Faunda R. Hatch v. Anthony J. Principi

This version includes an errata dated 20Dec04 - e

UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS

NO . 03-1282

FAUNDA R. HATCH , APPELLANT ,

V.

ANTHONY J. PRINCIPI,

SECRETARY OF VETERANS AFFAIRS, APPELLEE.

On Appeal from the Board of Veterans' Appeals

(Argued October 5, 2004 Decided December 2, 2004 )

Kenneth M. Carpenter, of Topeka, Kansas, argued the cause, and Denton M. Hatch, of

Spanish Fork, Utah, was on the pleading for the appellant.

Erika E. Liem, with whom Tim S. McClain, General Counsel; R. Randall Campbell, Assistant

General Counsel; and Brian B. Rippel, Deputy Assistant General Counsel, all of Washington, D.C.,

were on the pleading for the appellee.

Before IVERS, Chief Judge, and KASOLD and HAGEL, Judges.

KASOLD, Judge: Mrs. Faunda Hatch, the surviving spouse of World War II veteran Myron

Hatch, appeals through counsel from a May 13, 2003, Board of Veterans' Appeals (Board) decision

that denied her claim for enhanced dependency and indemnity compensation (enhanced DIC) under

section 1311(a)(2) of title 38, United States Code. The Board denied her claim on the basis that her

husband had not been evaluated as 100% disabled as a result of a service-connected disability for

at least eight continuous years prior to his death. Mrs. Hatch seeks reversal and argues that (1) there

is a reasonable medical probability, based on a medical opinion obtained after Mr. Hatch's death, that

he was totally disabled for the eight years prior to his death, and (2) the Board was required under

Hix v. Gober, 225 F.3d 1377 (Fed. Cir. 2000) [hereinafter Hix II], to consider that newly acquired

medical opinion and determine de novo whether Mr. Hatch "hypothetically" could have been

awarded a 100% disability rating for the eight years prior to his death. Mrs. Hatch further argues that

her claim is an independent claim that is not dependent on the benefits that her husband had been

receiving. The Secretary urges the Court to affirm the Board's decision and argues that the Board

correctly relied upon a VA General Counsel precedent opinion that precluded consideration of

evidence not contained within the veteran's claims file. He further argues that the Board correctly

denied the enhanced DIC claim because Mr. Hatch had not submitted his claim for service

connection eight or more years prior to his death and had not been rated as 100% service-connected

disabled for the eight years immediately preceding death. The Secretary additionally argues that the

Board considered all relevant evidence of record and provided an adequate statement of reasons or

bases for its findings and conclusions. For the reasons set forth below, the Court will set aside the

decision of the Board and remand the matter for further proceedings consistent with this opinion.

I. BACKGROUND

Mr. Hatch served in the United States Army from October 1943 to March 1946. Record (R.)

at 18. On June 6, 1994, he filed a formal claim for service connection for, inter alia, post-traumatic

stress disorder (PTSD) (R. at 78-81); the claim was granted by a VA regional office (RO) and a 10%

disability rating was assigned initially (R. at 147-49) and subsequently increased to 70%, effective

as of the date of his original claim (R. at 202-07). In August 1999, the RO granted an increased

rating to 100%, effective July 27, 1998, the date on which Mr. Hatch had submitted his claim for an

increased rating. R. at 248-50. Mr. Hatch died on December 23, 2001. R. at 267.

In January 2002, Mrs. Hatch submitted a claim for death benefits as the surviving spouse.

R. at 261-65. Later that same month, the RO granted, inter alia, service connection for Mr. Hatch's

cause of death, entitling Mrs. Hatch to regular dependency and indemnity compensation (regular

DIC), but the RO denied entitlement to enhanced DIC. R. at 256-59. Mrs. Hatch appealed the denial

of enhanced DIC to the Board. R. at 294. Thereafter, Mrs. Hatch submitted to the Board a June

2002 letter from Dr. Dawson Hedges, who stated his belief, based on his prior evaluations of Mr.

