Legality of State Payments to Attorneys Representing Veterans ( 1986 )

Legality of State Payments to
Attorneys Representing Veterans
A state veterans agency’s payment of fees exceeding $10 to attorneys for representing veterans
under laws administered by the Veterans Administration does not violate federal laws govern­
ing the practice o f attorneys before the Veterans Administration. The $10 limit and other
restrictions on attorney’s fees imposed by federal law do not apply to payments by third
parties.
January 28, 1986
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M em orandum O p in io n for th e G eneral Co un sel,
V e t e r a n s A d m in is t r a t io n
This responds to your request that this Department consider whether legisla­
tion recently enacted by the state of Oregon authorizing payment by the Oregon
Department of Veterans’ Affairs to attorneys representing veterans under laws
administered by the Veterans Administration violates 38 U.S.C. §§ 3404 and
3405.1 Payments to attorneys under the Oregon statute are likely to exceed the
$10 fee limit imposed by § 3404. Although we view the question as close, we
have concluded that 38 U.S.C. §§ 3404 and 3405 do not bar payments by the
Oregon Department of Veterans’ Affairs to attorneys representing veterans.
Sections 3404(a) and (b) provide for the “recognition” of attorneys by the
Administrator of the Veterans Administration (Administrator), and allow the
Administrator to suspend or exclude “unprofessional, unlawful, or dishonest”
attorneys from practice before the Veterans Administration.2 Section 3404(c)
1C hapter 790, Oregon Law s 1985 (to be codified at Oregon Rev. Stat. 406.030) provides, in relevant part:
(1) The D irector o f V eterans' A ffairs, on behalf o f this state, m ay, with agreem ent o f the
A ttorney General, contract with attorneys for the provision by the attorneys o f services as
counsel fo r w ar veteran residents o f O regon in the preparation, presentation and prosecution o f
claim s under laws adm inistered by the U nited States Veterans Adm inistration.
* * *
(3) Insofar as possible, the expense o f services provided under a contract authorized by this
section shall be paid by the state to an attorney from funds available to the D epartm ent of
V eterans’ A ffairs.
Provisions concerning the representation o f veterans in claim s before the V eterans A dm inistration are set out
in 38 U.S.C. §§ 3401-3405.
2 Section 3404 provides in full:
(a) The A dm inistrator may recognize any individual as an agent o r attorney for the preparation,
presentation, and prosecution o f claim s under laws adm inistered by the V eterans’ A dm inistra­
tion. The A dm inistrator may require that individuals, before being recognized under this section.
Continued
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provides that the Administrator pay attorneys representing veterans no more
than $10 for each claim. Section 34053 establishes criminal penalties for
soliciting, contracting, charging, or receiving “any fee or compensation except
as provided in section[] 3404” or another provision not relevant here.4 Con­
gress first enacted fee limitations for veterans’ attorneys in 1862. 12 Stat. 568.
The current limit of $10 was set in 1864, 13 Stat. 389, and has remained
unchanged since that day.
In determining whether the recently enacted Oregon legislation is legal, we
begin with the language of the federal statutes.5 There is no dispute that the
statutory language prohibits the payment by a veteran of an attorney’s fee in
excess of $10 with respect to any one claim. Indeed, §§ 3404 and 3405 do not
allow any direct payment to the attorney by the claimant. As noted, these
provisions instruct the Administrator to determine and pay fees, and provide
that the fees “shall not exceed $10 with respect to any one claim” and “shall be
deducted from monetary benefits claimed and allowed.”
Whether the statutory language also forbids payments in excess of $10 by
third parties to attorneys representing veterans is more problematic. Section
3404(c), the prohibitory provision, does not address fees paid by third parties.
Instead, this provision simply limits the fees that can be deducted from benefits
allowed in successful claims, and provides that the Administrator determine
and deduct those fees.
Section 3405 is somewhat less clear. As noted, § 3405 imposes criminal
penalties for, among other things, receiving “any fee or compensation except as
2 ( . . . continued)
show that they are o f good moral ch aracter and in good repute, are qualified to render claim ants
valuable service, and otherw ise are com petent to assist claim ants in presenting claim s.
