Leamon Johnson , Jr. v. Anthony J. Principi , 17 Vet. App. 436 ( 2004 )

UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS
NO . 03-1039(E)
LEAMON JOHNSON , JR., APPELLANT ,
V.
ANTHONY J. PRINCIPI,
SECRETARY OF VETERANS AFFAIRS, APPELLEE.
On Appellant's Application for Attorney Fees and Expenses
(Decided January 29, 2004 )
AnnMarie D. Leikauf, of Branchburg, New Jersey, was on the pleading for the appellant.
Tim S. McClain, General Counsel; R. Randall Campbell, Assistant General Counsel; Thomas
A. McLaughlin, Special Assistant to the Assistant General Counsel; and Adam K. Llewellyn, all of
Washington, D.C., were on the pleading for the appellee.
Before FARLEY, IVERS, and STEINBERG, Judges.
STEINBERG, Judge, filed the opinion of the Court. IVERS, Judge, filed a concurring
opinion.
STEINBERG, Judge: This case is before the Court on the appellant's September 2, 2003,
application for reasonable attorney fees and expenses under the Equal Access to Justice Act,
28 U.S.C. § 2412(d) (EAJA). For the reasons set forth below, the Court will deny the application.
I. Relevant Background
The appellant, through counsel, previously sought review of a January 29, 2003, Board of
Veterans' Appeals (Board or BVA) decision that denied service connection for both a low-back
disability and a left-leg shortening. Preparatory to rendering its January 2003 decision, the Board
"undertook additional development with respect to the issues on appeal, pursuant to the authority
granted by [38 C.F.R. § 19.9(a)(2) (2002)]". Board Decision at 2. Regulatory section 19.9(a)(2) then
stated that when "further evidence, clarification of the evidence, correction of a procedural defect,
or any other action is essential for a proper appellate decision, a Board Member or panel of Members
may . . . [d]irect Board personnel to undertake the action essential for a proper appellate decision."
38 C.F.R. § 19.9(a)(2) (2002) (revision proposed in 68 Fed. Reg. 69062 (Dec. 11, 2003)). On May 1,
2003, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) issued its decision in
Disabled American Veterans v. Secretary of Veterans Affairs, 327 F.3d 1339 (Fed. Cir. 2003) (DAV
v. Sec'y), in which it held, in a regulation challenge under 38 U.S.C. § 503, that 38 C.F.R.
§ 19.9(a)(2), as revised on January 23, 2002, 67 Fed. Reg. 3099, 3104 (effective Feb. 22, 2002), in
conjunction with 38 C.F.R § 20.1304 (2002), was invalid because it was "contrary to the requirement
of 38 U.S.C. § 7104(a) that 'all questions in a matter which [under section 511(a)] is subject to
decision by the Secretary shall be subject to one review on appeal to the Secretary.'" DAV v. Sec'y,
327 F.3d at 1341-42 (quoting 38 U.S.C. § 7104(a)). The Federal Circuit noted:
Before the challenged regulations took effect, if the Board accepted
evidence not already considered by the [agency of original
jurisdiction (AOJ)] . . . [Department of Veterans Affairs' (VA)]
regulations required the Board to refer such evidence to the AOJ for
review and preparation of [a Supplemental Statement of the Case]
unless the appellant (or representative) waived in writing initial
consideration by the AOJ or the Board could grant the benefits
sought.
DAV v. Sec'y, 327 F.3d at 1343 (citing to 38 C.F.R. §§ 19.9(a)(2), 20.1304 (2002)). The Federal
Circuit continued:
Section 19.9(a)(2), in conjunction with the amended rule . . .
§ 20.1304, is inconsistent with 38 U.S.C. § 7104(a) because §
19.9(a)(2) denies appellants "one review on appeal to the Secretary'
when the Board considers additional evidence without having to
remand the case to the AOJ for initial consideration and without
having to obtain the appellant's waiver. . . . VA therefore has no
choice but to give effect to Congress's clear intent. . . .
....
. . . [E]ven though the amendments to § 19.9 may further []
VA's stated objective of efficiency, striking the sensible balance
between decreasing appeal processing times and the competing public
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policy of protecting an appellant's right to due process is a matter for
Congress, not this Court. . . . We therefore hold that, as it operates
with 38 C.F.R. § 20.1304, § 19.9(a)(2) is invalid.
DAV v. Sec'y, 327 F.3d at 1347-48.
Following the Federal Circuit's invalidation of the revised regulatory § 19.9(a)(2), the parties
filed on July 28, 2003, a joint motion to vacate the January 2003 BVA decision and remand the
matters in order for the Board to "act in compliance with [the Federal Circuit's holding in DAV v.