Hatch, "that there is a reasonable medical probability that Myron Hatch had a total service-connected

disability eight years prior to his death." R. at 311. The Board denied Mrs. Hatch's claim because

Mr. Hatch had not been rated by VA as 100% disabled for his service-connected PTSD for the eight

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years immediately preceding his death. R. at 10-12. In denying the claim, the Board refused to

consider the newly presented evidence from Dr. Hedges because the Board was bound by VA

General Counsel Precedent Opinion 9-2000 (Dec. 8, 2000), which opined that an enhanced DIC

claim could not be awarded based on new evidence submitted after the death of a veteran. R. at 8-

13. This appeal followed.

II. ANALYSIS

As an initial matter, the Court will address the question of whether this case is affected by

a stay the United States Court of Appeals for the Federal Circuit issued in National Orgization of

Veterans' Advocates, Inc. v. Secretary of Veterans Affairs, 314 F.3d 1373, 1381-82 (Fed. Cir. 2003)

[hereinafter NOVA II]. In NOVA II, the Federal Circuit stayed the processing of claims for enhanced

DIC benefits where a surviving claimant sought to reopen a deceased veteran's previously and finally

denied claim for service connection with total disability rating on the grounds of new and material

evidence. Id. In the instant case, during oral argument, counsel for both parties agreed that the stay

does not affect these proceedings because Mrs. Hatch's claim for enhanced DIC was not an attempt

to reopen her husband's claim; rather, it was an independent claim of her own (albeit, in the view of

the Secretary, dependent on Mr. Hatch's claim). The Court agrees with the parties that, for the reason

they submit, the proceedings in this case are not stayed.

It is important to summarize the history of the relevant law in effect during the pendency of

this claim. Section 1311(a)(2) provides surviving spouses with an enhancement to the regular DIC

entitlement in the case of "a veteran who at the time of death was in receipt of or was entitled to

receive . . . compensation for a service-connected disability that was rated totally disabling for a

continuous period of at least eight years immediately preceding death." 38 U.S.C. § 1311(a)(2)

(emphasis added). This Court has interpreted the "or was entitled to receive" language of section

1311(a)(2) as permitting a complete review of the veteran's file and a determination de novo of

whether the veteran hypothetically was entitled to benefits sufficient to warrant enhanced DIC for

the surviving spouse. Hix v. West, 12 Vet.App. 138 (1999) [hereinafter Hix I]; Pardue v. West, No.

97-1789, 1999 WL 79512 (Vet. App. Feb. 8, 1999), aff'd, Hix II, supra. The Secretary appealed Hix

I and Pardue to the Federal Circuit, which consolidated the cases in rendering its decision in Hix II.

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The Federal Circuit affirmed both cases, holding that claimants may establish entitlement to

enhanced DIC benefits by showing that the veteran was hypothetically entitled to receive a total

disability evaluation for the requisite period of time on the basis of a "de novo determination of the

veteran's disability, upon the entirety of the record including any new evidence presented by the

surviving spouse." Hix II, 225 F.3d at 1380-81 (latter emphasis added). This was the first explicit

judicial pronouncement that new evidence could be presented to the Secretary for consideration in

a surviving spouse's claim for enhanced DIC. The Court, however, notes that Pardue involved the

situation where the surviving spouse, after her veteran-husband's death, testified that the veteran had

been a "very, very sick man" and further submitted to the RO new medical evidence and lay

statements in support of her claim for enhanced DIC. See Pardue, 1999 WL 79512, at *2.

After the Federal Circuit issued its Hix II decision, the VA General Counsel issued a

precedent opinion, which opined that the language in Hix II regarding the consideration of new

evidence presented by a surviving spouse in support of an enhanced DIC claim was "obiter dictum"

and therefore not binding on the Secretary. VA Gen. Coun. Prec. 9-2000 (Dec. 8, 2000) [hereinafter

G.C. Prec. 9-2000]. The Board, in the case at bar, relied upon this precedent opinion in denying Mrs.

Hatch's enhanced DIC claim. R. at 8-13.

Also subsequent to the Federal Circuit's Hix II decision, the Secretary modified § 3.22, of

title 38, Code of Federal Regulations, the regulation implementing section 1318(b) of title 38, United

States Code. Section 1318(b) governs the provision of benefits for survivors of veterans who died

from non-service-connected causes and at the time of death were "in receipt of or entitled to receive"

disability compensation for service-connected disabilities rated as totally disabling. Section 1318(b)

contains the same "or was entitled to receive" language as section 1311(a)(2) (in terms of the

duration of total disability resulting from service-connected disability), the section at issue in Hix

II and herein. The Secretary's modification, inter alia, revised § 3.22 to define expressly the phrase

"entitled to receive" as limited to the situation where benefits were not awarded "due solely to clear

and unmistakable error [CUE]" by the agency, thus preventing the use of newly presented evidence

to establish a hypothetical entitlement to DIC under section 1318 in the place of the actual

entitlement. See 65 Fed. Reg. 3,388, 3,391 (Jan. 21, 2000); see also Livesay v. Principi, 15 Vet.App.

