Opinion ID: 210150
Heading Depth: 4
Heading Rank: 1

Heading: The Nature and Extent of the Change of the Law

Text: In its 2005 decision, the Veterans Court found that the nature and extent of the change in the law was substantial. We agree with the Veterans Court that, during the years after Green was issued but before NOVA I stayed the cases, Rodriguez and others like her had a cognizable claim for DIC benefits under the “hypothetical entitlement” approach. Consequently, many claimants who would have had a claim for DIC benefits under the Green interpretation of § 1318 no longer have a claim due to the amendment of § 3.22. Our analysis, however, cannot end there. The Secretary asserts that the 2000 amendment to § 3.22 was neither an unforeseeable nor a fundamental change in law. Essentially, the Secretary argues that, from 1990 until the Veterans Court issued its opinion in Green in 1997, the Department interpreted both § 1318 and its implementing regulation, § 3.22, as precluding the “hypothetical entitlement” approach. In support of this, the Secretary points out that the 2006-7023 11 General Counsel for the Department officially announced this interpretation in 1990. Then, when the Veterans Court’s decisions in Green and its progeny breathed life into the “hypothetical entitlement” theory, the Secretary responded by amending § 3.22 to clarify that § 1318 could not be read to allow “hypothetical entitlement” claims. In addition, the Secretary points to our decisions in NOVA I and NOVA II, holding that the language of § 1318 is ambiguous with regard to whether it allows “hypothetical entitlement” claims. The Secretary cites National Cable & Telecommunications Association v. Brand X Internet Services, 545 U.S. 967, 981-83 (2005), for the proposition that courts owe deference to an agency’s reasonable regulatory interpretation of an ambiguous statute, even where a court has previously adopted a different interpretation. Because Rodriguez should have expected that deference would be shown to the Secretary’s interpretation of the ambiguous “entitled to receive” language, the Secretary contends that the 2000 amendment cannot be considered a sharp or unexpected change in law. According to Rodriguez, however, the 2000 amendment did not reaffirm the Department’s settled position because the Department’s position was only settled within the private recesses of its institutional mind. She argues that the pre-1997 interpretation of § 1318 was sufficiently unclear to allow the Green interpretation by the Veterans Court. Thus, the Department’s position only became clear in 2000 when it amended § 3.22. We agree with the Secretary that, from 1990 until Green was decided in 1997, the Department’s interpretation of the “entitled to receive” language of §§ 1318 and 3.22 2006-7023 12 clearly precluded DIC claims using the “hypothetical entitlement” approach. While the statutory language remained ambiguous, the Secretary’s interpretation did not. Furthermore, in NOVA I, we found that § 3.22 was an “interpretive rule” rather than a “substantive rule.” In reaching this conclusion, we cited Paralyzed Veterans of America v. West, 138 F.3d 1434 (Fed. Cir. 1998), for the proposition that “substantive rules are those that effect a change in existing law or policy or which affect individual rights and obligations.” NOVA I, 260 F.3d at 1375 (internal quotations omitted). Interpretive rules, on the other hand, “clarify or explain existing law or regulation,” and a rule may still be interpretive even though it has consequences for the rights of the parties. Id. at 1375-76. Thus, in NOVA I, we held that the amendment to § 3.22 did “no more than interpret the requirements of § 1318” and clarify the agency’s earlier interpretation of that statute. Id. at 1377. In keeping with our decision in NOVA I, we find here that, in amending § 3.22, the Secretary was merely clarifying the Department’s earlier interpretation of § 1318, and, thus, the nature and extent of the change to the law was not substantial. 2. The Degree of Connection Between the Operation of the New Rule and a Relevant Past Event In laying out the second factor of the Princess Cruises test, we stated that “not only must a new rule effect a significant change in the law, but this change must also have a significant connection with past events.” 397 F.3d at 1365-66. In Princess Cruises, a new U.S. Customs rule required that certain data be collected, and created an evidentiary presumption to be applied when that data was not available. Id. at 1360. The cruise line had failed to collect the relevant data from trips that had occurred prior to the new rule. Id. This Court found that the new law had a significant connection with 2006-7023 13 past events, because the cruise line would never be able to rebut the evidentiary presumption established by the new rule. Id. at 1366. Here, in contrast, § 3.22 does not meaningfully alter the consequences of relevant past events. The Secretary asserts that § 3.22 governs prospective entitlement to DIC, and that the application of a new provision that only authorizes or affects the propriety of prospective relief is not retroactive. See Landgraf, 511 U.S. at 275. In addition, the Secretary maintains that application of amended § 3.22 does not increase the evidentiary burden on Rodriguez, but merely narrows the scope of what is admissible. Finally, the Secretary argues that there is no relevant connection between the filing of Rodriguez’s claim and the operation of § 3.22. He points out that Rodriguez filed her claim before Green