Did the Department of Veterans’ Affairs commit a clear and unmistakable error when it denied veteran disability benefits based on the agency’s interpretation of the law at the time, which was found to be erroneous by the agency’s later interpretation?
This case asks the Supreme Court to decide whether an agency commits “clear and unmistakable error” when it denies benefits to a veteran by relying on a binding regulation that is later invalidated. Petitioner Kevin George enlisted in the military when he was seventeen years old and was later medically discharged when he was diagnosed with schizophrenia. George sought benefits for the aggravation of his symptoms but was denied because the Board of Veterans’ Appeals relied on a later-invalidated regulation that incorrectly interpreted the statutory requirements for proving aggravation. After the regulation was invalidated in the early 2000s, George brought a claim for revision of the Board’s decision. The Federal Circuit Court, however, denied George’s claim, concluding that the agency had correctly relied on the law as interpreted at the time of its decision. George claims that an agency commits clear and unmistakable error when relying on later invalidated regulations. Respondent Denis McDonough, the Secretary of Veterans Affairs, counters that agencies do not commit clear and unmistakable error when relying on binding regulations in existence at the time of decision making. This case has important implications for military veterans’ benefits claims and the efficiency of Veterans’ courts.
Questions as Framed for the Court by the Parties
Whether, when the Department of Veterans’ Affairs denies a veteran’s claim for benefits in reliance on an agency interpretation that is later deemed invalid under the plain text of the statutory provisions in effect at the time of the denial, that is the kind of “clear and unmistakable error” that the veteran may invoke to challenge VA’s decision.
The Department of Veterans’ Affairs (“VA”) administers a federal program that provides disability benefits to United States military veterans. See George v. McDonough at 1229. The VA does not give benefits to veterans for disabilities which existed before the veteran’s time in the military except for those noted at the time of the veteran’s examination. See id.; 38 U.S.C. § 1111. However, when a veteran applies for disability benefits from the VA, a federal statute, 38 U.S.C. § 1111, requires that the VA presume a veteran was of sound condition when the veteran entered service. Id. In 1970, the VA issued a regulation interpreting Section 1111 to require the VA to establish by clear and unmistakable evidence that the veteran had a disorder prior to enlistment to rebut that presumption. Id. at 1229–30. The regulation did not require the VA to make any showing as to whether the veteran’s condition was aggravated by the veteran’s time in the service. Id.
Petitioner Kevin George (“George”) enlisted in the United States Marine Corps in June of 1975. Id. at 1230 George suffered a psychotic episode one week after joining. Id. A military medical board diagnosed George with paranoid schizophrenia and discharged him from service. Id. While the medical board determined that George had schizophrenia before entering the service, it also determined that George’s service had aggravated his condition. Id. However, a separate physical evaluation board issued a conflicting opinion, finding George’s service did not aggravate his schizophrenia. Id. George applied for military benefits in December 1975, but the VA denied his claim. Id. After George appealed the denial, the Board of Veterans’ Appeals (“Board”) affirmed the VA’s determination in September 1977. Id. at 1231.
In 2003, the VA invalidated and then subsequently amended its regulation that interpreted Section 1111. Id. at 1230. In addition to requiring a showing that the veteran’s disorder pre-dated enlistment, the VA’s new regulation also required it to establish by clear and unmistakable evidence that the veteran’s service did not aggravate a prior disorder. Id. The VA justified this amendment by asserting that the agency’s initial interpretation conflicted with the plain language of Section 1111. Id. The United States Court of Appeals for the Federal Circuit affirmed the VA’s new interpretation in Wagner v. Principi. Id.
In 2014, George brought a claim formally requesting that the Board revise its 1977 benefits denial, on the grounds that the VA made a clear and unmistakable error (“CUE”) in denying him benefits. George v. McDonough at 1231. George argued that by following the VA’s prior regulation, the Board failed to correctly apply the language of Section 1111 to George’s appeal. Id. However, the Board denied George’s request, and the United States Court of Appeals for Veterans Claims (“Veterans Court”) affirmed the Board’s denial. The Veterans Court noted that CUE does permit collateral attack on Board decisions but held that CUE claims are analyzed from the point of view of the law as it was understood at the time. Id. at 1232. The Veterans Court found George could not establish a CUE claim against the Board because the 1977 Board correctly applied the VA regulation in place at the time. Id.
