Thun v. Shinseki

United States Court of Appeals for the Federal Circuit

2008-7135

DENNIS M. THUN,

Claimant-Appellant,

v.

ERIC K. SHINSEKI, Secretary of Veterans Affairs,

Respondent-Appellee.

Kenneth M. Carpenter, Carpenter, Chartered, of Topeka, Kansas, argued for
claimant-appellant.

Meredyth Cohen Havasy, Trial Attorney, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of Washington, DC, argued for
respondent-appellee. With her on the brief were Jeanne E. Davidson, Director, and
Martin F. Hockey, Jr., Assistant Director. Of counsel on the brief were David J. Barrans,
Deputy Assistant General Counsel, and Y. Ken Lee, Attorney, United States
Department of Veterans Affairs, of Washington, DC.

Appealed from: United States Court of Appeals for Veterans Claims

Chief Judge William P. Greene, Jr.
 United States Court of Appeals for the Federal Circuit

2008-7135

DENNIS M. THUN,

Claimant-Appellant,

v.

ERIC K. SHINSEKI, Secretary of Veterans Affairs,

Respondent-Appellee.

Appeal from the United States Court of Appeals for Veterans Claims
in 05-2066, Chief Judge William P. Greene, Jr.

___________________________

DECIDED: July 17, 2009
___________________________

Before MAYER, RADER, and BRYSON, Circuit Judges.

BRYSON, Circuit Judge.

In most veterans’ benefits cases, the Department of Veterans Affairs (“DVA”)

assigns disability ratings based on a schedule of ratings for specific injuries and

diseases. Sometimes, however, the schedular criteria are inadequate to capture the full

extent and impact of the veteran’s disability. The DVA has provided by regulation that

in such an exceptional case the veteran may be eligible for an “extra-schedular”

disability rating. 38 C.F.R. § 3.321(b)(1).
 This appeal concerns the proper allocation of authority to adjudicate a veteran’s

entitlement to an extra-schedular disability rating under section 3.321(b)(1) of the DVA’s

regulations, 38 C.F.R. § 3.321(b)(1). The Court of Appeals for Veterans Claims (“the

Veterans Court”) held that while the Under Secretary for Benefits and the Director of the

Compensation and Pension Service are the only individuals authorized to assign an

extra-schedular rating, the DVA regional offices and the Board of Veterans’ Appeals

may conduct initial screening of disability claims and may refer to the Under Secretary

or the Director only those claims that meet two of the three regulatory criteria for extra-

schedular consideration. Thun v. Peake, 22 Vet. App. 111 (2008). We affirm.

I

Appellant Dennis M. Thun served in the United States Marine Corps from April

1966 until April 1972. During his service, he participated in several combat operations

in Vietnam. In June of 1999, a DVA examining physician diagnosed Mr. Thun as

suffering from post-traumatic stress disorder caused by his combat experience in

Vietnam. A DVA regional office granted Mr. Thun service-connected disability status

and rated his condition as 10 percent disabling. Mr. Thun continued to press his claim

for disability benefits, seeking an increased disability rating and a referral to the Under

Secretary for Benefits or the Director of the Compensation and Pension Service for an

extra-schedular rating.

In February 2005, the regional office increased Mr. Thun’s disability rating to 70

percent but denied the request for extra-schedular consideration. With respect to Mr.

Thun’s referral request, the regional office found that Mr. Thun did not have any

exceptional or unusual symptoms that were not expressly contemplated by the rating

2008-7135 2
schedule for anxiety disorders. As further support for its decision, the regional office

cited the absence of any record evidence that the 70 percent rating misrepresented the

extent to which Mr. Thun’s disability interfered with his employment. On appeal, the

Board upheld the denial of Mr. Thun’s referral request. The Board was persuaded that

Mr. Thun’s symptoms were “squarely contemplated by the rating criteria supporting a 70

percent rating.” In the alternative, the Board found that there was no evidence in the

record of any “marked interference with obtaining and retaining employment.”

