Citation Nr: 1137997 Decision Date: 10/12/11 Archive Date: 10/19/11 DOCKET NO. 09-02 708 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Cleveland, Ohio THE ISSUE Eligibility for payment of attorney fees from past-due benefits. REPRESENTATION Appellant represented by: Katrina J. Eagle, Attorney ATTORNEY FOR THE BOARD Stephanie L. Caucutt, Counsel INTRODUCTION The Veteran served on active duty from May 1942 to October 1945. He died in August 1994. The appellant, S.K., represented the Veteran's surviving spouse with regard to a claim of entitlement to dependency and indemnity compensation (DIC) benefits. She died in April 2007. This matter comes before the Board of Veterans' Appeals (Board) on appeal from an April 2008 determination of a Regional Office (RO) of the Department of Veterans Affairs (VA) in Cleveland, Ohio. In that decision, the RO determined that S.K. was not entitled to payment of attorney fees from past due benefits. FINDINGS OF FACT 1. A June 2003 Board decision denied a claim to reopen the issue of service connection for the cause of the Veteran's death. 2. The Veteran's surviving spouse entered into a fee agreement with S.K. in September 2003; this agreement meets the basic statutory and regulatory requirements for payment of attorney fees from past-due benefits. 3. In April 2005 the United States Court of Appeals for Veterans Claims issued a memorandum decision in which the Board's June 2003 decision was vacated and remanded; S.K. participated in the appeal before the Court. 4. The Board reopened the previously denied claim of entitlement to service connection for the cause of the Veteran's death in January 2006 and remanded the underlying merits of the claim to the RO. 5. The RO awarded service connection for the cause of the Veteran's death by rating decision signed and dated March 23, 2007. 6. Notice of the March 23, 2007, rating decision and award of dependency and indemnity compensation (DIC) benefits was sent to the surviving spouse in May 2007. 7. A payment for an amount totaling eighty percent of the calculated past-due benefits was remitted to the surviving spouse in May 2007. 8. In July 2007, the VA received notice via S.K. that the surviving spouse had passed away in April 2007. 9. The evidence is in relative equipoise as to whether the March 23, 2007, rating decision and subsequent DIC award was "authorized" prior to the surviving spouse's death in April 2007. CONCLUSION OF LAW The criteria for the payment of attorney's fees from past-due benefits based on a grant of service connection for the cause of the Veteran's death in a March 2007 RO rating decision are met. 38 U.S.C.A. § 5904 (West 2002 & Supp. 2010); 38 C.F.R. § 14.636 (2011); 38 C.F.R. § 20.609 (2007). REASONS AND BASES FOR FINDINGS AND CONCLUSION Due Process Considerations Initially, the Board notes that under the Veterans Claims Assistance Act (VCAA), when VA receives a complete or substantially complete application for benefits, it must (1) notify the claimant of the information and evidence not of record that is necessary to substantiate a claim, (2) which information and evidence VA will obtain, (3) and which information and evidence the claimant is expected to provide. 38 U.S.C.A. § 5103(a) (West 2002); 38 C.F.R. § 3.159 (2011). An attorney fee dispute, however, is not a "claim" for benefits under Chapter 31 of Title 38 of the United States Code. As such, VA's duties to notify and assist do not apply. See Sims v. Nicholson, 19 Vet. App. 453, 456 (2006). Regardless, the Board notes that the appellant has been afforded an opportunity to meaningfully participate in his claim. Moreover, the Board is granting the full benefit sought on appeal. Thus, even if an error was committed with respect to due process, there is no prejudice in proceeding with a determination at this time. Legal Criteria and Analysis By way of background, the Board denied a claim to reopen the issue of service connection for the cause of the Veteran's death in June 2003. In September 2003, the Veteran's surviving spouse and the attorney-appellant executed a fee agreement, which was filed at the Board, and which provided that twenty percent of any past-due benefits awarded on the basis of this claim were to be withheld by the VA for direct payment to the attorney-appellant. Thereafter, in April 2005, the United States Court of Appeals for Veterans Claims (Court) vacated the Board's June 2003 decision and remanded the appeal for readjudication. The Board subsequently remanded the issue of service connection for the cause of the Veteran's death in January 2006, and by rating decision signed and dated March 23, 2007, the RO awarded service connection for the Veteran's death. Notice of the March 23, 2007, rating decision and award of dependency and indemnity compensation (DIC) benefits was sent to the surviving spouse (with a copy to the attorney-appellant) on May 11, 2007. A payment for an amount totaling eighty percent of the calculated past-due benefits was issued on May 16, 2007. On July 5, 2007, the RO mailed notice of a determination regarding attorney fees to the surviving spouse and the attorney-appellant. Attorney fees in the calculated amount of $27,202.61 plus $210.00 were found to be payable based on the award of DIC benefits and service-connected burial benefits. On July 24, 2007, the RO received notice via the attorney-appellant that the surviving spouse had passed away on April 14, 2007. Thereafter, in April 2008, the RO issued a new determination regarding attorney fees in which it determined that no attorney fees were to be paid by reason that