Veteranclaims’s Blog

August 6, 2014

Johnson v. McDonald, No.2013-7104(Decided: August 6, 2014); 38 C.F.R. § 3.321(b)(1); Extra-schedular; Auer Deference

Excerpt from decision below:
“Because the Veterans Court’s interpretation of 38 C.F.R. § 3.321(b)(1), which governs referral for extra-schedular consideration, contravenes the plain meaning of the regulation, we reverse and remand.”
===========================

Concurring opinion filed by Circuit Judge O’MALLEY MOORE, Circuit Judge

“The majority here cites Seminole Rock and Auer—which are binding Supreme Court precedent—and explains that deference to an agency’s interpretation of its
own regulation is warranted only when the language of the regulation is ambiguous. Because I agree with the majority that 38 C.F.R. § 3.321(b)(1) is unambiguous—
and thus there is no need to apply Auer deference—I join the majority’s decision. I note, however, that the validity of Auer deference is questionable, both generally and specifically as it relates to veterans’ benefit cases.
===========================
United States Court of Appeals for the Federal Circuit
______________________
MARVIN O. JOHNSON,
Claimant-Appellant,
v.
ROBERT A. MCDONALD,
Secretary of Veterans Affairs,
Respondent-Appellee.
______________________
2013-7104
______________________
Appeal from the United States Court of Appeals for
Veterans Claims in No. 10-1785, Judge Mary J. Schoelen.
______________________
Decided: August 6, 2014
______________________
KENNETH M. CARPENTER, Carpenter, Chartered, of
Topeka, Kansas, argued for claimant-appellant.
MARTIN F. HOCKEY, JR., Assistant Director, Commercial
Litigation Branch, Civil Division, United States
Department of Justice, of Washington, DC, argued for
respondent-appellee. With him on the brief STUART F.
DELERY, Assistant Attorney General, and BRYANT G.
SNEE, Acting Director. Of counsel on the brief were DAVID
J. BARRANS, Deputy Assistant General Counsel, and
JOHNSON v. MCDONALD 2

MARTIE ADELMAN, Attorney, United States Department of
Veterans Affairs, of Washington, DC.
______________________
Before MOORE, O’MALLEY, and CHEN, Circuit Judges.

Opinion for the court filed by Circuit Judge MOORE.
Concurring opinion filed by Circuit Judge O’MALLEY.
MOORE, Circuit Judge.

Marvin O. Johnson appeals from the decision of the Court of Appeals for Veterans Claims (Veterans Court) denying his request for referral for extra-schedular consideration of his service-connected disabilities. Because the Veterans Court’s interpretation of 38 C.F.R. § 3.321(b)(1), which governs referral for extra-schedular consideration, contravenes the plain meaning of the regulation, we reverse and remand.

I.
When determining compensation for serviceconnected disabilities, the Department of Veterans Affairs (DVA) generally assigns disability ratings based on a schedule of ratings for specific injuries and diseases.
Ratings are typically assigned based on the degree of disability and the effect it has on a veteran’s earning capacity, but are sometimes also based on other factors
such as effect on social functioning or effect on daily activities. In some cases the schedular criteria are inadequate to capture the full extent and impact of the veteran’s disability. The DVA has thus provided by regulation that in such “[e]xceptional cases,” the veteran may be eligible for an “extra-schedular” disability rating. 38 C.F.R. § 3.321(b)(1). There is no dispute that § 3.321(b)(1)
entitles a veteran to consideration for referral for extraschedular evaluation based on an individual disability not adequately captured by the schedular evaluations. This appeal concerns whether § 3.321(b)(1) also entitles a
JOHNSON v. MCDONALD 3

