Angel Vazquez-Flores v. Eric K. Shinseki

UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS
NO. 05-0355(E)
ANGEL VAZQUEZ-FLORES, APPELLANT,
V.
ERIC K. SHINSEKI,
SECRETARY OF VETERANS AFFAIRS, APPELLEE.
On Appeal from the Board of Veterans' Appeals
(Argued May 9, 2012 Decided July 31, 2012)
Kathy Lieberman, of Washington, D.C., for the appellant.
Debra L. Bernal, with whom Will A. Gunn, General Counsel; R. Randall Campbell, Assistant
General Counsel; and Carolyn F. Washington, Deputy Assistant General Counsel, were on the brief,
all from Washington, D.C., for the appellee.
Before KASOLD, Chief Judge, and HAGEL and GREENE, Judges.
KASOLD, Chief Judge: Veteran Angel Vazquez-Flores applies through counsel pursuant
to the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412(d), for an award of attorney fees and
expenses in the amount of $29,560.92 for 179.4 hours of attorney work and $865.40 in expenses.
The Secretary challenges Mr. Vazquez-Flores's EAJA application in part asserting substantial
justification and, alternatively, unreasonable fees. Single-judge disposition was rendered in a
December 16, 2011, memorandum decision; however, reconsideration was granted at Mr. Vazquez-
Flores's request, and this matter was assigned for panel decision. The panel heard oral argument on
May 9, 2012. The December 16 memorandum decision will be withdrawn and this decision issued
in its stead. For the reasons set forth below, Mr. Vazquez-Flores's EAJA application will be granted
in part.
I. FACTUAL AND PROCEDURAL HISTORY PRIOR TO EAJA APPLICATION
Mr. Vazquez-Flores appealed a February 1, 2005, Board of Veterans' Appeals (Board)
decision that denied benefits for his neuropsychiatric disorder, including as secondary to a service-
connected renal disability, because it was not service connected, and denied an increased disability
rating for his service-connected nephrolithiasis, including an extraschedular rating. On appeal, Mr.
Vazquez-Flores argued that the Board (1) provided an inadequate statement of reasons or bases with
regard to his claim for benefits for his neuropsychiatric disorder, (2) erred in finding that he was
adequately notified how to substantiate his claim for an increased disability rating for his
nephrolithiasis, and (3) provided an inadequate statement of reasons or bases with regard to its denial
of an increased disability rating, including an extraschedular rating, for his nephrolithiasis.
On January 30, 2008, the Court held that the Board (1) provided an inadequate statement of
reasons or bases for its decision with regard to Mr. Vazquez-Flores's claim for benefits for
neuropsychiatric disorder, and (2) clearly erred in finding that the Secretary had provided adequate
notice with regard to Mr. Vazquez-Flores's claim for an increased disability rating for his
nephrolithiasis because the notice lacked specificity tied to the requirements for a higher rating as
reflected in the assigned diagnostic code. Vazquez-Flores v. Peake, 22 Vet.App. 37 (2008). The
Board decision was set aside and the matters remanded for further adjudication. Id. The Court did
not address Mr. Vazquez-Flores's argument that the Board provided an inadequate statement of
reasons or bases with regard to its denial of an increased disability rating, including an
extraschedular rating, for his nephrolithiasis.
The Secretary appealed that part of the Court's decision that held that the Board clearly erred
in finding that the Secretary had provided adequate notice with regard to Mr. Vazquez-Flores's claim
for an increased disability rating for nephrolithiasis. On appeal, the U.S. Court of Appeals for the
Federal Circuit (Federal Circuit) determined that specific notice how to substantiate an increased
disability rating claim was not required – i.e., only general notice how to substantiate the claim was
required – and remanded the matter for further review. Vazquez-Flores v. Shinseki, 580 F.3d 1270(Fed. Cir. 2009).
On remand, the Court clarified that its January 30, 2008, decision with regard to Mr.
Vazquez-Flores's claim for benefits for a neuropsychiatric disorder was not appealed by the Secretary
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and remained the decision of the Court on that matter. Vazquez-Flores v. Shinseki, 24 Vet.App. 94(2010). Applying the Federal Circuit's decision that the Secretary is required to provide only general
notice how to substantiate an increased disability rating claim, the Court found that the Secretary's
notice was incomplete. However, the Court also found that the notice error was harmless and
affirmed that part of the Board decision that denied an increased schedular rating for Mr. Vazquez-
Flores's neuropsychiatric disorder.
