Citation Nr: 1324461 Decision Date: 08/01/13 Archive Date: 08/13/13 DOCKET NO. 13-00 615 ) DATE ) ) THE ISSUE Whether the appellant is entitled to the award of the full 20 percent ($2,078.76) attorney fees based on an August 2010, rating decision which assigned a 70 percent rating for the Veteran's service-connected bipolar disorder effective September 9, 2009, and also granted an earlier effective of October 6, 2000, for the grant of service connection for bipolar disorder. ATTORNEY FOR THE BOARD A.D. Jackson, Counsel INTRODUCTION The Veteran had active duty service from October 1964 to September 1965. He died on September [redacted], 2011. The appellant in this case is the Veteran's former attorney, S.K. In May 2005, the Board of Veterans' Appeals (Board) denied service connection for PTSD and bipolar disorder. In August 2006, the Veteran appealed the Board's May 2005 denial to the United States Court of Appeal for Veterans Claims (Court). By order dated in August 15, 2006, the Court remanded for compliance with the instructions in the August 2006 joint motion. In compliance with the August 15, 2006 order, the Board remanded the case for further development in November 2006. In April 2008, the Board again remanded the case. In May 2009, the RO granted service connection for bipolar disorder assigning a 30 percent rating, effective October 6, 2001. The Veteran disagreed with the assigned evaluation and the effective date of service connection. In August 2010, the RO granted a 70 percent rating for bipolar disorder, effective from September 9, 2009. The RO also granted an earlier effective date of October 6, 2000, for the grant of service connection for the bipolar disorder. The issue of eligibility for the payment of attorney fees from past-due benefits arises from September and October 2010 decisions of the RO that determined that the Veteran's former attorney, was eligible for a portion of past-due benefits set aside for payment of attorney fees, but not the full amount (20 percent of past-due benefits) of the August 2010 rating action. The attorney perfected an appeal of that decision. REMAND The basic facts in this case are not in dispute. In October 2000, the Veteran through his Congressman, petitioned to reopen a claim for a nervous disorder to include bipolar disorder and PTSD. In a May 2002 rating action the RO denied service connection for PTSD and determined that he had not submitted new and material evidence to reopen a claim for bipolar disorder. In a May 2005 decision the Board determined that the claim concerning a bipolar disorder was a new claim. However, denied service connection for both bipolar disorder and PTSD. In October 2005, the Veteran and his attorney entered into a contingent fee contract for the purpose of appealing the Board's decision to the Court. The Veteran and his attorney both signed the attorney fee contract which satisfied the basic statutory and regulatory requirements set forth in 38 U.S.C.A. § 5904(d) and 38 C.F.R. § 20.609(c). Specifically, a final decision had been promulgated by the Board with respect to the issue involved and the attorney was retained not later than one year following the date of the Board's decision. That agreement also provided that a fee equal to 20 percent of the total amount of any past-due benefits were to be withheld by the VA and paid directly to the attorney. In August 2006, the Veteran appealed the Board's May 2005 denial of service connection for PTSD and bipolar disorder to the United States Court of Appeal for Veterans Claims (Court). By order dated in August 15, 2006, the Court remanded for compliance with the instructions in the August 2006 joint motion. In compliance with the August 15, 2006 order, the Board remanded the case for further development in November 2006. In May 2009, the RO granted service connection for bipolar disorder, assigning a 30 percent rating, effective October 6, 2001. In June 2009, the attorney, S.K., was notified that $2, 944.09 (20 percent of past-due benefits) was withheld from the May 2009 rating action according to 38 C.F.R. § 14.636. In July 2009, the attorney filed a notice of disagreement (NOD) with the both the assignment of a 30 percent evaluation and the effective date of service connection that was assigned for bipolar disorder. He also claimed entitlement to a TDIU. In August 2009, the VA released $2, 944.09 (minus $100.00 for assessment fees) to the attorney, S.K. On October 5, 2009, the RO denied entitlement to a TDIU. On October 30, 2009, the RO received a VA form 21-22 appointing the Texas Veterans Commission (TVC), as his new representative. In January 2010, the RO received a fax from S.K., disagreeing with the October 2009 denial of the TDIU and he also requested that the RO schedule a personal hearing. In a second letter that month the attorney requested a Decision Review Officer (DRO) review of the October 2009 RO decision and again requested a personal hearing. In April 2010, the Veteran was notified that the VA accepted his VA Form 21-22 appointing the TVC as his representative. He was also notified that despite his new representation, his former attorney may still be paid fees due to retroactive benefits. In August 2010, the RO granted a 70 percent rating effective from September 9, 2009. The RO also granted