veteran to consideration for referral for extra-schedular evaluation based on multiple disabilities, the combined effect of which is exceptional and not captured by schedular evaluations.
Mr. Johnson served in the U.S. Army from May 1970 to December 1971. Years after leaving the service, Mr. Johnson filed a claim for increased disability ratings for
his service-connected disabilities, including rheumatic heart disease (then rated 10% disabling), and degenerative changes of the right and left knees (each knee rated 10% disabling). A DVA regional office (RO) denied Mr. Johnson’s claims, finding that he was not entitled to a rating of total disability based on individual unemployability (TDIU). Mr. Johnson appealed to the Board of
Veterans’ Appeals (Board), and the Board affirmed the denial of Mr. Johnson’s TDIU claim. The Board also denied Mr. Johnson’s claim for extra-schedular consideration
of the combined impact of his service-connected
rheumatic heart disease and right knee disability under
§ 3.321(b)(1). Mr. Johnson appealed to the Veterans
Court, arguing that the plain language of § 3.321(b)(1)
requires the DVA to consider his disabilities both individually
and collectively in deciding whether he was entitled
to an extra-schedular evaluation.
In an en banc decision, a majority of the Veterans
Court affirmed the Board. Johnson v. Shinseki, 26 Vet.
App. 237, 248 (2013). It found the language of
§ 3.321(b)(1) ambiguous, explaining that “it is not clear
from the language of the regulation whether an extraschedular
evaluation is to be awarded solely on a disability-
by-disability basis or on the combined effect of a
veteran’s service-connected disabilities.” Id. at 243. The
Veterans Court concluded that, given the ambiguity in
the language, it should defer to the DVA’s interpretation
of the regulation. Id. It found that the DVA interpreted
§ 3.321(b) in the Veterans Benefits Administration Adjudication
Procedure Manual (VBA Manual) Rewrite M21-
JOHNSON v. MCDONALD 4
1MR, Part III, Subpart. iv, chapter 6, § B.5.c, which states
that a claim is to be submitted for extra-schedular consideration
“if the schedular evaluations are considered
inadequate for an individual disability.” Id. at 244. The
Veterans Court determined that the DVA’s interpretation
was entitled to substantial deference because it was not
unreasonable, plainly erroneous, or inconsistent with the
regulation and statutory scheme. Id. at 244–45. Based
on the DVA’s interpretation as reflected in the VBA
Manual, the Veterans Court concluded that the Board
was not required to consider whether Mr. Johnson was
entitled to referral for extra-schedular consideration of his
disabilities on a collective basis. Id. at 245.
Judge Moorman filed an opinion concurring in the result.
Id. at 249 (Moorman, J., concurring). He explained
that the plain language of § 3.321(b)(1) “on its face, appears
most easily construed to convey only one meaning—
that a veteran’s collective service-connected disabilities
may be considered in determining whether referral for an
extraschedular rating is warranted.” Id. at 248. However,
he concluded that the DVA “has offered an alternative
meaning for the language in the regulation that is plausible,
albeit not obvious.” Id. He explained that based on
the “deference due to an agency in its interpretation of its
own regulations, [he] reluctantly conclude[d] that the
Secretary has presented a plausible, even though
strained, alternative reading of § 3.321(b)(1) that warrants
an affirmance of the Board’s decision.” Id. at 251.
Chief Judge Kasold dissented, concluding that
§ 3.321(b)(1) is not ambiguous. Id. at 254 (Kasold, C.J.,
dissenting). He stated that the plain language of the
regulation calls for referral for extra-schedular consideration
if the schedular evaluations are inadequate to compensate
a veteran for his or her service-connected
disabilities, either collectively or individually. Id. at 255–
57. Judge Davis also filed a dissenting opinion, in which
Judge Bartley joined. Id. at 265 (Davis, J., dissenting).
JOHNSON v. MCDONALD 5
Judge Davis agreed with Chief Judge Kasold’s dissent
and emphasized that his dissent was “grounded in the
conviction that the language of § 3.321(b)(1) unambiguously
refutes the interpretation advanced by the Secretary.”
Id.
Mr. Johnson appeals. We have jurisdiction under 38
U.S.C. § 7292(a).
II.
We review statutory and regulatory interpretations of
the Veterans Court de novo. 38 U.S.C. § 7292(d)(1); see
also Prenzler v. Derwinski¸ 928 F.2d 392, 393 (Fed. Cir.
1991). Deference to an agency’s interpretation of its own
regulation “is warranted only when the language of the
regulation is ambiguous.” Christensen v. Harris Cnty.,
529 U.S. 576, 588 (2000); Bowles v. Seminole Rock &
Sand Co., 325 U.S. 410, 414 (1945); see also Christopher v.
SmithKline Beecham Corp., 132 S. Ct. 2156, 2166 (2012).
“An agency’s interpretation of its own regulation is controlling
unless that interpretation is plainly erroneous or
inconsistent with the regulation.” Thun v. Shinseki, 572
F.3d 1366, 1369 (Fed. Cir. 2009); see also Auer v. Robbins,
519 U.S. 452, 461 (1997).
The DVA enacted § 3.321(b)(1) pursuant to 38 U.S.C.
§ 1155. Section 1155 authorizes the DVA to create a
disabilities rating schedule and instructs the DVA to
adopt schedular ratings to account for “reductions in
