Majeed v. Principi

UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS

NO . 00-2015

SALAHUDIN MAJEED , APPELLANT ,

V.

ANTHONY J. PRINCIPI,

SECRETARY OF VETERANS AFFAIRS, APPELLEE.

On Appeal from the Board of Veterans' Appeals

(Argued June 5, 2002 Decided October 28, 2002)

John E. Howell, of Washington, D.C., for the appellant.

Darryl A. Joe, of Washington, D.C., with whom Tim S. McClain, General Counsel; Ron

Garvin, Assistant General Counsel; and R. Randall Campbell, Principal Deputy Assistant General

Counsel, all of Washington, D.C., were on the pleadings, for the appellee.

Before KRAMER, Chief Judge, and FARLEY and STEINBERG, Judges.

STEINBERG, Judge, filed the opinion of the Court. KRAMER, Chief Judge, filed a

concurring opinion.

STEINBERG, Judge: The appellant, Salahudin Majeed, through counsel, seeks review of

an August 14, 2000, decision of the Board of Veterans' Appeals (Board or BVA) that determined

that, of the $30,049.92 special separation bonus (SSB) paid to him by the U.S. Army, $24,039.94

was the proper amount to be recouped from Department of Veterans Affairs (VA) disability

compensation. Record (R.) at 4, 7. The appellant filed a brief and a reply brief, and the Secretary

filed a brief. Oral argument was held on June 5, 2002. On June 6, 2002, the Court ordered the

Secretary to file a memorandum notifying the Court of the status of the appellant's then-pending

request for a waiver of the amount that, according to VA, he owed to VA as an overpayment of his

disability compensation. In response to the Court's order, the Secretary filed a June 20, 2002,

response indicating that the appellant's waiver request had been denied on June 18, 2002. On

October 3, 2002, the appellant submitted a notice of supplemental authority regarding a regulatory

amendment. The Court has jurisdiction over this case under 38 U.S.C. §§ 7252(a) and 7266(a). For

the reasons set forth below, the Court will vacate the Board decision on appeal and remand the

matter for readjudication.

I. Relevant Background

The veteran served on active duty in the U.S. Army from December 1981 to September 1992.

R. at 10. Upon separation from service, he received an SSB in the amount of $30,058.67

[hereinafter referred to as $30,000]. (We note that there are minor discrepancies in figures set forth

at various points in the record on appeal (ROA). See, e.g., R. at 10 (describing SSB amount as

"$30,058.67"), 26 (same), 112 (describing SSB amount as "$30,284.68"), 123 (same), 341

(describing SSB amount as "$30,049.92"), 392 (same). Because our disposition, set forth below,

is not predicated on the precise amounts involved here, rounded figures will be used in order to

simplify the ensuing discussion. The Court notes that this rounding is intended to improve

readability only and not to serve as a recalculation of any amount.) Several readjustments, totaling

$9,529.54 [hereinafter referred to as $9,500], were made to the SSB amount, apparently reflecting

recoupment by the U.S. Army of an amount sufficient to satisfy obligations, primarily repayment of

a reenlistment bonus for which the veteran had not met his full contractual service obligation, that

the veteran owed to the U.S. Army. R. at 60. He thereafter served on active duty for training from

February through July 1993. R. at 11.

In August 1994, the VA Regional Office (RO) in Atlanta, Georgia, granted the veteran VA

service connection for several disabilities, for which he was assigned a combined disability rating

of 40%. R. at 18. That VARO informed him that his benefits would be withheld until all of the

$30,000 SSB had been recouped. R. at 26. He appealed to the Board the issue of recoupment (R.

at 29), and in January 1997 his representative filed with the Board a pleading arguing that the veteran

"should receive his service[-]connected disability compensation without recoupment of his

separation pay." R. at 38. In February 1997, the Board remanded the veteran's claim to the RO to

clarify several matters and then to "readjudicate the veteran's claim that his VA disability

compensation is not subject to recoupment of separation pay". R. at 46. After the RO adjudicated

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the other issues on remand (and apparently did not readjudicate the issue of recoupment, see R. at 68,

78), the veteran filed a Notice of Disagreement (NOD) as to that RO decision (R. at 81). It appears

that he argued that, because the $9,500 had been deducted from his SSB, he received only

$20,755.14 [hereinafter referred to as $20,750] before taxes and that that amount was the proper

amount subject to recoupment. Ibid; compare R. at 97 ("[y]ou should have only been recouping

$20,[750]") with R. at 81 ("[y]ou should only be collecting separation pay balance of $16,000").

An April 1998 "Report of Contact" seems to indicate that an employee at the Winston-Salem,

North Carolina, RO contacted VA's Central Office to request clarification of the amount of SSB to

be recouped in the veteran's case. R. at 106. According to an April 1998 Supplemental Statement

of the Case (SSOC), "[i]t was determined that only the $20,[750] should be recouped", and,

therefore, "[a]n out[-]of[-]system payment of [$9,500 was] made to the veteran". R. at 113. The

SSOC went on to note that "[t]he recoupment of . . . SSB[] in the amount of $20,[750] is correct."

R. at 114.

The veteran again appealed this decision to the Board; he asserted once more that his benefits

should not be subject to recoupment of his SSB. R. at 118. In July 1998, the Board determined,

inter alia, that "[t]he veteran's VA disability compensation is subject to recoupment of separation

pay". R. at 125. In making this decision, the Board noted that, because "the amount of the

separation pay to be recouped is not at issue[,] the Board will not make any findings in that regard."

