not be assignable except to the extent specifically authorized by law, and such payments made to, or on account of, a beneficiary shall be exempt from taxation, shall be exempt from the claim of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary.

38 U.S.C. § 5301(a)(1). This exemption provision protects the veteran recipient of the benefits and affords security for his or her family. The VBA also dictates the manner in which payments of VA benefits are made to fiduciaries, allowing that "payment of benefits under any law administered by the Secretary may be made directly to the beneficiary or to a relative or some other fiduciary for the use and benefit of the beneficiary." 38 U.S.C. § 5502(a)(1). Here, Gossett brings a Section 1983 action, claiming that defendant Czech, his legal custodian authorized to receive and administer his veterans' benefits, has been using part of his benefits to reimburse the Hospital for Gossett's care and maintenance in violation of 38 U.S.C. § 5301(a)(1).²

A

The district court granted summary judgment for the defendant in this case, basing its holding on the Supreme Court's decision in Keffeler. 537 U.S. 371, 123 S.Ct. 1017, 154 L.Ed.2d 972 (2003). In Keffeler, the State of Washington was appointed to serve as the representative payee for foster care children receiving SS benefits. Id. at 379, 123 S.Ct. 1017. Washington then used the SS benefits to reimburse itself for the cost of foster care. Id. at 378-79, 123 S.Ct. 1017. The plaintiffs alleged that the State's use of their benefits violated 42 U.S.C. § 407(a), the "antiattachment" provision contained in the Social Security Act (SSA), 49 Stat. 620 (1935), codified as amended, 42 U.S.C. § 301 et seq.³ Id. at 375, 123 S.Ct. 1017. The Court, however, found that the State's use of plaintiffs' SS benefits did not amount to an "execution, levy, attachment,[or] garnishment" within the meaning of Section 407(a). Id. at 382-83, 123 S.Ct. 1017. The Court further held that the State's reimbursement scheme did not fit within the meaning of "other legal process," and thus did not violate Section 407(a). Id. at 383-86, 123 S.Ct. 1017.

In addition, the Court specifically noted that the State, much like a parent or legal guardian, was "under a legal obligation to support" the "basic needs" of its foster children, irrespective of whether those children were eligible for SS benefits or whether such funds could be used as reimbursement. See Keffeler, 537 U.S. at 388 n. 11, 123 S.Ct. 1017. Similarly, in serving as the Commissioner-appointed "representative payee" for the foster children's SS benefits, the State was charged with acting in their interests. See id. at 376, 388-89, 123 S.Ct. 1017. The Court in Keffeler concluded that Section 407(a) did not apply to the State in this context, because just as a parent "ha[s] no obligation to exhaust his personal finances in providing for[his child's] support before spending any of [the child's] social security benefits on the child's maintenance[,]" neither did the State have such an obligation to exhaust its own funds first. See id. at 388-89 & n. 11, 123 S.Ct. 1017 (internal quotation marks omitted).

The district court in this case held, and defendant here argues, that because of the similarity between the SSA and the VBA, "the Keffeler holding should be extended to Veteran's Benefits and Section 5301, meaning that a representative payee's use of the funds for support of the beneficiary does not violate Section 5301."

We observe that Keffeler does not directly control this case, as there are significant differences between the antiattachment provision for SS benefits analyzed by Keffeler, 42 U.S.C. § 407(a), and the VA benefits counterpart, 38 U.S.C. § 5301(a)(1). We acknowledged similarities between these two statutory sections in Nelson v. Heiss, 271 F.3d 891(9th Cir. 2001), but we also noted that the language of the two sections "is somewhat different...." Id. at 895. While those differences did not affect our decision in Nelson, see id. at 894-95 (concluding that VA benefits recipients, like SS benefits recipients, cannot consent in advance to an assignment of future funds), the differences are significant in this case. Specifically, Section 5301(a)(1), unlike Section 407(a), expressly exempts veterans' benefits from the "claim of creditors." In addition, Section 407(a) protects SS benefits only from "execution, levy, attachment, garnishment, or other legal process," while Section 5301(a)(1) provides that VA benefits "shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever[.]" Thus, the VBA creates a significantly broader preclusion than the corresponding section in the SSA, which the Supreme Court has construed narrowly as addressing only judicial means of attachment. See Keffeler, 537 U.S. at 383-86, 123 S.Ct. 1017.

Nevertheless, Keffeler provides important guidance concerning the principles that should apply when determining whether Czech's use of Gossett's funds violates federal law....