Johnson v. McDonald

United States Court of Appeals

for the Federal Circuit

______________________

MARVIN O. JOHNSON,

Claimant-Appellant,

v.

ROBERT A. MCDONALD,

Secretary of Veterans Affairs,

Respondent-Appellee.

______________________

2013-7104

______________________

Appeal from the United States Court of Appeals for

Veterans Claims in No. 10-1785, Judge Mary J. Schoelen.

______________________

Decided: August 6, 2014

______________________

KENNETH M. CARPENTER, Carpenter, Chartered, of

Topeka, Kansas, argued for claimant-appellant.

MARTIN F. HOCKEY, JR., Assistant Director, Commer-

cial Litigation Branch, Civil Division, United States

Department of Justice, of Washington, DC, argued for

respondent-appellee. With him on the brief STUART F.

DELERY, Assistant Attorney General, and BRYANT G.

SNEE, Acting Director. Of counsel on the brief were DAVID

J. BARRANS, Deputy Assistant General Counsel, and

2

JOHNSON v. MCDONALD

MARTIE ADELMAN, Attorney, United States Department of

Veterans Affairs, of Washington, DC.

______________________

Before MOORE, O’MALLEY, and CHEN, Circuit Judges.

Opinion for the court filed by Circuit Judge MOORE.

Concurring opinion filed by Circuit Judge O’MALLEY.

MOORE, Circuit Judge.

Marvin O. Johnson appeals from the decision of the

Court of Appeals for Veterans Claims (Veterans Court)

denying his request for referral for extra-schedular con-

sideration of his service-connected disabilities. Because

the Veterans Court’s interpretation of 38 C.F.R.

§ 3.321(b)(1), which governs referral for extra-schedular

consideration, contravenes the plain meaning of the

regulation, we reverse and remand.

I.

When determining compensation for service-

connected disabilities, the Department of Veterans Affairs

(DVA) generally assigns disability ratings based on a

schedule of ratings for specific injuries and diseases.

Ratings are typically assigned based on the degree of

disability and the effect it has on a veteran’s earning

capacity, but are sometimes also based on other factors

such as effect on social functioning or effect on daily

activities. In some cases the schedular criteria are inade-

quate to capture the full extent and impact of the veter-

an’s disability. The DVA has thus provided by regulation

that in such “[e]xceptional cases,” the veteran may be

eligible for an “extra-schedular” disability rating. 38

C.F.R. § 3.321(b)(1). There is no dispute that § 3.321(b)(1)

entitles a veteran to consideration for referral for extra-

schedular evaluation based on an individual disability not

adequately captured by the schedular evaluations. This

appeal concerns whether § 3.321(b)(1) also entitles a

3

JOHNSON v. MCDONALD

veteran to consideration for referral for extra-schedular

evaluation based on multiple disabilities, the combined

effect of which is exceptional and not captured by schedu-

lar evaluations.

Mr. Johnson served in the U.S. Army from May 1970

to December 1971. Years after leaving the service, Mr.

Johnson filed a claim for increased disability ratings for

his service-connected disabilities, including rheumatic

heart disease (then rated 10% disabling), and degenera-

tive changes of the right and left knees (each knee rated

10% disabling). A DVA regional office (RO) denied Mr.

Johnson’s claims, finding that he was not entitled to a

rating of total disability based on individual unemploya-

bility (TDIU). Mr. Johnson appealed to the Board of

Veterans’ Appeals (Board), and the Board affirmed the

denial of Mr. Johnson’s TDIU claim. The Board also

denied Mr. Johnson’s claim for extra-schedular considera-

tion of the combined impact of his service-connected

rheumatic heart disease and right knee disability under

§ 3.321(b)(1). Mr. Johnson appealed to the Veterans

Court, arguing that the plain language of § 3.321(b)(1)

requires the DVA to consider his disabilities both individ-

ually and collectively in deciding whether he was entitled

to an extra-schedular evaluation.

In an en banc decision, a majority of the Veterans

Court affirmed the Board. Johnson v. Shinseki, 26 Vet.

App. 237, 248 (2013). It found the language of

§ 3.321(b)(1) ambiguous, explaining that “it is not clear

from the language of the regulation whether an extra-

schedular evaluation is to be awarded solely on a disabil-

ity-by-disability basis or on the combined effect of a

veteran’s service-connected disabilities.” Id. at 243. The

Veterans Court concluded that, given the ambiguity in

the language, it should defer to the DVA’s interpretation

of the regulation. Id. It found that the DVA interpreted

§ 3.321(b) in the Veterans Benefits Administration Adju-

dication Procedure Manual (VBA Manual) Rewrite M21-

4

JOHNSON v. MCDONALD

1MR, Part III, Subpart. iv, chapter 6, § B.5.c, which states

that a claim is to be submitted for extra-schedular consid-

eration “if the schedular evaluations are considered

inadequate for an individual disability.” Id. at 244. The

Veterans Court determined that the DVA’s interpretation

was entitled to substantial deference because it was not

unreasonable, plainly erroneous, or inconsistent with the

regulation and statutory scheme. Id. at 244–45. Based

on the DVA’s interpretation as reflected in the VBA

Manual, the Veterans Court concluded that the Board

was not required to consider whether Mr. Johnson was

entitled to referral for extra-schedular consideration of his

disabilities on a collective basis. Id. at 245.