Although Mr. Vazquez-Flores argued in his initial brief that the Board provided an
inadequate statement of reasons or bases with regard to its denial of an increased disability rating,
including an extraschedular rating, for his nephrolithiasis, the Court did not address this issue in its
January 2008 decision. Moreover, this issue was not again briefed after remand from the Federal
Circuit and the Court again did not address this part of Mr. Vazquez-Flores's initial argument in its
final decision on the merits. Rather, the Court sua sponte noted that possible entitlement to an
extraschedular rating for nephrolithiasis was inextricably intertwined with the claim for benefits for
both disabilities. Thus, in light of the Court's remand of his claim for benefits for a neuropsychiatric
disorder, the Court also remanded the issue of Mr. Vazquez-Flores's possible entitlement to an
extraschedular rating for his nephrolithiasis. The Court also sua sponte found that the Board failed
to address entitlement to total disability based on individual unemployability (TDIU), which had not
been argued by Mr. Vazquez-Flores but reasonably had been raised by the record, and remanded this
matter for further adjudication. Id.II. PARTIES' ARGUMENTS WITH REGARD TO THE EAJA APPLICATION
Mr. Vazquez-Flores argues that he is entitled to EAJA fees and expenses for all the time
reasonably spent on the case. He argues that he was a prevailing party because he prevailed before
the Court on his claim for benefits for his neuropsychiatric disorder. Moreover, he argues that when
the Court set aside part of the Board decision and remanded the matters on appeal, the legal
relationship of the parties was changed, making him a prevailing party. Additionally, he argues that
all his arguments before the Court and Federal Circuit were reasonable and deserving of attorney fees
and expenses, even though his arguments related to his claim for increased benefits for
nephrolithiasis were not the basis for a remand of that matter.
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The Secretary agrees that Mr. Vazquez-Flores is a prevailing party, and does not contest the
EAJA application with regard to fees and expenses related to the claim for benefits for a
neuropsychiatric disorder. Although the Secretary initially argued that he was substantially justified
with regard to the claim for increased benefits for nephrolithiasis and incorporated that argument in
a supplemental memorandum of law, his overall position is that Mr. Vazquez-Flores's success (or
lack of success) in his arguments should be a significant consideration when assessing the
reasonableness of his EAJA application. More specifically, the Secretary argues that none of Mr.
Vazquez-Flores's arguments related to his claim for benefits for nephrolithiasis should be awarded
EAJA fees because none of his arguments were the basis for remand.
In response to a request for supplemental briefing, both parties argued that the "special
circumstances" exception for denying an EAJA application requires some degree of fraud or bad
faith on the part of the applicant, which each party also argued was not present in this case.
Additionally, prior to oral argument, the Secretary asked the Court to take judicial notice of an
alternative position taken in another case pending before the Court in which the Secretary argued that
the Court should extend the special circumstances exception to include situations where appellant's
success on the claim was independent of counsel's arguments. He did not, however, change his
argument in this case. Accordingly, other than to grant the Secretary's motion to take judicial notice
of an alternative position on the issue, the special circumstance exception will not be further
discussed.
III. DISCUSSION
A. Whether a Party is a Prevailing Party is a Threshold Determination.
EAJA fees may be awarded only when the applicant is a prevailing party. See 28 U.S.C. §
2412(d)(1)(A), (1)(B), (2)(B); Scarborough v. Principi, 541 U.S. 401, 407-08 (2004); Owens v.
Brown, 10 Vet.App. 65, 66 (1997). Prevailing party status is a threshold determination that bars any
and all EAJA awards if not met. See Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). An appellant
is considered a prevailing party upon either "(1) the ultimate receipt of a benefit that was sought in
bringing the litigation, i.e., the award of a benefit, or (2) a court remand predicated upon
administrative error." Zuberi v. Nicholson, 19 Vet.App. 541, 544 (2006); but see Buckhannon Bd.
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& Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598 (2001) ("catalyst theory"
– which pertains to a situation in which a defendant voluntarily acts in response to the litigation that
achieves the result sought by the plaintiff – is not basis for prevailing party status); Akers v.
Nicholson, 409 F.3d 1356, 1360 (Fed. Cir. 2005) (holding that a remand due to an intervening Court
decision did not render the appellant a prevailing party for EAJA purposes).
