Thurlow: Retroactive Application of the Revised Extraschedular Consideration Regulation

Thurlow v. Wilkie, Case Number 16-3633, decided September 12, 2018 address whether the revised Section 3.321(b) applies retroactively. 

In December 2017, the VA issued a final regulation amending 38 CFR Section 3.321(b).  Specifically, the 2014 Federal Circuit decision Johnson v. McDonald, 762 F.3d 1362 (Fed. Cir. 2014) had determined extraschedular consideration was based on the collective impact of multiple disabilities.  The amendment to the regulation clarified that extraschedular consideration should be based on just a single service connected disability.  Importantly, this new regulation was issued while this case was pending and the question arose whether it applied to cases pending before the Court.  The regulation specifically stated it applied to cases before the Courts.

After noting that retroactivity is not favored in the law, the Court then delved into the issue.  The Court acknowledged the change in regulation was unfavorable to veterans and then pivoted to Princess Cruises, Inc. v. United States, 397 F.3d 1358 (Fed. Cir. 2005) for help in considering whether the case should be applied retroactively.  Princess Cruises explains that when assessing the retroactive application of a new or amended regulation, the Court must consider: (1) "the nature and extent of the change in the law," (2) "the degree of connection between the operation of the new rule and a relevant past event," and (3) "familiar considerations of fair play, reasonable reliance, and settled expectations."  Id. at *6.

The Court then noted that if Congress had passed a statute applying retroactively it would not have had to engage in the Princess Cruises analysis but when a regulation is changed, the analysis must be undertaken.  Id. at *7.  The veteran argued a substantive right cannot be impacted retroactively, but the Court pointed to Tarver v. Shinseki, 557 F.3d 1371 (2009) and Rodriguez v. Peake, 511 F.3d 1147 (2008), noting in these “cases, the Federal Circuit upheld retroactive application of new regulations less favorable to claimants where, as here, the amended regulation reinstated VA's earlier regulatory interpretation.”  Id. at *8.

The Court then applied the Princess Cruises factors.  First, it determined the change in law was a return to a position it had held in successive stages of litigation and no substantial than Rodriguez.  Second, the Court focused on the fact there was no indication the veteran altered his behavior in reliance on Johnson v. McDonald.  Finally, the Court reasoned in light of the history of proceedings, the veteran had fair notice of the Secretary’s position and could have no settled expectations the Johnson interpretation would not change.  As a result, the Court determined there was no impermissible retroactive effect in the Secretary’s intent to apply the new regulation to claims currently on appeal to the Court and as a result of the new regulation, Thurlow’s arguments as to the collective impact of the disabilities must fail.

Besides illustrating that the VA is not interested in the best interests of veterans (they not only fought, but retroactively changed rules making it impossible for a veteran with multiple service connected disabilities to get an extraschedular rating for the combined impact of those ratings), this case demonstrates the deferential approach taken by the Courts to agency regulations.  This is a larger issue than those simply involving veteran, but such deference is especially problematic in veteran cases where a regulations should be read under Gardner v. Brown in the veteran’s favor.  I also have a hard time thinking of a veteran’s case where the Princess Cruises analysis would prevent retroactive application of a law, which suggests it is an ineffective guard against retroactive legislation.  I am hopeful this case is appealed to the Federal Circuit, I am not sure they will alter the Princess Cruises framework, which the Veteran’s Court felt bound to follow, but its application to veteran’s cases should be called into question.

The decision was by Chief Judge Davis and joined by Judges Pietsch and Toth.

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Spellers: Extraschedular Ratings v Schedular Symptoms for Sciatica and Reasons and Bases Problems

Spellers v. Wilkie, Case Number 16-4053, decided September 7, 2018 considers referral for an extraschedular rating under 38 CFR Section 3.321(b)(1) and determines that it is not required because the scheduler rating covered the symptoms complained of by the veteran.

The veteran was rated for bilateral lower extremity sciatica at mild for each leg.  The veteran did not appeal the sciatica rating of mild, but did appeal the failure to refer for an extraschedular rating due to his use of an assistive device (cane or walker).  “This matter was submitted to a panel of the Court principally to address whether the Board must consider the  Appellant's use of assistive devices, such as a cane or walker, in its extraschedular analysis of his sciatica. As we will further explain, because of the nature of the criteria contained in 38 C.F.R. § 4.124a, Diagnostic Code (DC) 8520 and 38 C.F.R. § 4.120, we hold that the schedular rating criteria contemplate the symptoms necessitating the use of assistive devices, as well as the severity of those symptoms, and thus referral for extraschedular consideration on that basis was not warranted.”  Id. at *1.

