I get a big bang out of the rare occasions when the Federal Circuit (CAFC) really stretches their collective brain musculature and actually arrives at a decision that is meaningful for Veterans and not merely window dressing. And ones which are impeccably argued in Veterans’ favor. Here’s a real daisy.
Granted, Judge Prost was a bit long winded in his ten-page dissent in search of a way to defeat the pro-Veteran canon of law established in Henderson v. Shinseki, 562 U.S. 428,441 (2011); (“We have long applied the canon that provisions for benefits to members of the Armed Services are to be construed in the beneficiaries’ favor.”). But leaning into the Chevron/Auer wind on this one is a dead end. And you’ll read why if you dive in. This decision has more side-cites worth bookmarking for future arguments than you can believe. And changing the rules while the game is in play was going to be noticed eventually in a higher Court.
§4.71a DC 5055
So, to understand this, I’ll briefly lay out the parameters. I don’t do musculoskeletal law if I can possibly pawn it off on another attorney. It just isn’t my bag. I have X brain cells left and have devoted most of them to SMC and §3.156(c). Nevertheless, I’ll point out the good one-liners for you if you’re lazy.
This decision all hinges directly on how the CAFC previously ruled in Hudgens v. McDonald, 823 F.3d 630 (Fed. Cir. 2016). It involves §4.71a DC 5055 and 5257. Back in 2015, VA attempted to clarify what they meant to say, and forgot to, in DC 5055 about what constituted a knee replacement- i.e., a partial or a total one. The problem only arose when this appeal reached the Fed. Cir. Hudgens argued that there was no Chevron deference established with prior agency action re the diagnostic code. 17 out of 21 decisions at the Board were in favor of just such a partial replacement to grant a 100% disability. ‘Call me Bob’ McDonald insisted it had to be a total makeover.
But, as VA is wont to step on their collective neckties, they tried to offer guidance to raters, VLJs et cetera that the correct interpretation was being misunderstood rather than fix the diagnostic code language.
On July 16, 2015, twelve days before the Secretary’s final brief in Hudgens was due with this court, the VA published the Knee Replacement Guidance. The Guidance stated that the VA was providing notice of the agency’s “longstanding interpretation of DCs 5051 to 5056” as providing for a 100-percent evaluation “when the total joint, rather than the partial joint, has been replaced by a prosthetic implant.” 80 Fed. Reg. at 42,040. The VA also announced in the Guidance that an “explanatory note” would be added to 38 C.F.R. § 4.71a stating that the “term ‘prosthetic replacement’ in diagnostic codes 5051 through 5056 means a total replacement of the named joint.”1 Id. at 42,041.
But you can’t then drag this “guidance” into the Court and say ‘see- this is our considered opinion and it proves it’. The Federales (O’MALLEY, PLAGER, and WALLACH) rightfully saw it as highway robbery and reversed and remanded. So lets call this the Knee Replacement Guidance or KRG and move on. We (as of 2016) have Mike Hudgens’ precedence going for us. Fast forward to now.
NOVA has three members who challenged VA’s technique of just issuing ‘manuals” or ‘guidance reminders’ on how they’ll be denying you without incorporating it into the actual Diagnostic Code. That requires publishing the proposed changes or clarifying language in notes at the bottom of ratings in the Federal Register for comment. If VA had published a change to DC 5055 to say specifically that “knee replacement” meant total knee replacement, I wouldn’t be sitting here grinning from ear to ear. They just added notes to the M 21 and said from now on, deny if it’s partial. But DC 5055 still didn’t say total. In fact, there were notes in the M 21 that indicated there were two ways to do it- pre and post 2015. So the NOVA boys said okay, let’s take the Secretary to Court and object to his gerrymandering DC 5055 post-1978. You can’t just publish guidance to repair your grammatical error.