(b ) The A dm inistrator, after notice an d opportunity for a hearing, may suspend or exclude from
fu rth er practice before the Veterans’ A dm inistration any agent or attorney recognized under this
section if he finds that such agent or atto rn ey (1) has engaged in any unlaw ful, unprofessional, or
d ish o n est practice; (2) has been g u ilty o f disreputable conduct; (3) is incom petent; (4) has
v iolated o r refused to com ply with an y o f the laws adm inistered by the V eterans' A dm inistration,
o r w ith any o f the regulations or instructions governing p ractice before the V eterans’ A dm inistra­
tion; o r (5) has in any m anner deceived, misled, or threatened any actual or prospective claimant.
(c) The A dm inistrator shall determ ine and pay fees to agents or attorneys recognized under this
section in allow ed claim s for m onetary benefits under the laws adm inistered by the V eterans’
A dm inistration. Such fees (1) shall b e determ ined and p aid as prescribed by the A dm inistrator;
(2) shall not exceed $10 w ith respect to any one claim ; an d (3) shall be deducted from monetary
benefits claim ed and allowed.
3 S ection 3405 provides in full:
W hoever (1) directly o r indirectly solicits, contracts for, charges, o r receives, or attem pts to
solicit, contract for, charge, or receive, any fee or com pensation except as provided in sections
3404 o r 784 o f this title, o r (2) w rongfully w ithholds from any claim ant o r beneficiary any part of
a b en efit o r claim allow ed and due h im , shall be fined not more than $500 or im prisoned at hard
la b o r fo r not m ore than tw o years, o r both.
4 38 U .S.C . § 784 provides jurisdiction in th e U nited States d istrict courts o v er insurance claim s by veterans
against th e V eteran s' A dm inistration. Section 784(g) allow s the court, as part o f its judgm ent, to allow
reasonable a tto rn ey ’s fees Mnot to exceed 10 per centum o f the amount recovered and to be paid by the
V eterans A dm inistration out o f the payments to be made under the judgm ent or decree at a rate not exceeding
one tenth o f each o f such paym ents until p a id .”
3 T he Suprem e C ourt has repeatedly em phasized that, in construing a statute, the place to begin is with the
plain language o f the provision. See, e.g., United States v. Apfelbaum , 445 U .S. 115 (1980); see generally 2A
Sutherlan d , Statutory Construction § 46.01 (4th ed. 1973).
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provided in section[] 3404” or another inapplicable provision. This language
may be reasonably interpreted as merely imposing criminal penalties for con­
duct that violates § 3404(c) (i.e., receipt of a fee in excess of $10 from a veteran
or the Veterans Administration). Under this interpretation, because § 3404(c)
does not address the receipt of fees from third parties, § 3405 would not impose
any penalty for this conduct.6 This reading would allow third-party payment of
veterans’ attorney’s fees because the third party would not contract for any fee
to be taken from the claimant, nor would the attorney solicit, contract for,
charge, or receive any fee from the claimant. It is also possible, however, to
construe § 3405 as prohibiting the receipt of any fee other than those lawfully
made under § 3404(c), a reading that would bar the third-party funding of
veterans’ lawyers envisioned in the Oregon statute.
Because the statutory language is not wholly clear on the point at issue, it is
appropriate to examine the statute’s legislative history. In our view, the limited
legislative history of § 3404 strongly supports the view that the original pur­
pose of these provisions was to protect veterans from unscrupulous lawyers7
and to keep lawyers from substantially diminishing any benefits granted to
veterans through the claim process.8 In Walters v. National A ss’n o f Radiation
Survivors, 473 U.S. 305 (1985), all members of the Supreme Court agreed that
protection from unscrupulous lawyers was the principal purpose of these
provisions.9
Obviously, the goal of protecting veterans from unscrupulous lawyers and
the desire to protect benefits recovered by a veteran suggest no reason to bar
third-party funding of attorneys representing veterans.10 It must be acknowl­
6 Such a reading would put a parallel construction on the tw o parts o f § 3405. The second part, dealing with
the l4w rongful[] w ithholdfing]” o f benefits, is explicitly directed tow ards w ithholding from “ any claim ant or
beneficiary.”