and its progeny were decided, and that Rodriguez therefore could not have relied on the state of the law as it was after Green permitted the “hypothetical entitlement” approach. Rodriguez asserts that the 2000 amendment of § 3.22 occurred solely as a result of Green and its progeny, and thus is connected to past events. Unlike the plaintiff in Princess Cruises, however, Rodriguez is unable to point to anything she would have done differently had she known the effect of the 2000 amendment when she filed her claim. We agree with the Secretary that there is no significant connection to past events in this case. Rodriguez did not rely to her detriment on the prior state of the law. When she originally filed her claim, Green and its progeny had not yet been decided. Although Rodriguez was entitled to the benefit of those cases after they were issued, she did not act differently because of those cases. While those holdings may have 2006-7023 14 injected new hope into her case, merely continuing to pursue a claim does not constitute a significant connection to past events under the Princess Cruises test. 5 3. Familiar Considerations of Fair Notice, Reasonable Reliance, and Settled Expectations The third factor is whether the new rule upsets the familiar considerations of fair notice, reasonable reliance, and settled expectations. We have yet to determine how much weight to give this factor. In Princess Cruises, we noted that the Fourth Circuit has required that, in order to establish that a rule would have an impermissible retroactive effect, the party advancing that theory needs to show “objectively reasonable reliance,” as opposed to subjective reliance, on the prior state of the law. 397 F.3d at 1366 (citing Olatunji v. Ashcroft, 387 F.3d 383, 396 (4th Cir. 2004)). We also noted that the D.C. Circuit “appears to view ‘the familiar considerations’ as akin to a tiebreaker in close cases.” Id. (citing Marrie v. SEC, 374 F.3d 1196, 1207 (D.C. Cir. 2004)). In Princess Cruises, however, we declined to decide how this Court would weigh this factor because we found that all three factors in Princess Cruises pointed in favor of finding a retroactive effect. Id. Similarly, here, because we find that all three factors favor the same position, we need not decide how much weight to afford the third prong of the test. In applying the third factor, the Secretary emphasizes, as did we in NOVA I, that the phrase “entitled to receive” in § 1318(b) is ambiguous. He argues that, because deference is owed to the Secretary’s interpretation of ambiguous statutes, Rodriguez could not have reasonably relied on a construction of § 1318(b) by the Veterans Court 5 We need not decide in this case whether the result would be different if Rodriguez had filed her claim after Green was decided. 2006-7023 15 that conflicted with the VA’s own announced interpretation. Moreover, Rodriguez had fair notice of the Department’s position, given that, before Green, the Department had consistently refused to recognize this interpretation, and, after Green, in both Carpenter and Wingo, the Department continued to oppose the Veterans Court’s interpretation of the “hypothetical entitlement” approach. Rodriguez claims she did not, in fact, have fair notice of the change in the law. She asserts that the amendment to § 3.22 was a new statement of law, not merely a clarification, and that, regardless of what the Department intended the interpretation of § 1318 to be, Green and its progeny represented a legitimate interpretation of the statute. Had the Department’s interpretation of the statute been as settled as the Secretary claims, Rodriguez concludes, the Veterans Court would never have decided the Green line of cases as it did. Rodriguez correctly points out that the Department did not appeal Green, Carpenter, or Wingo to this Court, thereby potentially creating the impression that the Department was accepting those cases as valid interpretations of the law. This possible impression, however, is insufficient to refute the Secretary’s evidence that Rodriguez had fair notice of the Department’s interpretation of the “entitled to receive” language. At the time Rodriguez filed her claim, the Department precluded the “hypothetical entitlement” approach. After Green, the Secretary continued to oppose the approach in other cases, including Carpenter and Wingo. Given this history, we agree that Rodriguez had fair notice of the Department’s interpretation beginning the day she filed her claim. 2006-7023 16 Furthermore, Rodriguez can hardly argue that she had “settled expectations” regarding the law, given the multiple changes to the interpretation of the statute that occurred while her claim was pending. As for reasonable reliance, Rodriguez could not have relied on the “hypothetical entitlement” approach when she first filed her claim, because she filed her claim pre-Green. While Rodriguez may have relied on the Veterans Court’s decisions after they were issued, she did not change her position based on such reliance. Thus, we find that the third Princess Cruises factor also weighs heavily in favor of the Secretary. Because all three Princess Cruises factors indicate that applying the amended version of § 3.22 to Rodriguez’s DIC claim does not create an unlawful retroactive effect, we reverse the decision of the Veterans Court on this issue. In doing so, we hold that 38 C.F.R. § 3.22, as amended by the Secretary in 2000, does not have a retroactive effect and may be applied to claims for DIC benefits filed by survivors before the amendment took effect.