Sec'y, supra]" (Motion at 2); on August 1, 2003, the Court granted that motion, vacated the January
2003 Board decision, and remanded the matter for readjudication consistent with the parties' joint
motion. Johnson (Leamon), No. 03-1039(E), (Vet. App. Aug. 1, 2003). On September 2, 2003, the
appellant filed, through counsel, the instant EAJA application requesting $1,562.50 in attorney fees
and $55 in expenses, for a total amount of $1,617.50. Application (Appl.) at 4-8. The appellant
contends that he should be awarded EAJA fees because he is a prevailing party and because the
Secretary's position was not substantially justified. Appl. at 3. The Secretary filed a response, in
which he (1) appears to contend that the appellant's EAJA application should be denied because the
appellant is not a prevailing party, and (2) does contend that, even if the Court finds that the
appellant has achieved prevailing-party status, a fee award is not warranted under the Court's
precedents because the Secretary's position was substantially justified at both the administrative and
litigation stages of the proceedings. Response (Resp.) at 3.
II. Analysis
A. Jurisdiction
This Court has jurisdiction to award reasonable attorney fees and expenses pursuant to
28 U.S.C. § 2412(d)(2)(F). Here, the appellant's September 2, 2003, EAJA application was filed
within the 30-day EAJA application period set forth in 28 U.S.C. § 2412(d)(1)(B) and satisfies any
EAJA jurisdictional content requirements, because the application contains the following: (1) A
showing that, by virtue of the Court's remand, he is the prevailing party within the meaning of the
EAJA; (2) a showing that he is a party eligible for an award under the EAJA because his net worth
does not exceed $2,000,000; (3) an allegation that the position of the Secretary was not substantially
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justified; and (4) an itemized fee statement. See 28 U.S.C. § 2412(d)(1)(A), (1)(B), (2)(B);
Scarborough v. Principi, 319 F.3d 1346, 1349 (Fed. Cir.), cert. granted, __ U.S. __, 124 S. Ct. 45,
(Sept. 30, 2003); Bazalo v. West, 150 F.3d 1380, 1383-84 (Fed. Cir. 1998); Cullens v. Gober,
14 Vet.App. 234, 237 (2001) (en banc); Rollins v. Principi, 17 Vet.App. 294, 297-98 (2003).
B. Prevailing-Party Status
In order to receive an EAJA award, an EAJA applicant must be a prevailing party. See
28 U.S.C. § 2412(d)(1)(A) ("court shall award to a prevailing party . . . fees and other expenses");
Sumner v. Principi, 15 Vet.App. 256, 260-61 (2001) (en banc), aff'd sub nom. Vaughn v. Principi,
336 F.3d 1351 (Fed. Cir. 2003); Cullens, supra; Rollins, 17 Vet.App. at 298; Briddell v. Principi,
16 Vet.App. 267, 271 (2002). The appellant has the burden of demonstrating prevailing-party status
under the EAJA. Sumner, Cullens, Rollins, and, Briddell, all supra. Prevailing-party status arises
in either of two ways. The first is through a direction of the Court, evident within the terms of the
particular Court decision upon which the appellant is basing the EAJA application, for VA to award
VA benefits to the appellant. See Sumner, 15 Vet.App. at 264-65; Rollins, supra. The second is
through the grant of a merits-stage Court remand that was predicated upon administrative error. See
Sumner and Rollins, both supra. In order for a remand to have been predicated upon administrative
error, the remand must have been either (1) directed in a Court opinion, decision, or order that
contained a Court recognition of administrative error or (2) granted on the basis of a concession of
error by the Secretary. See Rollins, supra; McCormick v. Principi, 16 Vet.App. 407, 411 (2002);
Briddell, 16 Vet.App. at 271-72. "The Court will not 'investigate at the EAJA prevailing-party stage
the validity, type, or nature of the administrative error.'" Rollins, supra (quoting McCormick, supra).
In the instant case, the appellant argues that he is a prevailing party for EAJA purposes
because his appeal of the January 2003 Board decision that had denied to him VA disability
compensation resulted in the vacatur of that decision. Appl. at 2-3. The Secretary suggests that the
appellant is not a prevailing party because the appellant obtained remand "based on matters
independent from [his] appeal to th[e] Court" (Resp. at 2-3) and because "any material alteration in
the parties' legal relationship came about in a manner distinct from what 'Congress sought to promote
in the fee statute'" (Resp. at 3 (citing Texas Teachers Ass'n v. Garland Ind. Sch. Dist., 489 U.S. 782,
792-93 (1989))).