As the Big Boys said it in Legal Beaglespeak…
We reject this circular argument. We are evaluating whether the Guidance constitutes a valid interpretation of DC 5055. The Guidance itself inserted the explanatory note into DC 5055. The Secretary would have us hold that the Guidance articulates the only reasonable reading of DC 5055 because the Guidance itself says so. See generally Resp’t’s Br. 29–31. That cannot be correct. Indeed, the Secretary’s argument contravenes a basic tenet of administrative law. Agencies must “use the same procedures when they amend or repeal a rule as they used to issue the rule in the first instance.” Perez v. Mortgage Bankers Ass’n, 575 U.S. 92, 101, 135 S.Ct. 1199, 191 L.Ed.2d 186 (2015); see 5 U.S.C. § 551(5). The VA promulgated DC 5055 following notice-and-comment rulemaking procedures in 1978. Updating the Schedule for Rating Disabilities, 43 Fed. Reg. 45,348, 45,348–50 (Oct. 2, 1978). Therefore, the Secretary cannot have amended DC 5055 without going through notice-and-comment.
Ruh-oh, Rorge. That pesky Federal Register rigmarole gig again. Quick, somebody get that written up and published. We need to plug the loophole pronto. But before this latest decision is complete, the Judges feel compelled to address the Auer/Chevron deference argument that the Feds should shut up and believe Denis when he says he and all his forebears always meant it to mean a total replacement and somehow a few VLJs or ignorant RVSRs didn’t get the email back in ’78, right? And what the hey, VLJs are just single judge memorandum -type decisions and not precedential so get off your high horse. You Feds are making mountains out of molehills. I can almost imagine Denis singing the old Beatles song “We can work it out”. No dice. (Try to see it my way-Do I have to keep on talking till I can’t go on?)
In Hudgens, we gave two reasons for why the Secretary’s interpretation of DC 5055—excluding partial knee replacements—was not entitled to Auer deference. 823 F.3d at 638–39. First, “the agency’s interpretation conflict[ed] with a prior [agency] interpretation”—namely, “numerous inconsistent rulings by the Board.” Id. at 638 (second brackets in original) (quoting Christopher v. Smith Kline Beecham Corp., 567 U.S. 142, 155, 132 S.Ct. 2156, 183 L.Ed.2d 153 (2012)). Second, the Secretary’s interpretation was a “post hoc rationalization” “adopted to support the Veterans Court’s interpretation.” Id. at 639.
[ In addition to Christopher v Smith Kline Beecham, I like to use Evans v. Shinseki, 25 Vet.App. 7, 16 (2011) (explaining that “it is the Board that is required to provide a complete statement of reasons or bases” for its decision and “the Secretary cannot make up for [the Board’s] failure to do so” by providing his own reasons or bases on appeal). Here’s another daisy: Smith v. Nicholson, 19 Vet.App. 63, 73 (2015) (“[I]t is not the task of the Secretary to rewrite the Board’s decision through his pleadings filed in this Court.”).
The second reason regarding post hoc rationalization is not relevant here as we are addressing only the interpretation put forward in the Knee Replacement Guidance, not a previous agency interpretation that the Secretary is justifying with the Knee Replacement Guidance.
See how slick Judge Cunningham slid that subtle underlined 2nd reason jab in at the end above? One thing I enjoy about litigating is that everyone is so dang polite. The Judges don’t rub Denis’ nose in his blatant attempts at post hoc rationalizations yet again nor his predecessors thinly -disguised attempts to wallpaper over defects in agency regulatory diagnostic codes with new revisions to the M 21. They blithely gloss over his pathetic attempts to screw Veterans and go on about their business telling him to go back to his desk and crayons. Color inside the Fed. Register lines from now on, Denis. You hear? Sure. You can do it. Go ahead and give it a try.
A wonderful piece of advice once proffered me was “If you find yourself in a hole, quit digging.” How à propos.
