Leamon Johnson , Jr. v. Anthony J. Principi

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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