Legality of State Payments to

Attorneys Representing Veterans

A state veterans agency’s payment of fees exceeding $10 to attorneys for representing veterans 

under laws administered by the Veterans Administration does not violate federal laws governing the practice of attorneys before the Veterans Administration. The $10 limit and other 

restrictions on attorney’s fees imposed by federal law do not apply to payments by third 

parties.

January 28, 1986

M e m o r a n d u m O p i n i o n f o r t h e G e n e r a l C o u n s e l ,

V e t e r a n s A d m i n i s t r a t i o n

This responds to your request that this Department consider whether legislation recently enacted by the state of Oregon authorizing payment by the Oregon 

Department of Veterans’ Affairs to attorneys representing veterans under laws 

administered by the Veterans Administration violates 38 U.S.C. §§ 3404 and 

3405.1 Payments to attorneys under the Oregon statute are likely to exceed the 

$10 fee limit imposed by § 3404. Although we view the question as close, we 

have concluded that 38 U.S.C. §§ 3404 and 3405 do not bar payments by the 

Oregon Department of Veterans’ Affairs to attorneys representing veterans.

Sections 3404(a) and (b) provide for the “recognition” of attorneys by the 

Administrator of the Veterans Administration (Administrator), and allow the 

Administrator to suspend or exclude “unprofessional, unlawful, or dishonest” 

attorneys from practice before the Veterans Administration.2 Section 3404(c)

1 Chapter 790, Oregon Laws 1985 (to be codified at Oregon Rev. Stat. 406.030) provides, in relevant part:

(1) The Director o f Veterans' Affairs, on behalf of this state, may, with agreem ent of the 

Attorney General, contract with attorneys for the provision by the attorneys of services as 

counsel for war veteran residents of Oregon in the preparation, presentation and prosecution o f 

claims under laws administered by the United States Veterans Administration.

* * *

(3) Insofar as possible, the expense of services provided under a contract authorized by this 

section shall be paid by the state to an attorney from funds available to the Department of 

V eterans’ Affairs.

Provisions concerning the representation of veterans in claims before the Veterans Administration are set out 

in 38 U.S.C. §§ 3401-3405.

2 Section 3404 provides in full:

(a) The Administrator may recognize any individual as an agent o r attorney for the preparation, 

presentation, and prosecution of claims under laws administered by the Veterans’ Administration. The Administrator may require that individuals, before being recognized under this section.

Continued

i
provides that the Administrator pay attorneys representing veterans no more 

than $10 for each claim. Section 34053 establishes criminal penalties for 

soliciting, contracting, charging, or receiving “any fee or compensation except 

as provided in section[] 3404” or another provision not relevant here.4 Congress first enacted fee limitations for veterans’ attorneys in 1862. 12 Stat. 568. 

The current limit of $10 was set in 1864, 13 Stat. 389, and has remained 

unchanged since that day.

In determining whether the recently enacted Oregon legislation is legal, we 

begin with the language of the federal statutes.5 There is no dispute that the 

statutory language prohibits the payment by a veteran of an attorney’s fee in 

excess of $10 with respect to any one claim. Indeed, §§ 3404 and 3405 do not 

allow any direct payment to the attorney by the claimant. As noted, these 

provisions instruct the Administrator to determine and pay fees, and provide 

that the fees “shall not exceed $10 with respect to any one claim” and “shall be 

deducted from monetary benefits claimed and allowed.”

Whether the statutory language also forbids payments in excess of $10 by 

third parties to attorneys representing veterans is more problematic. Section 

3404(c), the prohibitory provision, does not address fees paid by third parties. 

Instead, this provision simply limits the fees that can be deducted from benefits 

allowed in successful claims, and provides that the Administrator determine 

and deduct those fees.