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165, 173-74 (2001) (en banc) (quoting and following standards set forth in Russell v. Principi,

3 Vet.App. 310, 313 (1992) (en banc), for allegations of CUE in a Board decision).

This regulatory change was challenged directly in the Federal Circuit in National

Organization of Veterans' Advocates, Inc. v. Secretary of Veterans Affairs, 260 F.3d 1365 (Fed. Cir.

2001) [hereinafter NOVA I]. In that case, the Federal Circuit generally recognized the authority of

the Secretary to interpret statutes and implement regulations, but it found the regulatory changes to

§ 3.22 to be inconsistent with § 20.1106, title 38, Code of Federal Regulations, which provided that

claims for enhanced DIC benefits under section 1311(a)(2) "will be decided without regard to any

prior disposition of those issues during the veteran's lifetime." See NOVA I, 260 F.3d at 1379. The

Federal Circuit stayed the processing of all claims for benefits under section 1318(b) and directed

the Secretary to harmonize his regulations under these sections or provide a reasonable explanation

why he chose to interpret the "entitled to receive" language in section 1318(b) in a manner

inconsistent with the same language in section 1311(a)(2). Id. at 1380-81. In response to NOVA

I, the Secretary attempted to harmonize his regulations by modifying § 20.1106 to require expressly

the adjudication of claims for enhanced DIC to be dependent on and constrained by prior

adjudications of the veteran's claims, thereby making adjudications of claims under both sections

1311(a)(2) and 1318(b) subject to the veteran's prior claims, if any. See Board of Veterans' Appeals

Rules of Practice: Claim for Death Benefits by Survivor, 67 Fed. Reg. 16,309, 16,317 (April 5,

2002).

The regulatory change to § 20.1106 was challenged directly in the Federal Circuit in NOVA

II. In that decision, the Federal Circuit again generally recognized the authority of the Secretary to

interpret statutes and promulgate regulations. The Federal Circuit, however, rejected the Secretary's

argument that the "entitled to receive" language in section 1311(a)(2) was unambiguous, and

specifically stated that the issue had been decided in Hix II and could not be revisited. NOVA II,

314 F.3d at 1378. The Federal Circuit further held, upon review of the amended § 20.1106, that the

Secretary had failed in his obligation under NOVA I to harmonize the regulations under sections

1311(a)(2) and 1318(b), and the Federal Circuit vacated the changes to § 20.1106. See NOVA II,

314 F.3d at 1381. With regard to Mrs. Hatch's claim for enhanced DIC, the state of the law reverted

back to a conflict between (1) the holding in Hix II that enhanced DIC claims under section

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1311(a)(2) could be adjudicated on new evidence submitted posthumously and, under § 20.1106,

"without regard" to prior adjudications of the veteran's claims, and (2) G.C. Prec. 9-2000, which

barred consideration of new evidence.

In the case on appeal, the Board based its denial of Mrs. Hatch's claim on the fact that it was

bound by G.C. Prec. 9-2000, which had rejected as obiter dictum the language in Hix II that required

the Secretary to accept newly submitted evidence to prove an enhanced DIC claim based on a

veteran's hypothetical entitlement to benefits. It is well established that, although the Board is bound

by the precedent opinions of the VA General Counsel, this Court is not so bound. See Theiss v.

Principi, 18 Vet.App. 204, 210 (2004); Cottle v. Principi, 14 Vet.App. 329, 335 (2001); Sabonis v.

Brown, 6 Vet.App. 426, 429 (1994); see also 38 U.S.C. §§ 7104(c), 7261. The Court reviews the

Secretary's interpretation of law de novo. See Butts v. Brown, 5 Vet.App. 532, 539 (1993) (en banc).

