Jackson v. McDonald , 635 F. App'x 858 ( 2015 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
FRANCIS M. JACKSON,
Claimant-Appellant
v.
ROBERT A. MCDONALD, SECRETARY OF
VETERANS AFFAIRS,
Respondent-Appellee
______________________
2014-7088
______________________
Appeal from the United States Court of Appeals for
Veterans Claims in No. 12-738, Judge Mary J. Schoelen,
Judge Robert N. Davis, Judge William A. Moorman.
______________________
Decided: June 2, 2015
______________________
KENNETH M. CARPENTER, Law Offices of Carpenter
Chartered, Topeka, KS, argued for claimant-appellant.
BARBARA E. THOMAS, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, argued for respondent-appellee. Also
represented by STUART F. DELERY, ROBERT E. KIRSCHMAN,
JR., KIRK T. MANHARDT; Y. KEN LEE, RACHAEL BRANT,
2 JACKSON v. MCDONALD
United States Department of Veterans Affairs, Washing-
ton, DC.
______________________
Before NEWMAN, REYNA, and TARANTO, Circuit Judges.
TARANTO, Circuit Judge.
The Department of Veterans Affairs denied an attor-
ney’s request for payment of a contingent fee that he
claimed on the basis of his representation of a veteran
seeking disability benefits. The Court of Appeals for
Veterans Claims upheld the denial, concluding that 38
U.S.C. § 5904, which provides for direct Department
payment of contingent fees, does not apply in this case
because of the timing of the veteran’s death—before he
received any disability compensation. Jackson v.
Shinseki, 26 Vet. App. 460, 464 (2014). We reject that
statutory interpretation, concluding that § 5904 authoriz-
es the fee payment in the circumstances of this case. We
also reject, as misinterpreting a regulation, the Depart-
ment’s sole basis for not exercising the § 5904 authority to
pay the requested fee. Accordingly, we reverse the Veter-
ans Court’s decision denying the fee.
BACKGROUND
Francis Jackson, an attorney, entered into a fee
agreement with H. M. Finemore, a veteran, in 1998. They
agreed that Mr. Jackson would represent Mr. Finemore in
pressing the latter’s claim for veteran’s benefits based on
back, leg, and foot disabilities. The agreement included
the following provision (J.A. 30):
3. CONTINGENT FEE. Client agrees to have the
Department of Veterans Affairs pay to the attor-
ney on the client’s behalf a fee equal to 20 percent
of the total amount of any past-due benefits
awarded on the basis of the Client’s claim with
the U.S. Department of Veterans Affairs. It is
JACKSON v. MCDONALD 3
understood that this Contingent fee is to be paid
by the VA directly to the Attorney from any past-
due benefits awarded on the basis of the Client’s
claim. However, Client remains liable for the
amounts of the contingent fee of 20 percent of any
past-due benefits awarded on the basis of the Cli-
ent’s claim until and unless the fee is paid to the
Attorney by the VA, and Client agrees to pay said
contingent fee directly to Attorney in the event
the VA fails to do so.
After a long review process, Mr. Finemore received a
favorable ruling from the Board of Veterans’ Appeals in
May 2007, but the ruling was limited: it did not resolve all
issues needing resolution for a final determination on the
claim for benefits. Specifically, the Board concluded that
Mr. Finemore’s disabilities were service connected. But it
remanded the case to the relevant Regional Office of the
Department for disability-rating and effective-date de-
terminations, which together would fix the amount of
disability-benefits compensation due Mr. Finemore.
Mr. Finemore died on January 20, 2008, before the
regional officer issued a decision implementing the
Board’s order. On January 31, 2008, the officer—
unaware of Mr. Finemore’s death—signed a “Rating
Decision” that determined the appropriate disability
ratings for particular periods, from the effective date of
the award forward, for Mr. Jackson’s service-connected
disabilities. The Department received news of Mr.
Finemore’s death a few days later, on February 4, 2008.
The Veterans Court noted that the record does not dis-
close whether the Department ever mailed out the Rating
Decision. Jackson, 26 Vet. App. at 461. And it is undis-
puted that, in light of Mr. Finemore’s death, the Depart-
ment never paid any compensation to Mr. Finemore or his
estate. See 38 U.S.C. §§ 5112(b), 5121; Padgett v.
Shinseki, 643 F.3d 950, 955 n.5 (Fed. Cir. 2011).