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In the Court's August 2003 remand order, the Court neither directed VA to award benefits,
see Sumner and Rollins, both supra, nor indicated that remand was based on either a "Court
recognition of administrative error" or the Secretary's "concession of error", Rollins and McCormick,
both supra. The Court's remand of the appellant's claim was based on the retroactive application of
the Federal Circuit's decision in DAV v. Sec'y, supra, and, therefore, was not a remand based on
administrative error. See Sachs v. Principi, 15 Vet.App. 414, 416 (2002) (concluding that "a remand
on the merits that is based on the rule of retroactive application is not a remand predicated upon
administrative error for purposes of [the] EAJA . . . [and, t]hus, for purposes of EAJA fees and
expenses, the appellant is not a prevailing party as a result of the Court's decision [on the merits]");
see also Flemming v. Principi, 16 Vet.App. 52, 53 (2002) (determining that "an appellant receiving
a remand under the rule of retroactive application, that is, an appellant who receives a remand solely
because of a change in caselaw during the pendency of his or her appeal, is not an EAJA prevailing
party"). Accordingly, in the instant case the appellant is not a prevailing party for EAJA purposes
and his EAJA application must be denied. See 28 U.S.C. § 2412(d)(1)(A); Sumner, supra; Halpern
v. Principi, 17 Vet.App. 225, 227 (2002); Flemming, Sachs, and McCormick, all supra. But see
Flemming, 16 Vet.App. at 55-59 (Steinberg, J., dissenting in part); Halpern, 15 Vet.App. at 419-20
(Steinberg, J., dissenting in part).
C. Substantial Justification
Although the Court concludes that the appellant is not a "prevailing party" for purposes of
an award of EAJA fees, the Court also concludes that even if the Court had found the appellant to
be a prevailing party, his EAJA application would still be denied. Where, as here, an appellant
alleges that the Secretary's position was not substantially justified, the Secretary has the burden to
prove that his position was substantially justified at both the administrative and litigation stages. See
Cullens, supra; Locher v. Brown, 9 Vet.App. 535, 537 (1996); Stillwell v. Brown, 6 Vet.App. 291,
301 (1994). "'[A] position can be justified even though it is not correct, and . . . it can be
substantially (i.e., for the most part) justified if a reasonable person could think it correct, that is, if
it has a reasonable basis in law and fact.'" Stillwell, 6 Vet.App. at 302 (quoting Pierce v.
Underwood, 487 U.S. 552, 566 n.2 (1988)). In Stillwell, the Court provided the following further
amplification:
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Two special circumstances may also have a bearing upon the
reasonableness of the litigation position of . . . VA, and of the action
or inaction by . . . VA at the administrative level. One is the
evolution of VA benefits law since the creation of this Court that has
often resulted in new, different, or more stringent requirements for
adjudication. The second is that some cases before this Court are
ones of first impression involving good[-]faith arguments of the
government that are eventually rejected by the Court.
Stillwell, 6 Vet.App. at 303. Furthermore, this Court established in Stillwell the following "totality
of the circumstances" standard to determine whether the Secretary has carried that burden:
VA must demonstrate the reasonableness, in law and fact, of the
position of . . . VA in a matter before the Court, and of the action or
failure to act by . . . VA in a matter before . . . VA, based upon the
totality of the circumstances, including merits, conduct, reasons
given, and consistency with judicial precedent and VA policy with
respect to such position, and action or failure to act, as reflected in the
record on appeal and the filings of the parties before the Court.
Stillwell, 6 Vet.App. at 302.
1. Administrative Stage. In demonstrating substantial justification at the administrative
level in a case in which the Secretary's regulation has been invalidated, the Secretary, as noted above,
must prove substantial justification both in promulgating the regulation and in his position during
the adjudication of the claim before the agency. See Felton v. Brown, 7 Vet.App. 276, 283 (1994)
(Felton II). The appellant argues that the Secretary's position was not substantially justified because
VA failed "to follow its own regulations . . . [and] acted in violation of 38 U.S.C. §§ 7104(a) and
5103(b)." Appl. at 3. The Secretary counters that he was substantially justified at the administrative
level because the invalidation of the revised regulatory § 19.9(a)(2) occurred subsequent to the Board
decision and because he acted reasonably in promulgating that revised regulation. Resp. at 4.
In Felton II, this Court denied an EAJA application based on an underlying decision in which
the Court had invalidated a VA regulation because "it was not authorized by the statute." Felton II,
7 Vet.App. at 282-83. In the Felton underlying merits decision, the Court had (1) determined that
the regulation's "restriction is clearly in contravention of the statute, and the regulation is, therefore,
neither 'appropriate to carry out' nor 'consistent with' the law under 38 U.S.C. § 501(a)"; (2)
determined that that "added restriction is an unauthorized limitation on the scope of [the governing
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statute]"; and (3) concluded that because the statute "clearly mandated" the benefit sought, the
regulation "violates the statue by denying" that benefit. Felton v. Brown, 4 Vet.App. 363, 371 (1993)
(Felton I). During the EAJA litigation, the Court held: "Although we held in the underlying case
on the merits that the Secretary's interpretation of the statute, as set forth in [the regulation], was in
excess of statutory authority, we cannot say that the Secretary's position had no reasonable basis in
law or in fact." Felton II, 7 Vet.App. at 283. The Court concluded: "Given the statutory silence on
the particular matter and the lack of a conflict with adverse precedent, the Secretary's position during
this part of the administrative phase, i.e., in promulgating the regulation at issue, was substantially
justified." Id. at 284.
