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.

To know more about whether Thomas Andrews can help you, please visit my website.