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The Department of Veterans Affairs' Entitlement Complex: Attorney Fees and Adminsitrative Offset After Astrue v. Ratliff





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The Department of Veterans Affairs (VA) administers a benefits system designed to be largely paternalistic. An important aspiration of this benefits scheme is that the process should be navigable by a veteran without savvy legal prowess or the assistance of an attorney. Although the regulations governing attorney involvement have changed, the intentions behind them have not: VA insists it must protect veterans from lawyers. Congress, however, is less skeptical of legal representation and has enacted statutes designed to encourage lawyers to take the cases of deserving veterans that might prove too difficult to win otherwise. As part of this congressionally mandated incentive structure, the Equal Access to Justice Act (EAJA) is available as a way for plaintiffs, through VA’s pockets, to pay the fees for lawyers who “win” against the government before the Court of Appeals for Veterans Claims (CAVC). The EAJA does not compensate attorneys for work done on the vast majority of veterans’ claims, which never reach the courts but are instead adjudicated at the agency level. There is, however, a separate compensation scheme to encourage attorney participation in the adjudication of VA benefits.

To ensure lawyers were not discouraged from representing veterans at this first, crucial stage, Congress instituted a contingency fee system: an attorney who succeeds in gaining benefits can receive 20% of the veteran’s past-due benefits award directly from the Secretary of Veterans Affairs. This largely straightforward system has raised few problems for attorneys and veterans—in most cases VA simply parcels out 20% to the attorney and then hands over the rest to the veteran. However, there is a small but critical area of complexity involving veterans who for whatever reason will not receive the entirety of their award. In these cases, the question becomes whether attorneys are to receive 20% of the original award or 20% of the award after offset or withholding.

For veterans who still receive some portion of their award, the answer is on the books. By statute, contingency fees are to be calculated from any past-due benefits awarded on the basis of the claim; “award” does not mean amount payable to the veteran but the actual award prior to any withholding. Snyder v. Nicholson held that award, in the “parlance of veterans’ benefits,” means “the amount stated as the award for success in pursuit of a claim for benefits.” Thus, even though a veteran might receive only a portion of his award, the attorney will still receive 20% of the original. This all flows from the idea that contingency fees in veterans’ benefits cases belong, by statute, to the attorney—and are thus payable directly from the benefits awarded on the claim, rather than being calculated from the actual payment to the veteran.

This result reflects Congress’s decision to promote attorney participation in the VA process by guaranteeing enforcement of a 20% contingency fee agreement should the veteran win the claim. But VA regulations institute a caveat: a contingency fee agreement will be upheld only if the award of past-due benefits “results in a cash payment to a claimant . . . from which the fee may be deducted.” By using results, VA asserts that contingency fee agreements lose their statutory protection if the claimant, by virtue of indebtedness to the United States, does not receive any payment at all. If no “fund” of past-due benefits is created, VA maintains that there is no percentage of that fund to which an attorney can be entitled. VA further reasons that if the veteran, as assignor, has no right to receive payment of any part of the past-due benefits, then his attorney, as assignee, cannot have such a right either. This policy has troubling consequences: by protecting only the fee agreements of veterans not in debt to the government beyond their claims’ values, VA in fact ensures that some of the neediest veterans cannot retain legal representation.

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