UNITED STAT ES COURT OF AP P EALS FOR VETERANS CLAIMS

N O

. 13-1240

J A C Q U E L I

N E S. R O B E R

TS , A P P E L L

A N T ,
V

. R O B E R T A. M C D O N

A L D , S E C R E TA R Y O F V E TE R

A N S A F F A I R S , A P P E L L E E

.
On Appea l from the B oard of Veter ans' Appea ls (De cided Oc tober 7, 2014)

Sandra E. Booth, of Columbus, Ohio, was on the brief for the a ppellant. Tammy L. Kennedy , Acting Gene ral Counsel; Mary Ann Flynn , Assistant Gene ral Counsel; and Christ opher O. Adeloye , Acting Deputy Assistant Ge n era l Counsel, all of Washington, D.C.,
wer e on the br ief for

the appe llee.

Be fore KASOL D, Chief Judge , and MOORMAN a nd BA RTL EY, Judges

. MOORMAN, Judge : The appellant, J acque line S. Roberts, the surviving spouse of veter an Clifford L

. Roberts, seeks review o f a De cembe r 28, 2012, decision of the Boa rd of Veter ans' Appea ls (B oard) that deter mined that the offse t of the appellant' s annuity benef its under the Survival Be nefits Plan (SBP), 10 U.S.C. §§ 1447-1455, ag ainst retroa ctive pay ment of depende ncy and indemnity compensa tion (DI C) is valid. The appellant' s SBP pay ments beg an y ear s befor e her awa rd of DI C benef

its. The Boa

rd relied exclusively on VA reg ulation 38 C.F.R. § 3.658 in reduc ing the appellant' s DI C awa

rd by withholding a retroa ctive DI C pay ment of $30,264.86 based on the appellant' s rec eipt of S BP p ayments during the same period. This panel direc ted supplemental briefing from the parties reg arding t h e authority for the Boa rd' s reduc tion of DI C benef its in this

case
. Be cause the DI C awa rd was not subject to an offse t under th e re gu l at i o n re lied on by the Boa rd, the Court will vaca te the B oard' s decision and r emand the ma tter for rea djudication.I. F ACTS

Mr. Roberts serve d on active d u t y in the U.S. Army from October 1949 to J une 1951 and from April 1953 to J anuar y 1972. Record (R.) at 825-30. The veter an and the appellan t we re marrie d in September 1982 and rema ined marrie d until his death in April 2005. Prior to his death, in July 2003, the veter an, as part of his elec tion to pa rticipate in the SBP, authorized VA to de duct $109.45 per month from his VA compensa tion benef its to pay for t h e S BP premiums. R. at 354. Acc ordi n g t o t h e elec tion form, the deductions wer e to be forwa rded to the Def

ense Financ e and Acc ounting Ser

vice ( DFA S). Id

. After the veter an died, the appellant filed a claim for DI C in May 2005. R. at 508-11. She beca me entitled to SBP annuity pay ments from the Depa

rtment of Def

ense (DoD) , eff

ective April 8, 2005. I n Aug ust 2006, to " ensure proper pay ment of the [S BP] a

nnuity ," the DFA S c ontacted VA
to inquire whether the appellant was entitled to DI C. R. at 371. The letter noted: "I f it is deter mined that there have been SBP overpa y ments to the annuitant based on a DI C entitlement, we will notify
y ou of the amount of money that we must rec oup from the annuitant' s DI C a nd the proposed dates for submission to DFAS [C leveland]." Id

. The Boa rd ultimately g rante d service connec tion for the cause of the veter an' s d ea th and

awa rded DI C, pursuant to 38 U.S.C. § 1310, in Fe bruar y 2010. R. at 94-105. The following month, the VA reg ional office (RO) assigne d an effec tive date of April 15, 2005. R. at 76. Acc ording ly , the appellant was found entitled to monthly DI C pay ments, eff ective May 1, 2005. R. at 5. Shortly there afte r, t h e R O contac ted DFA S and was informed that the appellant had rec eived a total of $30,264.86 in SBP pay

ments betwee n April 2005 and Mar ch 2010. R. at 83. I n a letter dated May 2010, the RO notified the appellant of her monthly DI C awa rd amount and the pa

y ment start date of

May 1, 2005. R. at 70. The letter also stated: Why Have We Withheld B enefits?