7 In Calhoun v. Massie, 253 U.S. 170, 173-74 (1920), the C ourt explained generally that such limits
“protect ju st claim ants from extortion o r im provident bargains.”
%See Cong. G lobe, 37th Cong., 2d Sess. 2101, 3119 (1862). See also Cong. Globe, 41st Cong., 2d Sess.
1967, 4459 (1870). In discussing the lim ited fee for veterans' agents or attorneys on pension claim s the five
dollar (at that tim e) fee was referred to as “sufficient com pensation.” The discussions clearly show the intent
o f each speaker to “protect the soldier from the rapacity o f these agents.” In less charitable mom ents agents
and attorneys are referred to as “vam pires,” an “infam ous gang o f cut throats,” “ sharks,” and a “piratical
crew .” Yet it is repeatedly noted that “the object o f [the lim it on fees o f agents and attorneys in claim ing
pensions and o th er allowances] . . . is to prevent extortionate charges,” to prevent fraud, and to m ake sure it is
“the soldier” w ho gets the money “and not the attorney.”
9 In Walters, the Supreme C ourt rejected a due process challenge to the restriction imposed by §§ 3404 and
3405; the holding o f the case does not control the issues raised-w hen a state seeks voluntarily to provide
counsel. The Suprem e C ourt upheld the facial constitutionality o f §§ 3404 and 3405. The constitutionality o f
these provisions as applied to specific individuals o r identifiable groups rem ains an open question. 473 U.S.
at 336 (concurrence), 358 (dissent).
10 However, any paym ent that directly o r indirectly dim inished the veteran's benefits w ould be inconsistent
w ith this purpose. See Richman v. Nelson, 49 N .Y .S.2d 514, 516 (1944) (paym ent to attorney from veteran’s
estate through the veteran’s sister, acting as a com m ittee, w ould “circum vent the statute”); but see Fuller v.
Dittmeier , No. 82 -0 6 4 8 C (E.D . Mo. M ar. 1, 1983) (unpublished) (decision that father o f veteran could pay
attorney to represent son); Welty v. United States , 2 F.2d 562 (6th C ir. 1924) (crim inal conviction for
violating $3 lim itation on attorney’s fees for representing W ar Risk Insurance claim ants reversed on grounds
that father was third party not covered by statute). Fuller and Welty are not directly on point, how ever,
because § 3405’s ten-dollar lim it applies to fee paym ents from any recipient or beneficiary. An im m ediate
fam ily m em ber m ight not be an independent third party in paying attorney's fees for a veteran.
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edged, however, that another goal of the federal statutes, as explained in
W alters, might be frustrated by third-party payments such as those that will be
made under the Oregon statute. In Walters, the Court concluded that “even
apart from the frustration of Congress’ principal goal of wanting the veteran to
get the entirety of the award, the destruction of the fee limitation would bid fair
to complicate a proceeding which Congress wished to keep as simple as
possible.” 473 U.S. at 326. Recognizing a relationship between the twin goals
of informality and the delivery of undiminished benefits to the Veteran, the
Court noted:
It is scarcely open to doubt that if claimants were permitted to
retain compensated attorneys the day might come when it could
be said that an attorney might indeed be necessary to present a
claim properly in a system rendered more adversary and more
complex by the very presence of lawyer representation. It is
only a small step beyond that to the situation in which the
claimant who has a factually simple and obviously deserving
claim may nonetheless feel impelled to retain an attorney simply
because so many other claimants retain attorneys. And this
additional complexity will undoubtedly engender greater ad­
ministrative costs, with the end result being that less Govern­
ment money reaches its intended beneficiaries.
Id.Notwithstanding Congress’ desire to preserve the informality of benefits
proceedings, we do not believe that this purpose is sufficient to support the
conclusion that third-party payments under the Oregon legislation would be
illegal.