To be a prevailing party and to be brought across the threshold and be entitled to "reasonable"
attorney fees and expenses, the appellant need only prevail "on any significant issue in litigation
which achieves some of the benefit the parties sought in bringing suit". Hensley, 461 U.S. at 433(stating that prevailing party status is a "generous formulation that brings the plaintiff only across
the statutory threshold"); Sumner v. Principi, 15 Vet.App. 256, 261 (2001) (en banc)("[I]n order to
attain prevailing-party status, a party is required to receive at least some relief on the merits of his
claim." (internal quotation marks omitted)). Thus, it is well settled that an appellant is considered
a "prevailing party" (1) when he prevails on a claim as a result of administrative error, but does not
prevail on unrelated claims within the same suit, see Hensley, 461 U.S. at 434, or (2) even when an
appellant's success in the suit was not related to the work of his attorney or not proportional to the
total number of attorney work hours expended, id. Otherwise stated, even when only a part of a
Board decision is remanded based on administrative error, an appellant meets the threshold
requirement for an EAJA award.
Here, Mr. Vazquez-Flores was a prevailing party in his appeal because the decision of the
Board was set aside and the matters on appeal remanded for further adjudication predicated, in part,
on administrative error. See Sumner, 15 Vet.App. at 261 (citing Buckhannon, 532 U.S. at 603 (a
"remand does not constitute some relief on the merits' unless that remand is predicated upon
administrative error")); see also Hensley, supra. Specifically, his claim for benefits for a
neuropsychiatric disorder was remanded because the Board provided an inadequate statement of
reasons or bases. Similarly, his claim for benefits for nephrolithiasis was remanded, in part, based
on the failure of the Board to address possible entitlement to TDIU.
B. Substantial Justification Depends on the Totality of Circumstances.
Once an EAJA applicant alleges that the Secretary's position was not substantially justified,
the burden shifts to the Secretary to demonstrate that his position was substantially justified at the
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administrative and litigation stages. See Pierce v. Underwood, 487 U.S. 552, 565 (1988) ("[A]
position can be justified even though it is not correct, and . . . it can be substantially (i.e., for the most
part) justified if a reasonable person could think it correct, that is, if it has a reasonable basis in law
and fact.); Locher v. Brown, 9 Vet.App. 535, 537 (1996); Stillwell v. Brown, 6 Vet.App. 291, 301
(1994) (the Secretary's position is substantially justified "'if a reasonable person could think it
correct, that is, if it has a reasonable basis in law and fact'" (quoting Pierce v. Underwood, 487 U.S.
552, 566 n.2 (1988))). Substantial justification is based on the totality of circumstances, which
includes consideration of, inter alia, "merits, conduct, reasons given, and consistency with judicial
precedent and VA policy with respect to such position, and action or failure to act, as reflected in the
record on appeal and the filings of the parties before the Court." White v. Nicholson, 412 F.3d 1314,
1317 (Fed. Cir. 2005) ("The totality of circumstances, by its very description, does not exclude any
valid issue from consideration.").
The Secretary does not assert substantial justification with regard to Mr. Vazquez-Flores's
claim for benefits for neuropsychiatric disorder. And, to the extent he maintains that he was
substantially justified with regard to the increased rating claim for nephrolithiasis, that argument
fails. To be sure, the Secretary succeeded in demonstrating that inadequate notice was not
prejudicial such that he prevailed in his litigation position on that issue. Similarly, the Court's
remand of possible entitlement to an extraschedular rating associated with Mr. Vazquez-Flores's
service-connected nephrolithiasis was due to the fact it was inextricably intertwined with
readjudication of possible entitlement to benefits for a neuropsychiatric disorder, as opposed to
administrative or litigation error, or lack of substantial justification at either the administrative or
litigation stages.
Nevertheless, the Court sua sponte noted that the record reasonably raised the issue whether
Mr. Vazquez-Flores's nephrolithiasis rendered him unemployable and whether he was entitled to
TDIU, and further noted that the Board failed to address these issues, warranting remand. Vazquez-
Flores v. Shinseki, 24 Vet.App. 94 (2010); see also Roberson v. Principi, 251 F.3d 1378 (Fed. Cir.
