# United States **Court of Appeals**  **for the Federal Circuit**

______________________ JAMES L. KISOR, Claimant

- Appellant

v.
DAVID J. SHULKIN, SE CRETARY OF VETERANS AFFAIRS, Respondent

- Appellee

______________________
2016

- 1929

______________________ Appeal from the United States Court of Appeals for Veterans Claims in No. 1 4- 2811, Judge Alan G. Lance
, Sr.

______________________
O N PETITION FOR PANEL REHEARING AND REHEARING EN BANC

______________________
K ENNETH M. C ARPENTER , Law Offices of Carpenter Chartered, Topeka, KS, filed a combined petition for panel rehearing and rehearing en banc for claimant

appellant.

I GOR H ELMAN , Commercial Litigation Branch, Civil Division, United States Department of Justice, Washin gton, DC, filed a response to the petition for respondent

appellee. Also represented by C HAD A. R EADLER , R OBERT E. K IRSCHMAN , J R ., M ARTIN F. H OCKEY , J R .; Y. K EN L EE , S AMANTHA A NN S YVERSON , Office of General Couns el,KISOR v. SHULKIN 2

United States Department of Veterans Affairs, Washin gton, DC.

______________________

Before P ROST , Chief Judge
, N EWMAN , L OURIE , S CHALL ∗

,

D YK , M OORE , O’M ALLEY , R EYNA , W ALLACH , T ARANTO , C HEN , H UGHES , and S TOLL , Circuit Judges

. O’M ALLEY , Circuit Judge

, with whom N EWMAN and M OORE , Circuit Judge s , join, dissent from the denial of the petition for rehearing en banc

. P ER C URIAM

. O R D E R Appellant filed a combined petition for panel rehea ring and rehearing en banc . A response to the petition w as invited by the court and filed by the appellee

. The petition for r ehearing was referred to the panel that heard the appeal, and thereafter, the petition and
response were referred to the circuit judges who are in regular active service. A poll was requested, taken, and failed. Upon consideration thereof,

I T I S O RDERED T HAT : The petition for panel rehearing is denied. The petition for rehearing en banc is denied.
The mandate of the court will be issued on February 7, 2018

.KISOR v. SHULKIN 3

F OR THE C OURT

January 31, 2018 /s/ Peter R. Marksteiner Date Peter R. Marksteiner Clerk of Court

∗ Circuit Judge Schall participated only in the dec ision on the petition for panel rehearing.

# United States **Court of Appeals**  **for the Federal Circuit**

______________________ JAMES L. KISOR, Claimant

- Appellant

v.
DAVID J. SHULKIN, SE CRETARY OF VETERANS AFFAIRS, Respondent

- Appellee

______________________
2016

- 1929

______________________ Appeal from the United States Court of Appeals for Veterans Claims in No. 1 4- 2811, Judge Alan G. Lance
, Sr.

______________________

O’M ALLEY , Circuit Judge
, with whom N EWMAN and M OORE , Circuit Judges , join, dissenting from the denial of rehearing en banc

. The panel in this case held that the word “relevant” in 38 C.F.R. § 3.156(c)(1), a regulation promulgated by the Department of Veterans Affairs (“VA”), is ambiguous. Kisor v. Sh ulkin , 869 F.3d 1360, 1367 (Fed. Cir. 2017). Indeed, after granting that both parties had offered reasonable interpretations of the regulation, the panel held that the regulation is not just ambiguous on its face, but that the apparent ambiguity is insoluble by resort to standard interpretive principles. Id. at 1367

– 68. The panel, thus, turned to Bowles v. Seminole Rock & Sand Co. , 325 U.S. 410 (1945), a nd Auer v. Robbins , 519 U.S.KISOR v. SHULKIN 2

452 (1997), (collectively “ Auer ” ) to resolve the question presented. It concluded that the VA was entitled to deference for its interpretation of its own ambiguous regulation and, on that ground, unsurprisingly found in favor of the VA

