National Organ., Vet. Advoc. v. Sec., Vet. Affairs, 02-7357.

• Citation: 314 F.3d 1373
• Decision Date: 10 January 2003
• Docket Number: No. 02-7357.,No. 02-7390.,02-7357.,02-7390.
• Parties: NATIONAL ORGANIZATION OF VETERANS' ADVOCATES, INC., Petitioner, and Paralyzed Veterans of America, Petitioner, v. SECRETARY OF VETERANS AFFAIRS, Respondent.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

314 F.3d 1373

NATIONAL ORGANIZATION OF VETERANS' ADVOCATES, INC., Petitioner, and Paralyzed Veterans of America, Petitioner, v. SECRETARY OF VETERANS AFFAIRS, Respondent.

No. 02-7357.

No. 02-7390.

United States Court of Appeals, Federal Circuit.

January 10, 2003.

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 petitioners. With him on the brief was Lawrence B. Hagel, General Counsel.

Russell A. Shultis, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for respondent. With him on the brief were Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director; and Deborah A. Bynum, Associate Director. Of counsel on the brief was Donald E. Zeglin, Deputy Assistant General Counsel.

Before CLEVENGER, SCHALL, and DYK, Circuit Judges.

DYK, Circuit Judge.

National Organization of Veterans' Advocates, Inc., ("NOVA") and Paralyzed Veterans of America ("PVA") (collectively, "petitioners"), challenge the validity of 38 C.F.R. § 20.1106, which was revised by the Department of Veterans Affairs ("the Department") in response to this court's decision in National Organization of Veterans' Advocates, Inc. v. Secretary of Veterans Affairs, 260 F.3d 1365 (Fed.Cir.2001) (hereinafter "NOVA I"). In NOVA I we found that the January 2000 revision of 38 C.F.R. § 3.22 was arbitrary and capricious because it was inconsistent with 38 C.F.R. § 20.1106. Id. at 1379. We, therefore, remanded to the Department with instructions to perform a rulemaking consistent with one of three enumerated options. Id. at 1379-81. We conclude that the Department, in the remand proceeding, failed to revise the two regulations to make them consistent with each other or to explain why reopenings for new and material evidence are excluded. We therefore again remand this case to the Department for further proceedings. We also continue to stay the processing of certain applications that would otherwise be denied under the standards currently being applied by the Department.

BACKGROUND

In NOVA I we reviewed in detail the statutory and regulatory scheme governing the award of dependency and indemnity compensation ("DIC benefits") to surviving spouses of deceased veterans. Briefly, that scheme is as follows. One statute (38 U.S.C. § 1311(a)(1)) has for many years provided for basic DIC benefits to survivors of veterans who died as the result of a service-connected disability. These basic benefits do not depend on whether the veteran received or was entitled to receive disability benefits during his lifetime. Two other provisions, however, provide for DIC payments or increased DIC payments that require a showing that the veteran met a requirement of being "in receipt of or ... entitled to receive ... compensation" for a service-connected disability that was "rated totally disabling" for a prescribed period before death. 38 U.S.C. §§ 1311(a)(2), 1318 (2000). One of these (38 U.S.C. § 1311(a)(2))¹ provides for increased DIC benefits to the survivors of a veteran whose death was "service-connected" where the veteran's "disability was rated totally disabling for a continuous period of at least eight years immediately preceding death." The other (38 U.S.C. § 1318)² provides for DIC benefits to be paid to survivors of veterans whose death was not service connected "as if the veteran's death were service related" when specific disability durational requirements are met. 38 U.S.C. § 1318(a) (2000).

Two issues have arisen concerning interpretation of the "entitled to receive" language of the statutes; first, whether, after the veteran's death, the survivors can file a new claim for the specified DIC benefits even though the veteran did not file a total disability claim during his lifetime or such a claim was filed but denied and, second, even if such new claims are barred, whether total disability claims filed (but denied) during the veteran's lifetime can be reopened after death in the context of a claim for DIC benefits.

Despite the virtual identity in the "entitled to receive" statutory language, the regulations in effect at the time of NOVA I interpreted the two statutes differently. In the case of § 1311(a)(2) benefits, one regulation (38 C.F.R. § 3.5(e))³ simply reiterated the statutory language, and another (38 C.F.R. § 20.1106)⁴ implied, as we held in Hix v. Gober, 225 F.3d 1377 (Fed. Cir.2000), that "the `entitled to receive' provision of § 1311(a)(2) requires de novo determination of the veteran's disability, upon the entirety of the record including any new evidence presented by the surviving spouse." Id. at 1380-81 (permitting the adjudication of DIC claims by the Board on a hypothetical basis). In the case of § 1318 benefits, one regulation (38 C.F.R. § 3.22)⁵ spelled out the Department's interpretation of the statute in detail (allowing the reopening only for clear and unmistakable error (CUE) claims) and the other (again § 20.1106) specifically provided that Board determinations thereunder would not be performed "without regard to any prior disposition of those issues during the veteran's lifetime." 38 C.F.R. § 20.1106 (2000).⁶

