Jacqueline S. Roberts v. Robert A. McDonald , 2014 U.S. Vet. App. LEXIS 1716 ( 2014 )

UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS
NO. 13-1240
JACQUELINE S. ROBERTS, APPELLANT,
V.
ROBERT A. MCDONALD,
SECRETARY OF VETERANS AFFAIRS, APPELLEE.
On Appeal from the Board of Veterans' Appeals
(Decided October 7, 2014)
Sandra E. Booth, of Columbus, Ohio, was on the brief for the appellant.
Tammy L. Kennedy, Acting General Counsel; Mary Ann Flynn, Assistant General Counsel;
and Christopher O. Adeloye, Acting Deputy Assistant General Counsel, all of Washington, D.C.,
were on the brief for the appellee.
Before KASOLD, Chief Judge, and MOORMAN and BARTLEY, Judges.
MOORMAN, Judge: The appellant, Jacqueline S. Roberts, the surviving spouse of veteran
Clifford L. Roberts, seeks review of a December 28, 2012, decision of the Board of Veterans'
Appeals (Board) that determined that the offset of the appellant's annuity benefits under the Survival
Benefits Plan (SBP), 10 U.S.C. §§ 1447-1455, against retroactive payment of dependency and
indemnity compensation (DIC) is valid. The appellant's SBP payments began years before her award
of DIC benefits. The Board relied exclusively on VA regulation 38 C.F.R. § 3.658 in reducing the
appellant's DIC award by withholding a retroactive DIC payment of $30,264.86 based on the
appellant's receipt of SBP payments during the same period. This panel directed supplemental
briefing from the parties regarding the authority for the Board's reduction of DIC benefits in this
case. Because the DIC award was not subject to an offset under the regulation relied on by the
Board, the Court will vacate the Board's decision and remand the matter for readjudication.
I. FACTS
Mr. Roberts served on active duty in the U.S. Army from October 1949 to June 1951 and
from April 1953 to January 1972. Record (R.) at 825-30. The veteran and the appellant were
married in September 1982 and remained married until his death in April 2005. Prior to his death,
in July 2003, the veteran, as part of his election to participate in the SBP, authorized VA to deduct
$109.45 per month from his VA compensation benefits to pay for the SBP premiums. R. at 354.
According to the election form, the deductions were to be forwarded to the Defense Finance and
Accounting Service (DFAS). Id.
After the veteran died, the appellant filed a claim for DIC in May 2005. R. at 508-11. She
became entitled to SBP annuity payments from the Department of Defense (DoD), effective April 8,
2005. In August 2006, to "ensure proper payment of the [SBP] annuity," the DFAS contacted VA
to inquire whether the appellant was entitled to DIC. R. at 371. The letter noted: "If it is determined
that there have been SBP overpayments to the annuitant based on a DIC entitlement, we will notify
you of the amount of money that we must recoup from the annuitant's DIC and the proposed dates
for submission to DFAS [Cleveland]." Id.
The Board ultimately granted service connection for the cause of the veteran's death and
awarded DIC, pursuant to 38 U.S.C. § 1310, in February 2010. R. at 94-105. The following month,
the VA regional office (RO) assigned an effective date of April 15, 2005. R. at 76. Accordingly,
the appellant was found entitled to monthly DIC payments, effective May 1, 2005. R. at 5. Shortly
thereafter, the RO contacted DFAS and was informed that the appellant had received a total of
$30,264.86 in SBP payments between April 2005 and March 2010. R. at 83.
In a letter dated May 2010, the RO notified the appellant of her monthly DIC award amount
and the payment start date of May 1, 2005. R. at 70. The letter also stated:
Why Have We Withheld Benefits?
You are not allowed to receive Special Benefits Program pay and DIC at the same
time. The following will provide an explanation of how this works:
For now, we have withheld $30,264.86, which is the amount paid to you from the
Special Benefits Program through Department of Defense Finance Services. We
must do this to prevent a double payment.
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Rawle at 71. In July 2010, the appellant filed a timely Notice of Disagreement as to the SBP offset
against her DIC benefits. R. at 64-69. In an August 2010 Statement of the Case (SOC), the RO
found that the offset and withholding of the retroactive DIC was correct based on 38 C.F.R. § 3.658.
R. at 53. The RO stated that § 3.658 "is the law being upheld in the VA's decision to offset the
claimant's DIC benefits with what she has already been paid under the Survivor's Benefit Program
(SBP)." Id.1 She appealed to the Board.
