R. Edward Bates v. R. James Nicholson

UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS

NO . 03-1903(E)

R. EDWARD BATES, PETITIONER ,

V.

R. JAMES NICHOLSON ,

SECRETARY OF VETERANS AFFAIRS, RESPONDENT .

On Petitioner's Application for Attorney Fees and Expenses

(Decided July 18, 2006 )

Kenneth M. Carpenter, of Topeka, Kansas, was on the pleading for the petitioner.

Tim S. McClain, General Counsel; R. Randall Campbell, Assistant General Counsel; Mary

Ann Flynn, Principal Deputy Assistant General Counsel; and David L. Quinn, all of Washington,

D.C., were on the pleading for the respondent.

Before HAGEL, MOORMAN, and SCHOELEN, Judges.

SCHOELEN, Judge: This case is before the Court on the petitioner's September 21, 2005,

application, filed, through counsel, for reasonable attorney fees and expenses under the Equal Access

to Justice Act, 28 U.S.C. § 2412(d) (EAJA), and his January 9, 2006, amended application. For the

reasons set forth below, the Court will deny the original and amended applications.

I. Background

Petitioner R. Edward Bates is an attorney at law admitted to practice before this Court. Prior

to July 2003, he was accredited to represent claimants before the Department of Veterans Affairs

(VA) pursuant to 38 U.S.C. §§ 5901 and 5904(a). In December 2000, a VA regional counsel notified

Mr. Bates of the Secretary's intent to cancel his accreditation to represent claimants before VA.

After a hearing on the matter, the petitioner was informed by a July 28, 2003, letter from the VA

General Counsel (GC) that, pursuant to section 5904(a) and 38 C.F.R. § 14.633 (2002), the Secretary

had cancelled his accreditation. On August 6, 2003, the petitioner, through counsel, filed with a VA

regional office (RO) a Notice of Disagreement (NOD) as to the Secretary's decision and requested

a stay of the cancellation pending administrative and judicial appellate review. The RO did not

respond to the petitioner's request, but instead referred the matter to the Office of the GC. On

October 20, 2003, the petitioner, through counsel, filed in this Court a petition for extraordinary

relief in the nature of a writ of mandamus requesting that the Court order the Secretary or his

delegates to provide a Statement of the Case (SOC) in connection with the petitioner's NOD. On

October 28, 2003, the petitioner filed a supplemental verified petition confirming that the Secretary

had refused to issue an SOC.

On October 31, 2003, the Court ordered the Secretary to file an answer to the petition. The

Secretary filed his answer on December 1, 2003. The Secretary asserted that the Court's authority

under the All Writs Act, 28 U.S.C. § 1651(a), did not extend to the matter raised in the petition

because such a matter could never result in a decision by the Board of Veterans' Appeals (Board).

Accordingly, the Secretary urged the Court to dismiss the petition for lack of jurisdiction.

In an order dated February 19, 2004, the Court dismissed the petition for lack of jurisdiction.

Bates v. Nicholson, 17 Vet.App. 443 (2004) (per curiam order). The Court concluded that section

5904(b) was not a law that "affects the provision of benefits by the Secretary to veterans," 38 U.S.C.

§ 511(a), and that, therefore, the issue of the petitioner's challenge to the termination of his

accreditation was not a matter justiciable by the Board under 38 U.S.C. § 7104(a). Because the

power to issue a writ extends only to the Court's potential jurisdiction, the Court concluded that it

was without authority to issue the writ of mandamus. Bates, 17 Vet.App. at 445-47. The petitioner

subsequently appealed the matter to the United States Court of Appeals for the Federal Circuit

(Federal Circuit).

On February 28, 2005, the Federal Circuit concluded that this Court had erred in holding that

section 5904(b) was not a "law that affects the provision of benefits to veterans" under section

511(a), and reversed our February 2004 decision in Bates. Bates v. Nicholson, 398 F.3d 1362 (Fed.

Cir. 2005). In reaching that conclusion, the Federal Circuit reasoned that, although subsection

5904(b) is not itself "a law that affects the provision of benefits," this Court erred when it construed

the term "law" in section 511(a) to indicate a particular statutory subsection (such as section

5904(b)). The Federal Circuit held that, for the purposes of section 511(a), "the relevant 'law' is the

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public law that originally enacted section 5904, the Veterans Act of 1936, ch. 867, 49 Stat. 2031."

