Peake v. Sanders (07-1209)
Oral argument: Dec. 8, 2008
Appealed from: United States Court of Appeals, Federal Circuit (May 16, 2007)
ADMINISTRATIVE LAW, DEPARTMENT OF VETERANS AFFAIRS, BURDEN OF PROOF, NOTICE, VETERANS CLAIMS ASSISTANCE ACT OF 2000
Woodrow Sanders and Patricia Simmons are U.S. military veterans who did not receive notice regarding who was responsible for obtaining evidence for their disability claims as is required by the Veterans Claims Assistance Act of 2000. At issue in this consolidated case is whether the Department of Veterans Affairs (“VA”) presumptively bears the burden of proving that a notice error in such benefits claims was harmless. The veterans argue that the language of 38 U.S.C. § 7261(b)(2) and the pro-claimant structure of the veterans benefits system create a presumptive burden on the VA. The VA argues that the Supreme Court should interpret the statute according to the prejudicial error rule of the Administrative Procedure Act, 5 U.S.C. § 706; this interpretation would require a claimant to prove that a VA notice error actually harmed the outcome of his or her claim. A Supreme Court ruling in favor of the veterans would bolster the pro-claimant system, making it easier for veterans to successfully bring claims. A decision for the veterans, however, could slow down the processing of deserving claims because the VA would have to defend its denial of claims where there was a notice error, but where the claimant did not suffer any harm from the error.
The Veterans Claims Assistance Act of 2000 (VCAA), Pub. L. No. 106-475, 114 Stat. 2096, requires the Department of Veterans Affairs (VA) to provide a notice to benefits claimants. Under 38 U.S.C. 7261(b)(2) (Supp. V 2005), review of administrative decisions resolving claims for veterans benefits must “take due account of the rule of prejudicial error.” The question presented is: Whether the court of appeals erred in holding that a failure of the VA to give the notice required by the VCAA must be presumed to be prejudicial.
Is a failure to give required notice to a veteran claiming disability benefits presumptively prejudicial?
This case involves two consolidated decisions issued by the Federal Circuit Court of Appeals, which has exclusive jurisdiction over appeals of the decision of the U.S. Court of Appeals for Veterans Claims. See 38 U.S.C. § 7292(c).Both cases center on the notice requirements imposed by the Veterans Claims Assistance Act of 2000 (“VCAA”) and who bears the burden of proving “prejudice” when the Department of Veterans Affairs (“VA”) fails to give proper notice to veteran claimants. If prejudice is proven on appeal, a veteran’s claim may be re-adjudicated by the VA. See id.
The first case involves Woodrow F. Sanders who served in the Army from 1942 to 1945. See Sanders v. Nicholson, 487 F.3d 881, 882 (Fed. Cir. 2007). Sanders sought service related disability benefits for injuries he claims he sustained when a bazooka exploded near his face in 1944. See id. at 883. In 1948, Sanders received a diagnosis of “chronic, right-eye choroidoretinitis” but the VA Regional Office (“VARO”) denied his benefits claim after finding no connection between the condition and his service. Id. Approximately forty years later, Sanders resubmitted his claim with the support of two additional medical exams and eventually was permitted to reopen his claim. See id. Following two more medical examinations by VA optometrists in 2000 and 2001, the VARO sent a letter to Sanders telling him it had all the information necessary to decide his claim, but that he could give it any other information he wanted considered. See id. at 884. The Board of Veterans’ Appeals (“Board”) denied Sanders’ claim, and he appealed to the United States Court of Appeals for Veterans Claims (“Veterans Court”). See id. On appeal, Sanders claimed that the VA did not provide the notice required by the VCAA because it did not tell him who was responsible for obtaining the evidence needed to support his claim and did not provide this notice before it denied his claim. See id. The Veterans Court held that Sanders was required to show that the VA’s failure to adhere to the notice requirements “prejudiced” (damaged) his claim. See id. The court found that he did not do so, and upheld the Board’s decision. See id. Sanders appealed this decision to the Federal Circuit, which held that notice errors were presumptively prejudicial and therefore that the Veterans Court improperly placed the burden of proving prejudice on the veteran. See id. at 891.
