Citation Nr: 21025173 Decision Date: 04/27/21 Archive Date: 04/27/21 DOCKET NO. 15-44 660 DATE: April 27, 2021 ORDER An overpayment of Department of Veterans Affairs (VA) disability benefits in the amount of $3,761.65 was properly created; the appeal is denied. FINDINGS OF FACT 1. In December 2012, the Veteran and his attorney entered into a valid fee agreement allowing for direct payment from VA to the attorney of 20 percent of the retroactive award of VA benefits. 2. In a February 2013 rating decision, the Veteran was granted VA benefits; the amount of past-due benefits generated from this award was $18,808.27. 3. The 20 percent due to the attorney totaled $3,761.65. 4. The Regional Office (RO) paid the full amount of $18,808.27 directly to the Veteran. 5. The RO discovered the erroneous payment, which resulted in the creation of an overpayment of $3,761.65 charged to the Veteran. 6. VA’s failure to make this direct payment did not constitute a reduction or discontinuance of benefits. CONCLUSION OF LAW The overpayment of VA disability benefits in the amount of $3,761.65 was properly created. 38 U.S.C. §§ 501, 5112, 5314, 5904; 38 C.F.R. §§ 1.911, 1.912a, 3.500(b)(2), 14.636. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran had active service from November 1977 to November 1981. This matter comes before the Board of Veterans’ Appeals (Board) on appeal from an October 2014 notification letter from the RO, informing the Veteran that $3,761.65 would be recouped from him to pay his attorney fees. The Veteran requested a Board hearing in his November 2015 substantive appeal. In March 2019, he requested that his hearing be rescheduled. In July 2019, he submitted a statement that he was unable to attend his rescheduled hearing; therefore, his hearing request is deemed withdrawn. Whether an overpayment of VA disability benefits in the amount of $3,761.65 was properly created In December 2012, the Veteran and an attorney entered into a valid fee agreement allowing for direct payment from VA to the attorney of 20 percent of the retroactive award of VA benefits. In a February 2013 rating decision, the Veteran was granted increased VA benefits. The amount of past-due benefits generated from this award was $18,808.27. Thus, 20 percent of this amount due to the attorney totaled $3,761.65. However, the RO erroneously paid the full amount of $18,808.27 directly to the Veteran. In May 2013, the Veteran’s attorney submitted notification that as of the date of the letter, they no longer represented the Veteran. The attorney specifically stated he was not waiving his right to collect attorney fees to which he was entitled. In June 2013, the RO informed the Veteran it mistakenly overlooked the filing of the valid direct-pay fee agreement and had failed to withhold the attorney fee from his past-due amount. The RO proposed to recoup the amount that should have been withheld for attorney fees from the Veteran’s benefits payments. The Veteran challenged the reasonableness of the fee agreement, but the challenge was later deemed abandoned. An October 2014 notification letter informed the Veteran the actions discussed in the June 2013 letter would be implemented, resulting in the creation of an overpayment of $3,761.65 charged to the Veteran. The Veteran contends that he does not owe this debt; his claim had already been granted prior to retaining the attorney; and that he, not the attorney, was responsible for the grant of the benefits that resulted in the attorney fees at issue. An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled, and may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, or any other form of benefits. See 38 U.S.C. § 5302; 38 C.F.R. §§ 1.956 (a), 1.962. In that consideration of the propriety of the creation, for a determination that the overpayment was not properly created such that the debt was not valid, it must be established that the Veteran was either legally entitled to the benefits in question or, if the Veteran was not legally entitled, then it must be shown that VA was solely responsible for the Veteran being erroneously paid benefits. Administrative errors include all administrative decisions of entitlement, whether based upon mistake of fact, misunderstanding of controlling regulations or instructions, or misapplication of law. VAOPGCPREC 2-90 (July 17, 1989); 55 Fed. Reg. 27757 (1990). Sole administrative error connotes that the Veteran neither had knowledge of nor should have been aware of the erroneous award. Further, neither the Veteran’s actions nor