Judge Moorman filed an opinion concurring in the re-

sult. Id. at 249 (Moorman, J., concurring). He explained

that the plain language of § 3.321(b)(1) “on its face, ap-

pears most easily construed to convey only one meaning—

that a veteran’s collective service-connected disabilities

may be considered in determining whether referral for an

extraschedular rating is warranted.” Id. at 248. Howev-

er, he concluded that the DVA “has offered an alternative

meaning for the language in the regulation that is plausi-

ble, albeit not obvious.” Id. He explained that based on

the “deference due to an agency in its interpretation of its

own regulations, [he] reluctantly conclude[d] that the

Secretary has presented a plausible, even though

strained, alternative reading of § 3.321(b)(1) that war-

rants an affirmance of the Board’s decision.” Id. at 251.

Chief Judge Kasold dissented, concluding that

§ 3.321(b)(1) is not ambiguous. Id. at 254 (Kasold, C.J.,

dissenting). He stated that the plain language of the

regulation calls for referral for extra-schedular considera-

tion if the schedular evaluations are inadequate to com-

pensate a veteran for his or her service-connected

disabilities, either collectively or individually. Id. at 255–

57. Judge Davis also filed a dissenting opinion, in which

Judge Bartley joined. Id. at 265 (Davis, J., dissenting).

5

JOHNSON v. MCDONALD

Judge Davis agreed with Chief Judge Kasold’s dissent

and emphasized that his dissent was “grounded in the

conviction that the language of § 3.321(b)(1) unambigu-

ously refutes the interpretation advanced by the Secre-

tary.” Id.

Mr. Johnson appeals. We have jurisdiction under 38

U.S.C. § 7292(a).

II.

We review statutory and regulatory interpretations of

the Veterans Court de novo. 38 U.S.C. § 7292(d)(1); see

also Prenzler v. Derwinski¸ 928 F.2d 392, 393 (Fed. Cir.

1991). Deference to an agency’s interpretation of its own

regulation “is warranted only when the language of the

regulation is ambiguous.” Christensen v. Harris Cnty.,

529 U.S. 576, 588 (2000); Bowles v. Seminole Rock &

Sand Co., 325 U.S. 410, 414 (1945); see also Christopher v.

SmithKline Beecham Corp., 132 S. Ct. 2156, 2166 (2012).

“An agency’s interpretation of its own regulation is con-

trolling unless that interpretation is plainly erroneous or

inconsistent with the regulation.” Thun v. Shinseki, 572

F.3d 1366, 1369 (Fed. Cir. 2009); see also Auer v. Robbins,

519 U.S. 452, 461 (1997).

The DVA enacted § 3.321(b)(1) pursuant to 38 U.S.C.

§ 1155. Section 1155 authorizes the DVA to create a

disabilities rating schedule and instructs the DVA to

adopt schedular ratings to account for “reductions in

earning capacity from specific injuries or combination of

injuries.” 38 U.S.C. § 1155 (emphasis added). Section

3.321(b)(1) provides as follows, in pertinent part:

To accord justice . . . to the exceptional case where

the schedular evaluations are found to be inade-

quate, the Under Secretary for Benefits or the Di-

rector . . . is authorized to approve on the basis of

the criteria set forth in this paragraph an extra-

schedular evaluation commensurate with the av-

6

JOHNSON v. MCDONALD

erage earning capacity impairment due exclusive-

ly to the service-connected disability or disabili-

ties. The governing norm in these exceptional

cases is: A finding that the case presents such an

exceptional or unusual disability picture with such

related factors as marked interference with em-

ployment or frequent periods of hospitalization as

to render impractical the application of the regu-

lar schedular standards.

38 C.F.R. § 3.321(b)(1)(2012) (emphases added).

On appeal, Mr. Johnson argues that the Veterans

Court misinterpreted § 3.321(b)(1). He contends that the

plain language of the regulation requires the DVA to

consider the combined effect of all of a veteran’s service-

connected disabilities in determining whether referral for

extra-schedular evaluation is appropriate. The govern-

ment counters that the plain language of § 3.321(b)(1)

indicates that it applies only to the impact of disabilities

individually, not collectively. In the alternative, the

government argues that the regulation is ambiguous and

that, given this ambiguity, we should defer to the inter-

pretation of the DVA.