R. at 123. The veteran then appealed the matter to this Court. R. at 137. On January 8, 1999, the

Secretary filed a motion to remand the matter for readjudication in light of the post-BVA-decision

amendment of 10 U.S.C. § 1174(h)(2). R. at 137. (The amendment to section 1174(h)(2) excluded

from recoupment an amount equal to the amount of federal income tax withheld from the separation

pay. National Defense Authorization Act for Fiscal Year 1997, Pub. L. No. 104-201, § 653,

110 Stat. 2422, 2583 (1996) [hereinafter NDAA FY 1997 § 653]. That amendment was later

extended "to any payment of separation pay under the special separation benefits program under

section 1174a of that title that was made during the period beginning on December 5, 1991, and

ending on September 30, 1996". See Transportation Equity Act of the 21st Century, Pub. L. No.

105-178, § 8208, 112 Stat. 107, 495 (1998) [hereinafter TEAC 1998 § 8208].) On February 13,

1999, the appellant joined in the Secretary's remand motion (R. at 141), and on February 19, 1999,

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the Court, via an order of the Clerk of the Court, granted the motion, vacated the underlying Board

decision, and remanded the matter (R. at 143).

On remand, the veteran filed with the Board a pleading in which he argued, inter alia, that

he "should be given every advantage in recalculating the amounts that have been previously recouped

from him because the law has been amended to require [that] [f]ederal [i]ncome tax withheld from

such pay be deducted from the amount recouped and [be] returned to him." R. at 147. He later filed

an additional pleading in which he argued, inter alia, that the Board should "recalculate the amount

of previously withheld [f]ederal income taxes to be refunded [to him] as soon as possible by payment

of an 'early hardship payment'". R. at 268. In a June 1999 BVA decision, the Board, after noting that

"it is not clear why the amount of over $9,000[,] which appears to have represented a debt of the

veteran to the service department and which the service department recouped from the separation

pay[,] should not have been considered as part of the separation pay" (R. at 319), remanded the claim

to the RO, inter alia, to "determine what the difference between the veteran's gross separation pay

of $30,[000] . . . and the amount determined by the RO to be his separation pay ($20,[750])

represents (i.e., determine what the $9,[500] represents)" (R. at 321). The Board also directed that,

if the $9,500 amount "represents recoupment by the service department of a debt owed due to the

veteran's previously having received a reenlistment bonus, the RO should explain why this should

not be recouped as part of the separation pay." R. at 321.

The veteran's claim was forwarded to the Baltimore, Maryland, RO. R. at 338. In a July

1999 letter, the RO informed the veteran that records from the Defense Finance and Accounting

Service showed the gross amount of his SSB to be $30,049.92, from which $6,009.98 was withheld

for federal income taxes, resulting in a net of $24,039.94 [hereinafter referred to as $24,000]. Ibid;

see also R. at 333. The RO then informed the veteran that it "propose[d] to stop [his] benefit

payments effective October 1, 1999, to collect the proper [n]et amount" of SSB, i.e., $24,000.

R. at 338. An August 1999 Baltimore RO letter to the veteran further explained the calculation of

the $24,000 amount. R. at 341-42. At a September 4, 1999, hearing at that RO, the veteran's

attorney, Mr. Howell, and the veteran, made the following statements:

Mr. Howell: Alright. [W]e have been very concerned about the calculations

that have occurred in determining recoupment or lack of recoupment in Mr. Majeed's

file. There have been a number of different calculations . . . and we wanted this

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hearing especially so that we could try and put the correct calculation and the

amounts on the record and to answer any questions that might come up about the

calculations.

R. at 367.

Mr. Howell: . . . I calculated this as $20,755.14[,] which is the number shown

on this document less . . . the $6,009.98 is $14,745.14 and that was the correct

amount to be recouped. Now they already recouped [(]and that's in the letter[)]

$20,520.38. What they should have recouped[,] $14,745.14[,] leaves a balance of

$5,775 owed and so we're asking for a minimum [reimbursement] of $5,775.22. Is

that correct?

Mr. Majeed: That's correct sir.

R. at 369.

In a September 1999 decision, a Baltimore RO hearing officer found that $24,000 was the

correct amount of the SSB subject to recoupment. R. at 389. As to the $9,500 used in satisfaction

of a debt to the U.S. Army, the RO noted: "Money paid to other sources (i.e., Service Department)

to pay off the veteran's debt is SSB 'received' by the veteran. The law makes no provision for waiver

of recoupment of SSB used to pay of[f] the veteran's debt." R. at 392. That RO issued an SSOC in

October 1999. R. at 406. The veteran appealed this matter to the Board (R. at 395) and argued that

the hearing officer's decision "erroneously concluded that the provisions of the law mandated

recoupment of the total amount of the separation benefit to which I was entitled, not the amount of

the separation bonus that I actually received" (R. at 410).

In the August 14, 2000, BVA decision here on appeal, the Board agreed with the Baltimore

RO that, of the veteran's $30,000 SSB, $24,000 was the proper amount to be recouped from VA

disability compensation. R. at 4. The Board noted: "There appears to be no remaining dispute that

the veteran's disability compensation is subject to recoupment of separation pay; rather, the

controversy now pending before the Board pertains solely to the amount of separation pay to be

recouped." R. at 3.

Subsequent to oral argument before the Court, the Court issued a June 6, 2002, order

directing the Secretary to file a memorandum notifying the Court of the current status of the

appellant's request for a waiver of recovery of overpayment of his disability compensation. On

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June 18, 2002, the appellant filed a pleading captioned "Supplemental Brief of the Appellant";

therein, he states that he is offering that "supplemental brief" in response to a question from the

bench at oral argument. June 18, 2002, Pleading at 1. On June 20, 2002, in a response to the Court's

June 2002 order, the Secretary indicates that the appellant's waiver request was denied by the

Baltimore RO on June 18, 2002. On July 2, 2002, the Secretary filed an opposition to the appellant's

June 18, 2002, pleading; he states that that pleading and the arguments therein should be

"disregarded" because the Court "did not request or order supplemental briefing in this case, either

at oral argument or by Court [o]rder." Opposition at 1. The Court will not accept for filing the

appellant's June 18, 2002, pleading, because it was neither requested by the Court nor is it

contemplated by the Court's Rules of Practice and Procedure.