George then appealed to the Court of Appeals for the Federal Circuit, and the Court consolidated George’s case with a similar case brought by another veteran. Id. at 1233. The Federal Circuit affirmed the Veterans Court, holding that CUE review is restricted to the law applicable at the time of the decision and that the VA’s regulation constituted such law. Id.
PRECEDENT AND THE TEXT AND HISTORY OF THE STATUTE
Petitioner George argues that misinterpreting an unambiguous statute amounts to clear and unmistakable error (“CUE”) under 38 U.S.C. Section 7111 and thus entitles him to revision of the decision denying him benefits. See Brief for Petitioner, Kevin R. George at 21. George contends that both the text and history of 38 U.S.C. Section 7111 support this finding. Id. at 22, 26–27.
George first notes that Section 7111 speaks in terms of the benefits decision itself and not the manner in which it is reached. See id. at 22. George asserts that it is important only that the VA made a CUE, and that it is irrelevant that the CUE was due to an invalid regulation in place at the time. Id. George further argues that regulations calling for incorrect interpretations of statutes are not valid under delegated rulemaking authority and cannot have force of law. Id. at 23. George contends that Respondent McDonough’s position—that the CUE statute does not apply to later-invalidated regulations— is not found within the statute’s text and is “fundamentally unsound.” Id. at 21–22. George further argues that McDonough also impermissibly elevates a regulation to statute-level importance by insulating invalid regulations from reversal under the statute. Id. Indeed, George points to the statutory scheme’s “pro-veteran canon,” an interpretive framework that requires all ambiguities to be resolved in favor of the veteran. See id. at 31. George asserts that reading the statute in light of this canon, the Supreme Court should reject any “exception” to relief for actions taken under later-invalidated regulations. Id. at 32.
George next highlights multiple court decisions pre-dating Section 7111 that support his position that applying invalid regulations is grounds for a CUE finding. See id. at 26–27. To further bolster his argument, George emphasizes that Representative Lane Evans, the chief supporter of the legislation, also suggested that CUE includes decisions made according to invalid regulations. See id. at 27. George concludes that under both a textual reading and in light of legislative history and lower court decisions in similar situations, parties are entitled to a decision revision when CUE occurs pursuant to a regulation that is later invalidated. Id. at 20.
Respondent Denis McDonough, the Secretary of Veterans Affairs, asserts that decision makers cannot commit CUE when they act pursuant to then-binding regulations. See Brief for Respondent, Denis R. McDonough at 21. McDonough further argues that for a decision to be CUE, it must not only misinterpret an unambiguous statute but must also be an unreasonable misinterpretation. See id. at 27.
McDonough first contends that agency members do not commit CUE when they apply a binding regulation that is later invalidated. Id. at 24. McDonough argues that this is because agency members have no choice but to follow binding regulations. Id. McDonough analogizes to Supreme Court decisions which must be followed by lower courts. See id. at 24. McDonough notes that lower court decisions may be invalidated due to later Supreme Court cases overturning precedent, but those lower court decisions do not amount to CUE. Id. McDonough asserts that the same conclusion applies here; the agency decision may be incorrect, but it was not CUE that entitles George to relief. See id.
McDonough also argues that a decision is not CUE just because it misinterprets a statute; the government must also have unreasonably interpreted the law. Id. at 26–27. McDonough points to the Equal Access to Justice Act (“EAJA”) which has a “similar inquiry” and looks to the law as the government reasonably believed it to be at the decision’s time instead of the current law. See id. McDonough asserts that under the EAJA, the court looks to whether the government “was substantially justified” in believing the law to be what the government thought; if so, there is no CUE. Id. McDonough argues that the same reasoning should apply to this statute. Id. at 27–29. McDonough contends that it was not unreasonable for the government to believe that the regulation here was valid at the time it denied George benefits. Id. at 27. Therefore, McDonough concludes that there was no CUE in this case because the decision makers correctly applied the regulation as it was interpreted in 1977. Id.