We agree with Mr. Johnson. The plain language of

§ 3.321(b)(1) provides for referral for extra-schedular

consideration based on the collective impact of multiple

disabilities. The regulation is specifically directed to the

“exceptional case where the schedular evaluations” are

inadequate. 38 C.F.R. § 3.321(b)(1). The use of the plural

“evaluations” suggests that the regulation contemplates a

situation in which evaluations assigned to multiple disa-

bilities are inadequate. Indeed, the regulation authorizes

“an extra-schedular evaluation” where “the schedular

evaluations” are inadequate to compensate for impair-

ment due to “the service-connected disability or disabili-

ties.” The use of “disability or disabilities” indicates that

the regulation contemplates that multiple disabilities may

7

JOHNSON v. MCDONALD

be considered together in referring veterans for extra-

schedular consideration. Similarly, the fact that the

regulation authorizes a single extra-schedular evalua-

tion—“an extra-schedular evaluation”—arising from the

“disability or disabilities” indicates that referral for extra-

schedular evaluation may be based on the collective

impact of the veteran’s disabilities. Moreover, the plain

language of § 3.321(b)(1) is consistent with the language

of § 1155 authorizing the regulation. 38 U.S.C. § 1155

(authorizing the Secretary to “adopt and apply a schedule

of ratings of reductions in earning capacity from specific

injuries or combination of injuries”).

We are not persuaded by the government’s argument

that the term “disability picture” in the regulation must

be construed as limited to the impact of a single disability

rather than multiple disabilities. Even if the term disa-

bility picture as used in other sections of the DVA regula-

tions were construed as referring to the impact of a single

disability, that is not the case with respect to

§ 3.321(b)(1). The clear language and the use of the term

“disability picture” in the context of § 3.321(b)(1) refers to

the collective impact of a veteran’s “service-connected

disability or disabilities.”

Seeking to overcome the plain language of the regula-

tion, the government further argues that the our interpre-

tation of § 3.321(b)(1) cannot be correct because another

provision, the TDIU provision at 38 C.F.R. § 4.16, is

already designed to address the situation where schedular

evaluations are insufficient to account for the collective

impact of multiple disabilities. We disagree. As the

government itself notes, the TDIU provision only accounts

for instances in which a veteran’s combined disabilities

establish total unemployability, i.e., a disability rating of

100 percent. Appellee’s Br. at 26. On the other hand,

§ 3.321(b)(1) performs a gap-filling function. It accounts

for situations in which a veteran’s overall disability

picture establishes something less than total unemploya-

8

JOHNSON v. MCDONALD

bility, but where the collective impact of a veteran’s

disabilities are nonetheless inadequately represented.

Our plain-language interpretation of § 3.321(b)(1) does

not render it duplicative of the TDIU provision of § 4.16.

Because we find that the plain language of

§ 3.321(b)(1) is unambiguous, we do not defer to the

DVA’s interpretation of its regulation. See Christensen,

529 U.S. at 588. The government cannot manufacture an

ambiguity in language where none exists in order to

redefine the plain language of a regulation. As Chief

Judge Kasold noted, “simply saying something is ambigu-

ous does not make it so.” Johnson, 27 Vet. App. at 254

(Kasold, C.J., dissenting). And we find no ambiguity in

the language of § 3.321(b)(1).

We further note that, while policy arguments would

not, in any case, persuade us to depart from the plain

language of the regulation, we see no policy justification

for interpreting § 3.321(b)(1) in the way that the govern-

ment advocates. The purpose of the regulation is “[t]o

accord justice . . . to the exceptional case where the sched-

ular evaluations are found to be inadequate.” 38 C.F.R.

§ 3.321(b)(1). There is no logic to the idea that it is only

necessary to accord justice based on a veteran’s individual

disabilities and not also on the collective impact of all of

the veteran’s disabilities. Limiting referrals for extra-

schedular evaluation to considering a veteran’s disabili-

ties individually ignores the compounding negative effects

that each individual disability may have on the veteran’s

other disabilities. It is not difficult to imagine that, in

many cases, the collective impact of all of a veteran’s

disabilities could be greater than the sum of each individ-

ual disability’s impact. The regulation itself makes clear

that it is meant to cover “an exceptional or unusual disa-

bility picture,” where the regular rating standards simply

would not adequately cover the extent of a veteran’s

disability. Given the intention of the regulation, the

government’s argument that the consideration of the need

9

JOHNSON v. MCDONALD

for extra-schedular review should occur by evaluating

each disability individually, without considering the

impact on a veteran of his or her collective disability

picture, seems difficult to defend.