. 869 F.3d at 1368

– 69

. T he panel predicated its decision on Auer deference, despite the Supreme Court’s repeated reminder that statutes concerning veterans are to be construed liberally in favor of the veteran

. Henderson v. Shinseki , 562 U.S. 42 8, 441 (2011); Brown v. Gardner , 513 U.S. 115, 117

– 18 (1994) (citation omitted). Whatever the logic behind continued adherence to the doctrine espoused in Auer

— and I see little

— there is no logic to its application to regulations promulgated pursuant to st atutory schemes that are to be applied liberally for the very benefit of those regulated. When these two doctrines pull in diffe rent directions, it is Auer deference that must give way. I dissent from the court’s refusal to take the opportunity to finall y so hold.
S everal justices of the Supreme Court recently have urged their colleagues to “ abandon[] Auer and apply[] the [Administrative Procedure] Act as written .” Perez v. Mortg. Bankers Ass’n , 135 S. Ct. 1199, 121 2– 13 (2015); see, e.g. , id. at 1213

– 25 (Thomas, J., dissenting) ( identifying several “serious constitutional questions lurking beneath” the doctrine of Auer deference ) ; id. at 1210

– 11 (Alito, J., concurring in part and concurring in the jud gment) (noting that Justices Scalia and Thomas have off ered “substantial reasons why the Seminole Rock doctrine may be incorrect”); see also Decker v. Nw. Envtl. Def. Ctr. , 568 U.S. 597 , 616 (2013) ( Roberts, C.J., concu rring) (recognizing that “[q]uestions of Seminole Rock and Auer deference arise as a matter of course on a regular basis” and noting “some interest in reconsidering those

cases ” ). Auer “encourag[es] agencies to write ambiguous regulations and interpret them later,” which “defeats the purpose of delegation ,” “undermines the rule of law ,” andKISOR v. SHULKIN 3

ulti mately allows agencies to circumvent the notice

- and

comment rulemaking process. Lisa Schultz Bressman, Beyond Accountability: Arbitrariness and Legitimacy in the Administrative State
, 78 N.Y.U. L. R EV

. 461, 551

– 52 (2003) ; see also Christopher v. SmithKline Beecham Corp.
, 567 U.S. 142, 158 (2012) (acknowledging the “risk that agencies will promulgate vague and open

- ended regul ations that they can later interpret as they see fit, thereby frustrat ing the notice and predictability purposes of rulemaking” (inte rnal quotation marks omitted))

. And, on

a structural level, by eliminating the separation between the entity that creates the law and the one that interprets it, Auer deference “leaves in place no independent inte rpretive check on lawmaking by an administrative age ncy.” John F. Manning, Constitutional Structure and Judicial Deference to Agency Interpretations of Agency Rules
, 96 C OLUM

. L. R EV

. 612, 639 (1996) ; see also Decker
, 568 U.S. at 621 (Scalia, J., concurring in part and dissen ting in part) (“ Auer deference .

. . contravenes one of the great rules of separation of powers: He who writes a law must not adjudge its violat ion.”) ; Egan v. Del. River Port Auth. , 851 F.3d 263, 280 (3d Cir. 2017) (Jordan, J., co ncurring in the judgment) ( critiquing the doctrine of Auer deference for its effect on the separation of powers)

. This court has no authority to reconsider Auer , of

course

. But, l eaving aside the continued vitality of Auer as a general proposition, granting Auer deference to the VA ’s interpr etation of its own ambiguous regulations flies in the face of another line of Supreme Court precedent

— the longstanding “canon that provisions for benefits to members of the Armed Services are to be construed in the beneficiaries’ favor .” Henderson , 562 U. S. at 441 (internal quotation marks omitted); see Gardner , 513 U.S. at 117

– 18 (citation omitted) ( acknowledging the “rule that inte rpretive doubt is to be resolved in the veteran’s favor”) ; see also Linda D. Jellum, Heads I Win, Tails You Lose: Re conciling Brown v. Gardner ’s Presumption that InterpretiveKISOR v. SHULKIN 4

Doubt Be Resolved in Veterans’ Favor with Chevron, 61 A M

. U. L. R EV

. 59, 77 n.141 (2011) (noting that “Gardner’s Presumption .