Patricia Simmons served in the Navy from 1978 to 1980. Simmons v. Nicholson, 487 F.3d 892, 893 (Fed. Cir. 2007). In 1980, Simmons filed a claim for right-ear hearing loss but the claim was denied because the degree of her hearing loss “did not warrant compensation under the applicable rating schedule.” Id. In 1998, Simmons sought to reopen her claim and add a claim for left-ear hearing loss, but the VARO denied the claim. See id. On appeal, the Board remanded her claim, partially because the VARO had not complied with the notice requirements of the VCAA. See id. Accordingly, after the remand, the VARO sent Simmons a notice letter in an attempt to comply with the VCAA. See id. The VARO then denied her claim, and this time the Board affirmed. See id.Simmons appealed to the Veterans Court alleging that the VA had failed to meet the notice requirements because the letter “failed to identify (1) the information or evidence needed to substantiate her claim for an increased rating, (2) which portion of the information and evidence, if any, was to be provided by Ms. Simmons, and (3) which portion, if any, the Secretary would attempt to obtain on her behalf.” Id. at 894. The Veterans Court agreed, finding that the notice should have told Simmons what information she needed to submit to support an increase in her disability rating. See id. Instead, the notice letter incorrectly told her that the VA already had all the information needed to prove her injury was service related. See id. The Veterans Court found that for this particular type of notice error, the VA bore the burden of demonstrating that the defective notice was not prejudicial. See id. The Secretary of the VA, James Peake, appealed the Veterans Court’s decision to the Federal Circuit. See id. The Federal Circuit upheld the ruling, deferring to its reasoning in Sanders that all notice errors are presumptively prejudicial. See id. at 896.
Peake appealed both Sanders and Simmons to the Supreme Court, which granted certiorari and consolidated the two cases for argument. See Peake v. Sanders, No. 07-1209 (U.S. 2008).
The Department of Veterans Affairs (“VA”) is an independent administrative agency. Brief of Amicus Curiae American Legion, Military Order of the Purple Heart, and National Veterans Legal Services Program (“American Legion”) in Support of Respondent at 14. Congress enacted the Veterans Claims Assistance Act of 2000 (“VCAA”) to provide guidelines for the VA to follow in fulfilling its duty to help veterans develop their benefits claims. Sanders v. Nicholson, 487 F.3d 881, 885 (Fed. Cir. 2007). The notice requirements of the VCAA obligate the VA to notify a veteran of what evidence is needed to substantiate his or her claim, who is responsible for gathering that information, and that the veteran may submit any evidence that applies to the claim. Sanders, 487 F.3d at 885 (citing 38 U.S.C. § 5103(a)); 38 C.F.R. § 3.159(b)(1). This case involves the determination of who bears the legal burden of proving to a court that the VA’s failure to provide proper notice under the prejudicial error provision of the VCAA, 38 U.S.C. § 7261(b)(2), prejudiced the veteran claimant. See Peake v. Sanders, No. 07-1209 (U.S. 2008).
If the VA denies a veteran’s claim for disability benefits stemming from their service in the armed forces, the veteran may appeal his or her claim through the VA’s agency hierarchy: the VA regional office (“VARO”), the Board of Veterans’ Appeals (“Board”), and finally the United States Court of Appeals for Veterans Claims (“Veterans Court”), an Article I court with jurisdiction over VA agency decisions. Once this process has been exhausted, the veteran may appeal to the United States Court of Appeals for the Federal Circuit (“Federal Circuit”).
According to the VA, this framework is important because the multiple levels of administrative review provide procedural safeguards that make it “unlikely that a notice error will truly cause prejudice to a claimant.” See Brief for Petitioner, James Peake, Secretary of Veterans Affairs at 31. The VA points out that it assists veterans with developing their claims throughout the process; for example, it gathers veterans’ medical records, and requests additional medical exams where necessary. See id. at 32–33. Similarly, over the course of a claim review and appeal, a veteran receives numerous statements from the VA outlining the reasons for the denial. See id. at 33–34. The VA also notes that in many cases, the veteran will simply have no additional information to submit, irrespective of what notice he receives. See id. at 30.A rule presuming prejudice may lead to cases being needlessly remanded, which in turn may backlog the VA system. See id. at 30. Currently, the VA receives in over 800,000 applications for benefits every year. See id. at 36-37. The VA believes that if more cases are remanded, the benefit administration process will further slow and deserving veterans will have to wait longer to receive their benefits. Id.
The Federal Circuit Bar Association (“Bar Association”) argues that placing the burden on the VA will better serve Congress’ desire to create an efficient, veteran-friendly system. Brief of Amicus Curiae Federal Circuit Bar Association in Support of Respondent at 21. Placing the burden on the VA will give it incentive to strictly follow the notice provision and ensure that it fully develops a veteran’s claim early in the proceedings and make it less likely that the VA will have to repeat the proceedings. See id. at 30. Because notice errors are, by definition, the fault of the VA, the Bar Association contends that not finding such an error prejudicial would allow the VA to benefit from its violation of the law. See id. at 15. Efficiency becomes increasingly important because veterans’ claims for disability benefits continue to rise at substantial rates. See Brief of Amicus Curiae American Legion in Support of Respondent at 3. What is more, the statistics show that error rates are already high in benefits claims, and that many of these errors could be corrected at an earlier point in the benefits process. See id. at 8 (noting that the Board remanded 77% of cases on appeal in the past twelve years).