Yo u are not allowed to rec eive Special Be nefits P rog ram pay and DI C at t h e s am e time. The following will provide an e x planation of how this works: For now, we have withheld $30,264.86, which is the amount paid to y o u fr o m t h e Special Be nefits Prog ram t h roug h Depa rtment of Def

ense Financ e Service s. We must do thi s to prevent a

double pay

ment.

2R. at 71. I n J uly 2010, the appell an t fi l ed a timely Notice of Disag ree ment as to the SBP offse t

ag ainst her DI C benef

its. R. at 64-69. I n an Aug ust 2010 Sta t em en t o f t h e C ase (SOC), the RO found that the offse t and withholding of the retroa ctive DI C was corr ect based on 38 C.F.R. § 3.658. R. at 53. The RO stated that § 3.658 "is the law being upheld in the VA' s decisi o n to offse t the claimant' s DI C be nefits with w hat she has alre ady been paid under the Survivor' s Be nefit Prog ram (SBP)." Id

. She appea led to the B oard.

1 I n the decision here on appea l, the Boa rd deter mined that offse t s i n DIC pay ments are

cover ed by § 3.658, that the appellant' s "SB P pay ments are considere d death co m p en s ati on or benef its under FECA for the purposes of that reg ulation," and that, there fore , "the offse t of the SBP
pay ments ag ainst the appellant' s DI C was prope r under 38 C.F.R. § 3.658 (2012)." R. a t 5- 6. The Boa rd denied the appellant' s claim for rele ase of the withheld DI C pay ments, finding that there wer e "no exceptions to that reg ulation that apply to the appellant" beca

use she did not rema

rry afte r ag e 57. Id . at 8 (discussing 38 U.S.C. §§ 103(d)(2)( B) , 1331(e) ).

II. ANALYSIS On appea l, the appellant arg ues that the Boa rd err ed in rely

ing on 38 C.F.R. § 3.658 and that the Boa rd' s relianc e on an inapplicable reg ulation to support its de cision is e rror as a matter of law and prejudicial to her. She asser ts that based on the nature of t he S BP, t he Board erre d in finding that pay ments made by the DoD under an SBP plan are "de ath compensa tion or benef its under the

VA regulation § 3.6 58 contains explicit pr ovisions explainin g the circum stances un der w hich DIC is subjec t 1 to an o ff set: (a) When an aw ard of [DIC] is m ade covering a per iod for w hich death com

pensation or benefits
un der the Feder al Em

plo y ee's Com

pensation A ct [(FE CA )], based on m ilitary service, hav e been paid to the sam e pay ee based on the sam e death, the a w ard of [DIC] w ill be m ade subjec t to an off set of pay m ents of death com

pensation or benefits un der the Feder al Em plo y ees' Com

pensation A ct over the
sam e p erio d. (b) When an aw ard of

[DIC] is m ade covering a period f or w hich death benefits hav e been paid to the sam e pay ee based on the d eath of another spouse the a w ard w ill be m ade subjec t to an offs et of pay m ents o f d eath pension or com pensation, or [DIC] over the sa me per iod in the case of the o ther spouse.
38 C.F.R. § 3. 65 8 ( 20 14 ).