Thus, as we noted in NOVA I, the § 1311(a)(2) regulations allowed the filing of new claims without regard to claim filing or claim dispositions during the veteran's lifetime, while the § 1318 regulations did not allow the filing of new claims, and allowed the reopening of claims only for CUE. NOVA I involved an appeal from the rulemaking proceeding adopting the new version of the § 1318 regulations (38 C.F.R. § 3.22).

In NOVA I we held that because the §§ 1311(a)(2) and 1318 regulations interpreted virtually identical statutory language inconsistently, those regulations could not stand. We remanded the proceeding to the Department with a mandate to perform an expedited rulemaking in which the Department was to do one of:

(1) [ ] provide a reasonable explanation for its decision to interpret sections 1311 and 1318 in inconsistent ways; or (2) [ ] revise 38 C.F.R. § 3.22 to harmonize that regulation with this court's interpretation of 38 C.F.R. § 20.1106 in Hix v. Gober, 225 F.3d 1377 (Fed.Cir.2000); or (3) [ ] revise 38 C.F.R. § 20.1106 to be consistent with the revised version of 38 C.F.R. § 3.22.

NOVA I, 260 F.3d at 1380-81. Thus, the purpose of the remand was to render consistent the implementing regulations for 38 U.S.C. §§ 1311(a)(2) and 1318, or to provide a reasonable explanation for the lack of consistency.

Upon remand the Department determined that the two statutes should be interpreted in the same way. 67 Fed.Reg. at 16,309 (Apr. 5, 2002). The Department also concluded that the § 1318 regulations (38 C.F.R. § 3.22) provided the correct interpretation of the statute. One might have then expected the Department to amend the § 1311(a)(2) regulations to contain the seven exceptions specifically listed in the § 1318 regulations (38 C.F.R. § 3.22) and also to amend 38 C.F.R. § 20.1106 to include references to both statutes. That did not occur. The Department did not amend its regulations implementing § 1311(a)(2) to make them consistent with 38 C.F.R. § 3.22, the regulation implementing § 1318. The Department instead only amended 38 C.F.R. § 20.1106 as follows:

Except with respect to benefits under the provisions of 38 U.S.C. 1311(a)(2) [and] 1318 ... issues involved in a survivor's claim for death benefits will be decided without regard to any prior disposition of those issues during the veteran's lifetime.

67 Fed.Reg. at 16,317 (emphasis added to indicate revision in text). Thus, the Department simply rewrote the regulations to require that claims under § 1311(a)(2) not be performed without regard to prior determinations, without revising the § 1311(a)(2) regulations to spell out the exceptions provided under the § 1318 regulations.

NOVA and PVA timely petitioned for review of this final rule.

DISCUSSION

We have jurisdiction to review the validity of the rulemaking process and the regulation challenged here pursuant to 38 U.S.C. § 502. See Disabled Am. Veterans v. Gober, 234 F.3d 682, 688 (Fed.Cir.2000), cert. denied, 532 U.S. 973, 121 S.Ct. 1605, 149 L.Ed.2d 471 (2001). The review is conducted in accordance with the standard of review in the Administrative Procedure Act ("APA"), 5 U.S.C. § 706.

I

The petitioners on appeal again argue that the contested statutes are clear and unambiguous, and that the regulations are inconsistent with the statutes. However, this court determined in NOVA I, 260 F.3d at 1377, that the statutory language was ambiguous. That determination corresponded to the first step in the two-step procedure established by the Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). See Haggar Apparel Co. v. United States, 222 F.3d 1337, 1340 (Fed.Cir.2000) ("First, always, is the question whether Congress has directly spoken to the precise question at issue."). Because we have already determined in NOVA I, 260 F.3d at 1379, that the statutory language does not resolve the question at issue, the petitioners' attempts to relitigate the issue of statutory construction under the first step of Chevron are impermissible. Similarly, the Department argues that it has not, in fact, changed its interpretation of § 1311(a)(2), and that we misconstrued its regulations in Hix. 67 Fed.Reg. at 16, 315-16. This avenue of argument is likewise foreclosed.

II

The remaining issue here is whether the Department committed error in the remand proceeding. The court "must decide (1) whether the statute unambiguously forbids the Agency's interpretation, and, if not, (2) whether the interpretation for other reasons, exceeds the bounds of the permissible." Barnhart v. Walton, 535 U.S. 212, 122 S.Ct. 1265,...