Cornell v. McDonald, docket no. 15-3191 (Dec. 12, 2016)

HELD: Attorney is not entitled to additional attorney fees on award for a total disability rating based on individual unemployability (TDIU) when the attorney did not raise the issue of TDIU during the underlying claim/appeal process and abandoned the client prior to the application for TDIU.

SUMMARY: Attorney Catherine Cornell represented veteran Bobby Moberly in his appeal for service connection for hearing loss and tinnitus. The scope of their fee agreement covered representation on “all issues . . . including obtaining the maximum rating available . . . and any other claim or benefit reasonably raised by the evidence,” and provided for a contingency fee of 20% of all awards of retroactive benefits. 

After the Board of Veterans’ Appeals granted the appeals, the RO implemented the decision and assigned an 80% disability rating for hearing loss and 10% for tinnitus. The rating code sheet of the decision noted that Mr. Moberly was now eligible for TDIU, but stated that “there is no evidence showing he is unable to work due to these disabilities.” The decision resulted in an attorney fee of over $18,000 that VA properly withheld from Mr. Moberly’s retroactive award and paid to Ms. Cornell. In November 2011, Cornell notified the veteran that she was closing his file because “there is no further work to be done on your claim.”

Moberly then appointed Disabled American Veterans (DAV) to represent him and, through DAV, submitted an application for TDIU and a letter from his doctor stating that he was unable to work because of his severe hearing loss. On May 4, 2012, the RO granted TDIU, effective 2006. On May 8, 2012, the notified Ms. Cornell that it was withholding an attorney fee of $20,204.16, which was released to her on July 24, 2012. On July 31, 2012, DAV submitted a Notice of Disagreement with the May 8 attorney-fee decision.

In December 2012, the RO notified Ms. Cornell that it had paid her in error, and stated that she should “settle this debt with Mr. Moberly.” Ms. Cornell appealed this decision. In September 2014, the RO issued a Statement of the Case, concluding that Ms. Cornell was not entitled to the $20,204.16 attorney fee.

In October 2014, Mr. Moberly requested that the RO expedite the appeal, and provided information about Ms. Cornell’s actions following her receipt of the $20,204.16 attorney fee. Mr. Moberly stated that Ms. Cornell called his wife after she had received the fee to find out “what was going on” and, when she realized that they did not know about the second attorney fee, said she wanted to send him new representation paperwork (“to get her back on my case”).

In April 2015, the Board of Veterans’ Appeals determined that the fee dispute was not a “simultaneously contested claim” and found that the payment to Ms. Cornell was improper. Ms. Cornell appealed to the Veterans Court in August 2015. In September 2015, VA paid Mr. Moberly $20,204.16. VA later informed the Court that it had failed to provide DAV with the May 2012 RO decision, suggesting that the decision was, therefore, not final.

On appeal to the CAVC, Ms. Cornell argued that she was entitled to the attorney fees because she represented Mr. Moberly in the underlying appeal that formed the basis of his entitlement to TDIU. The Secretary argued that Ms. Cornell did not raise the issue of TDIU during her representation and was, therefore, not entitled to attorney fees on that award. Mr. Moberly filed a brief as an intervenor in this appeal, arguing that Ms. Cornell was not entitled to the fee because she did nothing to earn it.

In its decision, the Court noted that Ms. Cornell presented a number of jurisdictional and procedural arguments, but found that the case involved “rather simple, undisputed facts” regarding her entitlement to the second attorney fee. The Court determined that she was not entitled to the second attorney fee because she did not contribute any argument or evidence that resulted in the award of TDIU to Mr. Moberly. The Court noted Ms. Cornell’s reliance on Mason v. Shinseki, 13 Vet.App. 79, 86 (1999), in which it had previously held that if eligibility for TDIU was raised during the underlying claim, then it is part of the initial rating and the attorney would be entitled to 20% of that award. But that was not the case here – because Ms. Cornell did not raise the issue of TDIU as part of Mr. Moberly’s underlying appeal.

Regarding Ms. Cornell’s jurisdictional arguments, the Court characterized these concerns as “an effort to obfuscate the problem she had by accepting payment for work that she did not do.” She had argued that the Board did not have jurisdiction to address the fee-eligibility issue since the relevant statute does not require VA to actually make such a determination and, thus, the Board’s review is simply “limited to ensuring compliance with the statutory and regulatory requirements.” The Court rejected this argument, finding that

[b]ecause an attorney may receive “only a fee that fairly and accurately reflects his [or her] contribution to and responsibility for the benefits awarded,” . . . the Board may consider not only the statutory and regulatory requirements of [38 U.S.C. §] 5904(d) and [38 C.F.R. §§] 14.636(e) and (h) with respect to eligibility for and reasonableness of fees, but the Board may also consider other factors pertinent to the specific circumstances of the case.

The Court also determined that this case did involve a “simultaneously contested claim” since the award of $20,204.16 to Ms. Cornell resulted in the payment of a lesser amount to Mr. Moberly, and that the Board thus erred in this portion of its decision. Ms. Cornell had argued that remand would be warranted, as she did not receive a Statement of the Case (SOC) that was required by the statute governing simultaneously contested claims. The Court disagreed, and determined that remand was not warranted because Ms. Cornell failed to “demonstrate that she suffered any prejudice” by any possible VA error in not providing her with an SOC.

Finally, the Court addressed Ms. Cornell’s equitable defense of laches against the Secretary “for his delay in seeking recoupment of the attorney fees.” The Court found that she failed to “demonstrate that laches applies in situations such as this where the Secretary acted to correct his error within a year.” The Court added that even if the laches defense applied, “Ms. Cornell does not come to the Court with clean hands” and is thus “precluded from asserting the equitable defense of laches.”

In summary, the Court concluded that VA’s payment of $20,204.16 to Ms. Cornell was improper and ordered VA to not recoup the fees from Mr. Moberly. The Court did, however, suggest that VA “may take all appropriate steps to recover the indebtedness from Ms. Cornell.”