3[FECA]" under § 3.658. Appellant' s Aug

. 11, 2014, Response (Resp.) to Court Orde r at 3 (quoting

R. a t 5)

. She further contends that there is no statutory authority for a reduc tion of a DI C awa rd or the withholding of DI C funds. The appellant maintains that the rele vant statutor y authority that addre sses the situation wher e a surviving spouse is entitled to both DI C and S BP i s fo u n d i n 10 U.S.C. § 1450(c) , which allows a reduc tion in the SBP annuity pay ment, not DI C. She maintains that section 1450(c ) confe rs specific authority on the DoD to rec oup SBP pay ments, but only in limit ed and specific circ umstances that do n o t i n cl u d e a reduc tion in DI C pay ments or the withholding of r etroa ctive DI C pay ments, and sets for

th specific pr ocedur es the DoD must follow in providing the spouse with notice of any rec oupment of SBP pay ments. Id

. at 5-8. She asser ts that she is "e ntitled to a

n acc ounting of, and potential cre dit f or, all premiums paid

. . . ag ainst the total offse t amount which the Boa rd enfor ced throug h its Dec ember 2012 decision" curr ently on appea l. Id . at 6 n.2. T h e S ecr etar

y conce des t hat t he Board incorre ctly relied on § 3.658(a) in deter mining tha t the offs et wa s v alid but maintains that other statutory and reg ulatory provisions authorize VA to deduct the SBP annuity pay ments from the DI C awa

rd and that, there fore , the Boa rd' s err or was not prejudicia l to the appellant. Secre tary ' s Aug

. 12, 2014, Resp. Be fore this Court, the Secre tary relies

on 38 U.S.C. § 5314 (" I ndebtedne s s o ff s et s ") and its implementing VA reg ulation 38 C.F.R. §§ 1.911(a) and 1.912a(a ). The Secre tary further arg ues that the appellant was notified of the offse t in May 2010 and that, if the Court deter mines that the notice does not comply with those provisions,
any er ro r is not prejudicia l to the appellant beca use she "f

ully pursued her rig ht to dispute the indebtedness deter

mination, and did so in a timely manner at the administrative level." Secre tary ' s Aug

. 12, 2014, Resp. at 4. The Secre tary also relies on a "Me morandum of Under standing Be tween the Depa rtment of Veter ans Affa irs and the Depa rtment of Def

ense–Retire d Pay and Survivor Annuitie s " ( M O U ) , w h ic h c o n ta ins provisions conce rning DI C and SBP. See Depa rtment of Def

ense Financ ial Manag ement Reg ulation 7000.14.R, vol. 7B, app. G, art. I -V (Oc t. 2010) (" MOU" ). The 2 Secre tary points to specific MOU provisions pursuant to which DoD is require d "to p ay o n ly the

T he MOU, sig ned by the DFA S dire ctor and the VA dire ctor of the Co mp e ns a tion and P ension Service, 2 allow s for either par ty to pr op ose am endm ents that, upon agreem ent by bo th par ties, beco m e eff ective; and allow s either par ty to term inate the MOU upon a 30 -day notice. Id . at G -10.

4amount of SBP that ' exceeds [a] DI C awa rd' " and "V A i s re q uired ' to [r] ecoup overpa y ments resulting from VA

. . . awa rds paid prior to the actua l reduc tion in the DFA S acc ount, provided the DFA S made the reduc tion on a timely basis upon rec eipt of the VA awa rd transac tion.'" Secre tary ' s Aug . 12, 2014, Resp. at 5 (quoting MOU at G- 3 (ar t. I I , sec. 2- 1(G)) ). The Secre tary asser

ts that "SB P is the benef

it that is reduc ed by the g rant of DI C pay ments" but tha t he re "be cause SBP pay ments wer e previously disbursed, in full, past-due DI C benef its are reduced i n order to eff

ectua te t he Tit le 10 offse t (thus ensuring Appellant does not impermissibly

rec eive full SBP and DI C benef its.)." Secre tary ' s Aug

. 12, 2014, Resp. at 5. The Secre tary does not discuss the statutes rele vant to "T itle 10 offset." Ba sed on the Secre tary ' s conce ssion that the Boa rd relied on an inapplicable VA reg ulation in c oncluding that the offse t a g ainst the appellant' s DI C a war d was valid, the Court c oncludes that

