UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS

NOS. 95-1068 AND 99-1250

HUGH D. COX, APPELLANT/PETITIONER,

V.

ANTHONY J. PRINCIPI,

SECRETARY OF VETERANS AFFAIRS, APPELLEE/RESPONDENT,

SAMUEL MOSLEY, INTERVENOR.

Before FARLEY, STEINBERG, and GREENE, Judges.

O R D E R

In an earlier opinion, dated October 6, 2000, in this case, the Court reversed a June 22, 1999,

decision of the Board of Veterans' Appeals; directed the Secretary to honor the 38 U.S.C. § 5904(d)

fee agreement and pay the appellant the sum of $3,381.60, to which the Court found him to be

entitled by law; and dismissed as moot the petitioner's petition for a writ of mandamus. Cox v.

Gober, 14 Vet.App. 148, 154 (2000) [hereinafter Cox v. Gober]. On November 7, 2000, the

Secretary filed a motion for reconsideration or, in the alternative, for a full-Court review.

The Secretary makes the following primary arguments: (1) The Court seemed to hold in Cox

v. Gober that decisions of the Comptroller General are binding upon the Department of Veterans

Affairs (VA), and any such holding violates the Constitutional separation of powers; (2) the

decisions of the Comptroller General cited by the Court are inapposite to the instant case and should

not be relied upon even as persuasive authority; and (3) the Court failed to address the Secretary's

contention that sovereign immunity prevents VA from making any payment to the appellant in this

case. Motion for Reconsideration (Mot.) at 2-11. On December 11, 2000, the Court stayed

proceedings in this case pending the outcome of a motion for reconsideration, or, in the alternative,

for a full-Court review, filed in Snyder v. Gober, 14 Vet.App. 154 (2000) [hereinafter Snyder I]. For

the reasons set forth below, the Court will lift the stay in this matter and proceed to act on the motion

for reconsideration. Concurrent with issuance of this order, the Court also issues an opinion (Snyder

v. Principi, __ Vet.App. ___, Nos. 98-2219 and 99-1164 (November 14, 2001) [hereinafter Snyder

II]) denying the Secretary's motion for reconsideration in Snyder I, supra. 

The Secretary's three primary arguments in his motion for reconsideration of Cox v. Gober

are identical to the first three arguments made in his motion for reconsideration in Snyder I. These

arguments are fully addressed in parts II.A., B., and C. of the Court's opinion in Snyder II, and for

the reasons set forth there, we find them equally unpersuasive here. Therefore, the Court will grant

the Secretary's motion for reconsideration, and will reaffirm all parts of the October 6, 2000, opinion
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in Cox v. Gober, with the exception of the part relating to the Secretary's first contention above,

specifically part III. of Cox v. Gober, 14 Vet.App. at 152-53, which will be superceded by part I. of

this order, although the result remains the same. Cf. Douglas v. Derwinski, 2 Vet.App. 435, 437

(1992) (en banc) (reaffirming panel opinion in Douglas v. Derwinski, 2 Vet.App. 103 (1992), except

for one part). In addition, the Secretary makes one additional argument not addressed in Snyder II.

The Court will address that point and reject it in part II. of this order.

I. Replacement Analysis

The relevant background for this case is stated in full in Cox v. Gober, 14 Vet.App. at 149-

151, and will not be repeated here. The Secretary concedes, and the Court agrees, that the fee

agreement entered into by the appellant and the veteran that is the subject of this appeal meets the

requirements of section 5904(d), thus entitling the appellant attorney to payment of 20% of the

amount of past-due benefits awarded to the veteran. Record (R.) at 73 (VA's December 4, 1992,

letter to the appellant stating that he was "entitled to a fee of 1/5 of past due benefits."); cf. In the

Matter of Fee Agreements of Smith, Cox, and Wick, 4 Vet.App. 487, 499 (1993) (In re Smith)

(holding that the Secretary was under no obligation to withhold and pay 20% of past-due benefits

where the fee agreement did not meet the requirements of § 5904(d)). It is also undisputed that the

entire award of past-due benefits was mistakenly paid by the Secretary directly to the veteran. See

R. at 73. The Secretary argues, however, that VA, its error notwithstanding, has no legal authority

to pay the appellant the 20% fee because all past-due benefits have already been paid to the veteran.

It is the Secretary's position that once all past-due benefits have been paid in a particular

claim, there are no funds remaining from which VA has the legal authority to make a disbursement

to the attorney. He argues that the appellant may be paid only out of the past-due benefits

specifically designated for payment to the veteran. Because that fund has been depleted, the

Secretary contends, in reliance on VA Gen. Coun. Prec. 27-92 (Dec. 9, 1992), that there is no remedy

for the Court to apply. However, as set forth in Snyder II, __ Vet.App. at ___, slip op. at 12, and as

is inherent in 38 U.S.C. § 5904(d)(2)(A)(i) and in 38 C.F.R. § 20.609(h) (2000), the Secretary is

obligated to withhold and pay the agreed-upon fee directly to the attorney and that duty also creates

a corresponding right for the attorney to collect that fee. See In re Smith, 4 Vet.App. at 495-96; In

the Matter of Fee Agreement of Smith, 5 Vet.App. 307, 308 n.3 (1993) (en banc order denying en

banc review) (Steinberg, J., dissenting). Thus, in the case of a 20% contingency fee agreement, the

veteran and the attorney each have a separate entitlement; the veteran is entitled to 80% of a fixed

amount (i.e., the past-due benefits awarded), and the attorney is entitled to 20% of that fixed amount.