The Bar Association also argues that placing the burden to demonstrate prejudice on the veteran could divert benefit money from the veteran to his or her attorney. See Brief of Federal Circuit Bar Association at 21–22. It contends that because “prejudice” is a legal term of art, proof of which requires understanding of legal standards not easily understood by many people, it may force veterans to hire attorneys to establish prejudice before the adjudicating body. See id. Veterans who are “physically or financially [unable] to secure the services of an attorney to overcome the burden . . . [may] forfeit their claims.” Id. at 25.
The Veterans Claims Assistance Act of 2000 (“VCAA”) requires the Department of Veterans Affairs (“VA”) to assist veterans in developing their disability benefits claims. 38 U.S.C. § 5103(a). The VA’s responsibilities under the VCAA include notifying claimants of what evidence is missing from their claims and who is responsible for obtaining that evidence. Id. The Veterans Court, in reviewing benefits claims decisions made by the Board of Veterans’ Appeals, must “take due account of the rule of prejudicial error,” as required by 38 U.S.C. § 7261(b)(2). At issue in this case is which party bears the burden of proving that a notice error was or was not harmful to a veteran’s claim. The two parties primarily disagree over whether courts should interpret § 7261(b)(2) the same way as a similarly-worded provision in the Administrative Procedure Act, which would place the burden of proving prejudice on the veteran claimant, or whether a court should presumptively assume that a notice error was prejudicial unless the VA proves that the error did not harm a claim.
Should courts interpret the prejudicial error provision in § 7261(b)(2) the same way they interpret the prejudicial error provision in the Administrative Procedure Act?
The Petitioner Department of Veterans Affairs (“VA”) argues that the prejudicial error provision in 38 U.S.C. § 7261(b)(2) is materially identical to the prejudicial error provision in the Administrative Procedure Act (“APA”), 5 U.S.C. § 706, and therefore, the APA’s rule should apply to § 7261(b)(2). See Brief for Petitioner, James Peake, Secretary of Veterans Affairs at 11. The VA argues that because the language in the two statutes is so similar, Congress intended § 7261 appeals to follow the pre-existing judicial interpretations of the APA prejudicial error provision. See id. at 11–12. According to the VA, circuit courts of appeals other than the United States Court of Appeals for the Federal Circuit have uniformly interpreted the APA prejudicial error provision as requiring the party seeking to overturn an administrative agency’s decision to prove that the agency erred and that its error was prejudicial. See id. at 14, 15–18. The VA believes this interpretation is correct, especially in light of the legislative history of § 7261(b)(2), which points to the APA’s prejudicial error rule as the rule that Congress intended to implement in § 7261(b)(2). See id. at 13–14 The VA acknowledges that the Federal Circuit is the only circuit court of appeals that has jurisdiction to review Veterans Court decisions, but argues that this exclusive jurisdiction does not allow the Federal Circuit to single out the VA by denying it the same standard of review that applies to other federal agencies under the APA. See id. at 18.
Respondent Patricia Simmons rejects the VA’s argument—that the APA prejudicial error provision governs and consequently, the burden of proving that a notice error harmed a veteran’s claim always rests on the veteran—for two reasons. See Brief for Respondent, Patricia Simmons at 38–39. First, Simmons argues that given the distinct statutory contexts of the Veterans Judicial Review Act (“VJRA”) and the APA, courts do not necessarily need to interpret the two prejudicial error rules the same way. See id. at 39. Simmons points out that if Congress wished to guarantee a consistent interpretation of the two prejudicial error rules, it could have directly cross-referenced the VJRA to the APA provision. See id. at 39–40. Second, Simmons argues that the VA incorrectly assumes which party has the burden of showing prejudice under the APA rule because the Supreme Court has never ruled on who bears the burden of proof under the APA prejudicial error provision. See id. at 41. Simmons contends that the circuit courts of appeals have not uniformly applied the burden standard that the VA supports, and that some courts of appeals have applied a standard that shifts the burden of proof between the plaintiff and agency according to context, and which sometimes places the burden on the agency to show that its error was harmless. See id. at 41–47.
However, the VA insists that the Federal Circuit incorrectly created a separate prejudicial error rule applicable only to VA proceedings. See Brief for Petitioner at 18. The VA argues that, contrary to the Federal Circuit’s reasoning, the VCAA did not amend § 7261(b)(2); it merely codified the VA’s existing notice requirements intended to aid veteran claimants. See id. at 19–20. According to the VA, the VCAA was enacted simply to overturn a Veterans Court decision, Morton v. West, which reduced VA requirements to aid claimants. See id. at 20–21.