. . conflicts with Auer deference”)

. In a case like this one, where the agency’s interpretation of an ambiguous regulation and a more veteran

- friendly inte rpretation are in conflict, it is unclear from our precedent which interpretation should control. See James D. Rid gway, Toward a Less Adversarial Relationship Between Che vron and Gardner, 9 U. M ASS

. L. R EV

. 388, 398

– 401 (2014) (discussing this court’s avoidance of “the tension between the canons of veteran friendliness and agency deference”). 1 I have long expressed skepticism about the applicability of Auer in this contex t. See, e.g.
, Johnson v. McDonald , 762 F.3d 1362, 1366

– 68 (Fed. Cir. 2014) (O’Malley, J., concurring) (noting “that the validity of Auer deference is questionable, both generally and specifically as it relates to veterans’ benefit cases”); Hudgens v. McDonald , 823 F.3d 630, 639 n.5 (Fed. Cir. 2016) (O’Malley, J.) (“In many cases, the tension between Auer and Gardner is difficult to resolve, since both seemingly direct courts to resolve ambiguities in a VA regulation but would, in many cases, counsel contra ry outcomes. ”). But, we keep finding reasons not to address the tension b etween these doctrines.

1 As the response to the petition for rehearing notes, we have “rejected the argument that the pro

veteran canon of construction overrides the deference due to the [VA’s] reasonable interpretation of an ambiguous statute .” Guerra v. Shinseki , 642 F.3d 1046, 1051 (Fed. Cir. 2011) (emphasis added) (citing Sears v. Principi , 349 F.3d 1326, 1331

– 32 (Fed. Cir. 2003)). Whatever the merits of tha t conclusion, w e have yet to decide how to resolve a conflict between the pro

- veteran canon and the VA’s interpretation of its own ambiguous regulation s

.KISOR v. SHULKIN 5

If only one of these doctrines can prevail in a given case, the pro

- veteran canon must overcome Auer

. “ Auer deference is warranted only when the language of the regulation is ambiguous.” Christensen v. Harris County
, 529 U.S. 576, 588 (2000). In interpreting a regulation

— including when deciding whether the regulation is ambi guous

— we apply the ordinary “rules of statutory constru ctio n.” Roberto v. Dep’t of Navy , 440 F.3d 1341, 1350 (Fed. Cir. 2006) (citation omitted) ; see also United States v. Lachman , 387 F.3d 42, 54 (1st Cir. 2004) (“[W] e look to agency interpretations only when the statute or regul ation remains ambiguous after we have employed the traditional tools of construction. ”)

. The “rule that inte rpretive doubt is to be resolved in the veteran’s favor,” Gardner
, 513 U.S. at 117

– 18, is one of those rules of statutory construction . A regulation cannot be so ambi guous as to r equire Auer deference if a pro

- veteran inte rpretation of the regulation is possible. As the Supreme Court has acknowledged, moreover, the “general rule” of Auer deference “ does not apply in all
cases, ” such as those where there are “strong reasons for with holding the deference that Auer generally requires.” Christopher , 567 U.S. at 155. The “rule that interpretive doubt is to be resolved in the veteran’s favor,” Gardner
, 513 U.S. at 117

– 18, provides just such a reason. Defe rring to the VA’s interpretation of a statute makes some

sense because Congress has delegated to the VA the authority to “issue[] a reasonable gap

- filling or ambiguity

resolving regulation .” Sears , 349 F.3d at 1332. But,

w here the VA itself has “promulgat e[d] [a] vague and
open- ended regulation[] that [it] can later interpret as [it] see[s] fit”

— to the detriment of veterans —no such defe rence can be warranted. Christopher , 567 U.S. at 158