4 JACKSON v. MCDONALD
In January 2009, Mr. Finemore’s surviving spouse,
through Mr. Jackson, filed a claim for accrued benefits
based on what Mr. Finemore was due when he died. See
§ 5121. A few months later, the Regional Office awarded
accrued benefits, giving as a reason for the decision the
exact disability ratings that had been set forth in the 2008
“Rating Decision.” Two months later, the office issued its
calculation of the total amount of the award, $136,652,
which followed mechanically from those rating determina-
tions. The Department paid $109,321.60 of the total to
Mr. Finemore’s surviving spouse, and it withheld
$27,330.40 (i.e., twenty percent) “for possible attorney
fees.” J.A. 91.
The withholding resulted from Mr. Jackson’s request
to the Department to pay him a twenty-percent contin-
gent fee. He based the request on his agreement with Mr.
Finemore, the Department’s determination to grant Mr.
Finemore disability benefits, and the statutory provision
for direct payment of contingent fees, 38 U.S.C. § 5904(d).
The Department denied Mr. Jackson’s request, based on
Mr. Finemore’s death and the absence of an agreement
between Mr. Jackson and Mrs. Finemore. The Depart-
ment reasoned that “[t]he past-due benefits can only be
payable as accrued benefits and if the accrued benefits
claimant has signed a fee agreement with” the attorney
seeking the fee payment. J.A. 52.
After the Board reached a similar conclusion, Mr.
Jackson appealed under 38 U.S.C. § 7252 to the Veterans
Court, which upheld the denial of Mr. Jackson’s claim for
fees. It concluded that the Department never awarded
Mr. Finemore any past-due benefits on the basis of his
claim within the meaning of § 5904(d). Jackson, 26 Vet.
App. at 463–64, 467. It also concluded that the subse-
quent grant of accrued benefits to Mr. Finemore’s surviv-
ing spouse did not implicitly constitute an award to Mr.
Finemore on the basis of his original claim for disability
benefits, again interpreting § 5904(d)’s requirements. Id.
JACKSON v. MCDONALD 5
at 464–67. Mr. Jackson filed a timely appeal to this court
under 38 U.S.C. § 7292(a).
DISCUSSION
We have jurisdiction to review a decision of the Veter-
ans Court where a party challenges the interpretation or
validity of a statute or regulation or the interpretation of
constitutional provisions. 38 U.S.C. § 7292(c). In con-
ducting that review, we must decide “all relevant ques-
tions of law.” § 7292(d)(1). In a case like this one, not
involving a constitutional issue, we may not “review (A) a
challenge to a factual determination, or (B) a challenge to
a law or regulation as applied to the facts of a particular
case.” § 7292(d)(2). “[S]tatutory interpretations by the
Veterans Court are reviewed de novo” by this court. Cook
v. Principi, 353 F.3d 937, 938 (Fed. Cir. 2003).
A
Section 5904 establishes the congressionally author-
ized framework for attorneys to represent benefits claim-
ants at the Department on a contingent-fee basis. It
limits when an attorney can begin charging a client for
representation, § 5904(c), caps a contingent fee at twenty
percent of the amount of past-due benefits awarded,
§ 5904(d)(1), and states the allowable bases for such fees,
§ 5904(d)(3). It also provides that the parties may agree
that the fee “is to be paid to the agent or attorney by the
Secretary directly from any past-due benefits awarded on
the basis of the claim.” § 5904(d)(2)(A)(i). The statute
then provides in similar language that, when there is
such an agreement, “[t]o the extent that past-due benefits
are awarded in any proceeding . . . the Secretary may
direct that payment of any fee to an agent or attorney . . .
be made out of such past due benefits.” § 5904(d)(3).
There is no dispute that Mr. Jackson and Mr.
Finemore “entered into a valid contingency fee agree-
ment” that satisfied § 5904’s requirements. Jackson, 26
6 JACKSON v. MCDONALD
Vet. App. at 461. The Department nevertheless denied
Mr. Jackson’s claim for fees because it interpreted the
statutory phrase “past-due benefits awarded on the basis
of the claim,” § 5904(d)(2)(A)(i), to require more than
determinations that a veteran’s disability is service
connected and of the veteran’s disability ratings for the
periods at issue from the effective date of the award
forward. We conclude, to the contrary, that the statute
does not require more than those determinations—which
were made for Mr. Finemore’s claim.