Similarly, in Ozer v. Principi, 16 Vet.App. 475 (2002) (Ozer II), this Court, in reliance on
Felton II, held that the Secretary's position in promulgating the regulation was substantially justified,
despite a later invalidation of the regulation at issue in that case, because the "case was one of first
impression", "there was no prior disapproval of or challenge to the regulation", and a reasonable
person could find that the Secretary's position was reasonably based in fact or law. Ozer II,
16 Vet.App. at 479. The decision in the underlying merits adjudication in Ozer had invalidated a
regulation because it imposed a limitation that was neither contained in, nor authorized by, the
statute at issue. Ozer v. Principi, 14 Vet.App. 257, 264 (2001) (Ozer I). In denying an award of
EAJA fees, the Court determined that Ozer I was indistinguishable from Felton I because "the
essence of the merits decision on the validity of the regulation in each case is the same: The
regulation contravened the plain language of the statute and thus was invalid." Ozer II,
16 Vet.App. at 478. Based on Felton I, the Court held that the Secretary was substantially justified
in promulgating the regulation. Ibid.
In the instant case, the Secretary argues that his position at the administrative level was
substantially justified because "VA's stated intent behind the new regulations was 'to shorten appeal
processing time and to reduce the backlog of claims awaiting decision'" (Resp. at 6 (citing 66 Fed.
Reg. 40942 (Aug. 6, 2001) (publishing proposed regulation for notice and consent)); he further
asserts that the final rule was adopted and published only after "VA acknowledged numerous
comments from a variety of commenters." Resp. at 6. Although the appellant contends that the
Secretary's position was not substantially justified because VA failed "to follow its own regulations
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. . . [and] acted in violation of 38 U.S.C. §§ 7104(a) and 5103(b)" (Appl. at 3), he has failed to show
how the instant case is distinguishable from either Ozer II or Felton II. Because the Court holds that
the Federal Circuit's holding in DAV v. Sec'y, supra, is premised on the same reasoning as Ozer I and
Felton I, and that, as in those cases, DAV v. Sec'y was a case of first impression and there had been
no prior adverse reaction to the proposed revision of regulatory § 19.9(a)(2), it cannot be said that
the Secretary was unreasonable in promulgating that regulation.
As to VA's application of the revised regulation in the instant case, the Court cannot find that
the Secretary's position at the administrative level was not substantially justified because "the Board
clearly relied upon then-current law." Clemmons v. West, 12 Vet.App. 245, 247 (1999) (discussing
Rhodan v. West, 12 Vet.App. 55 (1998)); see Wisner v. West, 12 Vet.App. 330, 333-34 (1999), aff'd
on other grounds sub nom. Abbs v. Principi, 237 F.3d 1342 (Fed. Cir. 2001); see also Owen v.
United States, 861 F.2d 1273, 1274-75 (Fed. Cir. 1988) (holding that "government position [is]
substantially justified when it [is] taken, based on precedents then standing", even though they are
later overruled). Furthermore, the validity of the § 19.9 revision had not been questioned until
several veterans organizations had filed with the Federal Circuit a petition for review of, inter alia,
the regulation at issue here. Cf. Felton II and Ozer II, both supra (not involving challenge, under
38 U.S.C. § 503, to issuance of regulation).
2. Litigation Stage. Regarding the Secretary's litigation position, the Court looks to the
circumstances surrounding the resolution of the dispute to determine whether the Secretary's position
was substantially justified. See Dillon v. Brown, 8 Vet.App. 165, 168 (1995); Carpenito v. Brown,
7 Vet.App. 534, 537 (1995); Bowyer v. Brown, 7 Vet.App. 549, 553 (1995). Because the only
litigation position taken by the Secretary before this Court was a timely request for remand, the Court
holds that the Secretary acted reasonably and was substantially justified at the litigation stage as well.
See Wisner, 12 Vet.App. at 334 (holding Secretary's litigation position substantially justified where
he moved quickly for remand based on subsequent change in caselaw); Stilwell, 6 Vet.App. at 302
(indicating that speed and cooperation in resolving matter is one factor by which to measure
reasonableness of VA's litigation position).
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III. Conclusion
On the basis of the foregoing analysis and the parties' pleadings, the Court denies the
appellant's September 2003 EAJA application.
APPLICATION DENIED.
IVERS, Judge, concurring in part: I concur in the Court's holding that the appellant fails to
meet the legal requirements for prevailing party status for the purposes of awarding EAJA fees.
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