The attorney's entitlement to his fee is no more "depleted" than would a veteran's right to VA

benefits be depleted had VA erroneously paid his benefits to some other veteran. Surely, the second

veteran would be the recipient of an overpayment, and unless and until VA recouped the money from

the second veteran, VA funds for the payment of benefits would be diminished, but that in no way

would eliminate VA's obligation to pay the first veteran the benefits to which he is entitled. Whether

or not the Secretary decides to try to recoup the erroneous payment is an entirely different matter.

See 38 U.S.C. § 5314 (authorizing the Secretary to recoup overpayments made to a benefits recipient

by offsetting future payments).
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The Secretary concedes in his supplemental memorandum that VA has authority to seek

recoupment from the veteran of the money wrongfully paid to him, but argues that VA has the

authority to pay the attorney only from the funds that it might happen to recover from the veteran.

Supplemental Memorandum at 12-14. This argument is based upon VA Gen. Coun. Prec. 27-92,

which concluded that "VA has no legal authority to pay attorney fees when payment of the complete

amount of past-due benefits has been made to the claimant." However, as we hold today in Snyder

II, the fact of an erroneous payment to a veteran is immaterial to the Secretary's responsibility to

make a payment to which there is lawful entitlement. See Snyder II, __ Vet.App. at __, slip op. at

9 (citing 2 Comp. Gen. 102, 106 (1922) (establishing that, where Veterans' Bureau made erroneous

payment to person not entitled thereto and where another person is clearly entitled to that payment,

it is "duty" of Director of Veterans' Bureau to "make payment to the rightful claimant . . . irrespective

of recovery by the government of the amount erroneously paid . . . even though it involves the

government in a double payment, provided, of course, there has been no contributing negligence or

other fault chargeable to the person claiming the payment"); 66 Comp. Gen. 617, 619 (1987) (same,

as to payment to Army construction contractor); 37 Comp. Gen. 131, 133 (1957) (same, as to

payment of death gratuity under Servicemen's and Veterans' Survivor Benefits Act); 19 Comp. Gen.

104, 105 (1939) (same, as to Social Security Act payment)). The Gen. Coun. Prec. 27-92 is plainly

in conflict with the holding in Snyder II and therefore cannot stand. See Snyder II, __ Vet.App. at

__, slip op. at 9 ("Secretary's historic reliance on VA Gen. Coun. Prec. 27-92 . . . is plainly in conflict

with our holding here and hence is invalid").

II. Secretary's Additional Argument

The Secretary argues, in a section of his motion entitled "This Court Misinterpreted

Controlling Precedent on Sovereign Immunity" (emphasis added), inter alia, that Cox v. Gober:

[A]ttempt[ed] to distinguish two decisions of the United States Court of Appeals for

the Eighth Circuit, Pittman v. Sullivan, 911 F.2d 42 (8 Cir. 1990)[,] and Russell v. th

Sullivan, 887 F.2d 170 (8 Cir. 1989). These cases relied on Ruckelshaus[ v. Sierra th

Club, 463 U.S. 680 (1983),] to support a conclusion that the United States is not

liable for payment of attorney fees when such an award would have to be made from

general agency funds as opposed to the past-due benefits from which it should have

been paid.

This Court distinguished Russell and Pittman stating that those cases were

decided based upon the "finding that payment of attorney fees was committed by

statute to the responsibility of the Secretary of Health and Human Services and was

not subject to judicial review." Cox [v. Gober, 14 Vet.App. at 154]. That analysis

is incorrect. It is true that both Pittman and Russell held that payment of attorney

fees for work done at the administrative level was subject to the discretion of the

Secretary of HHS and was not reviewable. However, inherent in the holdings of both

cases is the view that attorney fees could be awarded for work in court. Pittman,

911 F.2d at 46; Russell, 887 F.2d at 171-72. . . . 
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Thus, while the Eighth Circuit in Russell did find that the district court lacked

jurisdiction to decide the attorney-fee question in that case because the district court

had no authority to review administrative-fee-payment decisions of the Secretary of

HHS, it did not rely on Ruckelshaus for this proposition. Instead, the court went on

to decide that, based upon Ruckelshaus, there was an additional basis for denying

payment of attorney fees, stating:

Finally, as the district court noted, even assuming it had jurisdiction

in this case, there is no waiver of immunity that allows the Secretary

to pay this fee. Since no funds are left for payment to Russell,

ordering the Secretary to pay [the attorney's] award would require

payment out of general social security funds. The United States is not

liable for such a payment absent a specific waiver of sovereign

immunity. See Ruckelshaus v. Sierra Club, [supra].