Section 3405 is somewhat less clear. As noted, § 3405 imposes criminal 

penalties for, among other things, receiving “any fee or compensation except as

2 ( .. . continued)

show that they are o f good moral character and in good repute, are qualified to render claimants 

valuable service, and otherwise are com petent to assist claim ants in presenting claims.

(b) The Adm inistrator, after notice and opportunity for a hearing, may suspend or exclude from 

further practice before the Veterans’ Adm inistration any agent or attorney recognized under this 

section if he finds that such agent or attorney (1) has engaged in any unlawful, unprofessional, or 

dishonest practice; (2) has been guilty of disreputable conduct; (3) is incompetent; (4) has 

violated o r refused to comply with any o f the laws adm inistered by the Veterans' Administration, 

or w ith any o f the regulations or instructions governing practice before the Veterans’ Administration; or (5) has in any manner deceived, misled, or threatened any actual or prospective claimant.

(c) The Adm inistrator shall determine and pay fees to agents or attorneys recognized under this 

section in allow ed claim s for monetary benefits under the laws administered by the Veterans’ 

A dm inistration. Such fees (1) shall be determined and paid as prescribed by the Administrator;

(2) shall not exceed $10 with respect to any one claim; and (3) shall be deducted from monetary 

benefits claim ed and allowed.

3 Section 3405 provides in full:

W hoever (1) directly or indirectly solicits, contracts for, charges, or receives, or attempts to 

solicit, contract for, charge, or receive, any fee or com pensation except as provided in sections 

3404 or 784 o f this title, or (2) wrongfully withholds from any claimant o r beneficiary any part of 

a benefit or claim allowed and due him , shall be fined not more than $500 or imprisoned at hard 

labor for not more than tw o years, or both.

4 38 U.S.C. § 784 provides jurisdiction in the United States district courts over insurance claims by veterans 

against the V eterans' Administration. Section 784(g) allows the court, as part of its judgm ent, to allow 

reasonable attorney’s fees Mnot to exceed 10 per centum o f the amount recovered and to be paid by the 

V eterans Adm inistration out o f the payments to be made under the judgm ent or decree at a rate not exceeding 

one tenth o f each o f such paym ents until paid.”

3 The Suprem e Court has repeatedly em phasized that, in construing a statute, the place to begin is with the 

plain language o f the provision. See, e.g., United States v. Apfelbaum, 445 U.S. 115 (1980); see generally 2A 

Sutherland, Statutory Construction § 46.01 (4th ed. 1973).

2
provided in section[] 3404” or another inapplicable provision. This language 

may be reasonably interpreted as merely imposing criminal penalties for conduct that violates § 3404(c) (i.e., receipt of a fee in excess of $10 from a veteran 

or the Veterans Administration). Under this interpretation, because § 3404(c) 

does not address the receipt of fees from third parties, § 3405 would not impose 

any penalty for this conduct.6 This reading would allow third-party payment of 

veterans’ attorney’s fees because the third party would not contract for any fee 

to be taken from the claimant, nor would the attorney solicit, contract for, 

charge, or receive any fee from the claimant. It is also possible, however, to 

construe § 3405 as prohibiting the receipt of any fee other than those lawfully 

made under § 3404(c), a reading that would bar the third-party funding of 

veterans’ lawyers envisioned in the Oregon statute.

Because the statutory language is not wholly clear on the point at issue, it is 

appropriate to examine the statute’s legislative history. In our view, the limited 

legislative history of § 3404 strongly supports the view that the original purpose of these provisions was to protect veterans from unscrupulous lawyers7 

and to keep lawyers from substantially diminishing any benefits granted to 

veterans through the claim process.8 In Walters v. National A ss’n o f Radiation

Survivors, 473 U.S. 305 (1985), all members of the Supreme Court agreed that 

protection from unscrupulous lawyers was the principal purpose of these 

provisions.9

Obviously, the goal of protecting veterans from unscrupulous lawyers and 

the desire to protect benefits recovered by a veteran suggest no reason to bar 

third-party funding of attorneys representing veterans.10 It must be acknowl6 Such a reading would put a parallel construction on the two parts of § 3405. The second part, dealing with 

the l4wrongful[] withholdfing]” of benefits, is explicitly directed towards withholding from “any claim ant or 

beneficiary.”

