Citation Nr: 0101466 Decision Date: 01/19/01 Archive Date: 01/24/01 DOCKET NO. 99-15 709A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Philadelphia, Pennsylvania THE ISSUE Whether $70,000 received in settlement under the Federal Tort Claims Act should be offset against compensation benefits payable to the veteran under the provisions of 38 U.S.C.A. § 1151. REPRESENTATION Appellant represented by: Patrick E. Dougherty, Attorney ATTORNEY FOR THE BOARD M. E. Larkin, Counsel INTRODUCTION The veteran served on active duty from June 1942 to June 1945. This matter is before the Board of Veterans' Appeals (Board) on appeal from a May 1999 decision of the Philadelphia, Pennsylvania Regional Office (RO) of the Department of Veterans Affairs (VA), which determined that compensation benefits to which the veteran was otherwise entitled would be withheld until the total amount of a $70,000 payment in settlement of a Federal Tort Claims Act (FTCA) suit was recouped. FINDINGS OF FACT 1. In May 1996, the veteran was granted compensation under 38 U.S.C.A. § 1151 for interdigital nerve neuropathy between the third and fourth fingers, right hand, as residuals of January 1995 surgery at a VA facility. 2. In May 1998, a settlement was negotiated in a claim under the Federal Tort Claims Act and monetary damages totally $70,000 were awarded to the veteran. 3. Effective retroactively to June 1, 1998, the veteran's compensation benefits were reduced as a result of an offset of $70,000 against the FTCA settlement award. CONCLUSION OF LAW The veteran's compensation benefits awarded pursuant to 38 U.S.C.A. § 1151 are subject to offset in the amount of $70,000 against his Federal Tort Claims Act settlement award, received in 1998. 38 U.S.C.A. §§ 1151, 7104 (West 1991); 38 C.F.R. § 3.800(a)(2) (2000). REASONS AND BASES FOR FINDINGS AND CONCLUSION I. Background In January 1995, the veteran underwent surgery on his right hand at a VA facility. He developed painful numbness on the radial side of the ring finger and the ulnar side of the long finger. The complaints did not improve with time and the veteran underwent a second surgical procedure in October 1995. Post-operatively, the pain improved; however, numbness affecting the ring and middle fingers did not. In July 1995, the veteran filed a claim for entitlement to compensation under the provisions of 38 U.S.C.A. § 1151 (West 1991) for a right hand condition which he felt had worsened as a result of the January 1995 surgery. He further claimed that he had an adverse shoulder condition as a result of that same surgery. In May 1996, the RO granted compensation under 38 U.S.C.A. § 1151 for interdigital nerve neuropathy between the third and fourth fingers, right hand, as residuals of the January 1995 surgery. By that same decision, the RO denied the veteran's claim for compensation benefits for a right shoulder rotator cuff tear as a result of the January 1995 surgery. In December 1996, the veteran filed a claim against the United States of America under the FTCA for damages for "personal injuries" resulting from the January 1995 surgery. In the complaint, the veteran averred that he experienced right hand and right shoulder problems as a result of the January 1995 surgery. A settlement of the claim was negotiated between the parties and became final in May 1998. As part of the settlement, the United States paid $70,000 in damages. The amount paid was noted to be in full settlement and satisfaction of the veteran's claims against the United States for personal injuries acquired on account of the incident giving rise to the lawsuit. The settlement check was made payable jointly to the veteran and his private attorney. Included in the claims folder is a copy of a Judgment Fund Award Data Sheet prepared by the Financial Management Service of the Department of the Treasury which recounts details related to the settlement award. A brief description of the facts giving rise to the claim noted that the veteran suffered permanent pain and partial loss of sensation of the right hand as a result of surgery at a VA hospital. A July 1998 settlement statement, signed by the veteran and submitted by his attorney, noted that of the $70,000 total settlement, 25 percent was paid to the attorney. With the payment of the attorney fee and costs advanced, the total proceeds due to the veteran were $49,205.32. In an August 1998 memorandum, the Deputy Assistant General Counsel notified the Director, Compensation and Pension Service, of the settlement of the veteran's claim under the FTCA. In the remarks section of that memorandum, it was noted that the $70,000 settlement amount was paid because the veteran had undergone hand surgery at a VA hospital, during which time the surgeon inadvertently injured a nerve in the hand which left the veteran unable to squeeze or grip anything with his injured hand. In a December 1998 letter to the veteran, the RO advised him that his compensation benefits would be reduced, effective June 1, 1998, in order to recoup the $70,000 amount received in settlement of the FTCA claim. In December 1998, the veteran's attorney disagreed with the proposed reduction because the veteran "did not agree to a reduction in compensation payments in lieu of a tort settlement." In May 1999, the RO notified the veteran that the action proposed in the December 1998 correspondence had been implemented and his benefits would be reduced, effective June 1, 1998, in order to recoup the $70,000 amount received as settlement under the FTCA. The veteran's attorney filed a notice of disagreement (NOD) in June 1999, arguing that the offset provisions do not apply to recoup compensation paid for an injury, as opposed to a disability. The attorney further argued that the veteran's original complaint included assertions regarding shoulder and hand disabilities; however, 1151 benefits were only granted for the right hand disorder and the May 1998 settlement agreement did not itemize what portion of the damages awarded applied to the right shoulder and what portion applied to the right hand. II. Analysis The veteran contends that the RO was incorrect in its determination that the full amount of $70,000 received in settlement of his FTCA claim should be offset against his 1151 compensation benefits. Under the FTCA, an injured person may bring a cause of action against the United States for injuries caused by a negligent or wrongful act or omission of government employees acting within the scope of their employment. 