This is not the first time we have resolved a dispute
over the meaning of “past-due benefits awarded on the
basis of the claim.” In Snyder v. Nicholson, 489 F.3d 1213
(Fed. Cir. 2007), we rejected the Department’s interpreta-
tion that the amount of an “award,” as used in § 5904,
depended on “the amount actually payable” to the veter-
an. Id. at 1219. Mr. Snyder, under a proper contingent-
fee agreement, represented a veteran who received a
determination from the Department that he had a ser-
vice-connected disability, followed by a rating decision
that assigned a disability rating and effective date for
that rating. The Department gave the veteran a 70-
percent disability rating, but it could not pay him that
amount: because he was incarcerated, statutes and regu-
lations required that the Department pay him at only the
10-percent level. When the Department then paid Mr.
Snyder his contingent fee based on the 10-percent, rather
than 70-percent, level, we rejected the Department’s
position, holding that the statute commanded payment
based on the 70-percent rating. “The word ‘award’ is clear
and unambiguous,” we said, and “means the amount
stated as the award for success in pursuit of a claim for
benefits.” Id. That amount “is distinct from the amount
payable” to the veteran, id., and is “determined by the
claimant’s disability rating—beginning on the effective
date and continuing through the date of the award,” id. at
1218.
JACKSON v. MCDONALD 7
Although the court in Snyder was interpreting the
amount of the relevant award under § 5904, not whether
an award occurred, the court’s explanation that the award
is determined by the service-connection determination,
disability rating, and effective date, and not what was
actually paid or payable to the veteran, carries over to the
particular circumstances of this case. When the Depart-
ment determines that a veteran suffers from a service-
connected disability, it “must assign a disability rating to
the claimant by determining ‘the average impairments of
earning capacity resulting from [the claimant’s] injuries
in civil occupations.’ ” Snyder, 489 F.3d at 1218 (quoting
38 U.S.C. § 1155). That rating, combined with the De-
partment’s determination of an effective date for the
rating, constitutes an award of past-due benefits, at least
in the circumstances presented here. The Department
has offered us no principled distinction, relevant to this
context, between a determination of the disability ratings
and effective dates, the two factors that dictate the award
amount, and the final calculation of that amount. Nor
has the Department contended that, once the foregoing
determinations were made in this case, anything material
remained to be done to calculate the amount of compensa-
tion, which was fixed mechanically by using figures, set
by statute, that defined the monthly payment for a given
disability rating for the periods covered by the award of
past-due benefits. Id.; 38 U.S.C. §§ 1114–15, 1134–35; 38
C.F.R. § 20.609(h)(3)(i) (2007) (currently codified as
amended at 38 C.F.R. § 14.636(h)(3)(i)); see U.S. Dep’t of
Veterans Affairs, Compensation, www.benefits.va.gov-
/compensation/resources_comp01.asp. 1
1 There is no suggestion here that the delay be-
tween the rating decision and the calculation of the past-
due-benefits amount based on that decision altered the
8 JACKSON v. MCDONALD
All the determinations required for an award were
made for Mr. Finemore’s claim. The Board determined
that Mr. Finemore’s disabilities were service connected in
its May 2007 decision. In the January 31, 2008 rating
decision, the regional officer made all the remaining non-
mechanical judgments: he determined the appropriate
disability ratings for Mr. Finemore’s service-connected
disabilities for each period at issue from the effective date
forward. By those two decisions, which left nothing but
clerical computations to complete in order to produce the
bottom-line dollar amount, the officer “awarded” “past-
due benefits,” and the award was “on the basis of the
claim” Mr. Finemore had before the Department.
§ 5904(d)(2)(A)(i).
Nothing in the statutory language requires more. In
particular, nothing in the statute requires that the deci-
sion be communicated to the veteran or, as Snyder makes
clear, that money actually be paid out. See 489 F.3d at
1217 n.1 (attorney must be paid 20 percent of full award
even if veteran will never receive full award amount).
And the statute does not require announcement of a
dollar figure, when calculating that figure requires no
more than a clerical task consisting of applying the sub-
stantive determinations (of ratings for given periods) to
standard statutory tables. Indeed, it is common to refer
to an “award” of “benefits” when the dollar amounts are
calculated amount. We note that this court has affirmed
the Department’s refusal to pay “interest or apply[] cost-
of-living increases to retroactive awards.” Arnesen v.