an earlier effective date of October 6, 2000, instead of October 2001. In September 2010, S.K. and the Veteran were notified that $2, 078.76 (20 percent of past-due benefits) was withheld from the August 2010 rating action according to 38 C.F.R. § 14.636. A one hundred dollar assessment fee was withheld from the fee, bringing the total to $1, 978.76. Later that month, the Veteran contacted the RO and noted that the appellant had been paid fees after the August 2009 rating action. He also noted that the attorney was not appointed to continue the appeal. On October 27, 2010, S.K. and the Veteran were notified that the RO had determined that the attorney was only entitled to the fees for the original date of grant of service connection for bipolar disorder. The RO determined the attorney was only entitled to fees from October 6, 2000 through October 31, 2001. The was determined to be $713.20. An assessment fee of $35.66 was withheld, resulting in a net payment of $677.54. In response, in November 2010 the former attorney disagreed with this finding stating that he was due to the full amount that was withheld, irrespective of the date that he withdrew from the case. A claimant may have attorney representation for the prosecution of claims for VA benefits. 38 U.S.C.A. § 5904(a). However, an attorney may charge a fee for such representation only if specified statutory and regulatory criteria are satisfied. 38 U.S.C.A. § 5904(c), (d); 38 C.F.R. § 20.609(c), (g), and (h). In addition, the fees charged by the attorney for services rendered must be reasonable. 38 C.F.R. § 20.609(e). Fees totaling no more than 20 percent of any past-due benefits awarded are presumed to be reasonable. 38 C.F.R. § 20.609(f). The Board, upon its own motion or the request of either party, may review the fee agreement and may order a reduction in the fee called for in the agreement if the Board finds that the fee is excessive or unreasonable. 38 U.S.C.A. § 5904(c)(2); 38 C.F.R. § 20.609(i). Attorney fees may be based on a fixed rate, hourly rate, a percentage of benefits recovered, or a combination thereof. 38 C.F.R. § 20.609(e). Reasonableness is determined by considering a number of factors as described in VA regulation. Id. In Scates v. West, 13 Vet. App. 98 (1999), the Veteran's former attorney sought payment of attorney fees from past-due benefits after his representation was terminated by the Veteran. A panel of the Court noted that the fee agreement in question provided for New York law to control the remedies available to the attorney. Id. at 104. After reviewing New York law, the Court held that the Veteran's former attorney was not entitled to payment of attorney fees from past-due benefits because the contingent fee contract between the Veteran and the attorney ceased to exist when the Veteran terminated the attorney client relationship. Id. Subsequently, the attorney obtained review by the full Court and withdrawal of the panel decision. See Scates v. West, 13 Vet. App. 304 (2000). The en banc Court decision held that all issues involving entitlement or eligibility for attorney fees under direct-payment contingency-fee agreements, as contrasted with the issues of reasonableness and excessiveness, must first be addressed by the RO. Scates v. Gober, 14 Vet. App. 62, 64 (2000). On further appeal, the U.S. Court of Appeals for the Federal Circuit (Court of Appeals) concluded that, when read in context and in the light of the statutory provisions governing the payment of attorney fees in veterans benefits cases, implicit a contingency fee arrangement was the understanding that the attorney's right to receive the full twenty percent of past due benefits would arise only if he continued as the claimant's attorney until the case was successfully completed. Scates v. Principi, 282 F.3d 1362, 1365 (Fed. Cir. 2002). Thus, the Court of Appeals held that an attorney with a contingent fee contract for payment of twenty percent of accrued veterans benefits awarded, discharged by the client before the case is completed, is not automatically entitled to the full twenty percent fee. He may receive only a fee that fairly and accurately reflects his contribution to and responsibility for the benefits awarded. Id. at 1366. The remaining question was which part of VA should determine the fee payable to the attorney, the RO or the Board. Id. The Court of Appeals did not reach the jurisdiction issue but rather concluded that the Court's decision may be sustained on alternate grounds, i.e., that on the particular facts of the case, the RO was the most appropriate agency initially to decide the attorney fee claim because it was better qualified than the Board to resolve the kind of factual inquiries involved. Id. at 1368. Those inquiries included why the veteran terminated the attorney's employment, on what basis should the attorney's share of the 20 percent contingent fee be calculated, and what effect did state law have on the contingent fee agreement. Id. at 1368-69. SK argues that Lippman v. Nicholson, 21 Vet. App. 184 (2007), is controlling in this case. In Lippman, the Court adopted the purported dictum in Scates as holding, and specifically determined that when an attorney representation contract is terminated but the attorney claims entitlement to a portion of the past-due