CHANGE IN LAW AND CHANGE IN INTERPRETATION OF LAW
George argues that he is entitled to a decision revision when there is CUE and no exclusion in the statute’s text for changes in law or changes in interpretation of the law. See Brief for Petitioner at 33. George points out that such exclusionary language was in the preamble to prior regulations, including 38 C.F.R. 3.105, but is not in the text of Section 7111 itself. Id. George asserts that if language appears in a regulation but not in the statute codifying such regulation, the Supreme Court does not read that language into the statute. See id. at 33–34. George contends that legislative history shows that Congress intended to codify only the “general contours” of the preexisting regulation, not the preamble or any exclusion found therein. Id. George thus concludes that based on canons of statutory interpretation as well as the legislative history, there is no exclusion from relief due to changes in law or changes in interpretation of the law. Id.
George next argues that even if an exclusion exists, there has been no change in law or change in interpretation of law here. Id. at 34. George contends that changes in law occur through Congressional changes in statutes or judge-made rules. Id. George asserts that a change in interpretation of law occurs when an agency has one regulation that permissibly interprets a statute and then sets forth a new regulation adopting a new, but still permissible, interpretation of that statute. See id. George contends that in this case, the Federal Circuit judge merely exposed an already-present error within the regulation. Id. at 35. George points to precedent holding that judicial interpretations dictate the law’s actual meaning and do not create or alter existing law. See id. Further, George asserts that judicially found agency errors are not within the “ordinary understanding” of either a change in law or a change in interpretation of law. Id. at 34. George states that nothing in the regulatory history suggests that either the VA or Congress intended judicial corrections of the type here to amount to changes in law or changes in interpretation of law. See id. at 37–38. Thus, George concludes that the invalidation at issue here is neither a change in law nor a change in interpretation of law because such invalidation is not within those phrases’ definitions or understandings. See id. at 34–35.
McDonough counters that the CUE statute does include an exclusion for changes in law or changes in interpretation of the law. See Brief for Respondent at 28–29. McDonough highlights that the regulations for implementing Section 7111—38 C.F.R. 3.105 and 38 C.F.R. 20.1403—define “clear and unmistakable error” and also explain when CUE applies. See id. McDonough states that 38 C.F.R. 3.105 explicitly excludes from CUE relief arguments based on changes in law and changes in interpretation of the law. Id. at 29. McDonough asserts that 38 C.F.R. 20.1403 requires review based on the existing law at the time of decision making. Id. McDonough notes that 38 C.F.R. 3.105 pre-dates Section 7111—which incorporates CUE—and that Section 7111 is based on 38 C.F.R. 3.105. Id. at 28. McDonough therefore concludes that the statute excludes decision revision for CUE if the argument for CUE stems from changes in law or changes in interpretation of laws. See id. at 29.
McDonough further avers that the changes in the regulation here do amount to changes in law and changes in interpretation of the law. See id. at 29. McDonough first contends that “law” means both statutes and binding regulations, such as the type of regulation at issue here. Id. at 30. Thus, McDonough asserts that invalidating a binding regulation is a change in the law. Id. McDonough asserts that even if invalidating the regulation does not amount to a change in law, however, it certainly amounts to a change in interpretation of law. See id. at 31. McDonough contends that a change in interpretation of law includes both changes from one permissible interpretation to another permissible interpretation, and changes that correct faulty interpretations. Id. McDonough asserts that Petitioner George interprets the concept too narrowly when arguing that it only applies to changes from one permissible interpretation to another. See id. McDonough argues that both the VA general counsel’s opinion and the Wagner opinion changed how to interpret the statute, thus invalidating the regulation. Id. McDonough asserts that this indeed is a change in interpretation of law as contemplated by the regulation and the statute at issue. See id. Therefore, McDonough concludes that George is not entitled to a decision revision, because his CUE argument rests upon a change in law and change in interpretation of law. Id.