An extraschedular rating is called for if “A finding that the case presents such an exceptional or unusual disability picture with such related factors as marked interference with employment or frequent periods of hospitalization as to render impractical the application of the regular schedular standards.”  Id. at *3. The Court explained that referral was governed by a three part inquiry found in Thun v. Peake, 22 Vet. App. 111, 115 (2008).  First,

whether the "evidence before VA presents such an exceptional disability picture that the available schedular evaluations for that service-connected disability are inadequate." This requires the Board to compare a veteran's specific symptoms and their severity with those contemplated by the rating schedule.  If the Board determines that a veteran's symptoms or their severity is not contemplated by the rating schedule, the second element requires the Board to "determine whether the claimant's exceptional disability picture exhibits other related factors," such as marked interference with employment or frequent periods of hospitalization. Finally, if the first two elements are met, the final element mandates that the Board refer the claim to the Under Secretary for Benefits or the Director of Compensation Service for a determination about whether an extraschedular rating is warranted.

Id. at *3-4 (internal citations omitted).

The Court then pivoted to the sciatica rating and noted the relevant Diagnostic Code is 38 CFR Section 4.124a, which contains a note stating “this regulation provides that "disabilit[ies] from the following diseases and their residuals may be rated from 10[%] to 100[%] in proportion to the impairment of motor, sensory, or mental function." …  It further notes that, when rating nerve injuries, "attention should be given to the site and character of the injury, the relative impairment in motor function, trophic changes, or sensory disturbances."  Id. at *4.

The veteran had argued DC 8520 does not contemplate use of an assistive device (cane or walker), but the Court essentially found the note contained before DC 8520 does cover use of an assistive device.  It then found:

Given the broad nature of that provision, finding symptoms not contemplated by its

"impairment of motor, sensory or mental function" language presents quite a challenge. All the symptoms for which a cane or walker could serve as a proxy are contemplated by § 4.120 as impairments of motor and sensory function. In other words, the symptoms of sciatica that cause the appellant to use assistive devices such as a cane or walker are contemplated by the scheduler rating criteria and therefore do not satisfy the first part of Thun's first element.

Id. at *7.

The Court then considered whether the rating schedule contemplates the severity of the symptoms and found

if the appellant is correct that "his assigned 10[%] ratings do not contemplate the severity of his bilateral lower extremity sciatica," then the rating schedule itself provides the appropriate remedy – assignment of a rating greater than mild.  This is so regardless of the reasons why his condition may be worse than mild (here purportedly due to use of assistive devices), because there are no criteria in DC 8520 that would need to be satisfied other than a level of severity worse than mild.

Id. at *8.

The Court stated: “In sum, both the symptoms and severity of the appellant's sciatica that require him to use a cane or walker are contemplated by the schedular rating criteria, specifically, in the regulations prefatory to DC 8520, such as § 4.120, and in DC 8520 itself.  Therefore, we hold that the Board did not err in its finding that the first element of Thun was not met on the ground that the appellant's condition necessitates use of assistive devices.”  Id. at *9.

The Court then considered a Board determination about the veteran’s credibility as to side effects of medication.  The veteran had recited side effects of medication warranted a higher rating, but the Board found the statements about the alleged side effects lacked credibility largely because complaints of the side effects are not captured in any of the medical records.  The Court rejected such an argument stating simply because they are not recorded in the records does not show they did not exist.  It explained

those records simply did not mention side effects.  It is not clear, therefore, that the appellant was asked about side effects at those times or that he did not actively deny side effects. "[T]he Board cannot determine that lay evidence lacks credibility merely because it is unaccompanied by contemporaneous medical evidence." Buchanan, 451 F.3d at 1337. Rather, the Board must "first establish a proper foundation for drawing inferences against a claimant from an absence of documentation."

Id. at *10-11.

While having potentially wider reaching impacts, this case really shows that attacking a sciatica rating should be done by attacking the actual rating as opposed to hoping for use of a an extraschedular rating.  While the mild, moderate and severe categories are not well defined, this case should encourage veterans and advocates to argue use of an assistive device prompts a higher rating than mild.  It shows that a veteran and advocate must closely examine the notes associated with a Diagnostic Code and let that lead them in how to attack a low rating.

The decision was by Judge Allen, joined in by Judges Bartley and Meredith.


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The Pending Claims Backlog

The below is a VA Office of Inspector General report on the pending claims backlog.  What is most interesting is that it confirms what many of us have known for years, the VA plays games with how it reports the number of claims waiting for a decision in order for it to make itself look more efficient than it is.

The report looks at the claim that the VA reported it had reduced the pending backlog from a peak of 611,000 in March 2013 to 71,690 at the end of September 2016 and at the end of May 2018, the reported pending backlog was 70,537.

The report was a review of whether VA’s reported statistics related to the pending disability claims backlog accurately included all disability claims over 125 days old requiring rating decisions.  OIG found that VA’s reported backlog did not include all claims that had been awaiting rating decisions for more than 125 days during the first and second quarters of FY 2016.  OIG estimated VA staff completed about 63,600 other EPs that required rating decisions that took over 125 days to complete but that VA did not count as part of the backlog. As a result, the OIG estimated that, in its completed backlog, VA only reported about 79 percent of the claims that required rating decisions that took over 125 days. More importantly, VA generally prioritized its workload of rating EPs over other EPs, resulting in significant delays in processing other EPs that were older and required rating decisions.

VA Office of Inspector General Report on the Pending Claims Backlog

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