II. Analysis

A. "Finality" Argument

The appellant argues that the decision by the Winston-Salem RO that $20,750 was the correct

amount subject to recoupment (R. at 114) "is binding and must be honored". Brief (Br.) at 3. The

appellant maintains that the Board decision under review "improperly introduced the question of the

correct amount to be recouped from [the a]ppellant's SSB." Br. at 11. He claims that introducing

this issue was improper because "[t]hat issue was not appealed, nor was it before the Board when

that decision was made". Ibid. He states that, under 38 C.F.R. §§ 3.104(a) and 3.105(b), the

decision of the Winston-Salem RO was binding on VA in all subsequent determinations.

1. Issue(s) Appealed. The facts of the case belie the appellant's first argument – that he was

appealing only the issue whether there properly could be any recoupment at all and not the amount

of recoupment. Indeed, before the Winston-Salem RO he contested, in addition to the propriety of

any recoupment (R. at 98-101), the amount that was subject to recoupment (R. at 97 ("[y]ou should

have only been recouping $20,[750]")). On appeal of that decision, he again argued the propriety

of any recoupment. R. at 118. However, in his first appeal to this Court, he agreed to a remand for

consideration of the statutory extension to SSB payments via TEAC 1998 § 8208 of the amendment

of 10 U.S.C. § 1174(h)(2) made by NDAA FY 1997 § 653. R. at 141. The amendment of section

1174(h)(2) related to amounts withheld for federal income taxes not being subject to recoupment.

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R. at 137. If his argument was only as to the propriety of any amounts being recouped, this

amendment would have had no effect on his case; taxes, whether or not they are withheld, could not

affect the primary argument that no amount should be recouped.

It seems evident that the veteran, after the February 1999 Court remand, continued to argue

that all amounts of recoupment were improper. See, e.g., R. at 350 (August 1999 letter arguing that

"[w]e believe that neither the separation bonus nor the reenlistment bonus . . . should have been

recouped in the first place" (emphasis added)). However, he also contested, alternatively, the

amount of the recoupment. See, e.g., R. at 147, 268, 367, 369, 410. Although it is certainly

appropriate for the appellant to argue both the propriety of any recoupment and, in the alternative,

the amount of the recoupment, such an argument still constitutes an appeal as to the amount of the

recoupment. Therefore, to the extent that the two issues are indeed severable (a question that need

not be decided here), the appellant is incorrect in stating that the issue of the amount of recoupment

"was not appealed, nor was it before the Board when that decision was made." Br. at 11.

Furthermore, although the conclusion to the appellant's principal brief here is ambiguous as to the

relief sought (the appellant "asks the Court to put an end to the cycle of payment and recoupment so

he can order his financial life", Br. at 25), the conclusion to his reply brief clarifies the relief that he

is seeking:

As seen above, the VA has committed a number of errors that are prejudicial

to [the a]ppellant. [The a]ppellant should be refunded $9,294.78, which is the

difference between the amount determined by the Winston-Salem VARO to be the

amount [the a]ppellant "received," $20,755.14 (less federal taxes withheld), and the

amount that the Baltimore VARO concluded was correct, $30,049.92 (less federal

taxes withheld).

Reply Br. at 11-12. To the extent that he might be correct that he never appealed to the Board, in

any respect, the issue of the amount of recoupment – a dubious proposition at best – he has, at this

point, appealed that issue; indeed, it is the only issue he appealed here. Therefore, the Court rejects

the appellant's argument on this point.

2. 38 C.F.R. §§ 3.104(a) and 3.105(b). The appellant's second argument, that 38 C.F.R.

§§ 3.104(a) and 3.105(b) make the decision of the Winston-Salem RO final and binding, fails

because these regulations appear to pertain to final decisions, and there is no basis for concluding

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that any of the four RO decisions in the instant case have ever become final. The sections state in

pertinent part:

§ 3.104 Finality of decisions.

(a) A decision of a duly constituted rating agency or other agency of original

jurisdiction shall be final and binding on all field offices of the Department of

Veterans Affairs as to conclusions based on the evidence on file at the time VA

issues written notification in accordance with 38 U.S.C. [§] 5104. A final and

binding agency decision shall not be subject to revision on the same factual basis

except by duly constituted appellate authorities or except as provided in § 3.105 and

§ 3.2600 of this part.

§ 3.105 Revision of decisions.

....

(b) Difference of opinion. Whenever an adjudicative agency is of the opinion

that a revision or an amendment of a previous decision is warranted, a difference of

opinion being involved rather than a clear and unmistakable error, the proposed

revision will be recommended to [VA] Central Office.

38 C.F.R. §§ 3.104(a), 3.105(b) (2001) (boldface italic emphasis added).

As the Secretary correctly points out (Br. at 13), this case (including the decision of the

Winston-Salem RO) has remained in appellate status approximately since the initial award of

disability compensation in August 1994. The only theory under which the appellant's finality

argument could succeed would be if he were able to "sever" the recoupment-amount claim from the

recoupment-propriety claim and appeal each claim separately. However, he makes no such

contention (and, as shown in part II.A.1., above, even a successful argument on this point would be

undercut because he appealed both issues).

The appellant appears to misconstrue § 3.104(a) as meaning that the decision of the Winston-

Salem RO could not be altered by another RO, regardless of the subsequent actions in the case.

