Nat'l Org. of Veterans' Advocates, Inc. v. Sec'y of Veterans Affairs

• Citation: 981 F.3d 1360
• Decision Date: 08 December 2020
• Docket Number: 2020-1321
• Parties: NATIONAL ORGANIZATION OF VETERANS' ADVOCATES, INC., Peter Cianchetta, Michael Regis, Andrew Tangen, Petitioners v. SECRETARY OF VETERANS AFFAIRS, Respondent
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

981 F.3d 1360

NATIONAL ORGANIZATION OF VETERANS' ADVOCATES, INC., Peter Cianchetta, Michael Regis, Andrew Tangen, Petitioners

v.SECRETARY OF VETERANS AFFAIRS, Respondent

2020-1321

United States Court of Appeals, Federal Circuit.

Decided: December 8, 2020

Roman Martinez, Latham & Watkins LLP, Washington, DC, argued for petitioners. Also represented by Shannon Marie Grammel, Blake Stafford.

Eric P. Bruskin, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for respondent. Also represented by Jeffrey B. Clark, Martin F. Hockey, Jr., Robert Edward Kirschman, Jr. ; Y. Ken Lee, Julie Honan, Office of General Counsel, United States Department of Veterans Affairs, Washington, DC.

Melanie L. Bostwick, Orrick, Herrington & Sutcliffe LLP, Washington, DC, for amicus curiae Military-Veterans Advocacy Inc. Also represented by James Anglin Flynn ; Jeffrey T. Quilici, Austin, TX; John B. Wells, Law Office of John B. Wells, Slidell, LA.

Stephen Blake Kinnaird, Paul Hastings LLP, Washington, DC, for amici curiae National Veterans Legal Services Program, Paralyzed Veterans of America, Veterans of Foreign Wars. Also represented by Alex Schulman. Amicus curiae National Veterans Legal Services Program also represented by Barton F. Stichman, National Veterans Legal Services Program, Washington, DC.

Angela K. Drake, Veterans Clinic, University of Missouri School of Law, Columbia, MO, for amicus curiae National Law School Veterans Clinic Consortium.

Before Prost, Chief Judge, Newman, Lourie, Dyk, O'Malley, Reyna, Wallach, Taranto, Chen, Hughes, and Stoll, Circuit Judges.¹

Dyk, Circuit Judge.

National Organization of Veterans’ Advocates, Inc., ("NOVA"), Peter Cianchetta, Michael Regis, and Andrew Tangen petition this court under 38 U.S.C. § 502 to review two interpretive rules that are set out in two provisions of the Veterans Affairs ("VA") Adjudication Procedures Manual M21-1 (the "Manual") and a Federal Register publication. The first interpretive rule, the Knee Joint Stability Rule, was promulgated on April 13, 2018, and is set forth in Section III.iv.4.A.6.d of the Manual. It assigns a joint instability rating under Diagnostic Code ("DC") 5257, 38 C.F.R. § 4.71a, based on the amount of movement that occurs within the knee joint. The second interpretive rule, the Knee Replacement Rule, provides that evaluation under DC 5055, 38 C.F.R. § 4.71a, is not available for partial knee replacement claims. The Knee Replacement Rule was first published in the Federal Register. That publication announced that section 4.71a was amended to include an explanatory note that " ‘prosthetic replacement’ means a total, not a partial, joint replacement," 80 Fed. Reg. 42,040, 42,041 (July 16, 2015). The Knee Replacement Rule was later published in a somewhat different form in a Manual provision, which was promulgated on November 21, 2016, and is currently located in Section III.iv.4.A.6.a of the Manual. The Manual provision informs regional office staff that evaluation under DC 5055, 38 C.F.R. § 4.71a, is not available for partial knee replacement claims filed and decided on or after July 16, 2015.

We conclude that NOVA has standing because it has veteran members who are adversely affected by the challenged Rules. We also conclude that the Knee Joint Stability Rule Manual provision is an interpretive rule reviewable under section 502 and that it constitutes final agency action. As to the Knee Replacement Rule, we also conclude that we have jurisdiction under section 502 and that it is final agency action. However, we leave to the merits panel the question whether the Knee Replacement Manual provision or the Federal Register publication constitutes the reviewable agency action. We thus conclude that we have jurisdiction over the petition for review.

We also hold that the petitioners’ challenge is timely under the six-year statute of limitations provided by 28 U.S.C. § 2401(a) and that Federal Circuit Rule 15(f), establishing a 60-day time limit for bringing section 502 petitions, is invalid.

We refer this case to a panel for adjudication on the merits.

BACKGROUND

Petitioners seek review of two interpretive rules governing disability claims for service-related knee injuries

. The first rule, the Knee Joint Stability Rule, was promulgated in the Manual in April 2018 and addresses the rating schedule for knee instability under DC 5257, 38 C.F.R. § 4.71a. The governing regulation assigns a 30 percent rating for "Severe" joint instability, a 20 percent rating for "Moderate" joint instability, and a 10 percent rating for "Slight" joint instability. DC 5257, 38 C.F.R. § 4.71a. In turn, the Knee Joint Stability Rule instructs VA regional office staff to assign a slight knee instability rating for 0–5 mm of joint translation, a moderate rating for 5–10 mm of joint translation, and a severe rating for 10–15 mm of joint translation.