2001) (Secretary must consider TDIU when a veteran makes a claim for the highest rating possible
and submits evidence of a medical disability and of unemployment); Carpenter v. West, 11 Vet.App.
140, 146-47 (1998) (Board must review all issues reasonably raised by liberal reading of appeal).
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Thus, remand of Mr. Vazquez-Flores's claim for increased benefits for nephrolithiasis was
predicated, at least in part, on administrative error, defeating the Secretary's contention that he was
substantially justified at the administrative stage. See Stillwell, supra.
C. Reasonableness is Based in Part on Success of the Arguments Presented.
It is well settled that only reasonable fees and expenses may be awarded under EAJA,
28 U.S.C. § 2412(d); Ussery v. Brown, 10 Vet.App. 51, 53 (1997) ("Once it is determined that a
claimant is entitled to an EAJA award, the Court still must determine what is a 'reasonable' fee."),
and that an applicant has the burden of demonstrating the reasonableness of his request for an EAJA
award, Blum v. Stenson, 465 U.S. 886, 897 (1984). Although "[t]he Court [generally] has wide
discretion in the award of attorney fees under the EAJA," Chesser v. West, 11 Vet.App. 497, 501
(1998), there are limitations. For example, when an appellant is successful on one claim as a result
of administrative error, but not successful as to other, distinct claims involved in the same litigation,
work spent solely on the unsuccessful claims is not entitled to an EAJA award. Hensley, 461 U.S.
at 434-35. Similarly, in addition to general reasonableness of the hours spent, there are specific
factors for consideration when assessing the reasonableness of an EAJA award. See id. at 430 n.3
(listing factors); McDonald v. Nicholson, 21 Vet.App. 257, 263-64 (2007) (persuasive argument of
Secretary); Ussery, 10 Vet.App. at 53 (listing of factors). Moreover, even though an appellant is a
prevailing party and has presented arguments that are "interrelated, nonfrivolous, and raised in good
faith," it may "say little about whether the expenditure of counsel's time was reasonable in relation
to the success achieved." Id. at 436.
1. Reasonableness of Hours Billed on a Claim for Benefits for a Neuropsychiatric Disorder
Mr. Vazquez-Flores's briefing and argument with regard to his claim for benefits for
neuropsychiatric disorder were helpful, persuasive, and successful in demonstrating administrative
error below that warranted remand. Therefore, the Court will award reasonable attorney fees and
expenses directly incurred in his appeal of the Board's denial of benefits for a neuropsychiatric
disorder. See Blum, supra.
2. Reasonableness of Hours Billed on a Claim for Increased Benefits for Nephrolithiasis
In regard to his increased rating claim for nephrolithiasis, Mr. Vazquez-Flores originally
argued that the Board (1) erred by finding that he was adequately notified how to substantiate his
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claim for an increased disability rating, and (2) provided an inadequate statement of reasons or bases
with regard to its denial of an increased disability rating, including an extraschedular rating. In its
January 2008 decision, the Court did not discuss Mr. Vazquez-Flores's reasons-or-bases argument,
and remanded his increased rating claim because of insufficient notice. Upon clarification by the
Federal Circuit as to the scope of notice the Secretary is required to provide, the Court determined
that the Board erred in finding the Secretary's notice adequate, but it further found that the error was
not prejudicial. However, the Court remanded the Board's denial of an increased rating for
nephrolithiasis because it found that entitlement to an extraschedular rating was inextricably
intertwined with the remand of the claim for benefits for neuropsychiatric disorder. The Court also
sua sponte found that the Board failed to address entitlement to total disability based on individual
unemployability (TDIU), which reasonably was not raised by Mr. Vazquez-Flores but had been raised
by the record, and remanded this matter for further adjudication.
Although Mr. Vazquez-Flores originally asserted a reasons-or-bases error in the Board's
denial of an increased schedular disability rating, including an extraschedular rating, for his
nephrolithiasis, this argument was not addressed in any of the judicial decisions on this case. With
regard to the Board's statement in support of its denial of an increased schedular disability rating for
nephrolithiasis, it is presumed that the Board's decision facilitated judicial review and otherwise was
adequate with regard to that matter. See Maggitt v. West, 202 F.3d 1370 at 1380-81 (Fed. Cir. 2000)
(in context of affirming Board decision on an issue, noting that argument not addressed is presumed
considered and rejected); Allday v. Brown, 7 Vet.App. 517, 527 (1995) (Board's statement "must be
adequate to enable a claimant to understand the precise basis for the Board's decision, as well as to
facilitate review in this Court").