a rema nd is war rante d. Both the RO and the Boa rd relied solely on the inapplicable VA reg ulation in reduc ing the appellant' s DI C awa rd. This Court's case law require s us to ensure compliance with

rea sonable notice and fa ir proce ss. See Thurber v. Brown , 5 Vet.App. 119 (1993) (noting that the "e ntire thrust of the VA' s nonadver sarial claims sy stem is predic ated upon a structure which provides for notice and an opportunity to be hear d at virtually ever y step in the proce ss" and announcing the "f air proc ess" fra

mework) ; see also Sprinkle v. Shinsek i , 733 F.3d 1180, 1185- 87 (F ed. Cir. 2013) (discussing the fair proce ss doctrine in the context of evidenc e develope d by the RO on rema nd and discussed in a Supplemental Statement of the Case (SSOC)); Austin v. Brown , 6 Vet.App. 547, 551 (1994). This Court has expl ai n ed t hat "c rea ting a proce dural rig ht in the name of fair proce ss principles is primarily based on the underlying conce pt of the VA adjudicator y scheme , not the U.S. Constit ution." Pricke tt v. Nicholson , 20 Vet.App. 370, 382 (2006). There is statutory and reg ulatory authority in the VA adjudicator y scheme that provides the appellant a rig ht to rec eive an SOC that complies with the dictates of V A' s reg ulation, i.e., the SOC must discuss how applicable laws and
reg ulations aff

ect the RO' s deter

mination on eac h issue. See 38 U.S.C. § 7105(d)( 1) (providing that

a claimant is entitled to an SOC that "sha ll include

. . .[a] citation to pertinent laws and reg ulations and a discussion of how such laws and reg ulations aff ect the ag ency ' s decision" ); 38 C.F.R. § 19.29, (b), (c) (2014) (SOC "must be complete enoug h to allow the appellant to prese nt written and/or oral

5arg ument befor e the Boa rd" ; and must contain, inter alia, a "s u m m ar y o f the applicable laws and
reg ulations, with appropr iate citations, and a discussion of how such laws and reg ulations aff ect the deter mination"; and "[t]he deter mination of the ag ency of orig inal jurisdiction on eac h issue and the

rea sons f or eac h such deter

mination with respe ct to which disag ree ment has been expressed" ); see also Archbold v. Brown , 9 Vet.App. 124, 129 (1996) (noting fundame ntal rig ht to rec eive appellate rig hts and SOC). Although it is clea r t hat t he Due Process Clause of the U.S. Constit ution applies
to proce eding s in which VA decide s whether claimants are elig ible for veter ans benef its, Cushman v. Shinsek

i , 576 F.3d 1290, 1296 (Fe d. Cir. 2009), t he C ourt need not rea ch the c onstitut ional due
proce ss question here beca use the appellant was deprive d of the fair proce ss descr ibed in VA' s own reg ulations. Ba sed on VA' s relianc e on an inapplicable reg ulation as the sole basis for reduc ing the appellant' s DI C awa

rd, the Court conclude s that the Aug ust 2010 SOC she rec eived does not provide the g overning authority un d er wh i ch VA has the authority to act and rec oup the asser ted
overpa y ment of benef

its cre ated throug h the DoD and, there fore , did not comply with § 19.29. She
was not put on notice of the l aw s and reg ulations that VA believes applicable