The barrier erected under §§ 3404 and 3405 against “[t]he regular introduc­
tion of lawyers into the proceedings” was not made absolute. Lawyers willing
to provide representation pro bono or for $10 or less are clearly allowed under
§§ 3404 and 3405. Indeed, §§ 3402 and 3403 expressly authorize certain
“representatives” and “agents” to participate in the “preparation, presentation,
and prosecution” of veterans claims, provided that no fee is extracted from the
veteran.
Section 3402 allows the Administrator to recognize representatives of veter­
ans’ organizations and the Red Cross “in the preparation, presentation, and
prosecution of [veterans’] claims,”11 provided that such representatives certify
11 Section 3402 provides in relevant part:
(a) (1) The A dm inistrator may recognize representatives o f the A merican Red Cross, the
A m erican L egion, the Disabled A m erican V eterans, the U nited Spanish W ar Veterans, the
V eterans o f F oreign W ars, and such other organizations as he may approve, in the preparation,
p resen tatio n , and prosecution o f claim s under the laws adm inistered by the V eterans’ A dm inis­
tration.
(2) The A d m inistrator may, in h is discretion, furnish, if available, space and office facilities
fo r the use o f paid full-tim e representatives o f national organizations so recognized.
(b) No individual shall be recognized under this section —
C ontinued
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to the Administrator “that no fee or compensation of any nature will be charged
any individual for services rendered in connection with any claim.” The statute
authorizes the Administrator to provide space and office facilities for such
“paid, full-time representatives.” Id. (emphasis added).12 Similarly, § 3403
grants the Administrator power to recognize an individual for the preparation,
presentation, and prosecution of any particular claim for benefits after certifi­
cation that no fee will be charged any individual for services rendered. Al­
though these “representatives” and “agents” need not be lawyers, it seems clear
that lawyers may serve in that capacity. In fact, we are informed that veterans
organizations have used and currently are using attorneys as representatives.13
Legal aid society attorneys also represent veterans in claims before the Veter­
ans Administration. Thus, because Congress approved of some participation by
attorneys, it seems doubtful that Congress would have wished to bar represen­
tation by lawyers furnished free of charge to the veteran by a state such as
Oregon.
Finally, general principles of statutory construction support a narrow reading
of §§ 3404 and 3405. Section 3405 provides substantial criminal penalties, and
under the widely recognized “rule of lenity” criminal provisions subject to
more than one reasonable construction should be interpreted narrowly and
ambiguity should be resolved in favor of lenience. See, e.g ., Bifulco \ . United
States, 447 U.S. 381 (1980); 3 Sutherland, Statutory Construction §§ 59.03 et
seq. (4th ed. 1973). This principle of construction supports the view that these
provisions only restrict payments from the claimant or beneficiary.
For the foregoing reasons, this Department believes that the Oregon statute
providing funds for attorneys representing veteran claimants does not violate
38 U.S.C. §§ 3404 and 3405.
C h a r l e s J. C o o p e r
A ssistant Attorney General
Office o f Legal Counsel
11 (. continued)
(1) unless he has certified to the A dm inistrator that no fee o r com pensation o f any nature will
be charged any individual for services rendered in connection with any claim ; and
(2) unless, w ith respect to each claim, such individual has filed w ith the A dm inistrator a
pow er o f attorney, executed in such manner and form as the A dm inistrator may prescribe.
12 38 U.S.C. § 3402(a)(2). The extensive use o f full-tim e paid service agents from veterans’ organizations
was noted by the Suprem e Court in Walters. 473 U.S. at 31 1 -1 2 . The Court noted that 86 percent o f all
claim ants are represented by service representatives. Id. at 312 n.4.
13 In a footnote, the Walters Court referred to testim ony by tw o attorneys, one w ho had handled claim s by
veterans as a law student and another w ho was a staff m em ber o f the appellee v eterans’ organization, “Swords
to Ploughshares.” 473 U.S. at 324 n . l l .
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