Bates, 398 F.3d at 1362. Under that definition, a "law" would encompass every statutory section and

subsection enacted by the public law (including section 5904(b)). Id. at 1355. Therefore, both the

Board and this Court have jurisdiction to review a VA accreditation-cancellation decision pursuant

to section 5904(b). Id.

In light of that determination, the Federal Circuit remanded the matter with instructions to

issue the requested writ of mandamus. Bates, 398 F.3d at 1365-66. In accordance with the mandate

of the Federal Circuit, on June 17, 2005, this Court granted the petitioner's petition for a writ of

mandamus and ordered the Secretary to issue an SOC. Bates v. Nicholson, 19 Vet.App. 197 (2005)

(per curiam order). The Secretary provided the petitioner with an SOC on July 6, 2005. On

September 21, 2005, the petitioner filed, through counsel, an EAJA application for attorney fees

incurred in connection with the mandamus action. In that application (as amended on January 9,

2006), he requests $8,778.58 in attorney fees and $1,738.80 in costs and expenses, for a total of

$10,517.38.

II. Contentions of the Parties

The petitioner asserts that he is entitled to an award of attorney fees under the EAJA because

he is a prevailing party and because the Secretary's position at the administrative stage was not

substantially justified. Application (Appl.) at 1. He contends that, contrary to the Secretary's

assertion, the issue in this case was not one of first impression. Appl. Response (Resp.) at 2-3. He

asserts that the Federal Circuit's decisions in Cox v. West, 149 F.3d 1360 (Fed. Cir. 1998), Hanlin

v.United States, 214 F.3d 1319 (Fed. Cir. 2000), and Scates v. Principi, 282 F.3d 1362 (Fed. Cir.

2002), are controlling precedents that address the question of whether attorney disaccreditation under

section 5904(b) is subject to administrative appellate review pursuant to 38 U.S.C. § 7105. Id. at

3-4. He argues that, in light of those precedents, the Secretary was not substantially justified in

believing that the statutory and regulatory scheme did not enable the claimants' representatives to

appeal to the Board matters relating to accreditation. Id. at 4. He further points out that the

Secretary's substantial justification argument is "the same argument rejected by the Federal Circuit"

in its reversal of Bates. Id. at 3.

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The Secretary contends that the Court should deny the petitioner's EAJA application. He

asserts that (1) VA's position was substantially justified at both the administrative and litigation

stages of the proceedings, and (2) in this case, special circumstances exist that would make an award

unjust. Secretary's (Sec'y) Resp. at 5, 13. The Secretary contends that the Court should find VA's

position to be substantially justified because "[t]he issue involved in this case was one of first

impression," and points to the fact that "there is nothing in section 5904(b) which, on its face, would

suggest that the Board would have jurisdiction over the accreditation of representatives." Id. at 8,

11. As to "special circumstances," the Secretary contends that the underlying facts of this case show

that the petitioner "repeatedly violated federal law," and that it would be unjust to order the

Government to "pay the legal costs associated with the defense of his misconduct." Id. at 13, 15.

The Secretary does not contest whether the petitioner was a "prevailing party," but notes that

controlling legal precedent "requires a party to have achieved some success on the merits (Akers v.

Nicholson, 409 F.3d 1356 (Fed. Cir. 2005)) before achieving such status," and that the Court's

authority under the All Writs Act "extends only to the 'administrative process,' not to the 'merits' of

a claim." Sec'y Resp. at 2 n. 1 (citing to Heath v. West, 11 Vet.App. 400, 402-03 (1998)).

III. Analysis

This Court has jurisdiction to award reasonable attorney fees and expenses pursuant to

28 U.S.C. § 2412(d)(2)(F). Here, the petitioner's September 21, 2005, EAJA application was filed

within the 30-day EAJA application period set forth in 28 U.S.C. § 2412(d)(1)(B). It also satisfies

the requisite EAJA "application-content specifications," because it contains the following: (1) An

allegation that the petitioner is a prevailing party; (2) a showing that he is a party eligible for an

EAJA award because his net worth does not exceed $2,000,000; (3) an allegation that the position

of the Secretary was not substantially justified; and (4) an itemized fee statement. See 28 U.S.C.