. Although she was informed several t imes of the VA' s withholding of her benef its to offse t an asser

ted overpa

y ment based on § 3.658(a) , in light of the Secre tary ' s position that VA reg ulation § 3.658(a) does not apply
to t he circumstance s in this case , the appellant was not provided the authority for the reduc tion in her D I C awar d. To the ex tent a harmless err or analy sis is applicable to the ty pe of violation of f

air proc ess i n volved here , cf

. Sprinkle, supra; Gambill v. Shinseki , 576 F.3d 1307, 1311 (F ed. Cir. 2009 ) (holding that the de n ia l o f a c o n s ti tu tiona l rig ht to challeng e adver se evidenc e throug h interrog atories "is subject to harmless err or analy sis"), the Court conclude s t h at t he appellant was prejudice d b ec au s e she was not informed of the proper leg al basis or authority for the reduc tion o f h er DIC benef its based on the overpa

y ment and was there fore denied the opportunity to challe n ge the reduc tion on the corr ect leg al basis o r au t h o ri t y
. Acc ording ly , on rema nd, the appellant is to be provided the opportunity to challeng e the basis for the asser ted overpa

y ment and its calc ulation and
any leg al authority and det er m ination to continue the reduc tion in her DI C awa rd. See 38 U.S.C.

6§ 7105(d)( 1); 38 C.F.R. § 19.29. Upon rea djudication, the appellant is entitled to an SSOC from the

RO reg arding her c laim and any other notice require ments under a ny applicable reg ulations. The Secre tary cites 38 U.S.C. § 5314(b), which applies to indebtedness "to the United States by v i rt u e o f [ a] person' s participa tion in a benef its prog ram administered by the Secre tary ," as authority for reduc ing the DI C awa rd. The Secre tary also cites 38 C.F.R. §§ 1.911 and 1.912a, which apply only to "the collection of debts resulting from an individual's participa tion in a VA benef it

. . . prog ram" and not to "V A' s other debt collection activities." 38 C.F.R. § 1.911 (2014); see 38 C.F.R. § 1.911a (2014) (apply ing to pa y ment of debts not a

rising out of participa tion in a VA benef it). I n this re g ard, the Court notes that the RO' s rec oupment of $30,264.86 appea rs to be not the result of

an over pay ment of bene fits administered by VA but t he result of an asser ted overpay

ment of S BP benefi t s m ad e b y the DoD. Acc ording ly , on rema nd, VA must issue a decision conce rning the applicability of the now-c ited reg ulations to the fac ts here and the law that authorizes VA to rec oup the asser ted overpay

ment on behalf of t he DoD by reduc ing the DI C awa rd. VA must discuss the leg al questions pr esente d in this appea l, the applicability of any title 10 and title 38 provisions and the MOU, the authority for VA to enter into the MOU as to DI C-SBP offse ts that resul t i n a reduc tion of a DI C awa

rd, as we l l as the rele vance of, and any fac tfinding pertinent to, any other DoD re g ulations. To the exte n t VA , o n rema nd, relies on section 5314(b) and §§ 1.911 and 1.912a in deter mining indebtedness resulting fr o m th e SB P, th e Co u r t n o te s that those provisions contain rig hts and remedies, including t he right t o notice of the rig ht to request wa iver of the indebtedness. The Court notes that the rec ord befor e the Court does not include any notice to the appellant of any rig ht
to reque st a waiver

. I n addition, the Court notes that in deter mining the amount of a debt owed and whether rec oupment of an of

fset amount is permitted, title 10 statutory provisions, e .g ., 10 U.S.C. § 1450 (" Pay

ment of annuity : benef

iciarie s") , (c) (" Offse t for amount of [DI C] ") , appea r rele vant to the DI C-SBP offse t issue, y et § 1.911 does not ref ere nce those provisio n s
. Al though § 1.912a(e ) addre sses the offse t of milit ary service debts, it discusses only VA collection b y o ff set from
compensa tion benef

its pay able "to a veter an" for indebtedness associate d wi t h t h e veter an' s participa tion in an SBP or Retired Service man' s Family Pro t ec t i on Plan. 38 C.F.R. § 1.912a(e ) (2014) (re fer encing plans presc ribed in "subc hapter I or I I of 10 U.S.C. chapte r 73")

. Fur thermore ,

7§ 1.912a(e ) ref ere nces 31 U.S.C. § 3716 (" Admin i s t ra tive offse t")