Such a view implies that a decision of an RO is "final and binding" as of the date it is issued, a result

that could be seen as at odds with the availability of an administrative appeal, see 38 U.S.C. § 7105;

38 C.F.R. §§ 20.201 (NOD), 20.202 (Substantive Appeal) (2001). Cf. Teten v. Principi, 16 Vet.App.

112, 116 (2002) ("at the time of his death, the BVA decision had not become final[] because the time

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for him to file a timely appeal to this Court . . . had not expired"). However, even assuming

arguendo that a decision of the RO is "final and binding" when issued, § 3.104(a) still allows for

revision of the "agency decision" by "duly constituted appellate authorities". 38 C.F.R. § 3.104(a)

(2001). In this case, the Winton-Salem RO decision was twice subject to review by the Board and

was reviewed by the Court, before the decision here at issue was decided by the Baltimore RO,

pursuant to specific remand instructions from the Board. To the extent that § 3.104(a) might be read

to preclude the Baltimore RO from revising the Winston-Salem RO decision in any case (i.e.,

because such revision must be done by "duly constituted appellate authorities"), the ultimate revision

here was made by the instant BVA decision, which, by its adoption of the RO's finding, would cure

any such Baltimore RO error.

Furthermore, the Court notes that were the appellant to prevail on this argument, the original

RO decision (the October 1994 decision of the Atlanta RO) that concluded that all $30,000 of the

SSB had to be recouped (R. at 26) would seem to be just as impervious to revision; in other words,

the appellant fails to account for the fact that the Winston-Salem RO decision was itself a revision

of a prior RO decision and that such a revision would run afoul of the very interpretation of

§ 3.104(a) that he proposes. (To the extent that the appellant argues that revision of the initial RO

decision by the Winston-Salem RO was appropriate under § 3.105(b) (discussed below), in that the

Winston-Salem RO revised the original RO decision after consultation with the VA Central Office,

the record reflects that the Winston-Salem RO contacted the VA Central Office to "clarify" the

recoupment amount (R. at 106), whereas § 3.105(b) provides that the Central Office is to be

contacted with a "proposed revision". 38 C.F.R. § 3.105(b) (2001). The appellant has presented no

argument supporting a conclusion that the actual revision of an RO decision can be made by the VA

Central Office, which is a plausible interpretation of the events in this case.)

As to the appellant's § 3.105(b) argument, the appellant fails to recognize that § 3.105, by the

very language of § 3.104(a), is only one of three options for revision of an RO decision, the other

two being revision by appellate authorities or revision pursuant to 38 C.F.R. § 3.2600 (which, except

as discussed in part II.D., below, is not relevant to the current inquiry). Thus, despite the appellant's

complaints described above that the RO failed to contact the VA Central Office before revising the

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Winston-Salem RO decision, the revision of that RO decision was consistent with § 3.104(a).

Therefore, the Court rejects the appellant's arguments on this revisability point.

B. "Received" Argument

The appellant also argues that, under 10 U.S.C. § 1174(h)(2), "received" means only that

amount of money that the appellant actually received, in the sense of having custody of it, as his

SSB. Br. at 19-24. Section 1174(h)(2) provides:

(2) A member who has received separation pay under this section, or

severance pay or readjustment pay under any other provision of law, based on service

in the armed forces shall not be deprived, by reason of his receipt of such separation

pay, severance pay, or readjustment pay, of any disability compensation to which he

is entitled under the laws administered by the Department of Veterans Affairs, but

there shall be deducted from that disability compensation an amount equal to the

total amount of separation pay, severance pay, and readjustment pay received, less

the amount of [f]ederal income tax withheld from such pay . . . .

10 U.S.C. § 1174(h)(2) (emphasis added). The appellant argues that the use of the terms "received"

and "entitled" is evidence of a Congressional intent to subject to recoupment only the amount of SSB

that he actually received (i.e., the amount of the check ultimately written to him), rather than the

amount initially calculated as due to him. Br. at 19-22. This argument is flawed in several respects.

First, as the statute inferentially indicates, the amount of the SSB is subject to taxation. Therefore,

the appellant would only "receive" an amount by virtue of the check released to him, which would

reflect the amount of "entitlement" minus, at a minimum, the tax withheld. However, the section

1174(h)(2) exclusion from recoupment of any amounts withheld as federal income taxes was, in

1998, statutorily extended to SSB benefits. See NDAA FY 1997 § 653; TEAC 1998 § 8208.

(Although the legislative history is inconclusive, this amendment may have been made in order to

correct an aberration whereby a veteran was taxed on the entire amount of his SSB, then had his

nontaxable VA disability compensation benefits used to recoup the pre-tax SSB amount, thereby

effectively subjecting to taxation a portion of his nontaxable VA benefits – i.e., the portion used to

recoup the pre-tax SSB amount. See generally Palm v. United States, 904 F.Supp. 1312, 1314-15

(M.D. Ala. 1995) (stating, prior to amendment of section 1174(h)(2), "[a]lthough it may seem unfair

to recoup taxable separation pay by withholding non[]taxable disability compensation, total

recoupment without tax relief was clearly intended by Congress"). The appellant's "received" versus

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"entitled" distinction does not account for this amendment. If this distinction were viable, Congress

would have had no need to amend the provision to account for taxes, because the pre-tax SSB would

be the "entitled" amount, and the post-tax SSB would be the "received" amount. The amendment

to this section, with its explicit Congressional recognition that taxes withheld should not be

recouped, is inconsistent with the appellant's proposed "received" versus "entitled" distinction.