the past due benefits did not result in a cash payment to the claimant. The RO acknowledged the May 16, 2007, payment of past-due benefits, but noted that such payment was erroneous, and therefore did not constitute "past due benefits . . . [resulting in] . . . a cash payment to the claimant" for purposes of determining attorney fees. The attorney-appellant appealed this decision and it is now before the Board for appellate review. The payment made to the surviving spouse on May 16, 2007, has not been recovered by the VA and was, in fact, deposited in her estate. VA law and regulations permit an agent or attorney to charge fees for representation of a client before the Secretary of VA (Secretary) in conjunction with a claim for VA benefits. Effective June 23, 2008, the controlling regulations were changed to permit attorneys and agents to charge fees for representation after an Agency of Original Jurisdiction (AOJ) has issued a decision on a claim or claims and a notice of disagreement has been filed with respect to that decision. 73 Fed. Reg. 29,875 (May 22, 2008) (codified at 38 C.F.R. § 14.636 (2011)). Prior to such date, attorneys and agents were permitted to charge fees only for services provided after a final decision had been promulgated by the Board with respect to the issue or issues and only if the agent or attorney was retained not later than one year following the date that the decision by the Board was promulgated. 38 C.F.R. § 20.609(c) (2007). Pertinent to the current appeal, the regulatory changes provide that, in cases in which the notice of disagreement was filed on or before June 19, 2007, the requirements contained in 20.609(c) still apply. See 38 C.F.R. § 14.636(c)(2); 20.609(c) (2007). As the relevant notice of disagreement was filed in August 2002, the "old" version applies. Here, the RO did not dispute that the attorney-appellant may charge fees for representation of the Veteran's surviving spouse following the promulgation of the June 2003 Board decision. That is, it has already been determined by the VA that the fee agreement executed by the attorney-appellant and the Veteran's surviving spouse meets the basic statutory and regulatory requirements for payment of attorney fees from past-due benefits. See 38 C.F.R. § 14.636(g). Additionally, as noted above, the fee agreement was executed within one year of the Board's June 2003 decision to deny service connection for the cause of the Veteran's death. See 38 C.F.R. § 14.636(c)(2). Thus, the relevant inquiry in this appeal is whether the attorney-appellant is entitled to or eligible for any fee from past-due benefits. According to VA regulatory authority, an agreement to pay fees directly to an attorney from past-due benefits will be honored by VA only if the following conditions are met: (i) the total fee payable (excluding expenses) does not exceed 20 percent of the total amount of the past-due benefits awarded; (ii) the amount of the fee is contingent on whether or not the claim is resolved in a manner favorable to the claimant or appellant, and; (iii) the award of past-due benefits results in a cash payment to a claimant or an appellant from which the fee may be deducted. 38 C.F.R. § 14.636(h). Again, the RO did not dispute that the first two requirements have been met for payment of an attorney fee out of past-due benefits. Rather, the attorney-appellant's fee has been denied by the RO on the basis that the March 2007 decision awarding service connection for the cause of the Veteran's death did not "result in a cash payment" as required by 38 C.F.R. § 14.636(h)(1)(iii). Included in the RO's April 2008 attorney fee determination is a copy of a VA Adjudication Procedure Manual, M21-1 Manual Rewrite (M21-1MR), provision which pertains to release of attorney fees when there is a claimant death. VA ADJUDICATION PROCEDURE MANUAL M21-1MR, PART I, CH. 3, ¶ 18.d (eff. May 6, 2005). This provision states that "[i]f the claimant dies after . . . receiving the 80 percent of past-due benefits, but before the remaining 20 percent is sent to either the claimant or his/her attorney . . . [t]hen the . . . withheld funds, that is 20 percent, are considered to be benefits that were actually paid prior to the claimant's death, and [the] attorney may be entitled to payment of fees (if all legal requirements are met) for representation of the deceased claimant." Alternatively, "[i]f the claimant dies after . . . the date of the rating decision, but before it is authorized . . . [t]hen the . . . only past-due benefits payable would be payable as accrued benefits under 38 U.S.C. 5121, and [the] attorney would be entitled to fees if the accrued benefits claimant has signed a fee agreement with the attorney [bold emphasis added]." In the instant case, the award of past-due benefits represents the non-recurring payment of DIC benefits and burial benefits that accrued from the effective date of the award of service connection for the cause of the Veteran's death to the date of the rating decision, March 23, 2007, which was prior to the surviving spouse's death. See 38 C.F.R. § 14.636(h)(3). Since the surviving spouse died after her past-due benefits had accrued, but before her award payment was issued, the relevant inquiry in this case is when does an award of past-due benefits "result in a cash payment." While not defined, 38 C.F.R. § 14.636(h)(1)(iii) notes that "[a]n award of past-due benefits will not always result in a cash payment to a claimant or an appellant," and one example given is the fact that no cash payment is made to a military retiree absent a corresponding