The Veterans Court sustained the Board’s decision as to Mr. Thun’s request for

extra-schedular consideration. The court began by setting out a three-part test, based

on the language of 38 C.F.R. § 3.321(b)(1), for determining whether a veteran is entitled

to an extra-schedular rating: (1) the established schedular criteria must be inadequate

to describe the severity and symptoms of the claimant’s disability; (2) the case must

present other indicia of an exceptional or unusual disability picture, such as marked

interference with employment or frequent periods of hospitalization; and (3) the award of

an extra-schedular disability rating must be in the interest of justice. Under the

regulation, the court held that the regional office and the Board have the authority to

deny extra-schedular consideration in any case in which they determine that the claim

fails either of the first two steps of the test. However, if the regional office or the Board

finds that the rating schedule is inadequate and the case presents other factors

indicative of an exceptional or unusual disability, the case must be referred to the Under

Secretary for Benefits or the Director of the Compensation and Pension Service for a

determination of whether an extra-schedular rating should be assigned in the interest of

justice. Thun, 22 Vet. App. at 115–17.

2008-7135 3
 After laying out the applicable legal principles, the court turned to the merits of

Mr. Thun’s appeal. The court affirmed the Board’s finding that his case was not

exceptional or unusual in light of the schedular criteria for anxiety disorders. With

respect to the Board’s alternative basis for decision, the court held that the Board had

erred by imposing a more demanding standard than was required by the DVA’s

regulations. The Board had rejected Mr. Thun’s referral request for failure to

demonstrate any difficulty in “obtaining and retaining employment,” even though the

DVA’s regulations merely require a showing that the disability caused “marked

interference” with existing employment. The Veterans Court concluded, however, that

the Board’s error was harmless because the finding as to the adequacy of the rating

schedule was sufficient to sustain the denial of Mr. Thun’s referral request. 22 Vet. App.

at 117–18.

II

On appeal, Mr. Thun does not challenge the Veterans Court’s articulation of the

standard for determining whether a veteran is entitled to an extra-schedular rating

pursuant to 38 C.F.R. § 3.321(b)(1). Rather, Mr. Thun’s sole contention is that the

Veterans Court misinterpreted section 3.321(b)(1) as authorizing the DVA regional

offices and the Board to reject a claim for extra-schedular consideration based on their

determination that the veteran does not qualify for a referral. Mr. Thun argues that

section 3.321(b)(1) requires the DVA regional offices and the Board to refer any case in

which they find a “plausible basis” for an extra-schedular rating, leaving to the Under

Secretary for Benefits and the Director of the Compensation and Pension Service the

task of assessing the merits of the claim.

2008-7135 4
 Section 3.321(b)(1) provides as follows, in pertinent part:

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 scheduler standards.

In construing the regulation, we first look to whether the DVA has offered its own

authoritative interpretation. An agency’s interpretation of its own regulation is controlling

unless that interpretation is “plainly erroneous or inconsistent with the regulation.” Auer

v. Robbins, 519 U.S. 452, 461 (1997); see also Bowles v. Seminole Rock & Sand Co.,

325 U.S. 410, 417-18 (1945); Haas v. Peake, 525 F.3d 1168, 1186-87 (Fed. Cir. 2008).

Such strong deference is appropriate even when the agency’s interpretation was

announced without resort to formal steps such as notice-and-comment rulemaking and

publication in the Federal Register. As the Supreme Court has noted, it is sufficient that

the asserted interpretation reflects “the agency’s fair and considered judgment on the

matter.” Auer, 519 U.S. at 462-63.

The DVA’s interpretation of section 3.321(b)(1) is set forth in the Veterans

Benefits Administration Adjudication Procedure Manual M21-1 (“the VBA manual”). The

VBA manual instructs the regional offices to “[s]ubmit compensation claims . . . for

extra-schedular consideration under 38 C.F.R. 3.321(b)(1) if . . . the schedular

evaluations are considered to be inadequate for an individual disability.” In cases in

which the regional offices find merit in a veteran’s claim for extra-schedular

2008-7135 5
consideration, the VBA manual directs the preparation of a memorandum to the Director

of the Compensation and Pension Service that includes a statement of the facts and a

“recommended evaluation.” The VBA manual therefore contemplates that the regional

offices will analyze the record evidence and will make the factual findings necessary to

support a recommendation to the Director. While the VBA manual contains no express

statement that the regional offices have the authority to reject claims for extra-schedular

consideration, the clear import of the manual is that a referral will be made only if the

regional office or the Board deems the case to be meritorious.