In 2017, VA published a notice of proposed rulemaking in the Federal Register proposing a nearly identical measurement-based assessment method for knee instability claims. According to petitioners, however, "multiple commenters complained that the measurement-based schedule for grading knee instability was too subjective and prone to error, insofar as it is affected by the amount of pressure applied by the physician. They also complained that the new schedule focused too narrowly on a rigid measurement, and thus would not account for the actual, functional loss suffered by veterans." Pet'r’s Br. 14. VA did not adopt the proposed rule and instead promulgated the Knee Joint Stability Rule in the Manual, which incorporates essentially the same measurement-based grading schedule. Petitioners argue that the Knee Joint Stability Rule is subjective and therefore "arbitrary and capricious and must be set aside." Pet'r’s Br. 14.

The second rule is the Knee Replacement Rule. Different versions of the Rule are set forth in a Federal Register notice and a Manual provision. The governing regulation, DC 5055, 38 C.F.R. § 4.71a, provides for a minimum 100 percent disability rating "[f]or 1 year following implantation of [a] prosthesis." The Federal Register notice was published in July 2015 and explained that "VA is adding an explanatory note under 38 CFR 4.71a ... which notifies readers that ‘prosthetic replacement’ means a total, not a partial, joint replacement, except as it is otherwise stated under DC 5054." 80 Fed. Reg. 42,040, 42,041 (July 16, 2015) ("2015 Interpretive Guidance"). The Knee Replacement Manual provision was promulgated in November 2016 and addresses disability ratings for knee replacements under DC 5055, 38 C.F.R. § 4.71a. The Knee Replacement Manual provision instructs VA regional office staff not to apply this diagnostic code when evaluating partial knee replacement claims filed and decided on or after July 16, 2015.

Petitioners argue that the Knee Replacement Rule violates this court's decision in Hudgens v. McDonald , which concluded that the Veterans Court "erred in its judgment that DC 5055 is limited to instances of full knee replacement." 823 F.3d 630, 637 (Fed. Cir. 2016). In so holding, this court addressed the 2015 Interpretive Guidance, stating that "we cannot ignore that, during the pendency of this appeal, the agency found the need to clarify the language" of the governing regulation and that "[s]uch ‘post hoc rationalization’ does not warrant deference under Auer [v. Robbins , 519 U.S. 452, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997) ]," that is, deference to the agency's own interpretation of its regulation. Id. at 639. Petitioners contend that nothing in Hudgens suggests that VA can "apply its flawed interpretation of DC 5055 to claims filed after the 2015 Interpretive Guidance." Pet'r’s Br. 12. Therefore, petitioners argue that "[t]he Knee Replacement Rule violates Hudgens and is unlawful." Id . at 13.

On January 3, 2020, NOVA filed a petition for review that, as amended on October 23, 2020, challenged these two interpretive rules. Petitioners argued that this court has jurisdiction over their petition because both Rules "qualify as interpretive rules for purposes of Section 502." Am. Pet. 2. They asked this court to overrule Disabled American Veterans v. Secretary of Veterans Affairs ("DAV "), 859 F.3d 1072 (Fed. Cir. 2017), which held that this court lacked section 502 jurisdiction to review interpretive rules promulgated in the Manual.

The petition for review further stated that its challenge was timely under 28 U.S.C. § 2401(a), which provides a six-year statute of limitations governing civil actions brought against the United States. However, petitioners acknowledged that their challenge was not timely under Federal Circuit Rule 47.12(a), now Federal Circuit Rule 15(f) with minor language changes, which states that an "action for judicial review under 38 U.S.C. § 502 of a rule and regulation of the Department of Veterans Affairs must be filed with the clerk of court within 60 days after issuance of the rule or regulation or denial of a request for amendment or waiver of the rule or regulation." Petitioners argued that this "60-day limitations period impermissibly conflicts with the six-year statute of limitations made applicable to Section 502 civil actions by Section 2401(a)." Am. Pet. 5. It therefore asked this court to "resolve the conflict" and set aside rule 15(f). Id. at 6.

We granted en banc review and asked that the parties address two issues:

A. Whether this court has jurisdiction under 38 U.S.C. § 502 to review provisions of the Department of Veterans Affairs’ Adjudication Procedures Manual M21-1 that are binding on the agency's initial adjudicators but not on the Board of Veterans’ Appeals, and whether this court should overrule Disabled American Veterans v. Secretary of Veterans Affairs , 859 F.3d 1072 (Fed. Cir. 2017).

B. Whether the time for filing a direct action for judicial review under 38 U.S.C. § 502 is governed by the 60-day deadline specified by

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