§ 2412(d)(1)(A), (1)(B), and (2)(B); Scarborough v. Principi, 541 U.S. 401 (2004); Scarborough

v. Nicholson, 19 Vet.App. 253, 257 (2005).

A. Prevailing-Party Status

The first question that must be resolved is whether the petitioner is a "prevailing party."

Comm'r v. Jean, 496 U.S. 154, 160 (1990) (holding that, "[i]n EAJA cases, the Court first must

determine if the applicant is a 'prevailing party' by evaluating the degree of success obtained. If the

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Government then asserts an exception for substantial justification or for circumstances that render

an award unjust, the court must make a second finding regarding these additional threshold

conditions."). Although the Secretary does not contest the prevailing-party question, the Court will

address it here because we have never addressed whether the grant of a petition for extraordinary

relief in the nature of a writ of mandamus renders a petitioner a "prevailing party" for the purposes

of the EAJA. For the reasons stated below, the Court holds that the petitioner is a prevailing party.

The Supreme Court set forth the requirements necessary for a plaintiff to be deemed a

"prevailing party" for the purpose of attorney fee awards under the Fair Housing and Amendments

Act of 1988 and the Americans with Disabilities Act in Buckhannon Bd. & Care Home, Inc. v. W.

Va. Dep't of Health & Human Res., 532 U.S. 598, 610 (2001). See also Brickwood Contractors, Inc.

v. United States, 288 F.3d 1371 (Fed. Cir. 2002) (applying Buckhannon to EAJA applications).

According to Buckhannon, a plaintiff must meet two criteria to qualify as a prevailing party. First,

the plaintiff must be able to point to a resolution of the dispute that causes a "material alteration in

the legal relationship of the parties." Buckhannon, 532 U.S. at 604 (quoting Tex. State Teachers

Ass'n v. Garland Indep. Sch. Dist., 489 U.S. 782, 792 (1989)). Second, that change in legal status

must be "judicially sanctioned." Id. In other words, prevailing-party status requires that a party

"must have received a judicial imprimatur tantamount to a judgment in favor of that party on the

merits of the original claim." Akers, 409 F.3d at 1359.

In applying Buckhannon, this Court has determined that to prevail, a party must have

achieved "the ultimate receipt of a benefit that was sought in bringing the litigation, i.e., the award

of a benefit, or, at a minimum, a court remand predicated upon administrative error." Sumner v.

Principi, 15 Vet.App. 256, 264 (2001) (en banc), aff'd sub nom. Vaughn v. Principi, 336 F.3d 1351

(2003) (appeal consolidated with appeal in Sumner v. Principi). The Court reached that conclusion

because both of those alternatives "entail resolutions that materially alter the legal relationship of the

parties," which the Court recognized as "the touchstone of the prevailing party inquiry." Id. (quoting

Tex. State Teachers Ass'n, supra).

However, it is also well established that certain interlocutory rulings often fail to provide the

"threshold level of relief " required to establish prevailing-party status. As examples of relief that

fall below that threshold, the Supreme Court in Buckhannon cited to the relief at issue in Hanrahan

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v. Hampton, 446 U.S. 754 (1980), and Hewitt v. Helms, 482 U.S. 755 (1987). In Hanrahan, an

appellate court reversed the district court's directed verdict against the respondents and remanded

the case for a new trial. In subsequent litigation for attorney fees, the Supreme Court rejected the

respondents' assertion of prevailing-party status, noting:

The respondents have of course not prevailed on the merits of any of

their claims. The Court of Appeals held only that the respondents

were entitled to a trial of their cause. . . . As is true of other

procedural or evidentiary rulings, these determinations may affect the

disposition on the merits, but were themselves not matters on which

a party could "prevail" for purposes of shifting his counsel fees to the

opposing party under § 1988.

446 U.S. at 758-59 (footnote omitted). Similarly, in Hewitt, the Supreme Court held that a prisoner

who had filed suit for damages and injunctive relief (but received neither) was not a prevailing party,

in spite of the appellate court's ruling that the prisoner's constitutional rights had been violated. In

reaching this result, the Court held that a party must "receive at least some relief on the merits of his

claim before he can be said to prevail. . . . The most that [the claimant] obtained was an interlocutory

ruling that his complaint should not have been dismissed for failure to state a constitutional claim.