Furthermore, the appellant's reading of "received" (to mean the amount of the check

eventually written for the SSB) would require this Court to read section 1174(h)(2) in a unique

manner that departs from other federal law. The appellant concedes that the adjustments (in the

amount of $9,500) made to his SSB by the U.S. Army were in satisfaction of his debts to the U.S.

Army. See Reply Br. at 4; see also In re Kelly, 88 B.R. 477 (Bank. M.D. Ga. 1988) (describing, in

bankruptcy proceeding, recovery of reenlistment bonus as a debt). Under 26 U.S.C. § 61(a)(12), a

discharge of indebtedness is considered income. See also Gitlitz v. Comm'r, IRS, 531 U.S. 206, 213

(2001) ("[s]ection 61(a)(12) states that discharge of indebtedness generally is included in gross

income"). Section 108 of title 26 provides an exclusion from gross income for a discharge of

indebtedness, but only if (a) the discharge occurs in a title 11 case; (b) the discharge occurs when the

taxpayer is insolvent; (c) the indebtedness discharged is qualified farm indebtedness; or (d) in the

case of a taxpayer other than a "C corporation", the indebtedness discharged is qualified real-property

business indebtedness. 26 U.S.C. § 108(a)(1). None of these conditions has been shown to exist in

this case. Indeed, it appears that the actual federal income tax withheld in this case was $6,000,

which was based on the original $30,000 "entitlement" amount. See R. at 338.

The appellant also concedes that the $9,500 was an amount he owed to the U.S. Army. There

is no indication in the record, nor is it argued by the parties, that, absent the SSB, the appellant would

not have owed this amount to the U.S. Army. Indeed, the veteran's attorney conceded that, absent

the SSB, the veteran would have owed $9,500 out of "personal finances". R. at 378. Hence, in the

sense that the veteran's receipt of a benefit (satisfaction of the debt) is a form of receipt of funds, he

did in fact "receive" this $9,500, just as the Board described (R. at 6). His argument, which would

essentially have this Court hold that a relief from debt is not "receipt" of funds, has no basis in

federal law, and we reject this argument as well.

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C. Stegall Argument

The appellant also argues that there is a violation of Stegall v. West, 11 Vet.App. 268 (1998),

because the Board failed to ensure that the RO complied with the remand instructions in the June

1999 BVA decision (R. at 319-21). In Stegall, we held that "a remand by this Court or the Board

confers on the veteran or other claimant, as a matter of law, the right to compliance with the remand

orders" and that "a remand by this Court or the Board imposes upon the Secretary of Veterans Affairs

a concomitant duty to ensure compliance with the terms of the remand". Stegall, 11 Vet.App. at 271.

The appellant's Stegall argument fails for several reasons. First, he appears to imply that

there is a Stegall violation solely because the October 1999 SSOC (R. at 406) failed to respond to

the Board's remand directives. Br. at 16. Although the SSOC does not seem to comply with the

Board's remand directives, prior to the issuance of that SSOC the Baltimore RO sent to the appellant

a detailed letter, dated August 19, 1999, that explained its actions and included three pages of

explanatory charts. R. at 341-45. The RO also sent him a detailed RO decision following a hearing.

R. at 389-92. In his brief, the appellant acknowledges receipt of the post-hearing decision (although

he does not acknowledge the August 1999 letter) (Br. at 17), but states that the decision is inadequate

as to one BVA instruction. Hence, our Stegall inquiry will focus on that asserted infirmity in the RO

decision.

The appellant asserts that the Baltimore RO decision, although adequate as to compliance

with all other remand instructions, failed to "answer question 2" of the Board's remand instructions

(Br. at 17), which stated as follows:

The RO should determine what the difference between the veteran's gross

separation pay of $30,058.67 . . . and the amount determined by the RO to be his

separation pay ($20,755.14) represents (i.e. determine what the $9,303.53 represents).

If it represents recoupment by the service department of a debt owed due to the

veteran previously having received a reenlistment bonus, the RO should explain why

this should not be recouped as part of the separation pay. This should be specifically

put in writing with supporting legal authority.

R. at 321. The appellant contends that the RO decision failed to answer this question because "[i]t

only conclude[d] that [the a]ppellant 'was erroneously refunded $9[,500] when he should have been

refunded tax withheld from SSB payment, which was $6,00[0]'". Br. at 17.

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The appellant's argument misrepresents the RO decision. The decision explained both the

factual and procedural history of this case (R. at 389-91), and explained what the $9,500 amount

represented. The decision then addressed why the RO determined that the $9,500 was a properly

recoupable amount: "Money paid to other sources (i.e., Service Department) to pay off the veteran's

debt is SSB 'received' by the veteran. The law makes no provision for waiver of recoupment of SSB

used to pay of[f] the veteran's debt." R. at 392. The appellant's argument makes sense on only one

potential ground: If the Board's remand instruction, which stated that "the RO should explain why

this should not be recouped as part of the separation pay" (R. at 321 (emphasis added)), were read

to preclude any new determination as to the amount of recoupment (this question is involved in part

II.D., below, but is not the same question; the question for Stegall purposes is compliance with, not

the efficacy of, the Board's directives). However, any such reading would conflict with the fourth

remand instruction of the Board:

After the action [sic] above have been completed, the RO should again review

the veteran's claim currently in appellate status, under the old and new (or amended)

versions of 10 U.S.C.[] § 1174(h)(2). In rendering its decision, the RO should

specifically note how it arrived at the amount of the veteran's separation pay to be

recouped.

R. at 322. It seems incongruous that the Board would order the RO to explain the $10,000 amount,

but then dictate the conclusion. Furthermore, the level of detail in the Board's remand instructions

would be unnecessary if the intent of the Board were simply to recalculate the amount to determine

the amount of income tax withheld.