In the decision here on appeal, the Board determined that offsets in DIC payments are
covered by § 3.658, that the appellant's "SBP payments are considered death compensation or
benefits under FECA for the purposes of that regulation," and that, therefore, "the offset of the SBP
payments against the appellant's DIC was proper under 38 C.F.R. § 3.658 (2012)." R. at 5-6. The
Board denied the appellant's claim for release of the withheld DIC payments, finding that there were
"no exceptions to that regulation that apply to the appellant" because she did not remarry after age
57. Id. at 8 (discussing 38 U.S.C. §§ 103(d)(2)(B), 1331(e)).
II. ANALYSIS
On appeal, the appellant argues that the Board erred in relying on 38 C.F.R. § 3.658 and that
the Board's reliance on an inapplicable regulation to support its decision is error as a matter of law
and prejudicial to her. She asserts that based on the nature of the SBP, the Board erred in finding
that payments made by the DoD under an SBP plan are "death compensation or benefits under the
1
VA regulation § 3.658 contains explicit provisions explaining the circumstances under which DIC is subject
to an offset:
(a) When an award of [DIC] is made covering a period for which death compensation or benefits
under the Federal Employee's Compensation Act [(FECA)], based on military service, have been paid
to the same payee based on the same death, the award of [DIC] will be made subject to an offset of
payments of death compensation or benefits under the Federal Employees' Compensation Act over the
same period.
(b) When an award of [DIC] is made covering a period for which death benefits have been paid to
the same payee based on the death of another spouse the award will be made subject to an offset of
payments of death pension or compensation, or [DIC] over the same period in the case of the other
spouse.
38 C.F.R. § 3.658 (2014).
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[FECA]" under § 3.658. Appellant's Aug. 11, 2014, Response (Resp.) to Court Order at 3 (quoting
R. at 5). She further contends that there is no statutory authority for a reduction of a DIC award or
the withholding of DIC funds. The appellant maintains that the relevant statutory authority that
addresses the situation where a surviving spouse is entitled to both DIC and SBP is found in
10 U.S.C. § 1450(c), which allows a reduction in the SBP annuity payment, not DIC. She maintains
that section 1450(c) confers specific authority on the DoD to recoup SBP payments, but only in
limited and specific circumstances that do not include a reduction in DIC payments or the
withholding of retroactive DIC payments, and sets forth specific procedures the DoD must follow
in providing the spouse with notice of any recoupment of SBP payments. Id. at 5-8. She asserts that
she is "entitled to an accounting of, and potential credit for, all premiums paid . . . against the total
offset amount which the Board enforced through its December 2012 decision" currently on appeal.
Id. at 6 n.2.
The Secretary concedes that the Board incorrectly relied on § 3.658(a) in determining that
the offset was valid but maintains that other statutory and regulatory provisions authorize VA to
deduct the SBP annuity payments from the DIC award and that, therefore, the Board's error was not
prejudicial to the appellant. Secretary's Aug. 12, 2014, Resp. Before this Court, the Secretary relies
on 38 U.S.C. § 5314 ("Indebtedness offsets") and its implementing VA regulation 38 C.F.R.
§§ 1.911(a) and 1.912a(a). The Secretary further argues that the appellant was notified of the offset
in May 2010 and that, if the Court determines that the notice does not comply with those provisions,
any error is not prejudicial to the appellant because she "fully pursued her right to dispute the
indebtedness determination, and did so in a timely manner at the administrative level." Secretary's
Aug. 12, 2014, Resp. at 4. The Secretary also relies on a "Memorandum of Understanding Between
the Department of Veterans Affairs and the Department of Defense–Retired Pay and Survivor
Annuities" (MOU), which contains provisions concerning DIC and SBP. See Department of Defense
Financial Management Regulation 7000.14.R, vol. 7B, app. G, art. I-V (Oct. 2010) ("MOU").2 The
Secretary points to specific MOU provisions pursuant to which DoD is required "to pay only the
2
The MOU, signed by the DFAS director and the VA director of the Compensation and Pension Service,
allows for either party to propose amendments that, upon agreement by both parties, become effective; and allows either
party to terminate the MOU upon a 30-day notice. Id. at G-10.
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amount of SBP that 'exceeds [a] DIC award'" and "VA is required 'to [r]ecoup overpayments
resulting from VA . . . awards paid prior to the actual reduction in the DFAS account, provided the
DFAS made the reduction on a timely basis upon receipt of the VA award transaction.'" Secretary's
Aug. 12, 2014, Resp. at 5 (quoting MOU at G-3 (art. II, sec. 2-1(G))).
The Secretary asserts that "SBP is the benefit that is reduced by the grant of DIC payments"
but that here "because SBP payments were previously disbursed, in full, past-due DIC benefits are
reduced in order to effectuate the Title 10 offset (thus ensuring Appellant does not impermissibly
receive full SBP and DIC benefits.)." Secretary's Aug. 12, 2014, Resp. at 5. The Secretary does not
discuss the statutes relevant to "Title 10 offset."