That is not the stuff of which legal victories are made." Hewitt, 482 U.S. at 760.

What primarily distinguishes this case from Hanrahan and Hewitt is that in this case, the

Court's issuance of the writ caused an undebatable change in the "legal relationship of the parties"

by both establishing the petitioner's right to appeal his case through VA's administrative review

process and finding error in the Secretary's interpretation of law. Although the plaintiffs in

Hanrahan were awarded the right to a "trial of their cause," 446 U.S. at 758-59, that award did not

change the legal relationship of the parties; at most, that award changed the legal relationship

between the plaintiffs and the district court. Unlike the claimant in Hewitt, the petitioner here

received more than a favorable statement of law. Here, the petitioner's securing of the previously

unrecognized right to VA administrative review did indeed change the legal relationship between

the parties because it is the Secretary who is now compelled, by the Court's "judicially sanctioned"

writ of mandamus, to provide that review.

What further distinguishes this case from Hanrahan and Hewitt is that in those cases, the

plaintiffs sought substantive relief, and, receiving only procedural benefits, sought EAJA fees for

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those. In this case, Mr. Bates' only purpose before the Court was to seek a writ compelling the

Secretary to issue an SOC, thereby allowing his appeal to proceed to the Board. Although the

mandamus relief granted is procedural and, in some sense, interlocutory, it is also precisely the relief

that he requested. See Me. Sch. Admin. Dist. No. 35 v. Mr. R., 321 F.3d 9, 15-16 (1st Cir. 2003)

(holding that "a defendant who prevails on the only claim that justifies the presence of the case in

a federal court" is a prevailing party); Watson v. County of Riverside, 300 F.3d 1092, 1096 (9th Cir.

2002) (holding that a plaintiff who succeeded in winning a preliminary injunction preventing the use

of an arrest report at an administrative hearing was a prevailing party because the plaintiff "obtained

significant, court-ordered relief that accomplished one of the main purposes of his lawsuit").

Further, that relief was granted on the basis he sought, not because of the fortuitous passage of

controlling legislation or for the consideration of new evidence. Cf. Akers, 409 F.3d at 1359

(concluding that remands based solely on the passage of a statute or intervening caselaw did not

confer prevailing-party status).

Moreover, the mandamus petition in this case cannot be viewed as truly "interlocutory." The

petitioner's underlying claim is, at this point, an entirely separate matter that may never be reviewed

in this Court (and, hence, may never be the subject of a claim for attorney fees under the EAJA). In

Cox v. West, this Court's concern over piecemeal litigation prompted us to dismiss as premature a

similar EAJA application for fees in connection with the mandamus petition filed in that case. Cox

v. West, 13 Vet.App. 364 (2000), revoked in part, 13 Vet.App. 461 (2000). However, Cox was

unique because in that case, the Court, instead of addressing the EAJA application, took note of the

protracted delays in the case and reinstated the mandamus petition, with orders that the Secretary file

status reports regarding the Board's timetable for adjudication of the case. Id. at 366-67. Hence,

because the mandamus petition was still pending before the Court and no longer the subject of a final

decision, the Court dismissed as premature the petitioner's EAJA application "without prejudice to

a future filing under the EAJA after the Court acts on the petition." Id. In this case, our June 17,

2005, order granting the writ is a final decision and the Court retains no jurisdiction over the matter.

See Former Employees of Motorola Ceramic Prods. v. United States, 336 F.3d 1360, 1366 (Fed. Cir.

2003)) (holding that remand predicated on agency error and requiring further agency proceedings

confers prevailing-party status "without regard to outcome of agency decision" if the court does not

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retain jurisdiction); Zuberi v. Nicholson, 19 Vet.App. 541, 547 (2006) (citing Motorola, supra, and

concluding that appellant was a prevailing party "because he secured a remand based on an agency

concession of error, and the Court ordered further agency action without retaining jurisdiction"). As

such, the petitioner's EAJA application in this case is not premature; on the contrary, the petitioner

would be barred from seeking EAJA fees if he had neglected to file that application within 30 days

of the Court's final decision. See 28 U.S.C. § 2412; see also Melkonyan v. Sullivan, 501 U.S. 89,

96-97 (1991).

