Cornell: Attorney Fees for Intervenor

Cornell v. Wilkie, Case Number 15-3191(E), decided May 31, 2019 considers a request for attorney fees under EAJA for an intervening veteran in a case.

This case involves a situation where an attorney helped a veteran obtain service connection for hearing loss and tinnitus, was compensated with 20% of the retroactive benefits, and then apparently withdrew from the case.  Subsequently, the DAV assisted in obtaining TDIU for the veteran which resulted in a significant grant and a second payment to the prior attorney.  The DAV assisted the veteran in submitting a NOD related to the grant of attorney fees and the VA determined the fee awarded was error and should not have been paid.  The attorney then filed a NOD as to that determination.  Ultimately, the Board concluded the second payment to the attorney was improper, which led to an appeal to the Veterans Court.

In the appeal to the Veterans Court, the veteran sought to intervene in the dispute between the attorney and VA.  The veteran, through new counsel, argued that unless the Secretary waived his right to recoup any payment to the first attorney ordered as a result of this appeal, the veteran retained an interest in the matter and should be allowed to intervene.  The Court allowed the intervening veteran to appear in the case.

Oral argument was conducted in the underlying case and at argument, the Court took the unusual step of announcing from the bench that, regardless of the Court’s ultimate decision on the merits of the appeal, the Secretary was precluded from recouping any of the payment made to Mr. Moberly. Id. at *3.  This was confirmed in the published opinion, where the Court stated:

[T]he Court will affirm the Board’s conclusion that VA’s payment of $20,304.16 in attorney fees to Ms. Cornell was improper. Based on this holding and as ruled on from the bench at oral argument, VA may not recoup payment of the fees from Mr. Moberly. 38 U.S.C. § 5314 (authorizing the Secretary to recoup overpayments made to a benefits recipient by offsetting future payments). The Secretary, however, may take all appropriate steps to recover the indebtedness from Ms. Cornell. 38 U.S.C. § 5316 (authorizing the Secretary to sue to collect certain debts).

Id. at *3.

The decision was affirmed by the Federal Circuit and the veteran, through counsel, sought EAJA fees for his participation in the underlying appeal.

The Secretary argued the veteran was not a prevailing party, questioned the Court’s jurisdiction over the matter, and argued the Secretary’s position was substantially justified.

As to jurisdiction, the Court noted the Secretary did not move for reconsideration or raise the matter to the Federal Circuit.  But, the Court still looked at the merits and determined  “that it had jurisdiction over the issue of recoupment from Mr. Moberly, and the bench announcement was entirely proper.”  Id. at *5.  The Court explained it

has jurisdiction over all issues "appropriately identified [from] the radix [root] of [the NOD]."  Because the Court held that the case presented a simultaneously contested claim, the Court must look to both NODs to identify appellate issues over which it had jurisdiction. Mr. Moberly's NOD asserted that because attorney Cornell no longer represented him in the TDIU claim, the 20% fee payment belonged to him as a portion of his past-due benefits. After VA paid him the disputed funds, the corollary issue of his right to retain that payment arose, along with the attendant right to be insulated from possible recoupment.

Id. at *6.  It then noted the Secretary had supported the veteran’s intervention in the matter and it was thus untenable for the Secretary to now argue the court did not have jurisdiction over those issues.  Id.

As to the issue of prevailing party, the Court noted the veteran had stated he would withdraw from the case if the VA would concede any right to seek recoupment against him.  The Court stated:

Clearly, the Court's announcement from the bench, reiterated in the Court's precedential opinion, is an order carrying the imprimatur of the Court that altered the legal relationship between the intervenor and the Secretary. Before the Court's ruling from the bench, the Secretary maintained that there was some possibility of recoupment from Mr. Moberly; the bench ruling and the corresponding text in the Court's opinion extinguished that possibility.

Id. at *7.

Finally, the Secretary argued his position about recoupment was substantially justified.  The Court noted the Secretary offered no justification for the erroneous payment to the initial attorney in the first instance and that when challenged the VA immediately acknowledged its error.  “Absent this error, none of this litigation would have been necessary.”  Id. at *8.

The Court then noted:

As to its litigation position, the Secretary has not persuaded the Court that its refusal to

give assurance to Mr. Moberly that he would not be subject to recoupment efforts was reasonable. Mr. Moberly repeatedly offered to withdraw from the underlying appeal, up to and including the day of the oral argument, if such assurance were given.

Id. at *8.  It then noted that if the Court had found the initial attorney was entitled to the disputed funds, it would have followed that the VA had committed administrative error and would have had not basis the error was attributable to the veteran. 

The Court then concluded by granting the EAJA application and finding:

The Secretary's argument that advance consideration of waiver would be premature before the creation of a valid debt is not persuasive. Where a potential erroneous payment would be so clearly attributable to administrative error, and so clearly lacking in fault on the part of the veteran, the refusal to give assurance of no recoupment is indefensible.

The Secretary's insistence on the possibility of recoupment against Mr. Moberly resulted

in an unnecessary expenditure of resources, both on the part of Mr. Moberly and of this Court.  The Secretary should have realized that any recoupment from Mr. Moberly would be against equity and good conscience, and that waiver would be the only appropriate response—even in advance of an application for waiver. There was simply no justification for prolonging the tribulations of this aged and frail veteran.

Id. at *9.

This case is important.  While involving a rare situation where a veteran might be forced to intervene in a case, this case establishes that the intervening attorney will have the right to collect EAJA fees.  The case also helps provide a good primer on when the VA should waive a debt it created through administrative error.  Finally, the Court seemed to recognize the Secretary’s inconsistent arguments and poor behavior in not agreeing it would not recoup a debt earlier and thus creating continued EAJA fees for the intervening veteran.

Decision was by Chief Judge Davis, and Judges Greenberg and Allen.

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