The appellant apparently is arguing that the Board erred by not enforcing the decision of the

Winston-Salem RO: "Further investigation, even a cursory review of the veteran's claims file, would

have produced the Winston-Salem Statement of the Case that spelled out the basis for their

decision." Br. at 17. That argument is not properly made in the Stegall context; the failure of the

Board to accept one of the appellant's arguments is not a failure of the Board to ensure compliance

with its own remand instructions. The RO here complied with the Board's instructions, and thus

there was no Stegall error.

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D. Statement of Reasons or Bases and Consideration of All Applicable Law

The Board is required to consider all relevant evidence of record and to consider, and discuss

in its decision, all "potentially applicable" provisions of law and regulation. Schafrath v. Derwinski,

1 Vet.App. 589, 593 (1991); see 38 U.S.C. § 7104(a), (d)(1); Weaver v. Principi, 14 Vet.App. 301,

302 (2001) (per curiam order); Sanden v. Derwinski, 2 Vet.App. 97, 100 (1992). The Board is also

required to include in its decision a written statement of the reasons or bases for its findings and

conclusions on all material issues of fact and law presented on the record; that statement must be

adequate to enable an appellant to understand the precise basis for the Board's decision, as well as

to facilitate review in this Court. See 38 U.S.C. § 7104(d)(1); Allday v. Brown, 7 Vet.App. 517, 527

(1995); Gilbert v. Derwinski, 1 Vet.App. 49, 56-57 (1990). To comply with this requirement, the

Board must analyze the credibility and probative value of the evidence, account for the evidence that

it finds persuasive or unpersuasive, and provide the reasons for its rejection of any material evidence

favorable to the veteran. See Caluza v. Brown, 7 Vet.App. 498, 506 (1995), aff'd per curiam, 78

F.3d 604 (Fed. Cir. 1996) (table); Gabrielson v. Brown, 7 Vet.App. 36, 39-40 (1994); Gilbert, supra.

In the instant case, the Court concludes that the Board has violated its duties under sections 7104(a)

and (d)(1) in two separate but related ways that warrant remand to the Board for readjudication.

In its adjudication of this claim, the Board failed to consider several potentially applicable

regulatory provisions. First, to the extent to which the amount at issue in this case, i.e., the amount

that VA has already recouped from the veteran, is classified as a "benefit" or "benefit claim" (a

determination that the Board failed to make), the Board failed to consider 38 C.F.R. § 3.105(h)

(detailing procedures applicable for reduction or discontinuance of benefits "where [such] reduction

or discontinuance of benefits is warranted by reason of information received concerning income")

and § 3.2600(d) ("[t]he reviewer may grant a benefit sought in the claim notwithstanding § 3.105(b),

but, except as provided in paragraph (e) of this section [(detailing revision of a prior decision on the

basis of clear and unmistakable error)], may not revise the decision in a manner that is less

advantageous to the claimant than the decision under review"). The former provision, if applicable,

would subject the liability-increase decision to definite procedural safeguards, which have seemingly

not been followed, whereas the latter provision, if applicable, would bar the actions of the Baltimore

RO.

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Second, the Board failed to consider 38 C.F.R. § 1.912a (collection by offset from VA benefit

payments). It appears that, after the initial determination by the Atlanta RO that $30,000 was the

proper amount subject to recoupment (R. at 26), that full amount was recouped. See R. at 113

(Winston-Salem RO, in setting proper amount at $20,750, made payment of $9,500 difference to

appellant, implying that entire $30,000 amount had been recouped). Following the Baltimore RO's

liability-increasing recalculation, therefore, there was an overpayment amount that the Secretary

subjected to recoupment. (We estimate this amount to be approximately $3,500, consisting of the

$9,500 payment made to the appellant by the Winston-Salem RO minus the $6,000 withheld from

the SSB as federal income tax, which amount was calculated by the Baltimore RO as not being

subject to recoupment.) To the extent that this $3,500 is fairly classified as a "debt" rather than part

of the original statutorily-mandated offset under section 1174(h)(2) (a determination that the Board,

again, failed to make), i.e., because that section 1174(h)(2) amount had already been recouped in

full and the $3,500 represented, therefore, a VA overpayment, then § 1.912a would seem to apply,

and the Board would have to ensure that VA complied with the procedural safeguards listed in that

provision. The Board, in failing to consider the potential applicability of the above three provisions

and possibly other applicable ones, has violated its duty under section 7104(a), see 38 U.S.C.

§ 7104(a); Weaver, Sanden, and Schafrath, all supra, and its duty under section 7104(d)(1) to

provide an adequate statement of reasons or bases discussing such provisions, see 38 U.S.C.

§ 7104(d)(1); Allday, Caluza, Gabrielson, and Gilbert, all supra. Therefore, the Court will vacate

the Board decision and remand the matter for readjudication.

Furthermore, as stated above, the original determination of the Atlanta RO was that the entire

amount of the appellant's SSB ($30,000) was the proper amount to be recouped (R. at 26), and the

Winston-Salem RO recalculated this figure to a lower amount ($20,750) (R. at 114). It appears that

the appellant had appealed this matter seeking, inter alia, a further downward recalculation of this

amount (i.e., seeking a figure less than $20,750 as the proper amount), in that he continued to appeal

the matter despite the fact that the Winston-Salem RO had granted him most, but not all, of the

recalculation he had sought. See R. at 81 (February 1998 NOD (as to January 1998 RO decision,

R. at 78) arguing that correct amount subject to recoupment was $16,000), 112-13 (Winston-Salem

RO decision recalculating the amount subject to recoupment as $20,750), 123 (July 1998 Board

15

decision, on appeal from Winston-Salem RO decision). The net result, however, after the income-

tax-withholding recalculation mandated by the 1999 Court remand (R. at 135), was a $3,250

increase in the appellant's liability.