benefits awarded, the RO should determine eligibility to collect the fee, and then the Board may review the fee for reasonableness using the factors set out in Scates and 38 C.F.R. § 20.609. Lippman, 21 Vet. App. at 190. Because the Veteran terminated S.K.'s representation, the Board must determine the reasonableness of any past-due benefits using the factors set forth in Scates and 38 C.F.R. § 20.609. As already noted, Scates held that a discharged attorney is only entitled to a fee reflecting his contribution to the litigation. The Federal Circuit provided a non-exhaustive list of factors which might or might not be relevant in addressing the referenced contribution, including the reason for the Veteran's termination of the representation; the basis for calculation of the 20 percent of past-due benefits (i.e. should it be calculated by days spent on the case by the former attorney, the number of hours spent on the case as compared to hours spent by other representatives involved in the case, etc.), whether the attorney can recover under quantum merit, and whether any other representative is also seeking legal fees. The Board notes that Scates considered, but did not ultimately decide, whether state or Federal law controls in addressing fee agreements. In Scates, the contingency fee itself stated that state law controlled the attorney's available remedies. There is no such provision in the Contract at issue here. Besides in Lippman, the Court specifically held that Federal law, and not state law, governs whether an attorney discharged by a veteran was entitled to an attorney fee that reflected his contributions to the veteran's recovery of past-due benefits, and how that fee might be determined. Lippman, 21 Vet. App. at 189-90. In this case, the October 2010 RO attorney fee decision found that the attorney had a valid fee agreement and was therefore eligible for payment of fees from past-due benefits, but limited the fees of the withheld amount. The RO does not adequately explain why the attorney was not due the full amount of the withheld amount. Moreover, the RO's determination does not consider the regulatory factors for evaluating reasonableness of fees. The Board notes that much of the information needed to address those reasonableness factors is not currently found in the record. In light of the above discussion, the Board finds that multiple significant questions of fact and law remain to be determined. In these circumstances, as in Scates, the Board agrees with the Court of Appeals' assessment that the RO is better qualified to make the factual inquiries that require resolution. The Board is returning the case to the RO for that purpose. Accordingly, the case is REMANDED for the following action: 1. The RO should readjudicate the issue of eligibility for the payment of attorney fees from past-due benefits. Such readjudication should include consideration of the effect of applicable law on the viability of the Contract after termination of the attorney-client relationship, as well as relevant federal law and precedent court decisions. 2. Since the RO found that the attorney is eligible for payment of attorney fees from past-due benefits, the RO should now determine what constitutes a reasonable fee under the circumstances of the case. As per VA regulation, factors considered in determining whether fees are reasonable include: (1) The extent and type of services the representative performed; (2) The complexity of the case; (3) The level of skill and competence required of the representative in giving the services; (4) The amount of time the representative spent on the case; (5) The results the representative achieved, including the amount of any benefits recovered; (6) The level of review to which the claim was taken and the level of the review at which the representative was retained; (7) Rates charged by other representatives for similar services; and (8) Whether, and to what extent, the payment of fees is contingent upon the results achieved. The RO should undertake whatever development action is necessary to adequately address these factors. 3. The RO must notify the involved parties of its determinations as required by VA law regulation and afford the applicable opportunity to respond. 4. Thereafter, the case should be returned to the Board for final appellate review, if in order. The appellant has the right to submit additional evidence and argument on the matter or matters the Board has remanded. Kutscherousky v. West, 12 Vet. App. 369 (1999). This claim must be afforded expeditious treatment. The law requires that all claims that are remanded by the Board of Veterans' Appeals or by the United States Court of Appeals for Veterans Claims for additional development or other appropriate action must be handled in an expeditious manner. See 38 U.S.C.A. §§ 5109B, 7112 (West Supp. 2012). _________________________________________________ KELLI A. KORDICH Acting Veterans Law Judge, Board of Veterans' Appeals Under 38 U.S.C.A. § 7252 (West 2002), only a decision of the Board of Veterans' Appeals is appealable to the United States Court of Appeals for Veterans Claims. This remand is in the nature of a preliminary order and does not constitute a decision of the Board on the merits of your appeal. 38 C.F.R. § 20.1100(b) (2012).