Russell, [887 F.2d] at 172.

Mot. at 7-9.

The Secretary also cites language from Pittman, 911 F.2d at 46, to the same effect. He then

quotes further language from Pittman, supra, about the directive of the Social Security

Administration's Programs Operating Manual System that provides that attorneys are to paid first

in cases of mistaken release of funds and that recoupment efforts from the claimant are to commence

thereafter. The Eighth Circuit rejected this concept (or, rather, stated in dictum that it would reject

this concept if the case were not disposed of on other grounds) on the ground of a lack of waiver of

sovereign immunity. Ibid. The Secretary states that this supports the notion that, even if the Court

believes that 38 C.F.R. § 20.609(h) "creates a legal debt and therefore provides authority for VA to

pay [the withheld funds] out of other funds", the Secretary may not do so because of the lack of a

waiver of sovereign immunity. Mot. at 10. The Secretary concludes by stating that "[t]he absence

of any discussion by the panel of the above authority provides yet another reason for reconsideration

. . . of the panel's decision." Mot. at 11. 

As to the Secretary's statement about "[t]he absence of any discussion by the panel of the

above authority", a simple scan of Cox v. Gober will reveal considerable discussion of these cases.

See Cox v. Gober, 14 Vet.App. at 153-54. Although the Secretary might not agree with our

interpretation of these cases, we trust that, in the future, his counsel will be more prudent in

characterizing the content of our opinions.

As to the merit ofthe Secretary's contention regarding these cases, the Secretary is, no doubt,

aware that Eighth Circuit caselaw is not binding on this Court. The Secretary's attempts to place

greater weight on this caselaw because, he claims, it interpreted Supreme Court precedent, are

unpersuasive. Neither opinion cited Ruckelshaus for the proposition on which the Secretary relies,

namely, that he is prevented from making any payment to the attorney because of a lack of a waiver
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of sovereign immunity. Rather, both opinions cite Ruckelshaus for the general proposition that the

United States is not liable for a payment absent a specific waiver of sovereign immunity. See

Pittman, 911 F.2d at 46; Russell, 887 F.2d at 172. That theory is not in dispute. Even if the Eighth

Circuit had interpreted Ruckelshaus in the manner described by the Secretary, it would not make

those opinions binding on this Court.

Second, the Secretary's interpretation of this Eighth Circuit caselaw relies on his

interpretation of sovereign immunity in the context of this case, i.e., that he has no authority to pay

attorney fees out of other funds. However, as set out in part II.B.1.c. of Snyder II, __ Vet.App. at

___, slip op. at 7-10, this interpretation is incorrect. The Court is not ordering the Secretary to pay

the attorney fee out of other funds but rather out of the withheld amount, which amount has remained

undisturbed in the Secretary's compensation and pension account. The amount erroneously released

did not come from the withheld past-due benefits, because such a release of funds would violate the

Secretary's obligations to withhold this amount. As detailed in Snyder II, __ Vet.App. at ___, slip

op. at 13, the full amount of the withheld past-due benefitsis available to be paid, and the Secretary's

sovereign-immunity arguments lack merit. Therefore, the Secretary's interpretation of this Eighth

Circuit precedent is equally lacking in merit.

Finally, the Secretary's substantive arguments as to the Eighth Circuit caselaw are off base.

The Secretary states that Cox v. Gober incorrectly interpreted the Eighth Circuit precedent, because

"inherent in the holdings of both cases is the view that attorney fees could be awarded for work in

court." Mot. at 8. However, neither Pittman nor Sullivan involved fees for work in court, see

Pittman, 911 F.2d at 46; Sullivan, 887 F.2d at 171, and, therefore, any statement they might make

on this point is dictum. In both cases, the fee at issue was for work done at the administrative level,

and the Eighth Circuit noted in each case, as this Court accurately stated in Cox v. Gober, that "the

payment of attorney fees was committed by statute to the responsibility of the Secretary of Health

and Human Services and was not subject to judicial review." Cox v. Gober, 14 Vet.App. at 154.

The Secretary's argument fails to take account of the fundamental difference between the situations

described in Pittman and Sullivan and the situation in this case. As the Court explained in Cox III,

both Pittman and Sullivan involved cases where the payment of attorney fees was a matter of

discretion and was not subject to judicial review, whereas, in the instant situation, "38 C.F.R. §

20.609(h) leaves no such discretion to the Secretary in the payment of the attorney fees involved in

the instant matter." Cox v. Gober, 14 Vet.App. at 154. Therefore, the Court rejects the Secretary's

arguments regarding this Eighth Circuit caselaw.

Upon consideration of the foregoing, it is

ORDERED that the Secretary's motion for reconsideration is granted. All parts of the

October 6, 2000, opinion are reaffirmed, with the exception of part III., 14 Vet.App. at 152-53,

which is superceded by part I. of this order. In all respects, the result remains the same.

DATED: November 14, 2001 PER CURIAM.