It is well settled that the veterans-benefits system is a pro-claimant system. See Brown v.

Gardner, 513 U.S. 115, 118 (1994) (stating, in context of statutory interpretation, "interpretive doubt

is to be resolved in the veteran's favor"); Hodge v. West, 155 F.3d 1356, 1362 (Fed. Cir. 1998)

(stating that "[t]his court and the Supreme Court both have long recognized that the character of the

veterans' benefits statutes is strongly and uniquely pro-claimant" and describing "the historically non-

adversarial system of awarding benefits to veterans"); Trilles v. West, 13 Vet.App. 314, 326 (2000)

(describing "the VA pro-claimant nonadversarial claims adjudication process"); Moore v. West,

13 Vet.App. 69, 74 (1999) (Steinberg, J., concurring) (describing "the pro-claimant nature of the VA

adjudication process"). Moreover, a review of the pertinent regulations shows that the Secretary has

established rather detailed procedural safeguards for a variety of situations in which a claimant's

benefits may be reduced, see, e.g., 38 C.F.R. § 3.105(e)-(i) (2001), and there is no indication that the

Board considered the applicability of any such process to the instant context. For example, in cases

in which a reduction in the rating of a service-connected disability is proposed, the following

procedure attaches:

Where the reduction in evaluation of a service-connected disability or

employability status is considered warranted and the lower evaluation would result

in a reduction or discontinuance of compensation payments currently being made, a

rating proposing the reduction or discontinuance will be prepared setting forth all

material facts and reasons. The beneficiary will be notified at his or her latest address

of record of the contemplated action and furnished detailed reasons therefor, and will

be given 60 days for the presentation of additional evidence to show that

compensation payments should be continued at their present level. Unless otherwise

provided in paragraph (i) of this section, if additional evidence is not received within

that period, final rating action will be taken and the award will be reduced or

discontinued effective the last day of the month in which a 60-day period from the

date of notice to the beneficiary of the final rating action expires.

38 C.F.R. § 3.105(e); see also 38 C.F.R. § 3.105(i) (detailing right to predetermination hearing for

those affected by, inter alia, procedures under § 3.105(e)-(h)).

16

In this case, the Board allowed the RO to increase the veteran's liability (R. at 321) and then

subsequently ratified that increase (R. at 7). Thus, the veteran, who was seeking a $4,750 reduction

in his liability, received instead a $3,250 increase; this result appears to be at odds with the pro-

claimant nature of the veterans-benefits system. By ratifying this increase in liability, the Board

essentially created a process whereby the veteran had to take an appeal at his own risk, i.e., the risk

that not only might he not receive what he requested but that he might end up in a worse position.

Where VA procedures authorize the Secretary to reduce benefits in certain contexts, as do 38 C.F.R.

§ 3.105(e)-(i), such a reduction must be preceded by detailed and specific procedural safeguards that

fully and fairly give the claimant notice of the proposed reduction and an opportunity to contest it.

See also Sutton v. Brown, 9 Vet.App. 553, 569-70 (1996) (calling for unified approach requiring

advance notice to appellant before Board considers evidence or issue not considered by RO). No

such procedure appears to have been followed in this case.

The Court emphasizes that it is not concluding that under no circumstances could the

Secretary lawfully take the actions that he has in this case. However, on remand, the Board must

provide a full explanation of (1) its authority to increase the appellant's liability (including its

jurisdiction to do so, as raised in the concurring opinion), (2) whether any prior protective procedures

attached to such an action, and (3) whether VA complied with those procedures. See 38 U.S.C.

§ 7104(a), (d)(1); Weaver, Allday, Caluza, Gabrielson, Sanden, Schafrath, and Gilbert, all supra.

To the extent that the Secretary concludes that he is authorized to create such an "appeal-at-your-

own-risk" scenario, he faces a heavy burden to explain adequately how such a scenario comports

with the pro-claimant nature of the veterans-benefits system. Therefore, the Board decision is

vacated on this basis as well to permit the Board to address these issues on remand.

III. Conclusion

On the basis of the above analysis, the ROA, and the submissions of the parties, the Court

vacates the Board decision and remands the matter for expeditious further development and issuance

of a readjudicated decision supported by an adequate statement of reasons or bases, see 38 U.S.C.

§§ 5103(a), 5103A, 5107, 7104(a), (d), 7105; 38 C.F.R. §§ 1.912a, 3.105(e)-(i), 3.2600(d); 66 Fed.

Reg. 45,620, 45,630-32 (Aug. 29, 2001) (amending 38 C.F.R. § 3.159, as applicable); and Fletcher

17

v. Derwinski, 1 Vet.App. 394, 397 (1991), all consistent with this opinion and in accordance with

section 302 of the Veterans' Benefits Improvements Act of 1994, Pub. L. No. 103-446, § 302, 108

Stat. 4645, 4658 (found at 38 U.S.C. § 5101 note) (requiring Secretary to provide for "expeditious

treatment" of claims remanded by BVA or the Court) [hereinafter VBIA § 302], see Vargas-

Gonzalez v. Principi, 15 Vet.App. 222, 225-30 (holding that VBIA § 302 applies to all elements of

claim remanded by Court or Board), and with all applicable law and regulation. See Allday,

7 Vet.App. at 533-34. On remand, the appellant will be free to submit additional evidence and

argument on the remanded claim in accordance with Kutscherousky v. West, 12 Vet.App. 369, 372-

73 (1999) (per curiam order) (concluding that an appellant is entitled, until 90 days after Board mails

postremand notice to appellant, to submit additional evidence and argument or to request hearing

on appeal at which appellant may submit new evidence), and all applicable law and regulation. The

Court notes that a remand by this Court or by the Board confers on an appellant the right to VA

compliance with the terms of the remand order and imposes on the Secretary a concomitant duty to

ensure compliance with those terms. See Stegall, supra. The appellant's June 18, 2002, pleading

captioned "Supplemental Brief of the Appellant" is not accepted for filing because the Court at no

point ordered such briefing. The Clerk of the Court will return this pleading to the appellant. A final

decision by the Board following the remand herein ordered will constitute a new decision that, if

adverse, may be appealed to this Court only upon the filing of a new Notice of Appeal with the Court

not later than 120 days after the date on which notice of the Board's new final decision is mailed to

the appellant. See Marsh v. West, 11 Vet.App. 468, 472 (1998).

