McHenry v. U.S., 03-5040.

• Decision Date: 13 May 2004
• Docket Number: No. 03-5040.,03-5040.
• Citation: 367 F.3d 1370
• Parties: Frederick S. McHENRY, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

367 F.3d 1370

Frederick S. McHENRY, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 03-5040.

United States Court of Appeals, Federal Circuit.

May 13, 2004.

COPYRIGHT MATERIAL OMITTED

Eugene R. Fidell, Feldesman Tucker Leifer Fidell LLP, of Washington, DC argued for plaintiff-appellant.

Michael D. Austin, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC argued for defendant-appellee. With him on the brief were Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; and Bryant G. Snee, Assistant Director.

Ronald S. Flagg, Sidley Austin Brown & Wood, LLP, of Washington, DC, for amicus curiae, the National Veterans Legal Services Program. With him on the brief was Barton F. Stichman National Veterans Legal Services Program, of Washington, DC.

Before LOURIE, BRYSON, and DYK, Circuit Judges.

DYK, Circuit Judge.

Appellant, Major Frederick S. McHenry ("McHenry"), appeals the decision of the Court of Federal Claims granting the government's motion for judgment upon the administrative record and upholding the 30% disability rating assigned to McHenry by the Navy's Physical Evaluation Board ("PEB"), based upon his level of impairment as a result of HIV infection, which is a precursor to AIDS. We affirm the decision of the Court of Federal Claims.

BACKGROUND

I

Congress has provided that, upon the pertinent Secretary's determination that a service member is "unfit to perform the duties of the member's office, grade, rank, or rating because of physical disability incurred while entitled to basic pay," the service member may retire for disability only "if the Secretary also makes the determinations with respect to the member and that disability specified in subsection (b) [of 10 U.S.C. § 1201]." 10 U.S.C. § 1201(a) (2000). Subsection (b) provides:

(b) Required determinations of disability. — Determinations referred to in subsection (a) are determinations by the Secretary that —

(1) based upon accepted medical principles, the disability is of a permanent nature and stable;

(2) the disability is not the result of the member's intentional misconduct or willful neglect, and was not incurred during a period of unauthorized absence; and

(3) either —

(A) the member has at least 20 years of service computed under section 1208 of this title; or

(B) the disability is at least 30 percent under the standard schedule of rating disabilities in use by the Department of Veterans Affairs at the time of the determination; and either —

(i) the member has at least eight years of service computed under section 1208 of this title;

(ii) the disability is the proximate result of performing active duty;

(iii) the disability was incurred in line of duty in time of war or national emergency; or

(iv) the disability was incurred in line of duty after September 14, 1978.

Id. § 1201(b) (emphases added).

In order to determine the existence and extent of disability, the Secretary established a PEB in 1990 "to act on behalf of the Secretary of the Navy (SECNAV) in making determinations of fitness for duty, entitlement to benefits, and disposition of service members referred to the Board." See Secretary of the Navy Instruction 1850.4C ("Secretary's Instruction") ¶ 6a (1990).¹ Enclosure (5) of the Secretary's Instruction set forth various procedures and standards that the PEB was required to follow.

The Instruction, however, was somewhat confusing. On the one hand, it recognized that, pursuant to 38 U.S.C. § 1155, the Department of Veterans Affairs ("VA") has adopted the Veterans' Administration Schedule for Rating Disabilities ("VASRD"), see generally 38 C.F.R. pt. 4 (2003), which are regulations that set forth ratings for various medical conditions, including HIV-related illness,² but it stated that the VASRD was merely a "guide." Secretary's Instruction, Encl. (2) ¶ 2100c. The Instruction also provided a different set of guidelines for certain circumstances, because of the Secretary's concern that the VASRD guidelines were unclear or could result in pyramiding.³ Secretary's Instruction, Encl. (4) at 27. It also stated that the scale "is for descriptive purposes only and is not meant to imply a specific disability rating is warranted for that stage." Id. at 28. In some areas, including the present one, the VASRD ratings and the Schedule C ratings were different.

II

In 1988, while McHenry was on active duty in the Marine Corps, he tested positive for HIV. He was found fit for duty by several Navy medical boards until November 27, 1995, when a Navy medical board diagnosed McHenry with Department of Defense Stage V HIV infection because of McHenry's multiple symptoms related to HIV infection and his resulting physical impairments. The Navy medical board recommended that a PEB evaluate McHenry's case to determine whether McHenry was unfit for duty, and, if so, his disability rating. The PEB assigned a Record Review Panel ("RRP") to review McHenry's records. On January 30, 1996, following the guidelines set forth in Schedule C, rather than the VASRD guidelines, the RRP found McHenry unfit for duty. Because the Schedule C guidelines did not specify a separate rating for Stage V HIV infection, the RRP assigned McHenry a 100% disability rating, which was consistent with Stage VI infection.⁴ See Secretary's Instruction, Encl. (4) at 28. The RRP sent these findings to McHenry in a letter dated February 8, 1996. McHenry responded to the RRP's findings on March 8, 1996, by initialing the following block on the PEB's form:

I ACCEPT the Preliminary/ Reconsidered Findings. I understand that it is subject to a legal review before becoming final. I waive my right to a formal hearing.