earning capacity from specific injuries or combination of
injuries.” 38 U.S.C. § 1155 (emphasis added). 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
. . . is authorized to approve on the basis of
the criteria set forth in this paragraph an extraschedular
evaluation commensurate with the avJOHNSON
v. MCDONALD 6
erage 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
schedular standards.
38 C.F.R. § 3.321(b)(1)(2012) (emphases added).
On appeal, Mr. Johnson argues that the Veterans
Court misinterpreted § 3.321(b)(1). He contends that the
plain language of the regulation requires the DVA to
consider the combined effect of all of a veteran’s serviceconnected
disabilities in determining whether referral for
extra-schedular evaluation is appropriate. The government
counters that the plain language of § 3.321(b)(1)
indicates that it applies only to the impact of disabilities
individually, not collectively. In the alternative, the
government argues that the regulation is ambiguous and
that, given this ambiguity, we should defer to the interpretation
of the DVA.
We agree with Mr. Johnson. The plain language of
§ 3.321(b)(1) provides for referral for extra-schedular
consideration based on the collective impact of multiple
disabilities. The regulation is specifically directed to the
“exceptional case where the schedular evaluations” are
inadequate. 38 C.F.R. § 3.321(b)(1). The use of the plural
“evaluations” suggests that the regulation contemplates a
situation in which evaluations assigned to multiple disabilities
are inadequate. Indeed, the regulation authorizes
“an extra-schedular evaluation” where “the schedular
evaluations” are inadequate to compensate for impairment
due to “the service-connected disability or disabilities.”
The use of “disability or disabilities” indicates that
the regulation contemplates that multiple disabilities may
JOHNSON v. MCDONALD 7
be considered together in referring veterans for extraschedular
consideration. Similarly, the fact that the
regulation authorizes a single extra-schedular evaluation—“
an extra-schedular evaluation”—arising from the
“disability or disabilities” indicates that referral for extraschedular
evaluation may be based on the collective
impact of the veteran’s disabilities. Moreover, the plain
language of § 3.321(b)(1) is consistent with the language
of § 1155 authorizing the regulation. 38 U.S.C. § 1155
(authorizing the Secretary to “adopt and apply a schedule
of ratings of reductions in earning capacity from specific
injuries or combination of injuries”).
We are not persuaded by the government’s argument
that the term “disability picture” in the regulation must
be construed as limited to the impact of a single disability
rather than multiple disabilities. Even if the term disability
picture as used in other sections of the DVA regulations
were construed as referring to the impact of a single
disability, that is not the case with respect to
§ 3.321(b)(1). The clear language and the use of the term
“disability picture” in the context of § 3.321(b)(1) refers to
the collective impact of a veteran’s “service-connected
disability or disabilities.”
Seeking to overcome the plain language of the regulation,
the government further argues that the our interpretation
of § 3.321(b)(1) cannot be correct because another
provision, the TDIU provision at 38 C.F.R. § 4.16, is
already designed to address the situation where schedular
evaluations are insufficient to account for the collective
impact of multiple disabilities. We disagree. As the
government itself notes, the TDIU provision only accounts
for instances in which a veteran’s combined disabilities
establish total unemployability, i.e., a disability rating of
100 percent. Appellee’s Br. at 26. On the other hand,
§ 3.321(b)(1) performs a gap-filling function. It accounts
for situations in which a veteran’s overall disability
picture establishes something less than total unemployaJOHNSON
v. MCDONALD 8
bility, but where the collective impact of a veteran’s
disabilities are nonetheless inadequately represented.
Our plain-language interpretation of § 3.321(b)(1) does
not render it duplicative of the TDIU provision of § 4.16.
Because we find that the plain language of
§ 3.321(b)(1) is unambiguous, we do not defer to the
DVA’s interpretation of its regulation. See Christensen,
529 U.S. at 588. The government cannot manufacture an
ambiguity in language where none exists in order to
redefine the plain language of a regulation. As Chief
Judge Kasold noted, “simply saying something is ambiguous
does not make it so.” Johnson, 27 Vet. App. at 254
(Kasold, C.J., dissenting). And we find no ambiguity in
the language of § 3.321(b)(1).
We further note that, while policy arguments would
not, in any case, persuade us to depart from the plain
language of the regulation, we see no policy justification
for interpreting § 3.321(b)(1) in the way that the government
advocates. The purpose of the regulation is “[t]o
accord justice . . . to the exceptional case where the schedular
evaluations are found to be inadequate.” 38 C.F.R.
§ 3.321(b)(1). There is no logic to the idea that it is only
necessary to accord justice based on a veteran’s individual
disabilities and not also on the collective impact of all of
the veteran’s disabilities. Limiting referrals for extraschedular
evaluation to considering a veteran’s disabilities