Respondent Woodrow Sanders argues that the original federal harmless error rule controls the interpretation of both § 7261(b)(2) and the APA statute. See Brief for Respondent, Woodrow Sanders at 15. According to Sanders, the Supreme Court’s original harmless error rule was codified as 28 U.S.C. § 391 (now 28 U.S.C. § 2111) and was the controlling rule that existed when Congress enacted the APA prejudicial error rule and § 7261(b)(2). See id. at 18–32. Sanders traces the common-law and statutory history of the federal harmless error rule to illustrate the progression and continuing applicability of the rule, which Sanders argues places the burden on the agency to show that a non-technical error was harmless. See id. at 15.
Should the pro-claimant nature of the veterans’ benefits system affect who has the burden of proving that a notice error was prejudicial?
Respondents Simmons and Sanders argue that the pro-claimant nature of the veterans benefits system is another reason why the agency should bear the burden of proof when it does not provide notice as required by the VCAA. See Brief for Respondent Simmons at 12–13; Brief for Respondent Sanders at 35–50. Simmons argues that Congress purposefully created the veterans benefits system in a pro-claimant framework, requiring the VA to help veterans in presenting their claims. See Brief for Respondent Simmons at 14–16. Furthermore, Simmons argues, the enactment of the VCAA itself shows Congress’ intent to maintain the veterans benefits system as a pro-claimant program that obligates the VA to ease the process for veterans. See id.at 16–17. Simmons argues that the Supreme Court would undermine the pro-claimant statutory scheme that Congress created if it were to interpret § 7261(b)(2) as requiring a veteran claimant to prove prejudice in the VA’s notice error. See id. at 18–19. Simmons argues that the VCAA notice requirements are a critical element of the veterans benefits program because notice, one of the first elements of a claim, affects the entire benefits process—indeed, much of Congress’ VA assistance requirements “hinge on effective notice.” See id. at 20. Statutory context, Simmons argues, can be a factor in the Court’s decision because § 7261 is ambiguous, and should thus be interpreted in favor of veterans. See id. at 33–34.
The VA insists, however, that § 7261(b)(2) is not ambiguous because the APA provision that Congress “borrowed” for § 7261(b)(2) has a “well-settled meaning.” Reply Brief for Petitioner at 5. In other words, the VA argues that the pro-claimant nature of the veterans benefits system should not influence the Supreme Court’s interpretation of § 7261(b)(2) because its provision is identical to the APA provision, which is not ambiguous. See id. Moreover, the VA argues that placing the burden on claimants is unnecessary because of the multi-layered review process of veterans benefits claims, in which the VA and the claimant have many opportunities to correct any error that might have occurred. See Brief for Petitioner at 10.Instead, presumptively placing the burden of disproving prejudice for notice errors on the VA would slow down the benefits process for deserving veterans. Id.
Did the court of appeals properly compare criminal and habeas corpus cases to the veterans’ proceedings?
The VA contends that the Federal Circuit’s use of two cases, Kotteakos v. United States and O’Neal v. McAninch, was improper because those types of cases—a criminal conspiracy conviction and a habeas corpus proceeding, respectively—dealt with an individual’s loss of liberty, not an “administrative adjudication of an entitlement to monetary benefits,” as did the veterans’ cases.Brief for Petitioner at 27. The VA argues that use of these cases was also improper because the cases relied on a prejudicial error statute with different language than that in § 7261(b)(2). See id. at 28. Furthermore, the VA argues that the Federal Circuit disregarded the procedural differences between judicial review of an agency action and appellate review of a lower court’s decision. See id. at 30. The VA states, for example, that unlike the review procedure at issue in Kotteakos, the non-adversarial veterans claims proceedings provide many opportunities to correct errors that may have occurred in an initial notice. See id. at 30–31. The VA argues that the Federal Circuit disregarded procedures like this, which lower the chances that one error will result in prejudice against a claimant, and make a presumption of prejudice against the VA unwarranted. Id.
The outcome of this case will affect the degree to which veterans can rely on the Department of Veterans Affairs (“VA”) for help in submitting their disabilities benefits claims. The respondent veterans argue that the VA’s pro-claimant benefits system would be undermined by a decision in favor of the VA, while the VA contends that a rule placing the burden on veterans to show prejudice from a VA notice error is consistent with existing law. The VA also argues that a decision in favor of the veterans would unnecessarily burden the claims system; however, the special protections that Congress has created for disabled veterans may warrant a decision in favor of the veterans.
Edited by: Lauren Buechner