Based on the Secretary's concession that the Board relied on an inapplicable VA regulation
in concluding that the offset against the appellant's DIC award was valid, the Court concludes that
a remand is warranted. Both the RO and the Board relied solely on the inapplicable VA regulation
in reducing the appellant's DIC award. This Court's caselaw requires us to ensure compliance with
reasonable notice and fair process. See Thurber v. Brown, 5 Vet. App. 119 (1993) (noting that the
"entire thrust of the VA's nonadversarial claims system is predicated upon a structure which provides
for notice and an opportunity to be heard at virtually every step in the process" and announcing the
"fair process" framework); see also Sprinkle v. Shinseki, 733 F.3d 1180, 1185-87 (Fed. Cir. 2013)
(discussing the fair process doctrine in the context of evidence developed by the RO on remand and
discussed in a Supplemental Statement of the Case (SSOC)); Austin v. Brown, 6 Vet. App. 547, 551
(1994).
This Court has explained that "creating a procedural right in the name of fair process
principles is primarily based on the underlying concept of the VA adjudicatory scheme, not the U.S.
Constitution." Prickett v. Nicholson, 20 Vet. App. 370, 382 (2006). There is statutory and regulatory
authority in the VA adjudicatory scheme that provides the appellant a right to receive an SOC that
complies with the dictates of VA's regulation, i.e., the SOC must discuss how applicable laws and
regulations affect the RO's determination on each issue. See 38 U.S.C. § 7105(d)(1) (providing that
a claimant is entitled to an SOC that "shall include . . .[a] citation to pertinent laws and regulations
and a discussion of how such laws and regulations affect the agency's decision"); 38 C.F.R. § 19.29,
(b), (c) (2014) (SOC "must be complete enough to allow the appellant to present written and/or oral
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argument before the Board"; and must contain, inter alia, a "summary of the applicable laws and
regulations, with appropriate citations, and a discussion of how such laws and regulations affect the
determination"; and "[t]he determination of the agency of original jurisdiction on each issue and the
reasons for each such determination with respect to which disagreement has been expressed"); see
also Archbold v. Brown, 9 Vet. App. 124, 129 (1996) (noting fundamental right to receive appellate
rights and SOC). Although it is clear that the Due Process Clause of the U.S. Constitution applies
to proceedings in which VA decides whether claimants are eligible for veterans benefits, Cushman
v. Shinseki, 576 F.3d 1290, 1296 (Fed. Cir. 2009), the Court need not reach the constitutional due
process question here because the appellant was deprived of the fair process described in VA's own
regulations.
Based on VA's reliance on an inapplicable regulation as the sole basis for reducing the
appellant's DIC award, the Court concludes that the August 2010 SOC she received does not provide
the governing authority under which VA has the authority to act and recoup the asserted
overpayment of benefits created through the DoD and, therefore, did not comply with § 19.29. She
was not put on notice of the laws and regulations that VA believes applicable. Although she was
informed several times of the VA's withholding of her benefits to offset an asserted overpayment
based on § 3.658(a), in light of the Secretary's position that VA regulation § 3.658(a) does not apply
to the circumstances in this case, the appellant was not provided the authority for the reduction in
her DIC award.
To the extent a harmless error analysis is applicable to the type of violation of fair process
involved here, cf. Sprinkle, supra; Gambill v. Shinseki, 576 F.3d 1307, 1311 (Fed. Cir. 2009)
(holding that the denial of a constitutional right to challenge adverse evidence through interrogatories
"is subject to harmless error analysis"), the Court concludes that the appellant was prejudiced
because she was not informed of the proper legal basis or authority for the reduction of her DIC
benefits based on the overpayment and was therefore denied the opportunity to challenge the
reduction on the correct legal basis or authority. Accordingly, on remand, the appellant is to be
provided the opportunity to challenge the basis for the asserted overpayment and its calculation and
any legal authority and determination to continue the reduction in her DIC award. See 38 U.S.C.
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§ 7105(d)(1); 38 C.F.R. § 19.29. Upon readjudication, the appellant is entitled to an SSOC from the
RO regarding her claim and any other notice requirements under any applicable regulations.
The Secretary cites 38 U.S.C. § 5314(b), which applies to indebtedness "to the United States
by virtue of [a] person's participation in a benefits program administered by the Secretary," as
authority for reducing the DIC award. The Secretary also cites 38 C.F.R. §§ 1.911 and 1.912a, which
apply only to "the collection of debts resulting from an individual's participation in a VA benefit . . .
program" and not to "VA's other debt collection activities." 38 C.F.R. § 1.911 (2014); see 38 C.F.R.
