This morning the Federal Circuit released a precedential opinion granting-in-part a petition to review the interpretations by the Department of Veterans Affairs of two diagnostic codes used to award disability benefits. Notably, Judge Prost dissented. Here are the introductions to the opinions.

National Organization of Veterans’ Advocates, Inc. v. Secretary of Veterans Affairs (Precedential)

At the heart of the government’s scheme for awarding disability benefits to veterans is a rating schedule. The Department of Veterans Affairs adopted this rating schedule to standardize the evaluation of how severely diseases and injuries resulting from military service impair veterans’ earning capacity. 38 C.F.R. § 4.1. The rating schedule is, in turn, divided into diagnostic codes that provide disability ratings for various symptoms or conditions.

National Organization of Veterans’ Advocates, Inc., Peter Cianchetta, Michael Regis, and Andrew Tangen petition this court under 38 U.S.C. § 502 to review the VA’s interpretation of two of these diagnostic codes: DCs 5055 and 5257, both found at 38 C.F.R. § 4.71a. The VA set out its interpretation of DC 5055 in Agency Interpretation of Prosthetic Replacement of a Joint, 80 Fed. Reg. 42,040 (July 16, 2015) (the “Knee Replacement Guidance” or “Guidance”), and VA Adjudication Procedures Manual M21-1 Section III.iv.4.A.6.a (the “Knee Replacement Manual Provision”). The VA set out its interpretation of DC 5257 in Manual Section III.iv.4.A.6.d (the “Knee Joint Stability Manual Provision”).

For the reasons provided below, we conclude that the Knee Replacement Manual Provision is not a reviewable agency action. We also hold that the Knee Replacement Guidance is arbitrary and capricious under the controlling precedent of Hudgens v. McDonald, 823 F.3d 630 (Fed. Cir. 2016). Finally, we dismiss the challenge to the Knee Joint Stability Manual Provision as moot. Accordingly, we grant-in-part and dismiss-in-part the petition.

PROST, Circuit Judge, dissenting.

At issue here is the Secretary’s guidance interpreting diagnostic code 5055 (“DC 5055”) as limited to total knee replacements. See 80 Fed. Reg. 42040 (July 16, 2015) (“Guidance”). The Secretary published the Guidance during a prior appeal, Hudgens v. McDonald, 823 F.3d 630 (Fed. Cir. 2016). There, when urged to apply the Guidance retrospectively, we withheld deference under Auer v. Robbins, 519 U.S. 452 (1997), because we concluded that the Guidance was a post-hoc rationalization in conflict with prior Board decisions. Hudgens, 823 F.3d at 638–39. Then, with Auer off the table, we resorted to the pro-veteran canon, which instructs that “interpretive doubt is to be resolved in the veteran’s favor,” Brown v. Gardner, 513 U.S. 115, 118 (1994). Invoking that rule, Hudgens held for the veteran solely because his interpretation was “permitted by the text of the regulation.” 823 F.3d at 639 (emphasis added). The majority concludes it is compelled to follow the same exact path laid out in Hudgens. I disagree. And, as I read it, so did Hudgens—which explicitly suggested that going forward the Secretary was free to do what he did here. Even if the majority is correct that DC 5055 is ambiguous, which I take as given for purposes of this dissent, our two reasons for avoiding Auer in Hudgens do not apply here, where we instead confront the Guidance’s prospective application. And the pro-veteran canon does not preclude deference here either. I respectfully dissent.