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Inc. v. Secretary of Veterans Affairs

United States Court of Appeals, Federal Circuit

June 24, 2019

NATIONAL ORGANIZATION OF VETERANS' ADVOCATES, INC., Petitioner
v.
SECRETARY OF VETERANS AFFAIRS, Respondent

          Petition for review pursuant to 38 U.S.C. Section 502.

          Kenneth M. Carpenter, Law Offices of Carpenter Chartered, Topeka, KS, argued for petitioner.

          Martin F. Hockey, Jr., Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for respondent. Also represented by Robert Edward Kirschman, Jr., Loren Misha Preheim, Joseph H. Hunt; Martie Adelman, Brian D. Griffin, Office of General Counsel, United States Department of Veterans Affairs, Washington, DC.

          Before Dyk, Wallach, and Stoll, Circuit Judges.

          Dyk, Circuit Judge.

         The National Organization of Veterans' Advocates, Inc. ("NOVA") challenges the validity of a rule promulgated by the Veterans Administration ("VA"). The rule is a 2017 amendment to 38 C.F.R. § 3.321(b)(1). The amended regulation cabined the preexisting regulation (as interpreted by this court in Johnson v. McDonald, 762 F.3d 1362 (Fed. Cir. 2014)). The amended regulation authorizes the VA "[t]o accord justice to the exceptional case where the schedular evaluation is inadequate to rate a single service-connected disability," by adopting "an extra-schedular evaluation commensurate with the average impairment of earning capacity due exclusively to the disability." 38 C.F.R. § 3.321(b)(1) (2017) (emphases added). Unlike the previous version, the regulation does not permit the VA to award extra-schedular disability compensation by considering the synergistic impact of multiple disabilities together.

         We deny NOVA's petition and hold that the 2017 amendment is not on its face arbitrary, capricious, an abuse of discretion, or otherwise contrary to law.

         Background

         I

         One of the primary tasks of the VA is to process claims for service-connected disability benefits sought by veterans. Once the VA has determined the existence of a disability, the VA must rate the disability, that is, determine the degree to which the veteran's earning capacity has been diminished. In that connection, the statute provides:

The Secretary shall adopt and apply a schedule of ratings of reductions in earning capacity from specific injuries or combination of injuries. The ratings shall be based, as far as practicable, upon the average impairments of earning capacity resulting from such injuries in civil occupations. . . .

38 U.S.C. § 1155.

         Pursuant to this statute, the VA rates disabilities according to a rating schedule that takes into account the veteran's degree of disability and the effect of that disability on the veteran's earning capacity. For example, where the veteran suffered a service-connected injury with a small impact on his earning capacity, he might be assigned a 20% rating. But if the veteran suffered a more serious injury that had a greater impact on the veteran's earning capacity, that veteran would receive a higher rating.

         The regulation at issue in this case, 38 C.F.R. § 3.321(b)(1), was designed to address exceptional situations in which the schedular rating for a single disability alone is inadequate to reflect the actual level of the earning impairment on the veteran. Before this regulation was amended in 2017, it provided:

To accord justice . . . to the exceptional case where the schedular evaluations are found to be inadequate, the Under Secretary for Benefits or the Director, Compensation and Pension Service, upon field station submission, is authorized to approve on the basis of the criteria set forth in this paragraph an extra-schedular evaluation commensurate with the average earning capacity impairment due exclusively to the service-connected disability or disabilities. The governing norm in these exceptional cases is: 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.

38 C.F.R. § 3.321(b)(1) (2014) (emphases added).

         Thus, this regulation provided for extra-schedular rating of the veteran's disabilities where the Board of Veterans Appeals ("Board") or regional office determined that the schedular evaluation "does not contemplate the claimant's same symptomatology or level of disability" and that the veteran's disability picture evinces "related factors such as marked interference with employment or frequent periods of hospitalization." Barton F. Stichman et al., Veterans Benefits Manual § 5.3 (2017-18 ed.); see also Thun v. Peake, 22 Vet. App. 111, 115-16 (2008), aff'd, 572 F.3d 1366 (Fed. Cir. 2009).

         II

         The present controversy arises from the fact that, in many cases, the veteran has more than one disability. Where a veteran suffers from more than one disability, the VA generally combines the individual disability ratings pursuant to a "combined ratings table" set forth in 38 C.F.R. § 4.25. The formula on which the table is based requires that the disabilities first be "arranged in the exact order of their severity, beginning with the greatest disability." 38 C.F.R. § 4.25(a). The percent efficiency for the highest rated disability is then determined-e.g., if a disability earns a 60% rating, the efficiency is 40%. Id. From there, the percent efficiency corresponding to the next highest rated disability is determined, and the first and second percent efficiencies are multiplied. Id. If there are more than two disability ratings, the process is then repeated with each lesser rating. Id. This results in an overall percent efficiency, which must then be converted to a corresponding disability rating.[1] Id. This number is then rounded "to the nearest degree divisible by 10, adjusting final 5's upward." Id.[2]

         Section 4.25 operates the same way in the case of extra-schedular ratings for multiple disabilities. Section 3.321(b)(1) requires considering whether each individual disability should result in an extra-schedular rating so that multiple disabilities can result in multiple extra-schedular ratings. There is no dispute that § 4.25 requires the VA to combine multiple disabilities resulting from extra-schedular ratings under § 3.321(b)(1). This approval is indeed recognized in the current rulemaking where the VA made clear that "a veteran would be entitled to an extra-schedular rating for each service-connected ...


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