However, because the Court sua sponte noted that the matter of entitlement to an
extraschedular rating was inextricably intertwined with the remand of the claim for benefits for a
neuropsychiatric disorder and remanded the matter on that basis, no determination – presumptive or
otherwise – was rendered with regard to the Board's statement regarding an extraschedular rating.
What is clear, is that the Court did not rely on Mr. Vazquez-Flores's argument that the Board's
statement on this issue was inadequate, and never found, implicitly or explicitly, that the Board
inadequately addressed this issue. Similarly, although the Court remanded the matter of entitlement
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to TDIU based on administrative error, such error was found sua sponte by the Court. In effect,
remand of Mr. Vazquez-Flores's claim for benefits for nephrolithiasis is due solely to the intervening
decisions of the Court with regard to error and inextricable intertwining, which intervening decisions
– but for the fact Mr. Vazquez-Flores prevailed on his arguments with regard to his claim for benefits
for neuropsychiatric disorder, and therefore the litigation as a whole – would not warrant prevailing
party status or an EAJA award. Cf. Akers, 409 F.3d at 1360 (holding that a remand due to an
intervening Court decision did not render the appellant a prevailing party for EAJA purposes); see
also McCormick v. Principi, 16 Vet.App. 407, 411 (2002) (noting that the Court should not "revisit
at the EAJA stage the logic of the merits decision").
Under such circumstances, where the arguments presented by Mr. Vazquez-Flores with regard
to his claim for benefits for nephrolithiasis were either rejected or otherwise not the basis for remand,
and where the Court did not find administrative error with regard to this claim based on any of Mr.
Vazquez-Flores's arguments, we do not find an EAJA award for the arguments presented to be
reasonable. Hensley, McCormick, and Chesser, all supra.
D. Calculation of Hours and Expenses Spent on Each Claim on Appeal
On behalf of his primary attorney, Ms. Kathy Lieberman, Mr. Vazquez-Flores requests
$20,434.81 in EAJA fees for 130.1 hours spent on the case and $307.33 for expenses. Ms. Lieberman
billed 6.7 hours for work on the claim for benefits for a neuropsychiatric disorder. Both the hours and
expenses claimed are reasonable on their face and will be awarded. Another 40.1 hours were spent
on research, drafting, and preparing for the oral argument, but it is not clear what part of the effort
applied to Mr. Vazquez-Flores's argument related to his claim for benefits for a neuropsychiatic
disorder and what part applied to the argument related to his claim for benefits for nephrolithiasis.
The time billed will be apportioned equally, and 20.1 hours will be awarded. See Elcyzyn v. Brown,
7 Vet.App. 170, 177-78 (1994) (apportioning hours spent on argument and preparation thereof); see
also Blum and Chesser, both supra.
Ms. Lieberman also billed 30.2 hours for general case management. This time does not appear
unreasonable on its face, and the full time billed for this work will be awarded. See Elcyzyn, supra
(actions such as reviewing the record, interviewing the client and undertaking procedural tasks are
"inextricably linked to the preparation of the entire case and there is no basis for an equitable
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apportionment"). Overall, 57 hours will be awarded for the time that can be attributed to work spent
on the arguments related to general case management and the claim for benefits for nephrolithiasis.
Additionally, Ms. Lieberman billed $307.33 in expenses, but failed to delineate the amount of
expenses related to Mr. Vazquez-Flores's unsuccessful argument to the Federal Circuit and the
amount of expenses charged following his appeal to the Federal Circuit. Consequently, half of the
requested expenses will be awarded: $153.66.
On behalf of his second attorney, Richard James, Mr. Vazquez-Flores requests $8,260.71 in
EAJA fees for 49.3 hours spent on the case and $558.07 for expenses. However, Mr. James's entire
billing is for work on the matter appealed to the Federal Circuit and for which the arguments were
not successful. Consequently, no EAJA compensation shall be awarded. See Hensley and Blum, both
supra.
IV. CONCLUSION
Upon consideration of the foregoing, the Secretary's motion for judicial notice is granted and
the appellant's EAJA application is GRANTED IN PART in the amount of $9,106.65 for 57 hours
of attorney work and $153.66 in expenses.
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