The Secretary argues that this Court should disregard the purported dictum in Hix II. We

disagree because the language in Hix II at issue here is not dictum. Although "[n]o controlling

precedent can arise from dictum on a question not before the court," Sullivan v. Dept. of Navy,

720 F.2d 1266, 1279 (Fed. Cir. 1983), "[w]hen an opinion issues for the Court, it is not only the

result but also those portions of the opinion necessary to that result by which we are bound."

Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 67 (1996); see also Bethea v. Derwinski, 2 Vet.App.

252, 254 (1992) (holding that this Court is bound by Federal Circuit precedent). In Pardue, the

companion case in Hix II, the claimant sought enhanced DIC benefits although the veteran had never

been awarded service connection, and the Federal Circuit remanded for consideration of new

evidence, posthumously submitted, that related to the veteran's medical and employment history.

Pardue, 1999 WL 79512, at *2. Accordingly, the Hix II decision rested, at least in part, on the facts

of Pardue, and we hold that the requirement of Hix II that VA adjudicate a claim for enhanced DIC

based on a review of the evidence of record, "including any new evidence presented by the surviving

spouse," cannot be dictum.

Finally, in NOVA II, when the Secretary attempted to relitigate the question whether the

"entitled to receive" language in section 1311(a)(2) was unambiguous, the Federal Circuit explicitly

rejected the Secretary's implicit argument that the Federal Circuit had erred in Hix II in its

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interpretation of that language, thus implicitly affirming its holding in Hix II. See NOVA II, 314 F.3d

at 1378. This Court is bound by Hix II, and the issue cannot be relitigated here. See Bethea, supra.

Because the VA General Counsel erroneously rejected the holding of Hix II as dictum, G.C.

Prec. 9-2000 is invalid and without force or effect. See Snyder v. Principi, 15 Vet.App. 285, 292

(2001) (invalidating General Counsel precedent opinion that is "plainly in conflict with [the

caselaw]"). Although the Board was correct to adjudicate Mrs. Hatch's claim under G.C. Prec. 9-

2000, see Theiss, Cottle, and Sabonis, all supra, because the Court herein invalidates that precedent

opinion the Board's decision in reliance upon it cannot stand. See Butts, supra; see also 38 U.S.C.

§ 7261(b)(2).

The Secretary also argues that Mrs. Hatch is not entitled to enhanced DIC because her

husband filed his claim less than eight years immediately preceding his death, and an effective date

of a claim can be no earlier than the date on which the claim is filed or the date entitlement arose,

whichever is later. See 38 C.F.R. § 3.400(b)(2) (2003). This argument is subsumed in and

foreclosed by the Federal Circuit's holding that a surviving spouse's claim for enhanced DIC does

not rely upon a prior adjudication of a veteran's claim for disability benefits and must be adjudicated

based upon a "de novo determination of the veteran's disability." Hix II, 225 F.3d at 1379-81; see

also 38 C.F.R. § 20.1106 (2001) (surviving spouse's claim for death benefits "will be decided

without regard to any prior disposition of those issues during the veteran's lifetime"). Thus, Mrs.

Hatch's claim for enhanced DIC must be adjudicated de novo, without consideration of the effective

date of her husband's prior grant of service connection for PTSD or the date of the original claim

therefor.

III. REMEDY AND CONCLUSION

Mrs. Hatch seeks reversal with the Court directing the award of enhanced DIC benefits;

however, the Secretary has not addressed the quintessential question of fact: Is the evidence

contained in the newly submitted medical report sufficient to conclude that Mr. Hatch hypothetically

would have been entitled to a 100% service-connected disability rating for the entirety of the eight

years immediately preceding his death? Such factual determinations cannot be made by this Court

in the first instance. See Thompson v. Gober, 14 Vet.App. 187, 188 (2000); see also 38 U.S.C.

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§ 7261(c). Accordingly, the decision of the Board will be set aside and the matter remanded for

readjudication consistent with this opinion. See Bucklinger, supra; see also 38 U.S.C.

§ 7261(a)(3)(A).

On remand, Mrs. Hatch may present any additional evidence and argument in support of the

matters remanded, and the Board must consider any evidence and argument so presented. See Kay

v. Principi, 16 Vet.App. 529, 534 (2002). The Court expects that the Secretary will provide

expeditious treatment of this matter on remand. See 38 U.S.C. § 7112.

SET ASIDE and REMANDED.

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