The Secretary contends that we should not characterize Board interpretations “as representing the agency’s official position.” Resp’t’s Br. 33–35. The Secretary notes that “to receive Auer deference, ‘the interpretation must at least emanate from those actors, using those vehicles, understood to make authoritative policy in the relevant context.’ ” Id. at 34 (internal brackets omitted) (quoting Kisor, 139 S. Ct. at 2416). The Board is not such an authoritative actor, the Secretary asserts, because it issues more than 100,000 non-precedential decisions a year where the judges act individually rather than in panels. Id. at 35 (citing Board of Veterans’ Appeals Annual Report to Congress (FY 2020), https://www.bva.va.gov/docs/Chairmans_Annual_Rpts/BVA2020AR.pdf). In the Secretary’s view, these facts, together with our statement in NOVA 2020 that Board decisions “appear not to be entitled to Auer deference,” 981 F.3d at 1382 n.14, “erodes the foundation” of our holding in Hudgens, Oral Arg. at 29:50–52.
I probably ought to go back and look up the utube™ oral argument to see who drew the short straw at the Commercial Litigation Branch and was sent up to be slaughtered at the lectern on oral. Might be better than a Laugh In rerun. I’ve seen some poorly prepared OGC folks up there on the CAVC orals who hit that point where they don’t have any viable answer so they revert back to Plan A and re-recite some statistic that isn’t logical in the Veterans Benefits scheme.
What Kisor Brings to the Table for Us
But, while we’re on the subject of agency deference or statutory deference, let’s examine, in the Court’s own words, the new legal standard of review à la Kisor… Read Kisor here.
Since our decision in Hudgens, the Supreme Court has addressed Auer deference in Kisor. In Kisor, the Court found “it worth reinforcing some of the limits inherent in the Auer doctrine.” 139 S. Ct. at 2415.
First, the Supreme Court held that before applying Auer deference, courts must “carefully consider the text, structure, history, and purpose of a regulation” and conclude that “the regulation is genuinely ambiguous.” Id.
Second, the agency’s interpretation must also be “reasonable” and “come within the zone of ambiguity the court has identified after employing all its interpretive tools.” Id. at 2415–16.
Third, “a court must make an independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight.” Id. at 2416. This third part of the Auer inquiry is relevant here. The Supreme Court gave a list of several “especially important markers for identifying when Auer deference is and is not appropriate” given the character and context of the interpretation. Id.
Or this blurb below. I think it will give Veterans a lot of new tools in the pouch to point to prior agency action at the BVA that supports their hypotheses of service connection. Certainty, if the facts are identical, the same result should ensue to ensure uniformity. Well, everywhere but at the VA where you can win the Lotto and walk away emptyhanded.
And although Board decisions are non-precedential and issued by single judges, they are—as we held in Hudgens—“the final decision[s] for the Secretary on all questions in matters affecting the provision of benefits” and provide persuasive authority to the Veterans Court on the interpretation of regulations. Hudgens, 823 F.3d at 638 (quoting Gibson, 26 Vet. App. at 566 (Kasold, C.J., dissenting) (citing 38 U.S.C. § 7104(c))).
So, the teaching moment here is for the VASEC-not you Veterans. If you want to repair a regulation or diagnostic code to make it easier to conduct a VA Texas Necktie Party, you have to follow the rules, sir. Considering it took them six years to fix this regulatory fustercluck, and they still don’t have it right, I wonder how long it ‘ll take to get the repair order in to the Fed. Reg. I also wonder how many Vets got the shaft between Hudgens and September 20, 2022. And will VA go back and fix ’em. All these queshuns.
In all fairness, I should mention that the Secretary got around to fixing it four years after Hudgens won his claim. Or so he thought. Until this, anyway. The Fed. Register bondo set up on February 7, 2021 and they rescinded the KRG (remember that?) the following day on February 8th. I won’t go into the Knee Replacement Manual (M 21) Provision (KRMP) as it applies to DC 5257. Suffice it to say this is more or less a regurgitation of more vivid post hoc reimaginings of what Congress really wanted to say. The Feds lay it out thusly. The KRG preexisted the KRMP so it’s (KRMP) immaterial. But the KRG was never properly situated into the regulation because it revised 5055 waaaaay too much so it’s arbitrary and capricious, an abuse of discretion and not in accordance with law. In short, it doesn’t even resemble DC 5055 anymore as it was envisioned back in 1978. So it also gets thrown out. Back to the drawing board, Denis.