B. Substantial Justification

Once an EAJA applicant alleges that the Secretary's position lacked substantial justification,

the burden shifts to the Secretary to show that the Government's position was substantially justified

at both the administrative and litigation stages of the matter in order to avoid paying EAJA fees. See

Locher v. Brown, 9 Vet. App. 535, 537 (1996). To meet this burden, the Secretary must demonstrate

that, based on "the totality of the circumstances, including merits, conduct, reasons given, and

consistency with judicial precedent," his position at the administrative and litigation stages of the

proceeding had "a reasonable basis in law and fact." Stillwell v. Brown, 6 Vet.App. 291, 302 (1994)

(quoting Pierce v. Underwood, 487 U.S. 552, 566 n.2 (1988)).

The Secretary's failure to prevail on the merits of the case does not raise a presumption that

his position was not substantially justified. Kali v. Bowen, 854 F.2d 329, 332 (9th Cir. 1988). As

the Supreme Court noted in Pierce v. Underwood, "a position can be justified even though it is not

correct," and should be considered substantially justified if "if a reasonable person could think it

correct." Underwood, 487 U.S. at 566 n.2. Although the fact that "one other court agreed or

disagreed with the Government does not establish whether its position was substantially justified,"

the observations of other courts are often considered relevant to that determination. Underwood, 487

U.S. at 568.

Frequently, cases before this Court present matters of first impression "involving good faith

arguments of the government that are eventually rejected." Stillwell, 6 Vet.App. at 303. Arguments

presented in a case of first impression are more likely to be considered substantially justified than

those where the Court determines that the Secretary ignored existing law. See Johnson (Leamon)

v. Principi, 17 Vet.App. 436 (2004) (holding that Secretary's position at the administrative level in

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promulgating and applying a regulation was substantially justified); Ozer v. Principi, 16 Vet.App.

475, 479 (2002) (holding that the Secretary's position in promulgating the regulation was

substantially justified, despite later invalidation of the regulation, because "there was no prior

disapproval of or challenge to the regulation"); Carpenter v. West, 12 Vet.App. 316 (1999) (holding

that it was not unreasonable for the Secretary not to have foreseen Court's expansion of 38 U.S.C.

§ 1318 caselaw). Cf. Moore v. Brown, 10 Vet.App. 436, 440-41 (1997) (concluding that Secretary's

administrative position was not substantially justified where Board failed to comply with well-

established statutory duty to assist).

Even in a case of first impression, however, the Court must determine whether the Secretary's

position was justified given the totality of the circumstances. We must determine whether the issue

presented "close" questions, and whether the Secretary sought an unreasonable interpretation or

resolution of the matter. See Felton v. Brown, 7 Vet.App. 276, 282 (1994) (citing Marcus v. Shalala,

17 F.3d 1033, 1038 (7th Cir. 1994) (finding that Government's contention that the questions involved

were "close" was controverted by the U.S. Supreme Court's statements that the Government policies

were "manifestly contrary to statute" and "made little sense" and by the "strong disapproval" of

relevant regulations by several circuits of the U.S. courts of appeals)). Other factors to be considered

include whether "the statutory scheme to be considered is complex, or . . . the analysis required, even

for a straightforward statute, is 'exceptional.'" Golliday v. Brown, 7 Vet.App. 249, 255 (1994) (citing

Stillwell, 6 Vet. App. at 303); see also Pottgieser v. Kizer, 906 F.2d 1319, 1324 (9th Cir. 1990)

(same).

In this matter, we hold that the Secretary's position on section 5904(b) was substantially

justified at both the administrative and litigation levels. Although the Federal Circuit ultimately

rejected the Secretary's argument and ordered issuance of the writ, we find, for the reasons set forth

below, that the Secretary's position had "a reasonable basis in law and fact." Underwood, 487 U.S.

at 566 n.2.

First, although the petitioner contends otherwise, the question presented in this case was

indeed a matter of first impression. While it is true that the Federal Circuit determined previously

that actions based on subsections 5904(c) and (d), (see Scates, Hanlin, and Cox, all supra), were

"subject to the specialized review process" set forth in section 7105, the analysis contained in those

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cases is not as illuminating as the petitioner suggests. Each of those cases involved the interpretation

of an individual statutory subsection that on its face was readily recognized as a law that affects "the

provision of benefits by the Secretary to veterans." 38 U.S.C. § 511(a). Hence, in resolving those

cases, neither this Court nor the Federal Circuit was pressed to determine whether an analysis beyond

a facial interpretation of the section 5904 provisions was appropriate.