CONCLUSION

We reverse and remand to the Veterans Court for fur-

ther proceedings in accordance with this opinion.

REVERSED AND REMANDED

United States Court of Appeals

for the Federal Circuit

______________________

MARVIN O. JOHNSON,

Claimant-Appellant,

v.

ROBERT A. MCDONALD,

Secretary of Veterans Affairs,

Respondent-Appellee.

______________________

2013-7104

______________________

Appeal from the United States Court of Appeals for

Veterans Claims in No. 10-1785, Judge Mary J. Schoelen.

______________________

O’MALLEY, Circuit Judge, concurring.

I agree with the majority’s well-reasoned analysis and

with the judgment it reaches. I write separately only to

note that, if the regulation here were deemed sufficiently

ambiguous to require application of Auer deference, I

believe this is a case in which the wisdom of continued

adherence to that principle should be reconsidered. See

Auer v. Robbins, 519 U.S. 452 (1997).

Several Supreme Court Justices have recently ex-

pressed an interest in revisiting the propriety of the

principles set forth in Auer and in Bowles v. Seminole

Rock & Sand Co., 325 U.S. 410 (1945). Decker v. Nw.

Envtl. Def. Ctr., 133 S. Ct. 1326, 1339 (2013) (Scalia, J.,

2 JOHNSON v. MCDONALD

concurring-in-part, dissenting-in-part) (“For decades, and

for no good reason, we have been giving agencies the

authority to say what their rules mean, under the harm-

less-sounding banner of ‘defer[ring] to an agency’s inter-

pretation of its own regulations.’” (citing Talk Am., Inc. v.

Mich. Bell Tel. Co., 131 S. Ct. 2254, 2265 (2011) (Scalia,

J., concurring))). Chief Justice Roberts, writing for him-

self and Justice Alito in Decker, recognized that:

(1) “[q]uestions of Seminole Rock and Auer deference arise

as a matter of course on a regular basis;” and (2) “there is

some interest in reconsidering those cases.” Decker, 133

S. Ct. at 1339 (Roberts, C.J., concurring).

While some level of deference may be appropriate,

there is a concern that “deferring to an agency’s interpre-

tation of its own rule encourages the agency to enact

vague rules which give it the power, in future adjudica-

tions, to do what it pleases. This frustrates the notice and

predictability purposes of rulemaking, and promotes

arbitrary government.” Talk Am., 131 S. Ct. at 2266

(Scalia, J., concurring). I agree with Justice Scalia’s

concerns that:

however great may be the efficiency gains derived

from Auer deference, beneficial effect cannot justi-

fy a rule that not only has no principled basis but

contravenes one of the great rules of separation of

powers: He who writes a law must not adjudge its

violation.

Decker, 133 S. Ct. at 1342 (Scalia, J., concurring-in-part,

dissenting-in-part).

Questions regarding the appropriate level of deference

given to an agency’s interpretation of its own regulation

are even more complex in the veterans’ benefit context,

where the Supreme Court has “long applied the canon

that provisions for benefits to members of the Armed

Services are to be construed in the beneficiaries’ favor.”

See Henderson v. Shinseki, 131 S. Ct. 1197, 1206 (2011)

JOHNSON v. MCDONALD 3

(citation and internal quotation marks omitted); see also

Brown v. Gardner, 513 U.S. 115, 118 (1994) (noting that

“interpretive doubt is to be resolved in the veteran’s

favor”). Where there is a conflict between an agency’s

reasonable interpretation of an ambiguous regulation and

a more veteran-friendly interpretation, it is unclear which

interpretation controls. See Linda D. Jellum, Heads I

Win, Tails You Lose: Reconciling Brown v. Gardner’s

Presumption that Interpretive Doubt Be Resolved in

Veterans’ Favor with Chevron, 61 Am. U. L. Rev. 59, 77

n.141 (2011) (“If an agency’s interpretation of its regula-

tion must be ‘plainly wrong’ before the court can reject

that interpretation, there can be little place for Gardner’s

[veteran-friendly] Presumption; the VA’s interpretation

would have to be plainly wrong before it was rejected.”).

The majority here cites Seminole Rock and Auer—

which are binding Supreme Court precedent—and ex-

plains that deference to an agency’s interpretation of its

own regulation is warranted only when the language of

the regulation is ambiguous. Because I agree with the

majority that 38 C.F.R. § 3.321(b)(1) is unambiguous—

and thus there is no need to apply Auer deference—I join

the majority’s decision. I note, however, that the validity

of Auer deference is questionable, both generally and

specifically as it relates to veterans’ benefit cases.