individually ignores the compounding negative effects
that each individual disability may have on the veteran’s
other disabilities. It is not difficult to imagine that, in
many cases, the collective impact of all of a veteran’s
disabilities could be greater than the sum of each individual
disability’s impact. The regulation itself makes clear
that it is meant to cover “an exceptional or unusual disability
picture,” where the regular rating standards simply
would not adequately cover the extent of a veteran’s
disability. Given the intention of the regulation, the
government’s argument that the consideration of the need
JOHNSON v. MCDONALD 9
for extra-schedular review should occur by evaluating
each disability individually, without considering the
impact on a veteran of his or her collective disability
picture, seems difficult to defend.
CONCLUSION
We reverse and remand to the Veterans Court for further
proceedings in accordance with this opinion.
REVERSED AND REMANDED
United States Court of Appeals
for the Federal Circuit
______________________
MARVIN O. JOHNSON,
Claimant-Appellant,
v.
ROBERT A. MCDONALD,
Secretary of Veterans Affairs,
Respondent-Appellee.
______________________
2013-7104
______________________
Appeal from the United States Court of Appeals for
Veterans Claims in No. 10-1785, Judge Mary J. Schoelen.
______________________
O’MALLEY, Circuit Judge, concurring.
I agree with the majority’s well-reasoned analysis and
with the judgment it reaches. I write separately only to
note that, if the regulation here were deemed sufficiently
ambiguous to require application of Auer deference, I
believe this is a case in which the wisdom of continued
adherence to that principle should be reconsidered. See
Auer v. Robbins, 519 U.S. 452 (1997).
Several Supreme Court Justices have recently expressed
an interest in revisiting the propriety of the
principles set forth in Auer and in Bowles v. Seminole
Rock & Sand Co., 325 U.S. 410 (1945). Decker v. Nw.
Envtl. Def. Ctr., 133 S. Ct. 1326, 1339 (2013) (Scalia, J.,
2 JOHNSON v. MCDONALD
concurring-in-part, dissenting-in-part) (“For decades, and
for no good reason, we have been giving agencies the
authority to say what their rules mean, under the harmless-
sounding banner of ‘defer[ring] to an agency’s interpretation
of its own regulations.’” (citing Talk Am., Inc. v.
Mich. Bell Tel. Co., 131 S. Ct. 2254, 2265 (2011) (Scalia,
J., concurring))). Chief Justice Roberts, writing for himself
and Justice Alito in Decker, recognized that:
(1) “[q]uestions of Seminole Rock and Auer deference arise
as a matter of course on a regular basis;” and (2) “there is
some interest in reconsidering those cases.” Decker, 133
S. Ct. at 1339 (Roberts, C.J., concurring).
While some level of deference may be appropriate,
there is a concern that “deferring to an agency’s interpretation
of its own rule encourages the agency to enact
vague rules which give it the power, in future adjudications,
to do what it pleases. This frustrates the notice and
predictability purposes of rulemaking, and promotes
arbitrary government.” Talk Am., 131 S. Ct. at 2266
(Scalia, J., concurring). I agree with Justice Scalia’s
concerns that:
however great may be the efficiency gains derived
from Auer deference, beneficial effect cannot justify
a rule that not only has no principled basis but
contravenes one of the great rules of separation of
powers: He who writes a law must not adjudge its
violation.
Decker, 133 S. Ct. at 1342 (Scalia, J., concurring-in-part,
dissenting-in-part).
Questions regarding the appropriate level of deference
given to an agency’s interpretation of its own regulation
are even more complex in the veterans’ benefit context,
where the Supreme Court has “long applied the canon
that provisions for benefits to members of the Armed
Services are to be construed in the beneficiaries’ favor.”
See Henderson v. Shinseki, 131 S. Ct. 1197, 1206 (2011)
JOHNSON v. MCDONALD 3
(citation and internal quotation marks omitted); see also
Brown v. Gardner, 513 U.S. 115, 118 (1994) (noting that
“interpretive doubt is to be resolved in the veteran’s
favor”). Where there is a conflict between an agency’s
reasonable interpretation of an ambiguous regulation and
a more veteran-friendly interpretation, it is unclear which
interpretation controls. See Linda D. Jellum, Heads I
Win, Tails You Lose: Reconciling Brown v. Gardner’s
Presumption that Interpretive Doubt Be Resolved in
Veterans’ Favor with Chevron, 61 Am. U. L. Rev. 59, 77
n.141 (2011) (“If an agency’s interpretation of its regulation
must be ‘plainly wrong’ before the court can reject
that interpretation, there can be little place for Gardner’s
[veteran-friendly] Presumption; the VA’s interpretation
would have to be plainly wrong before it was rejected.”).
The majority here cites Seminole Rock and Auer—
which are binding Supreme Court precedent—and explains
that deference to an agency’s interpretation of its
own regulation is warranted only when the language of
the regulation is ambiguous. Because I agree with the
majority that 38 C.F.R. § 3.321(b)(1) is unambiguous—
and thus there is no need to apply Auer deference—I join
the majority’s decision. I note, however, that the validity
of Auer deference is questionable, both generally and
specifically as it relates to veterans’ benefit cases.

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