– 59

. The D.C. Circuit has reached an analogous conclusion in the cont ext of Indian law, where “[t] he governing canon of construction requi res that ‘ statutes are to be construed liberally in favor of the Indians, with ambiguous prov i-KISOR v. SHULKIN 6

sion s interpreted to their benefit.’” Cobell v. Norton , 240 F.3d 1081, 1101 (D.C. Cir. 2001) (quoting Montana v. Blackfeet Tribe of Indians , 471 U.S. 759, 766 (1985)). The Cobell court acknowledged that, under Chevron, U.S.A. Inc. v. Nat. Res. Def. Council , 467 U.S. 837 (1984), “ord inarily we defer to an agency ’ s interpretations of ambig uous statutes entrusted to it for administration .” Cobell
, 240 F.3d at 1101. The court nevertheless found that

“ Chevron deference is not applicable ” in the Indian law context. Id. It gave the agency’s interpretation “‘careful consideration,’ but the normall y- applicable deference was trumped by the requirement” to construe statutes libera lly in favor of Indians. Cobell v. Kempthorne ( Cobell II )
, 455 F.3d 301, 304 (D.C. Cir. 2006) (quoting Cobell , 240 F.3d at 1101) . The D.C. Circuit has attributed its depart ure from the norm of Chevron deference to “the special strength of this canon .” Albuquerque Indian Rights v. Lujan , 930 F.2d 49, 59 (D.C. Cir. 1991) (citing Muscogee (Creek) Nation v. Hodel , 851 F.2d 1439, 1445 n.8 (D.C. Cir. 1988)).
The veteran

- friendly canon of construction , which originates in the Supreme Court’s World War II

– era expression of solicitude towards those who “drop their own affairs to take up the burdens of the nation
, ” Boone v. Lightner , 319 U.S. 561, 575 (1943)
, carries comparable weight

. Indeed, it is difficult to overstate the importance of the veteran

- friendly approach to veterans’ benefits statutes and their accompanying regulations. As we have recognized, “the veterans benefit system is designed to award ‘entitlements to a special class of citizens, those who risked harm to serve and defend their country. This entire scheme is imbued with special beneficence from a grateful sovereign.’” Barrett v. Principi
, 363 F.3d 1316, 1320 (Fed. Cir. 2014 ) (quoting Bailey v. West , 160 F.3d 1360, 1370 (Fed. Cir. 1998) (en banc) (Michel, J., concu rring in the result))

. That overarching motivation explains “the uniquely pro

- claimant nature of the veterans co m-KISOR v. SHULKIN 7

pensation system,” Hensley v. West , 212 F.3d 1255, 1262 (Fed. Cir. 2000), a s well as why the Supreme Court has “long applied” the pro

- veteran canon of interpretation to the statutory scheme. Henderson , 562 U.S. at 441. Granting Auer deference to VA regulations conflicts directly with the moral principles underlying the veterans benefit system

. The VA nevertheless urges us to deny en banc review because the petitioner did not raise this argument in his appeal. Resp. to Pet. for Rehearing at 11 (citing Pentax Corp. v. Robison , 135 F.3d 760, 762 (Fed. Cir. 1998)). The central foc us of the parties’ arguments was the interpr etation of § 3.156(c)(1). It is hard to imagine how a party can waive the question of the correct legal standard to apply in deciding that question. Cf. Winfield v. Dorethy
, 871 F.3d 555, 560 (7th Cir. 2017) (“ [W] aiver does not apply to arguments regarding the applicable standard of review. ”). I also note that, in determining whether the regulation is ambiguous, the panel expressly held that “canons of construction do not reveal its meaning.” Kisor
, 869 F.3d at 1367. The veteran

- friendly canon should have fallen within that category.
B ecause the petition raises a significant question about our standard of review, waiver does not preclude us from addressing the question en banc

. I note, moreover, that the abs ence of counsel at the early stages of veterans’ appeals and the fact that, even where counsel appear, they often do so pro bono, will help assure that we will continue to find process

- related excuses to avoid resolving this important question

. And, as a result, veterans will continue to be prejudiced by resort to Auer

. This case presents an ideal vehicle for us to consider the reach of Auer deference when it comes into conflict with the pro

veteran canon of construction. I respectfully dissent from the court’s decision not to take this issue up now.