Principi, 300 F.3d 1353, 1359 (Fed. Cir. 2002); see Smith
v. Principi, 281 F.3d 1384, 1388 (Fed. Cir. 2002). Moreo-
ver, in a case like this, current Department regulations fix
the amount as of the “date of the initial disability rating
decision.” 38 C.F.R. § 14.636(h)(3)(i).
JACKSON v. MCDONALD 9
uncalculated, as when future benefits are awarded, to be
calculated based on statutory tables that will change as
the years pass. See 38 U.S.C. § 5110 (specifying
“[e]ffective dates of awards,” even though calculated
award amount may change); see also Veterans’ Compen-
sation Cost-of-Living Adjustment Act of 2014, Pub. L. No.
113-181, § 2, 128 Stat. 1916, 1916–17; Veterans’ Compen-
sation Cost-of-Living Adjustment Act of 2013, Pub. L. No.
113-52, § 2, 127 Stat. 582, 582–83; 38 U.S.C. § 1104. The
term “award” in other contexts likewise does not require
specification of a dollar amount that can be calculated
clerically. See, e.g., Muller Boat Works, Inc. v. Unnamed
52’ House Barge, 464 F. Supp. 2d 127, 149 (E.D.N.Y. 2006)
(“Defendants are awarded . . . post-judgment interest,
calculated by the Clerk of the Court at the rate prescribed
by [statute].”); United States v. Tate & Lyle N. Am. Sug-
ars, 228 F. Supp. 2d 308, 327 (S.D.N.Y. 2002) (similar).
This understanding of the word “award” serves the ev-
ident function of the statutory provision at issue. Once
essentially all nonclerical determinations have been
made, the lawyer typically need do no more work to
further the client’s interests in securing the amount that
follows from those determinations, and success (for that
result) is not contingent on the clerical calculation.
Indeed, the applicable Department regulations already
treat any further adjudication on the client’s behalf (such
as to alter the disability rating or effective date) as a
separate “phase” of representation, and the Department
separately pays any contingent fee due to a subsequent
increase in the award amount. 38 C.F.R. § 20.609(h)(3)(i)
(2007) (currently codified as amended at 38 C.F.R.
§ 14.636(h)(3)(i)). No statutory purpose would be served—
to the contrary, the congressional interest in encouraging
lawyers to take on representation of veterans would be
disserved—by making entitlement to the fee depend on
the Department’s completion of the clerical task that
remains.
10 JACKSON v. MCDONALD
In this case, moreover, we see nothing in the statute
that precludes viewing the regional officer’s January 31,
2008 rating decision as an “award” of “past-due benefits”
“on the basis of [Mr. Finemore’s] claim,” § 5904(d)(2)(A)(i),
just because, unbeknownst to the officer, Mr. Finemore
had died a few days before the decision. The statutory
language does not require that result, and the Depart-
ment itself treated the January 31 decision as a proper
rating decision. For example, the regional office’s state-
ment of the case on Mr. Jackson’s fee request, which the
office must prepare before a claim goes before the Board,
lists a timeline of “Adjudicative Actions” relevant to Mr.
Finemore’s claim. J.A. 88–89. One of the listed adjudica-
tions, labeled “01-31-2008[:] Rating Decision granting
service connection,” summarizes the substance of the
regional officer’s disability-rating determination. J.A. 89.
Likewise, when the regional office later awarded Mrs.
Finemore’s accrued-benefits claim, it stated that “[a]
review of the record reveals at the time of death BVA had
granted service connection . . . with an evaluation of 60
percent effective September 7, 1995,” and listed the other
rating percentages and effective dates from the January
31 rating decision. J.A. 66. And the decisions from the
regional office and the Board regarding Mr. Jackson’s
contingent fee never called into question whether the
Department had “awarded” Mr. Finemore past-due bene-
fits—they stated only that payment could not be made.
See J.A. 52 (office decision: “We are unable to pay any
Attorney Fees due you due to the veteran’s death. The
past-due benefits can only be payable as accrued benefits
. . . .” (emphasis added)); J.A. 81 (Board decision: “Because
a cash payment ‘from which the fee may be deducted’ was
never made, VA cannot honor the Contingent Fee Agree-
ment between the Veteran and the appellant.” (emphases
added)).