his or her failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C. § 5112 (b)(9), (10); 38 C.F.R. § 3.500 (b)(2); Jordan v. Brown, 10 Vet. App. 171 (1997) (sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). Thus, a finding of sole administrative error requires not only error on the part of VA, but that the beneficiary is unaware that the payments are erroneous. The United States Court of Appeals for Veterans Claims (Court) noted that, “[s]tated another way, when an overpayment has been made by reason of an erroneous award based solely on administrative error, the reduction of that award cannot be made retroactive to form an overpayment debt owed to VA from the recipient of the erroneous award.” Erickson v. West, 13 Vet. App. 495, 499 (2000). By statute, a VA claimant and an attorney may enter into a fee agreement providing that payment for the services of the attorney will be made directly to the attorney by VA out of any past-due benefits awarded in a proceeding before VA or an appellate court. 38 U.S.C. § 5904 (d). The total fee payable to any attorney under such a fee agreement “may not exceed 20 percent of the total amount of any past-due benefits awarded on the basis of the claim.” 38 U.S.C. § 5904 (d)(1). An attorney is precluded from claiming as a fee a portion of the future monthly benefits that will be paid to the Veteran. Further, a fee pursuant to a statutory “direct payment” fee agreement is to be paid to the attorney by VA directly from any past-due benefits awarded on the basis of the claim. 38 U.S.C. § 5904 (d)(2)(A)(i). Such an agreement 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 Veteran, and (iii) the award of past-due benefits results in a cash payment to a claimant or a Veteran from which the fee may be deducted. 38 C.F.R. § 14.636 (h)(1) (formerly 38 C.F.R. § 20.609 (e)). As noted, the record includes a valid attorney fee agreement signed by the Veteran and attorney that was received by VA in December 2012. The February 2013 rating decision resulted in a grant of benefits (cash payment) with the total fee payable to the attorney, which did not exceed 20 percent of the total amount of the past-due benefits awarded. While the Board acknowledges that the Veteran does not believe the attorney represented him and that the attorney did not contribute to the grant of benefits, the Veteran’s attorney was entitled to attorney’s fees pursuant to the December 2012 fee agreement. 38 C.F.R. § 14.636 (h)(1). The attorney was duly appointed as the Veteran’s representative and filed a valid fee agreement, which was signed by both the Veteran and the attorney. The attorney provided representation — and was in fact listed as the representative — on the February 2013 rating decision that resulted in an award of past due benefits. As to any administrative error, the statutory and regulatory provisions pertaining to such error only allow for a finding of improper creation only in cases that involve a discontinuation or reduction of benefits (i.e. compensation, dependency and indemnity compensation, or pension). 38 U.S.C. § 5112 (b)(10); 38 C.F.R. § 3.500 (b)(2). In this case, neither of these types of situation is present, as the Veteran underwent no change in circumstances and VA did not reduce or discontinue any ongoing benefit payment. Instead, VA failed to withhold 20 percent of the single, total lump sum past due benefits payment awarded to the Veteran for the Veteran’s attorney fees pursuant to a valid fee agreement. Thus, while the VA action was clearly erroneous, the error was not made in relation to any reduction or discontinuance but merely in relation to a distribution. Consequently, it cannot be construed as the type of action, which would lead to the improper creation of an overpayment. 38 U.S.C. § 5112 (b)(10); 38 C.F.R. § 3.500 (b)(2). Even assuming that the erroneous distribution could be construed as involving reduction or discontinuance, the erroneous payment was not due to sole VA administrative error. 38 U.S.C. § 5112 (b)(10); 38 C.F.R. § 3.500 (b)(2). The Veteran was aware or should have been aware of the attorney fee agreement he signed, and that his attorney filed with VA. In light of the above, the Board finds that the debt of $3,761.65 was properly created. T. Blake Carter Acting Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board A. Dean, Counsel The Board’s decision in this case is binding only with respect to the instant matter decided. This decision is not precedential and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.