7 In Calhoun v. Massie, 253 U.S. 170, 173-74 (1920), the Court explained generally that such limits 

“protect just claimants from extortion or improvident bargains.”

%See Cong. Globe, 37th Cong., 2d Sess. 2101, 3119 (1862). See also Cong. Globe, 41st Cong., 2d Sess. 

1967, 4459 (1870). In discussing the limited fee for veterans' agents or attorneys on pension claims the five 

dollar (at that time) fee was referred to as “sufficient compensation.” The discussions clearly show the intent 

of each speaker to “protect the soldier from the rapacity of these agents.” In less charitable moments agents 

and attorneys are referred to as “vampires,” an “infamous gang of cut throats,” “sharks,” and a “piratical 

crew.” Yet it is repeatedly noted that “the object of [the limit on fees o f agents and attorneys in claiming 

pensions and other allowances] . . . is to prevent extortionate charges,” to prevent fraud, and to make sure it is 

“the soldier” who gets the money “and not the attorney.”

9 In Walters, the Supreme Court rejected a due process challenge to the restriction imposed by §§ 3404 and 

3405; the holding of the case does not control the issues raised-when a state seeks voluntarily to provide 

counsel. The Supreme Court upheld the facial constitutionality o f §§ 3404 and 3405. The constitutionality o f 

these provisions as applied to specific individuals or identifiable groups remains an open question. 473 U.S. 

at 336 (concurrence), 358 (dissent).

10 However, any payment that directly or indirectly diminished the veteran's benefits would be inconsistent

with this purpose. See Richman v. Nelson, 49 N.Y.S.2d 514, 516 (1944) (payment to attorney from veteran’s 

estate through the veteran’s sister, acting as a committee, would “circumvent the statute”); but see Fuller v. 

Dittmeier, No. 82-0648 C (E.D. Mo. Mar. 1, 1983) (unpublished) (decision that father of veteran could pay

attorney to represent son); Welty v. United States, 2 F.2d 562 (6th Cir. 1924) (criminal conviction for

violating $3 limitation on attorney’s fees for representing W ar Risk Insurance claimants reversed on grounds

that father was third party not covered by statute). Fuller and Welty are not directly on point, however, 

because § 3405’s ten-dollar limit applies to fee payments from any recipient or beneficiary. An immediate 

family member might not be an independent third party in paying attorney's fees for a veteran.

3
edged, however, that another goal of the federal statutes, as explained in 

Walters, might be frustrated by third-party payments such as those that will be 

made under the Oregon statute. In Walters, the Court concluded that “even 

apart from the frustration of Congress’ principal goal of wanting the veteran to 

get the entirety of the award, the destruction of the fee limitation would bid fair 

to complicate a proceeding which Congress wished to keep as simple as 

possible.” 473 U.S. at 326. Recognizing a relationship between the twin goals 

of informality and the delivery of undiminished benefits to the Veteran, the 

Court noted:

It is scarcely open to doubt that if claimants were permitted to 

retain compensated attorneys the day might come when it could 

be said that an attorney might indeed be necessary to present a 

claim properly in a system rendered more adversary and more 

complex by the very presence of lawyer representation. It is 

only a small step beyond that to the situation in which the 

claimant who has a factually simple and obviously deserving 

claim may nonetheless feel impelled to retain an attorney simply 

because so many other claimants retain attorneys. And this 

additional complexity will undoubtedly engender greater administrative costs, with the end result being that less Government money reaches its intended beneficiaries.

Id.

Notwithstanding Congress’ desire to preserve the informality of benefits 

proceedings, we do not believe that this purpose is sufficient to support the 

conclusion that third-party payments under the Oregon legislation would be 

illegal.