In Mr. Bates' case, however, the Federal Circuit majority agreed that "[t]he argument that

[section] 5904(b) is itself a 'law that affects the provision of benefits' is unpersuasive." Bates,

398 F.3d at 1360. Unlike sections 5904(c) and (d), section 5904(b) is not, on its face, "a law that

affects the provision of benefits by the Secretary to veterans" under section 511(a). It was not until

this case arose that the Federal Circuit decided that an analysis beyond explaining the "plain

meaning" of that provision was necessary to resolve the issue.

Moreover, the route by which the Federal Circuit concluded that section 5904(b) was "a law

that affects the provision of benefits" could not have been easily divined from existing caselaw and

arguably may be described as "exceptional." See Golliday, supra. Specifically, the Federal Circuit

had given no previous indication that the relevant inquiry for the application of section 511(a) was

not limited to whether the statutory provision at issue "affects the provision of benefits" to veterans,

but could include whether that provision was originally enacted in a public law that affected the

provision of such benefits. In light of that fact, and because both this Court and the Federal Circuit

have previously addressed section 5904 by individual subsection as opposed to a single public law,

the Secretary's implicit choice to interpret the term "law" as an individual statutory subsection was

reasonable. As Judge Bryson noted in his concurrence:

[I]t is commonplace to refer to single statutory sections and subsections as "laws,"

and not to reserve that designation exclusively for whole public laws. This is not to

say that a statutory section or subsection is the only meaning of the term "law," but

simply that it cannot reasonably be claimed that the "plain meaning" of the term

"law" is restricted to public laws.

398 F.3d at 1368 n.2 (Bryson, J., concurring) (citations omitted).

Furthermore, although VA is required by policy and statute to provide veterans a "strongly

and uniquely pro-claimant" administrative review process, Hodge v. West, 155 F.3d 1356, 1362 (Fed.

Cir. 1998), it could not be assumed that attorneys or veterans' representatives would be entitled to,

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or in need of, such a process (or that such a process would be available when no benefits claimant

is involved in the case) for purposes of the termination of accreditation. In sum, the Court finds that,

based on the totality of the circumstances, a "reasonable person" could find the Secretary's

interpretation of the statutory scheme to be reasonably grounded in law and fact. Accordingly, the

Court holds that the Secretary's position with respect to the jurisdiction of the Board and the Court

and sections 511(a) and 5904(b) was substantially justified.

C. Special Circumstances

Pursuant to 28 U.S.C. § 2412 (d)(1)(A), a court may not make an EAJA award to a party if

it "finds . . . that special circumstances make an award unjust." The Government bears the burden

of raising this affirmative defense and must demonstrate that such special circumstances militate

against an EAJA award. See Perry v. West, 11 Vet.App. 319, 325 (1998); Doria v. Brown,

8 Vet.App. 157, 163 (1995). In Doria, the Court noted two types of special circumstances:

"[S]ituations where the government proffers novel but credible extensions and interpretations of the

law; and . . . situations 'where equitable considerations dictate an award should not be made.'" Id.

at 162. In Perry, the Court adopted a definition of the equitable-considerations prong of "'special

circumstances' that predominantly relies upon 'unclean hands.'" Perry, supra; see also Locher,

9 Vet.App. at 540; Oguachuba v. INS, 706 F.2d 93 (2d Cir. 1983).

In the instant matter, the Secretary contends that the petitioner has "unclean hands," alleging

that the petitioner "repeatedly violated federal law and unlawfully charged . . . over $100,000 [] of

VA disability compensation benefits to which he was not legally entitled." Resp. at 13. However,

as the petitioner notes, the Secretary's allegations are presently the subject of a direct appeal to the

Board, and this Court may ultimately review the Board decision in that appeal. Hence, considering

the Secretary's allegations in the present context would be "both premature and inappropriate," and

we will refrain from doing so.

IV. Conclusion

On the basis of the foregoing analysis, the petitioner's application for attorney fees and

expenses is DENIED.

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