Under the foregoing analysis, the Department made
an award of past-due benefits on January 31, 2008, based
JACKSON v. MCDONALD 11
on Mr. Finemore’s claim. No precedent supports a contra-
ry conclusion. The ruling here applies § 5904’s language
to the award based on the claim of Mr. Finemore, with
whom Mr. Jackson had a fee agreement, not to the award
based on the distinct, though purely “derivative,” claim of
Mrs. Finemore for accrued benefits under § 5121.
Zevalkink v. Brown, 102 F.3d 1236, 1241 (Fed. Cir. 1996);
see also Padgett, 643 F.3d at 955 n.5. Mr. Jackson is not
invoking § 5904 based on an award to a claimant different
from the client with whom he had an agreement. This
case thus is unlike Hanlin v. Nicholson, 474 F.3d 1355,
1360 (Fed. Cir. 2007), in which this court held that an
attorney could not collect fees based on an award under
38 U.S.C. § 1314 to a deceased veteran’s disabled son,
with whom he had no fee agreement, even though the
attorney had a fee arrangement with a surviving spouse
who obtained an award under 38 U.S.C. § 1311 and the
two awards were related. No authority contradicts our
holding that § 5904 applies to Mr. Jackson’s request for
fees based on the claim of his client, Mr. Finemore.
B
Our conclusion about the statute does not fully resolve
this case. The statute says that, where there is a qualify-
ing fee agreement and past-due-benefits award, the
Department “may” direct payment of the fee out of the
past-due benefits. § 5904(d)(3). In this court, however,
the Department presents only one ground for withholding
payment under that “may” language. And that ground is
legally incorrect.
The Department relies on a regulation that prevents
payment of fees unless “[t]he award of past-due benefits
results in a cash payment . . . from which the fee may be
deducted.” 38 C.F.R. § 20.609(h)(1)(iii). As a straightfor-
ward factual matter, the award to Mr. Finemore did
“result[ ] in a cash payment . . . from which the fee may be
deducted,” namely, the cash payment to Mrs. Finemore on
12 JACKSON v. MCDONALD
her purely derivative accrued-benefits claim, from which
the Department did withhold Mr. Jackson’s requested fee.
The Department returns, therefore, to its statutory posi-
tion and contends that § 5904 prohibits the natural read-
ing of the regulation by requiring that the qualifying
award of past-due benefits on a veteran’s claim result in a
cash payment to the veteran. Gov’t Br. at 25–28; see id.
at 26–27 (relying on Hanlin); id. at 28 (“Because no award
of past-due benefits to Mr. Finemore resulted in a cash
payment to him, Mr. Jackson’s representation of Mr.
Finemore does not fulfil[l] the conditions under which the
VA, pursuant to its own regulation, will direct a payment
of fees to an attorney.”). But that is just the view of the
statute that we have rejected as contrary to a proper
construction. The statute does not require payment to the
veteran for the fee-supporting benefit award to exist. The
statute thus supplies no reason to give the current regula-
tion a reading contrary to the straightforward meaning of
its terms.
The Department suggests in passing that there is
something inequitable about paying Mr. Jackson in the
circumstances here. It says: “[s]ection 5904 does not
permit the deduction of Mr. Jackson’s attorney fee from
Ms. Finemore’s ‘cash payment’ ”; Mr. Jackson’s agreement
with Mr. Finemore “cannot authorize the payment of Ms.
Finemore’s money to Mr. Jackson”; and “[w]ithout Ms.
Finemore’s written permission, the VA cannot divert a
chunk of her benefits to her late husband’s attorney.”
Gov’t Br. at 25, 26, 28. Even as a general matter, the
Department has shown no inequity in lowering the
amount available to a surviving spouse by subtracting the
attorney fee earned in securing all of the determinations
needed to produce the ultimate, purely derivative, ac-
crued-benefit award. And in this particular case, with
Mrs. Finemore having died months even before the Veter-
ans Court argument took place, Jackson, 26 Vet. App. at
462, the Department is ill-positioned to invoke “Ms.
JACKSON v. MCDONALD 13
Finemore’s money” in an appeal to equity. At oral argu-
ment in this court, the Department stated that it lacks
authority to pay Mrs. Finemore’s estate the money it
withheld from its payment in 2009 and plans to keep the
money itself. Oral Arg. at 15:20–15:45. As between the
Department and Mr. Jackson, equity does not appear to
lie with the Department.
CONCLUSION
For those reasons, we reverse the decision of the
Court of Appeals for Veterans Claims.
REVERSED