The barrier erected under §§ 3404 and 3405 against “[t]he regular introduction of lawyers into the proceedings” was not made absolute. Lawyers willing 

to provide representation pro bono or for $10 or less are clearly allowed under 

§§ 3404 and 3405. Indeed, §§ 3402 and 3403 expressly authorize certain 

“representatives” and “agents” to participate in the “preparation, presentation, 

and prosecution” of veterans claims, provided that no fee is extracted from the 

veteran.

Section 3402 allows the Administrator to recognize representatives of veterans’ organizations and the Red Cross “in the preparation, presentation, and 

prosecution of [veterans’] claims,”11 provided that such representatives certify

11 Section 3402 provides in relevant part:

(a) (1) The A dm inistrator may recognize representatives of the American Red Cross, the 

Am erican Legion, the Disabled American Veterans, the United Spanish W ar Veterans, the 

Veterans of Foreign W ars, and such other organizations as he may approve, in the preparation, 

presentation, and prosecution of claim s under the laws adm inistered by the Veterans’ Administration.

(2) The A dm inistrator may, in h is discretion, furnish, if available, space and office facilities 

for the use o f paid full-time representatives o f national organizations so recognized.

(b) No individual shall be recognized under this section —

Continued

4
to the Administrator “that no fee or compensation of any nature will be charged 

any individual for services rendered in connection with any claim.” The statute 

authorizes the Administrator to provide space and office facilities for such 

“paid, full-time representatives.” Id. (emphasis added).12 Similarly, § 3403 

grants the Administrator power to recognize an individual for the preparation, 

presentation, and prosecution of any particular claim for benefits after certification that no fee will be charged any individual for services rendered. Although these “representatives” and “agents” need not be lawyers, it seems clear 

that lawyers may serve in that capacity. In fact, we are informed that veterans 

organizations have used and currently are using attorneys as representatives.13 

Legal aid society attorneys also represent veterans in claims before the Veterans Administration. Thus, because Congress approved of some participation by 

attorneys, it seems doubtful that Congress would have wished to bar representation by lawyers furnished free of charge to the veteran by a state such as 

Oregon.

Finally, general principles of statutory construction support a narrow reading 

of §§ 3404 and 3405. Section 3405 provides substantial criminal penalties, and 

under the widely recognized “rule of lenity” criminal provisions subject to 

more than one reasonable construction should be interpreted narrowly and 

ambiguity should be resolved in favor of lenience. See, e.g., Bifulco \ . United

States, 447 U.S. 381 (1980); 3 Sutherland, Statutory Construction §§ 59.03 et

seq. (4th ed. 1973). This principle of construction supports the view that these 

provisions only restrict payments from the claimant or beneficiary.

For the foregoing reasons, this Department believes that the Oregon statute 

providing funds for attorneys representing veteran claimants does not violate

38 U.S.C. §§ 3404 and 3405.

C h a r l e s J. C o o p e r

Assistant Attorney General

Office o f Legal Counsel

11 (. continued)

(1) unless he has certified to the Administrator that no fee o r compensation o f any nature will 

be charged any individual for services rendered in connection with any claim; and

(2) unless, with respect to each claim, such individual has filed with the Administrator a 

power of attorney, executed in such manner and form as the Administrator may prescribe.

12 38 U.S.C. § 3402(a)(2). The extensive use o f full-time paid service agents from veterans’ organizations 

was noted by the Supreme Court in Walters. 473 U.S. at 311-12. The Court noted that 86 percent o f all 

claimants are represented by service representatives. Id. at 312 n.4.

13 In a footnote, the Walters Court referred to testimony by two attorneys, one who had handled claims by 

veterans as a law student and another who was a staff member of the appellee veterans’ organization, “Swords 

to Ploughshares.” 473 U.S. at 324 n .ll.

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