waiver of retirement pay. Similarly, the version of the M21-1MR effective the date of the April 2008 attorney fee decision cites a number of examples of when an award does not result in a cash payment. Unfortunately, the current situation is not addressed (i.e., when a cash payment was made in error based on misinformation). As previously noted above, a cash payment was, in fact, made to the surviving spouse in the present case. However, as the payment was not remitted prior to her May 2007 death, the RO asserts that the cash payment was erroneous, and therefore not contemplated by 38 C.F.R. § 14.636(h)(1)(iii). Initially, the Board notes that there is no authority for concluding that a cash payment under § 14.636(h)(1)(iii) must have been a "valid" payment. Additionally, the Board observes that it is not bound by Department manuals, circulars, or similar administrative issues in making a determination. 38 C.F.R. § 19.5 (2010). However, if the Board was to assume that 38 C.F.R. § 14.636(h)(1)(iii) refers only to non-erroneous cash payments, and was to rely on the M21-1MR provision cited by the RO in its April 2008 determination, the relevant inquiry as to whether an award "results in a cash payment" appears not only to rest on whether benefits were actually paid, but when the award was "authorized." See VA ADJUDICATION PROCEDURE MANUAL M21-1MR, PART I, CH. 3, ¶ 18.d. As for when an award has been "authorized," this same chapter of the M21-1MR outlines steps to be taken to withhold past-due benefits for possible attorney fees when a running award does not exist, as in this case. VA ADJUDICATION PROCEDURE MANUAL M21-1MR, PART I, CH. 3, ¶ 16.a (eff. May 6, 2005). Relevant to this appeal, step one indicates that an individual should "[p]repare and authorize the award (emphasis added)" prior to sending the folder to Finance with a memorandum requesting that twenty percent of past-due benefits be withheld for possible payment of attorney fees. Id. A review of the claims file reveals a Routing and Transmittal Slip from the RO's Attorney Fee Coordinator was received by Finance on April 17, 2007, requesting that twenty percent of past-due benefits be withheld for possible payment of attorney fees. Attached to this document is a Past-Due Benefits Worksheet (Initial Calculation) that is signed by the Attorney Fee Coordinator. The signature line was initially dated prior to the surviving spouse's death, on April 5, 2007, and was subsequently crossed out and dated three days after her death, on April 17, 2007. The Board recognizes that it is not entirely clear from these facts when step one of the M21-1MR, ¶ 16.a, was completed. However, given that a calculation of the award is necessary to complete steps 1 through 4, and seeing as it appears that the initial calculation was, in fact, April 5, 2007, it is reasonable to conclude that the award was "prepared and authorized" prior to the surviving spouse's death. Affording all reasonable doubt to the attorney-appellant, the Board therefore finds that the evidence of record supports authorization of the DIC award prior to the date of the surviving spouse's death. See 38 U.S.C.A. § 5107(b) (West 2002); 38 C.F.R. § 3.102 (2011). As such, the award of attorney fees from past-due benefits should be granted. Relevant to this determination, the Board observes that the outcome and conclusion regarding whether the March 2007 rating decision resulted in a cash payment is consistent with more recent changes to VA policy. In this regard, the provisions of the M21-1MR pertaining to payment of attorney fees were amended effective September 30, 2010, and while there was no real substantive change to the process for withholding and authorizing an award, the section quoted by the RO in its April 2008 determination no longer exists. Instead, current VA policy indicates that "[i]f the claimant dies after the rating decision is signed and dated by the decision-maker, but before the decision is promulgated (in other words, before the 20 percent or less has been withheld)[, the VA is to] compute the amount of fees[,] withhold the fees, and make a fee eligibility decision." VA ADJUDICATION PROCEDURE MANUAL M21-1MR, PART I, CH. 3, ¶ 17.f (eff. Sept. 30, 2010). As for the 80 percent of past-due benefits due the claimant, these funds are not to be released, but instead kept in VA's entitlement fund. Id. at Note. Clearly, the VA has amended its policy to prevent situations such as the one that is the subject of this decision (i.e., a claimant dies after a rating decision is issued, but before the payment is processed). In removing the requirement that the award be authorized, the only issue is when the rating decision was signed and dated (provided the award would have resulted in a cash payment but for the claimant's death). As noted above, the rating decision awarding service connection for the cause of the Veteran's death was signed and dated March 23, 2007, which is prior to the surviving spouse's death. In sum, the Board finds that analyzing whether the eligibility requirements for an attorney fee have been met under the laws, regulations, and policies in effect both at the time of the original decision and at the time of the current determination, results in a favorable outcome for the attorney-appellant. As all the requirements for payment of an attorney fee out of past-due benefits have been met, this appeal is granted. ORDER Eligibility for payment of attorney fees from past-due benefits is granted. ____________________________________________ MILO H. HAWLEY Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs