Citation Nr: 0614918
Decision Date: 05/22/06 Archive Date: 08/22/06

DOCKET NO. 02-20 140A ) DATE
                    )
                    )

On appeal from the Department of Veterans Affairs Regional Office in Nashville, Tennessee


THE ISSUE

Entitlement to payment of attorney fees from past-due benefits.

REPRESENTATION

Appellant represented by: Disabled American Veterans

WITNESS AT HEARING ON APPEAL

The veteran

ATTORNEY FOR THE BOARD

Raymond F. Ferner, Counsel

INTRODUCTION

This matter comes before the Board of Veterans' Appeals (BVA or Board) on appeal from a decision of the Department of Veterans Affairs (VA) Regional Office (RO) in Nashville, Tennessee, that determined that the veteran's former attorney was entitled to payment of attorney fees and withheld 20 percent of the veteran's past-due benefits for possible payment of attorney fees. The veteran, who had active service from January 1973 to May 1977 and from October 1977 to March 1979, appealed that decision to the BVA, and the case was referred to the Board for appellate review. In July 2004, the Board returned the case to the RO for additional development. Following completion of the requested development, the case was returned to the Board for further review.

FINDINGS OF FACT
  1. All relevant evidence necessary for an equitable disposition of this matter has been obtained.
  2. The fee agreement between the veteran and his former attorney meets the basic statutory and regulatory requirements for payment of attorney fees from past-due benefits.
  3. A BVA decision dated in October 2001 resulted in the veteran being awarded past-due benefits from February 8, 1991, and the RO withheld from those past-due benefits an amount calculated at $42,857.80 as representing the maximum attorney fees payable.
  4. The RO received a statement from the veteran in March 2001 indicating that he had terminated his attorney's employment shortly following the BVA hearing scheduled for February 1, 2001.
  5. Under the facts and circumstances of this case, attorney fees calculated in the amount of $42,857.80 are reasonable.
CONCLUSION OF LAW

The requirements for payment of attorney fees in the amount of twenty percent of past-due benefits payable to the veteran calculated in the amount of $42,857.80 have been met. 38 U.S.C.A. § 5904 (West 2002); 38 C.F.R. § 20.609 (2005).

REASONS AND BASES FOR FINDINGS AND CONCLUSION

The basic facts in this case are not in dispute. In June 1991 the veteran filed a claim for an increased evaluation for his service-connected psychiatric disorder. A rating decision dated in January 1992 increased the evaluation for that disability from noncompensable to 10 percent from February 8, 1991, with the date of a VA outpatient treatment record apparently being construed as an informal claim for an increased evaluation. The veteran expressed disagreement with that decision and initiated an appeal to the BVA. In July 1995, the Board returned the case to the RO for additional development, and following accomplishment of the requested development, a July 1997 rating decision increased the evaluation for the veteran's psychiatric disorder to 30 percent, also effective from February 8, 1991. The veteran continued his dissatisfaction with the RO's decision, and the case was returned to the Board for further appellate review. In a decision dated in December 1997, the Board affirmed the RO's decision to assign a 30 percent evaluation for the veteran's bipolar disorder.

In July 1998, the veteran and his attorney entered into a contingent fee contract for the purpose of appealing the Board's decision to the United States Court of Appeals for Veterans Claims (Court). At this point, the Board notes that the attorney fee contract signed by the veteran and his former attorney 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.

Proceedings before the Court included filing of a Joint Motion for Remand. In that Joint Motion, the basis for the remand was that the veteran had not been afforded a personal hearing as he had requested. That basis appears to be the primary reason for the Joint Motion, although the Board acknowledges that the motion indicated that there were private medical records that had not been obtained despite the veteran's failure to respond to the RO's October 1995 letter requesting the complete mailing address for each of the medical care providers. The Court granted that Joint Motion in February 1999. The veteran's former attorney then filed an application for Equal Access to Justice Act (EAJA) fees and provided the Court with an itemized listing of services provided between July 1998 up to and including the time expended for preparation of the EAJA application. The veteran's former attorney claimed total fees and expenses in the amount of $3,435, which the Court granted in March 1999.

In July 1999 the Board returned the case to the RO for accomplishment of the development requested by the Joint Motion for Remand. After accumulating additional evidence, a rating decision dated in December 2000 increased the evaluation for the veteran's psychiatric disorder from 30 percent to 50 percent, effective August 31, 2000. A letter from the RO to the veteran and his former attorney indicated that the total amount of past-due benefits resulting from that award had been computed as $1,270.10 and that 20 percent of that amount, $254.02, represented the maximum fee payable by the VA from past-due benefits. Evidence of record indicates that the veteran's former attorney was paid $254.02 and that fee is not at issue in this matter and the veteran does not dispute his former attorney's entitlement to that sum.

The veteran was then scheduled for a hearing before the BVA at the RO on February 1, 2001. At that hearing the Member of the Board acknowledged that the veteran had been represented by his former attorney but that he was unrepresented at the hearing. When the veteran was asked whether he chose to represent himself at the hearing, he stated that he did not feel that he had any other option. At that point the Member of the Board informed the veteran of other representational options, but the veteran responded that he had checked with two service organizations who both informed him that they would not get involved as long as an attorney was representing him. When asked whether the veteran desired to keep his former attorney as his representative he stated that he did not have much of a choice and indicated that an agreement had been signed. When the veteran was asked whether it was his intention to release the former attorney as his representative the veteran stated that he did not think he could if he wanted to release the attorney.

Following that hearing, the veteran sent a letter to the RO in March 2001 in which he formally notified the RO that effective February 5, 2001, he released his attorney. That letter also documented what the veteran perceived as shortcomings in his former attorney's representation in his claim.

The veteran's file was then transferred to the BVA, and in a decision dated in October 2001, the Board increased the evaluation for the veteran's bipolar disorder to 100 percent. In a rating decision dated in November 2001 the RO effectuated the Board's decision and assigned a 100 percent evaluation from February 8, 1991. In letters to the veteran and his former attorney informing them of the decision for increased compensation benefits, it was noted that 20 percent of past-due benefits calculated in the amount of $43,580.28 had been withheld as representing the maximum attorney fee payable from those past-due benefits. In February 2002, the veteran submitted a Notice of Disagreement in which he questioned the reasonableness of the attorney fees. The RO issued a Statement of the Case, after which the veteran filed a Substantive Appeal. The veteran then appeared at a hearing before the BVA in Washington, D.C., in September 2000.

At the BVA hearing the veteran testified that he had been dissatisfied with his former attorney's representation prior to the date of his February 2001 BVA hearing, but was unaware that he could terminate his former attorney's employment at any time until he checked with another attorney locally. The veteran also indicated that he had spoken with his attorney on the morning of the hearing and that his attorney advised him against attending the hearing and when asked whether the veteran's former attorney provided a reason as to why the veteran should not attend the hearing, the veteran answered in the negative.

Thereafter, the Board returned the case to the RO and requested the attorney provide an itemized statement concerning the time spent and the nature of the work performed in connection with his employment with the veteran, and specifically advised the former attorney that a statement of services provided on behalf of the veteran between July 1, 1998, and February 11, 1999, was of record and that the statement requested should reflect service provided on behalf of the veteran between February 12, 1999, and February 2001, the date the veteran terminated the attorney's employment. Both parties were afforded an opportunity to submit any additional evidence and/or argument they desired to have considered in connection with this matter.

In October 2004 the veteran's former attorney submitted a memorandum in support of recovery of the 20 percent contingency fee. In that memorandum the veteran's former attorney asserted that he was entitled to the total amount of the 20 percent contingency fee since the veteran had not rebutted the presumption of the reasonableness of the fee. In support of that proposition the former attorney cited the Court cases of In Re Mason, 13 Vet. App. 79 (1999) and In the Matter of Vernon, 8 Vet. App. 497 (1996). The former attorney also cited the exception in Scates v. Principi, 282 F.3d 1362 (Fed. Cir. 2002) for the proposition that if the former counsel is not entitled to the full amount of the contingency fee as a matter of law, that he should be entitled to most, if not all of the 20 percent contingency fee.

After the initial decision regarding the withholding of past-due benefits calculated in the amount of $43,580.20, an adjustment was made after the veteran pointed out that the amount withheld should not include the amount between the date of the BVA decision and the date of the rating decision. Consequently, an adjustment was made and it appears that the amount set forth in the Board's July 2004 REMAND, $42,857.80, represents the amount of past-due benefits now withheld by the RO as representing the maximum amount of attorney fees being withheld pending a decision.

At the outset of the Board's analysis it is acknowledged that the 20 percent contingency fee provided by the attorney fee contract in this case is presumed reasonable. 38 C.F.R. § 20.609(f). The veteran essentially contends that the former attorney should be found to be entitled to this fee with respect to only a portion of his past-due benefits based on his dissatisfaction with his former attorney's representation of him and based on what he perceived as the attorney's limited effort on his part. It is not disputed by either party, and is in fact documented, that the former attorney in this case did continue to represent the veteran subsequent to the Court's remand. Further, from a review of all of the evidence of record, the Board finds that although the former attorney did not expend a significant amount of time on this veteran's case following the Court's remand, the amount of actual time expended by the former attorney is not dispositive of this case as it is clear the former attorney did continue to actively represent the veteran at least through part of 2001.

The Board notes that 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 (Federal Circuit) 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 in 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 Federal Circuit 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 Federal Circuit 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.

The Board notes however, that 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. Thus, the Board must determine why the veteran terminated the former attorney's employment, and on what basis should the attorney's share of the 20 percent contingent fee be calculated. As noted above, the former attorney may receive only a fee that fairly and accurately reflects his contribution to and responsibility for the benefits awarded.

The Board notes that the July 1998 attorney fee agreement provided that the veteran could discharge his attorney at any time, but that the veteran's right to discharge attorney must be made in good faith, and by good faith it was specified that the veteran must entertain a reasonably objective belief in the attorney's inadequate representation. The veteran essentially contends that his discharge of the former attorney was made in good faith and that he had a reasonably objective belief that the attorney's representation was inadequate.

One of the reasons the Court vacated and remanded the Board's decision in this case was based on the former attorney's representation to the Court that the veteran had not been provided a hearing. Indeed, the veteran had requested a hearing which he had not been afforded, and continued to desire a hearing following the Court's remand. After the case was returned to the RO from the Board, a hearing was scheduled as specifically requested by the veteran's attorney at the Court. However, the veteran testified under oath that on the day of the hearing he spoke with his attorney who advised him not to attend the hearing. The veteran indicated that his former attorney did not provide a reason for his recommendation that he not attend the hearing. Thus, the veteran asserts that the advice provided by his former attorney not to attend the scheduled Board hearing was contrary to the position taken before the Court and contrary to his desire to attend the Board hearing.

Further, the veteran indicated that he was dissatisfied with the communication difficulties with the former attorney during the pendency of his prior appeal. He has submitted a copy of a letter dated in January 2001 from the former attorney to the veteran indicating that his office had been unable to contact the veteran by telephone and requesting that the attorney contact their office. The veteran, however, has stated the he did apprise the former attorney of his new work number, and that his home telephone number had remained the same since 1997. The attorney has not specifically addressed these contentions.

The veteran also asserts that given the amount of work expended by the former attorney and the level of expertise demonstrated, the fee in this case is unreasonable.

The Board has considered the stated reasons why the veteran terminated the former attorney's employment, and finds that the record does not demonstrate that the terms of the fee agreement should not be enforced based on its stated terms. As noted above, "good faith" as set forth in the fee agreement means that veteran must entertain "a reasonably objective belief in the attorney's inadequate representation". The question before the Board is not whether the veteran could discharge the attorney, but rather to what extent should the terms of the fee agreement be enforced.

The veteran has stated that the former attorney advised that he not appear for the Board hearing despite the attorney's request for such a hearing at the Court. However, the Board notes that the attorney's efforts successfully resulted in a vacate of the Board's prior denial and remand by the Court. The former attorney also continued to represent the veteran and had documented contact with the RO and the veteran subsequent to the Court remand. While the Board acknowledges the veteran's contentions regarding the advice provided regarding the Board hearing, a reasonable person may conclude that the attorney's advice had simply changed between the time the Joint Motion was filed and the time of the hearing, and not that inadequate representation was involved such that the full terms of the fee agreement should not be enforced.

The veteran has also stated that he had difficulties in communication with the former attorney as outlined in a letter dated in March 2001. However, given that the former attorney and the veteran reside in different states, this is conceivable and in fact, there is some documentation of this difficulty. It is clear that there was, however, ongoing communication between the veteran and the former attorney throughout the years of the appeal process.

Finally, the Board finds that the record clearly demonstrates a reasonable amount of time expended by the former attorney on the veteran's claim over the course of several years, and the former attorney has documented his level of expertise in veterans law.

Thus, the Board finds that the stated reasons for terminating the former attorney's services are not consistent with the terms of the fee agreement and that the fee agreement should be enforced on its terms.

The Board must next determine on what basis should the attorney's share of the 20 percent contingent fee be calculated. As noted above, the veteran did attend the Board hearing in February 2001, and following that hearing, the case was returned to the Board. The veteran testified at the most recent Board hearing that he discharged the former attorney by telephone on February 5, 2001. However, VA did not receive notice that the veteran discharged the former attorney until March 2001. By Board decision dated in October 2001, a 100 percent evaluation was assigned the disability in question. A review of that decision does not reflect that the grant was based necessarily on the testimony provided by the veteran at that hearing. In that decision, the Board found that: "[t]he most recent evidence, however, especially the August 2000 VA examination report, tends to support a conclusion that the veteran's adverse symptomatology now renders him unable to maintain employment....Given clinical assessments recently made, the most recent GAF score, and the increasing problems experienced by the veteran, the Board finds that the evidence regarding the claim for an increased rating is at least in relative equipoise." Thus, it appears that the basis for the Board grant was the cumulative evidence of record and particularly that obtained through the efforts of the former attorney, following the Court's remand and prior to the time that the veteran terminated the former attorney's services after having been represented by him for three years. Indeed, such evidence was obtained even prior to the 2001 Board hearing.

Consequently, under the facts and circumstances of this case, the Board finds a reasonable fee for the veteran's former attorney represents 20 percent of past-due benefits awarded the veteran in the amount of $42,857.80. The Board finds that the fee fairly and accurately reflects the former attorney's contribution to and responsibility for the benefits awarded.

ORDER

Reasonable attorney fees from past-due benefits representing 20 percent of the veteran's compensation award or $42,857.80 are granted pursuant to the attorney fee agreement between the veteran and his former attorney, and subject to the provisions governing the award of monetary benefits.

_________________________________________________
S. L. Kennedy
Veterans Law Judge, Board of Veterans' Appeals
Department of Veterans Affairs
 Printer-Friendly Version
 
© Disabled American Veterans. All rights reserved.