VACATED AND REMANDED.

KRAMER, Chief Judge, concurring: I concur in the vacatur of the August 14, 2000, Board

of Veterans' Appeals (Board or BVA) decision and remand of the appellant's claim. I write

separately, however, because I believe that the remand in this case should be ordered at this time on

a somewhat different basis.

On appeal to this Court, the appellant asserts that he did not appeal the April 1998

determination by the Winston-Salem VA regional office (RO) that the amount of his pre-tax special

separation bonus (SSB) subject to recoupment was $20,755.14. Appellant's Brief (Br.) at 11; see

18

Record (R.) at 111-14. The appellant further asserts and the record reflects that the Board, in its

July 31, 1998, decision dealing with the assignment of effective dates for his service-connected

disabilities, recognized that the amount of pre-tax SSB subject to recoupment was not at issue and

that, in April 1998, the Winston-Salem RO had determined that $20,755.14 was the pre-tax SSB

amount to be recouped. Appellant's Br. at 11; see R. at 123. The appellant then asserts that,

subsequent to the filing with this Court of his Notice of Appeal from that July 1998 BVA decision,

the joint remand sought by the parties and ordered by the Court was for the sole purpose of

calculating and refunding to him, in light of the amendment of 10 U.S.C. § 1174(h)(2) during the

pendency of his claim, the amount of federal income tax that had been withheld from his SSB.

Appellant's Br. at 12; see R. at 135-38, 141, 143; 10 U.S.C. § 1174(h)(2) (amount equal to total

amount of separation pay, inter alia, received less amount of federal income tax withheld from that

pay shall be deducted from disability compensation); see also Transportation Equity Act for the 21st

Century, Pub. L. No. 105-178, § 8208, 112 Stat. 107, 495 (1998); National Defense Authorization

Act for Fiscal Year 1997, Pub. L. No. 104-201, § 653, 110 Stat. 2422, 2583 (1996). The appellant

argues that, therefore, the issue of the proper amount of his pre-tax SSB that is subject to recoupment

was not properly before the Board when it rendered either its June 28, 1999, decision remanding his

claim to the RO or its August 14, 2000, decision presently on appeal. Appellant's Br. at 11-14. (I

note that the June 1999 remand was for further development and that, in that remand, the BVA

directed the RO, inter alia, to specifically note how it had arrived at the amount of SSB to be

recouped. R. at 319-22.) The ultimate result of those Board decisions was an increase in the pre-tax

SSB amount subject to recoupment.

The initial question presented to the Court here is whether the April 1998 Winston-Salem

RO determination that the pre-tax SSB amount subject to recoupment was $20,755.14 (which pre-tax

amount subsequently was increased to $30,049.92 in July 1999 by the Baltimore RO and was

affirmed by the BVA in the decision on appeal) was in appellate status and thus properly before the

Board. In this regard, it does not appear from the record on appeal (ROA) that the appellant filed

a Notice of Disagreement (NOD) as to the April 1998 Winston-Salem RO decision. See 38 U.S.C.

§ 7105 (filing NOD and appeal). Compare Collaro v. West, 136 F.3d 1304, 1308-09 (Fed. Cir.

1998) (as to appellant's general and broad NOD), with Ledford v. West, 136 F.3d 776, 779-80 (Fed.

19

Cir. 1998) (as to appellant's specific and limited NOD). The ROA does reflect, however, that, when

his case previously was before this Court on appeal, the appellant joined in a joint motion for remand

that required VA to determine the applicability to and the effect upon his case of the amendment of

10 U.S.C. § 1174(h)(2), which amendment required the deduction from pre-tax SSB of the amount

of federal income tax withheld to determine the net amount of SSB to be recouped. R. at 136-37,

141; see R. at 143 (February 19, 1999, Court order granting motion to remand and vacating

July 1998 BVA decision).

In the August 2000 decision presently on appeal, the Board "point[ed] out" (in essence

concluded) that the April 1998 Winston-Salem RO decision regarding the correct amount of the

appellant's pre-tax SSB to be used in a recoupment calculation was "rendered during the course of

the present appeal" and, therefore, pursuant to the appellate process, was being reviewed in its

decision. R. at 6. However, given that the Board did not address the matters discussed in the

preceding paragraph in so concluding that this issue was in appellate status, I believe that the Board

reached this conclusion prematurely and thus failed to provide an adequate statement of reasons or

bases as to why it had the authority to consider the accuracy of $20,755.14 as the pre-tax SSB

amount subject to recoupment. See 38 U.S.C. § 7104(d)(1); Weaver v. Principi, 14 Vet.App. 301,

302 (2001) (per curiam order); Allday v. Brown, 7 Vet.App. 517, 527 (1995); Gilbert v. Derwinski,

1 Vet.App. 49, 57 (1990). Thus, I would vacate the August 14, 2000, Board decision and remand

the appellant's claim for readjudication on this basis.

20