28 U.S.C. § 1346(b). Title 38, United States Code, Section 1151 provides that a veteran who has suffered disability as the result of VA medical treatment is entitled to compensation as if the disability were service connected. 38 U.S.C.A. § 1151 also provides that, "[w]here an individual is . . . awarded a judgment against the United States in a civil action brought pursuant to section 1346(b) of title 28, or . . . enters into a settlement or compromise under section 2672 or 2677 or title 28 by reason of a . . . disability or death treated pursuant to this section as if it were service-connected, then no benefits shall be paid to such individual for any month beginning after the date such judgment, settlement or compromise becomes final until the aggregate amount of benefits which would be paid but for this subsection equals the total amount included in such judgment, settlement or compromise." 38 U.S.C.A. § 1151(b). Where any person is awarded a judgment on or after December 1, 1962, against the United States in a civil action brought pursuant to 28 U.S.C. § 1346(b), or enters into a settlement or compromise on or after December 1, 1962, under 28 U.S.C. § 2672 or § 2677, by reason of disability within the purview of this section [i.e., 38 U.S.C.A. § 1151], no compensation shall be paid to such person for any month beginning after the date such judgment, settlement, or compromise on account of such disability becomes final until the total amount of benefits which would be paid except for this provision equals the total amount included in such judgment, settlement or compromise. 38 C.F.R. § 3.800(a)(2) (2000). In making a determination as to the amount of offset in this case, the Board is bound by the regulations of the Department, instructions of the Secretary, and the precedent opinions of the VA General Counsel. 38 U.S.C.A. § 7104. The veteran and his representative argue that the amount of offset should not include an amount representing compensation for disability when the settlement agreement referred to personal injury only. That very question was addressed in a VA General Counsel precedent opinion in which it was determined that the plain language of what is now section 1151 (formerly section 351) requires offset of benefits equal to "the total amount" of any judgment, settlement or compromise entered into by an individual on a FTCA claim. VAOGCPREC 52-91; 56 Fed.Reg. 50,150 (1991). It was further noted that the legislative history of section 1151 evidenced a clear purpose to require offset of the total amount of any FTCA judgment or settlement to an individual without distinction as to the bases for the various portions of the total amount (i.e., economic (loss of earning capacity) vs. noneconomic (e.g., pain and suffering) losses). Id. The veteran and his representative also argue that the amount of offset should not include any amount attributable to a right shoulder injury as VA compensation benefits were not awarded for that disability. A review of the settlement agreement shows that the veteran would receive $70,000 in full settlement of all claims for personal injuries which the veteran had or may have against the United States on account of the incident giving rise to the lawsuit. There is no reference in the settlement agreement to the specific injury. While the original complaint included references to the right shoulder, the Board notes that there is no proof that the settlement agreement was intended to compensate the veteran for the shoulder injury as well. The Board also notes that documentation within the record which details to the payment to be made pursuant to the agreement refers to the right hand only. Given that reference within documentation related to the settlement and payment is to the right hand only and the fact that the terms of the FTCA settlement itself do not include any indication that the proceeds were intended to include damages for a right shoulder disorder, the Board finds that the preponderance of the evidence shows that the damage award related to the right hand only. Finally, the veteran and his representative argue that the amount of offset should not include the amount of attorney fees paid out of the settlement proceeds. In that regard, the VA General Counsel has held that, where, as here, it has been determined that a settlement agreement was entered into pursuant to a claim under the FTCA by an appellant in their own right and not as a representative for others, that individual's future compensation benefits based on the same disability must be offset by the entire amount of the settlement proceeds, including the amount of attorney fees paid out of such proceeds. The language of 38 U.S.C.A. § 1151 does not condition offset upon whether an individual has actually received or retained the entire amount of the settlement. Therefore, the entire amount of the settlement must be offset, without regard to whether the veteran actually received the entire amount or assigned a portion of the settlement to an attorney. See VAOPGCPREC 7-94; 59 Fed.Reg. 27308 (1994). The Board also notes that the settlement agreement itself noted that each party will bear his or her own expenses. Thus, the payment of attorney fees to the veteran's attorney from the settlement proceeds in this case is in essence a payment by the veteran, from the settlement funds, used to satisfy the veteran's contractual obligation to the attorney. It is not a separate award to the attorney. The facts show that the FTCA settlement was distributed to the veteran in his individual capacity. As such, the Board finds the compensation benefits awarded to the veteran under 38 U.S.C.A. § 1151 are subject to the offset in the amount of $70,000 against his FTCA settlement award. Where the law and not the evidence is dispositive of the issue before the Board, the claim should be denied because of the absence of legal merit or the lack of entitlement under the law. Sabonis v. Brown, 6 Vet. App. 426 (1994). Accordingly, the appeal must fail. ORDER The appeal is denied. DEREK R. BROWN Veterans Law Judge Board of Veterans' Appeals