We agree with the government that section 3.321(b)(1) does not unambiguously

preclude the regional offices and the Board from performing a threshold inquiry into

whether a veteran qualifies for extra-schedular consideration. Contrary to Mr. Thun’s

assertions, nothing in the language of the regulation limits the regional offices and the

Board to considering whether a “plausible basis” for an award exists. Although only the

Under Secretary and the Director have the authority to award an extra-schedular rating,

the regulation is silent on the question whether those individuals must also make all of

the factual findings necessary to support the award.

The regulation’s use of the phrase “upon field station submission” suggests, at a

minimum, that the regional offices and the Board were intended to play some role in

evaluating a claim for an extra-schedular rating. Permitting the regional offices and the

Board to issue a “field station submission” in which they recommend extra-schedular

consideration still reserves to the Under Secretary and the Director the ultimate

authority to “approve” those recommendations based on whether the veteran should

receive an extra-schedular rating “to accord justice.”

2008-7135 6
 Mr. Thun argues in favor of a restrictive interpretation of section 3.321(c) by

analogizing to 38 C.F.R. § 4.16(b), which provides:

[R]ating boards should submit to the Director, Compensation and
Pension Service, for extra-schedular consideration all cases of
veterans who are unemployable by reason of service-connected
disabilities, but who fail to meet the percentage standards set forth
in paragraph (a) of this section.

Mr. Thun insists that because “nothing in § 4.16(b) suggests that the regional office

needs to make a threshold inquiry before it makes a referral,” section 3.321(b)(1) should

be similarly interpreted to preclude the regional office and the Board from conducting a

threshold inquiry into the merits of a request for extra-schedular consideration.

We do not accept the premise of Mr. Thun’s argument, namely, that under

section 4.16(b) the regional office does not make any threshold inquiry before referring

the matter to the Director of the Compensation and Pension Service. The plain

language of the regulation requires such referrals to be made only when it has been

determined that the claimant is “unemployable by reason of service-connected

disabilities.” And the DVA’s General Counsel has issued a precedential opinion stating

that section 4.16(b) requires “a finding that the service-connected disabilities render a

particular veteran unemployable.” DVA General Counsel Op. 6-96 ¶ 5. Because a

finding of unemployability is a condition precedent to a referral by the regional office

under section 4.16(b), that regulation supports, rather than undermines, the DVA’s

interpretation of section 3.321(b)(1).

The DVA’s interpretation finds further support in 38 C.F.R. § 3.321(c), which

states that “[c]ases in which . . . the propriety of an extra-schedular rating is

questionable may be submitted to Central Office for advisory opinion.” Because that

2008-7135 7
regulation provides an optional mechanism for submitting cases to the Central Office,

the implicit suggestion is that the “propriety of an extra-schedular rating” in most cases

shall be decided by the regional offices and the Board in the first instance. Thus, the

regulatory context of section 3.321(b)(1) is consistent with the notion that the regional

offices and the Board have been charged with a substantial role in adjudicating a

veteran’s entitlement to an extra-schedular rating.

Finally, Mr. Thun argues that the DVA’s interpretation of section 3.321(b)(1)

creates a bifurcated process in which the claimant’s opportunity for judicial review “is

limited to the refusal to refer and does not reach the decision made by the Under

Secretary or the Director on the merits of the referral.” The DVA’s interpretation of

section 3.321(b)(1) does not restrict the opportunity for judicial review. Under either

interpretation, factual determinations must be made as to whether a veteran qualifies for

an extra-schedular rating. If the regional office or the Board makes factual findings

adverse to the claimant with regard to the extra-schedular claim, those findings will be

reviewable by the Veterans Court under the clearly erroneous standard of review, see

38 U.S.C. § 7261(a)(4), just as would be the case if those findings were made by the

Under Secretary or the Director.

Each party shall bear its own costs for this appeal.

AFFIRMED.

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