. See 38 C.F.R. § 1.912a(e )(2) (desc ribing proce ss involving offse ts to rec oup indebtedness to the milit ary service that require s miltary service to cer

tify that due proce ss proce dures of 31 U.S.C. § 3716 have been provided to the
veter an); 57 Fe d. Reg

. 47, 2 6 2 (O ct

. 15, 1992) (F inal Rule) (ame nding § 1.912a to implement
proce dures for involuntary offse t from VA compensa tion or pension b en ef i t pay ments under 38 U.S.C. § 5301(c) "to rec oup debts owed by VA benef iciarie s to the milit ary service s" and noting that the "a mended reg ulation implements the proce dures ag ree d to betwee n the milit ary service s and VA in which the milit ary service will aff ord the veter an the leg al rig hts require d by section 5301(c) ")

. Notably , the Secre tary quotes a DoD reg ulation perta ining to "D I C Offse t" that provides that "[p]ay ment of the SBP annuity is not withheld or delay ed pending verific ation of the DI C awa rd if the annuitant signs a statement authorizing the VA to collect any overpa y ment that results from the overla p of the DI C and SBP pay ments." D oD Fina

ncial Mana g ement Reg ulation, vol. 7B, ch. 46,
para
. 460402 (Jul y 2011) (quoted in Secre tary ' s Aug

. 12, 2014, Resp. at 5 n.1.). The DoD reg ulation also contains a provision that allows the liquida tion of a debt by utiliz ing one of three methods, including "[t]he annuitant authorizing the VA to reduc e DI C and remit the amount collecte d to the DFA S-Cleveland site." Id

. at para
. 460701

. Ac co rdi ng ly , the reg ulation appea rs to contemplate written authoriz ation from the SBP an n u i t an t befor e there i s a reduction in DI C to satisfy an S BP annuity overpa

y ment. The rec ord befor e the Court, howeve r, does not con t ai n any documents ref lecting whether the appellant signe d "a statement authorizing the VA to collect any overpa y ment that results from the overla p of the DI C and SBP pay ments" or "a

uthorizi ng VA to reduc e DI C and remit the amount collec ted to DFA S." I n pursuing the m atters on rema nd, the appellant is fre e to s u b m i t additional evidenc e and
arg ument on the rema

nded matters, and the Boa rd is require d to consider any such rele vant evidenc e and arg ument. See Kay v. Principi , 16 Vet.App. 529, 534 (2002) (stating that, on rema nd, the Boa

rd
must consider additional evidenc e and arg ument in assessing entitlement to bene fi t soug ht); Kutscherousky v. W

est , 12 Vet.App. 369, 372-73 (1999) (per curia m order ). "A rema nd is meant to entail a critica l examination of the justification for the decision. The Court expects that the [Board] will ree x ami n e the evidenc e of rec ord, seek any other evidenc e the Boa rd fee ls is nece ssary , and

8issue a ti mely , well-s u p p o rt ed d ecision in this case ." Fletche r v. Derwinski , 1 Vet.App. 394, 397

(1991). The Boa

rd must proce ed expeditious ly , in acc ordanc e with 38 U.S.C. § 7112 (re quiring the Secre tary to provide for "e x peditious trea tment" of claims rema nded by the Court). I f the appellant believes tha t the Secre tary is not a djudicating the matter expeditious ly , she should r equest that the Secre tary adjudicate it; if the Secre tary ref uses, she can seek relief from this Court. See Dicarlo v. Nicholson , 20 Vet.App. 52, 56- 57 (2006).

III. CONCLUSION Upon consideration of the fore g oing analy sis, the r e c o r d o n appea l, and the parties' pleading s, the December 28, 2012, Boa rd dec ision is VACATED, and the matter of the validi ty of t he offset of the appellant' s annuity benef its under the SBP ag ainst her re t ro active pay ment of DI C is REMANDED f

or fur ther a djudication consistent with this opi nion.

9