§ 1.911a (2014) (applying to payment of debts not arising out of participation in a VA benefit). In
this regard, the Court notes that the RO's recoupment of $30,264.86 appears to be not the result of
an overpayment of benefits administered by VA but the result of an asserted overpayment of SBP
benefits made by the DoD. Accordingly, on remand, VA must issue a decision concerning the
applicability of the now-cited regulations to the facts here and the law that authorizes VA to recoup
the asserted overpayment on behalf of the DoD by reducing the DIC award. VA must discuss the
legal questions presented in this appeal, the applicability of any title 10 and title 38 provisions and
the MOU, the authority for VA to enter into the MOU as to DIC-SBP offsets that result in a
reduction of a DIC award, as well as the relevance of, and any factfinding pertinent to, any other
DoD regulations.
To the extent VA, on remand, relies on section 5314(b) and §§ 1.911 and 1.912a in
determining indebtedness resulting from the SBP, the Court notes that those provisions contain rights
and remedies, including the right to notice of the right to request waiver of the indebtedness. The
Court notes that the record before the Court does not include any notice to the appellant of any right
to request a waiver. In addition, the Court notes that in determining the amount of a debt owed and
whether recoupment of an offset amount is permitted, title 10 statutory provisions, e.g., 10 U.S.C.
§ 1450 ("Payment of annuity: beneficiaries"), (c) ("Offset for amount of [DIC]"), appear relevant to
the DIC-SBP offset issue, yet § 1.911 does not reference those provisions. Although § 1.912a(e)
addresses the offset of military service debts, it discusses only VA collection by offset from
compensation benefits payable "to a veteran" for indebtedness associated with the veteran's
participation in an SBP or Retired Serviceman's Family Protection Plan. 38 C.F.R. § 1.912a(e)
(2014) (referencing plans prescribed in "subchapter I or II of 10 U.S.C. chapter 73"). Furthermore,
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§ 1.912a(e) references 31 U.S.C. § 3716 ("Administrative offset"). See 38 C.F.R. § 1.912a(e)(2)
(describing process involving offsets to recoup indebtedness to the military service that requires
miltary service to certify that due process procedures of 31 U.S.C. § 3716 have been provided to the
veteran); 57 Fed. Reg. 47,262 (Oct. 15, 1992) (Final Rule) (amending § 1.912a to implement
procedures for involuntary offset from VA compensation or pension benefit payments under
38 U.S.C. § 5301(c) "to recoup debts owed by VA beneficiaries to the military services" and noting
that the "amended regulation implements the procedures agreed to between the military services and
VA in which the military service will afford the veteran the legal rights required by section
5301(c)").
Notably, the Secretary quotes a DoD regulation pertaining to "DIC Offset" that provides that
"[p]ayment of the SBP annuity is not withheld or delayed pending verification of the DIC award if
the annuitant signs a statement authorizing the VA to collect any overpayment that results from the
overlap of the DIC and SBP payments." DoD Financial Management Regulation, vol. 7B, ch. 46,
para. 460402 (July 2011) (quoted in Secretary's Aug. 12, 2014, Resp. at 5 n.1.). The DoD regulation
also contains a provision that allows the liquidation of a debt by utilizing one of three methods,
including "[t]he annuitant authorizing the VA to reduce DIC and remit the amount collected to the
DFAS-Cleveland site." Id. at para. 460701. Accordingly, the regulation appears to contemplate
written authorization from the SBP annuitant before there is a reduction in DIC to satisfy an SBP
annuity overpayment. The record before the Court, however, does not contain any documents
reflecting whether the appellant signed "a statement authorizing the VA to collect any overpayment
that results from the overlap of the DIC and SBP payments" or "authorizing VA to reduce DIC and
remit the amount collected to DFAS."
In pursuing the matters on remand, the appellant is free to submit additional evidence and
argument on the remanded matters, and the Board is required to consider any such relevant evidence
and argument. See Kay v. Principi, 16 Vet. App. 529, 534 (2002) (stating that, on remand, the Board
must consider additional evidence and argument in assessing entitlement to benefit sought);
Kutscherousky v. West, 12 Vet. App. 369, 372-73 (1999) (per curiam order). "A remand is meant to
entail a critical examination of the justification for the decision. The Court expects that the [Board]
will reexamine the evidence of record, seek any other evidence the Board feels is necessary, and
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issue a timely, well-supported decision in this case." Fletcher v. Derwinski, 1 Vet. App. 394, 397
(1991). The Board must proceed expeditiously, in accordance with 38 U.S.C. § 7112 (requiring the
Secretary to provide for "expeditious treatment" of claims remanded by the Court). If the appellant
believes that the Secretary is not adjudicating the matter expeditiously, she should request that the
Secretary adjudicate it; if the Secretary refuses, she can seek relief from this Court. See Dicarlo v.
Nicholson, 20 Vet. App. 52, 56-57 (2006).
III. CONCLUSION
Upon consideration of the foregoing analysis, the record on appeal, and the parties' pleadings,
the December 28, 2012, Board decision is VACATED, and the matter of the validity of the offset
of the appellant's annuity benefits under the SBP against her retroactive payment of DIC is
REMANDED for further adjudication consistent with this opinion.
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