(J.A. at 100 (emphasis and strikethrough in original).) However, no Notification of Decision was issued.

Meanwhile, on February 7, 1996, the Director of the Naval Council of Personnel Boards ("NCPB") issued a policy letter directing the PEB "to follow the VASRD in determining the degree of disability for members found unfit for duty as a result of HIV-related illnesses," rather than the guidelines set forth in Schedule C. (J.A. at 95.) On February 10, 1996, the National Defense Authorization Act for Fiscal Year 1996, Pub.L. No. 104-106, 110 Stat. 186, was signed into law. The Act included the "Dornan Amendment," which amended 10 U.S.C. § 1177 to require discharge or retirement for HIV-positive members of the armed forces. Id. § 567, 110 Stat. at 328-29. In response, the Director issued a second policy letter to the PEB on February 12, 1996, which directed that all HIV cases "pending PEB action are to be held in abeyance until further guidance is provided by a higher authority. `Pending PEB action' includes those cases in which all PEB procedures have been completed but a Notification of Decision (en bloc) has not yet been promulgated." (J.A. at 98.)⁵ As noted, no Notification of Decision had been promulgated in McHenry's case at the time of the second policy letter.

The Dornan Amendment was repealed on April 26, 1996, by the Omnibus Consolidated Rescissions and Appropriations Act of 1996, Pub.L. No. 104-134, § 2707, 110 Stat. 1321, 1321-330. On May 2, 1996, the Assistant Secretary of Defense for Force Management Policy sent a memorandum to the Assistant Secretary of the Navy (Manpower and Reserve Affairs) providing that "the Department's policies affecting HIV-positive members, that were in effect prior to the enactment of Section 567, remain unchanged." (J.A. at 103.) The Director issued a third policy letter to the PEB on May 6, 1996, providing that "[t]he Physical Evaluation Board will use the VASRD Code 6351 guidelines for assigning disability percentage ratings for HIV+ related illnesses; however, no member will be assigned any percentage rating less than 30%." (J.A. at 104.)

The PEB RRP treated McHenry's case as still pending because no decision had issued. In accordance with the VASRD, the RRP assigned McHenry a 30% disability rating on May 13, 1996. On June 7, 1996, McHenry demanded a formal hearing, and the hearing panel of the PEB assigned McHenry a 30% disability rating on August 27, 1996. On September 10, 1996, McHenry accepted these findings, stating:

I AGREE WITH AND ACCEPT THE FINDINGS OF THE REGIONAL HEARING PANEL. I AM NOT GOING TO APPEAL OR REBUT THE FINAL DECISION AND HEREBY WAIVE MY RIGHT TO THE FIFTEEN DAY APPEAL PERIOD WHICH FOLLOWS A FORMAL HEARING. I RESPECTFULLY REQUEST MY CASE BE PROCESSED WITHOUT DELAY FOR SEPARATION/RETIREMENT.

(J.A. at 115 (emphasis in original).) On September 25, 1996, the President of the PEB issued the formal Notification of Decision assigning McHenry a 30% disability rating, and McHenry was placed on the Temporary Disability Retired List on December 31, 1996.

III

On April 10, 1997, McHenry applied to the Board for Correction of Naval Records ("BCNR"), seeking the initial January 30, 1996, 100% disability rating. The BCNR denied McHenry's application on April 5, 1999. On October 5, 1999, McHenry filed an action in the Court of Federal Claims, seeking the difference between the retirement pay he would have received if he had been retired with a 100% rating (the initial rating of January 30, 1996) and the retirement pay he had received pursuant to his 30% disability rating, and correction to his records so he would receive future disability retirement pay at the 100% level. On March 3, 2000, the government moved for judgment on the administrative record. McHenry cross-moved for summary judgment.

On November 15, 2002, the Court of Federal Claims granted the government's motion for judgment on the administrative record, denied McHenry's cross-motion for summary judgment, and entered judgment in favor of the government. McHenry v. United States, No. 99-857 C (Fed.Cl. Nov. 15, 2002). The court held that there was a "conflict between the two rating systems," that the Director had authority to choose which rating system to apply, and...