COMPLEXITY OF THE DISABILITY-BENEFIT SYSTEM FOR VETERANS
The Military-Veterans Advocacy and Legal Aid Foundation of Los Angeles (collectively, “MVA”), in support of George, argue that the Federal Circuit’s holding further complicates an already overcomplicated disability-benefits system. Brief for the Military-Veterans Advocacy and Legal Aid Foundation of Los Angeles, in Support of Petitioner at 5. MVA asserts that the process by which veterans may appeal a VA decision concerning a veteran’s disability benefits is time consuming and complex, and many veterans proceed through this system without the representation of counsel. Id. at 15. According to MVA, the Board often denies benefits to deserving veterans and is slow to correct its mistakes, as evidenced by the case at hand. Id. at 25. MVA contends that the Federal Circuit’s holding exacerbates this issue by making permanent the Board’s legal mistakes. Id. at 26. MVA adds that because many of these disability recipients are fully dependent on the benefits they receive from the VA, the Federal Circuit’s holding would have a substantial effect on many veterans’ lives. Id. at 7.
McDonough counters that the Federal Circuit’s holding creates a clear and definite rule, thereby simplifying the VA’s veterans-disability system, contrary to MVA’s belief. Brief for Respondent, Denis R. McDonough at 41. McDonough emphasizes that the size and scope of the disability application and appeals process requires that judicial review of Board decisions be governed by clear and calibrated rules. Id. Additionally, McDonough contends that the claims and appeals process is simplified when Board decisions are afforded a degree of finality. Id. at 40. McDonough then concludes that because narrowly construing CUE claims gives weight to the finality of Board judgments, the judgment of the Federal Circuit should be affirmed. Id.
POTENTIAL BURDEN ON THE VA AND BOARD OF VETERANS’ APPEALS
Disabled American Veterans (“DAV”), in support of George, argues that allowing veterans to bring CUE claims when the VA changes its interpretation of relevant statutes would not flood the Board with CUE claims. Brief for the Disabled American Veterans, in Support of Petitioner at 8. DAV contends that opponents of the statute’s enactment raised similar concerns that were later shown to be misguided. Id. at 8, 10. Indeed, DAV notes that just roughly four percent of appeals to the Board are CUE claims. Id. DAV argues that then expanding these claims in very narrow instances would not substantially increase the overall burden on the Board. Id. at 10. Finally, DAV points out that even if the VA must redirect funds to deal with a new influx of CUE claims, the proliferation of erroneous VA judgments justifies this practice. Id. at 10–11.
McDonough responds that adopting George’s view would lead to the disability-benefits system becoming flooded with appeals. Brief for Respondent at 41. McDonough posits that the VA resolves over a million compensation claims annually, and the Board must hear appeals from many of those. Id. Requiring the Board to also hear appeals of all cases decided under an old interpretation of law would only further bog down an already overburdened process. Id. at 42. McDonough adds that Congress’s other restrictions on VA claims appeals evinces Congressional intent to limit the amount of claims the Board hears, such as through the requirements that an appeal be timely. Id. at 40. Additionally, McDonough argues that because reversal for CUE confers a broad remedy, a collateral attack on a final judgment, it makes sense that judicial review is narrow. Id. Further, McDonough asserts that veterans are protected by a general catch-all provision authorizing the VA to grant monetary relief where benefits have not been provided to a veteran due to administrative error. Id. at 40–41. McDonough notes that this provision ensures that even where the Board denies a CUE claim, a veteran can still get benefits if due to an error on behalf of the VA or Board. Id. Ultimately, McDonough argues that the current interpretation of the CUE regime correctly balances the competing interests. Id.
- Dan Schweitzer, Supreme Court Report: George v. McDonough, NAAG (Feb. 3, 2022)
- David Taylor, Supreme Court to Consider Veterans Law's Clear and Unmistakable Error Standard, FedCircuitBlog (January 28, 2022)