Veteranclaims’s Blog

February 22, 2018

FedCir.; 38 U.S.C. § 5121(a); Youngman, 699 F.3d at 1304; accrued benefits; fiduciary standing;

Excerpt from decision below:

“Mr. Hiles does not dispute that he is not among those listed in § 5121(a). He therefore cannot recover his father’s accrued benefits. See Youngman v. Shinseki, 699 F.3d 1301, 1304 (Fed. Cir. 2012) (“[T]he veteran’s fiduciary does not have standing or authority to receive accrued benefits that were unpaid at the veteran’s death, other than in accordance with payments as provided in 38 U.S.C. § 5121(a), to designated family members or for reimbursement of the expenses of last sickness and burial.”).”

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“Yet even if Mr. Hiles were found to have been his father’s fiduciary and had standing to bring this due process claim on behalf of his deceased father, he would
not be able to recover his father’s accrued benefits because that property interest was statutorily extinguished at the Veteran’s death. See Youngman, 699 F.3d at 1304 (holding that because the veteran “died without any heirs in the categories qualifying under § 5121, his unpaid benefits died with him”).

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NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
______________________
MARSHALL G. HILES,
Claimant-Appellant
v.
DAVID J. SHULKIN, SECRETARY OF VETERANS
AFFAIRS,
Respondent-Appellee
______________________
2017-1247
______________________
Appeal from the United States Court of Appeals for
Veterans Claims in No. 14-617, Judge Mary J. Schoelen,
Judge Margaret C. Bartley, Senior Judge Lawrence B.
Hagel.
______________________
Decided: February 22, 2018
______________________
RACHEL J. ELSBY, Akin, Gump, Strauss, Hauer &
Feld, LLP, Washington, DC, argued for claimantappellant.
Also represented by JENNA PELLECCHIA, Philadelphia,
PA.
NATHANAEL YALE, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, argued for respondent-appellee. Also
HILES 2 v. SHULKIN
represented by CHAD A. READLER, ROBERT E. KIRSCHMAN,
JR., ELIZABETH M. HOSFORD; BRIAN D. GRIFFIN, AMANDA
BLACKMON, Office of General Counsel, United States
Department of Veterans Affairs, Washington, DC.
______________________
Before MOORE, MAYER, and STOLL, Circuit Judges.
MOORE, Circuit Judge.
Marshall G. Hiles appeals the U.S. Court of Appeals for Veterans Claims’ (“Veterans Court”) denial of his appeal. Mr. Hiles is the son of decorated World War II
veteran Charles D. Hiles (the “Veteran”), who honorably served our country on active duty in the U.S. Army from July 1943 to January 1946, and was awarded the Combat Infantry Badge, the Purple Heart, and the Bronze Star Medal. Because we conclude that the Veterans Court correctly denied Mr. Hiles’ appeal for lack of standing to recover his deceased father’s accrued benefits, we affirm.
Following his service, the Veteran was awarded compensation for multiple disabilities connected to his military service, including psychoneurosis. These benefits were adjusted over time, and by the start of 2006 he was receiving benefits for a disability rating of 20%. In February 2006, he requested an increase in his disability ratings. On September 27, 2006, the VA notified the Veteran by letter that pursuant to a new rating decision he was entitled to additional disability benefits accruing from at least February 2006. These are not insignificant sums. Many veterans rely on these funds to cover essential expenses. Prompt disbursement of awarded funds is the least the government can do for those who have served our country.
Here, however, the Veteran never received the additional
benefits because they were withheld by the VA. In
its September 2006 letter, the VA proposed a finding that
the Veteran was not competent to manage his VA bene

HILES v. SHULKIN 3
fits. The letter did not state the VA would withhold the
additional benefits until it made a determination on
competency, so Mr. Hiles and the Veteran believed the VA
was in the process of calculating the additional benefits
and would disburse them once calculated. Yet, without
explanation, the VA did withhold the additional disability
benefits it found the Veteran needed and was entitled to.
Almost four months later, on January 17, 2007, the VA
informed the Veteran by letter it had finished reviewing
evidence about his “ability to handle [his] own financial
affairs” and determined he was “not competent for VA
purposes.” J.A. 2099; see also J.A. 5. The VA stated it
would withhold his additional benefits “until a fiduciary
[was] assigned to handle” them. J.A. 5; J.A. 2099.
The government argued that the VA was entitled to
withhold these additional disability benefits until it
determined that the Veteran was competent to receive the
funds or, if incompetent, until a fiduciary was appointed.
Oral Arg. at 19:55–20:27; id. at 22:21–22:40. While the
VA has statutory and regulatory processes for appointing
fiduciaries to receive benefits on behalf of a beneficiary
determined to be incompetent, the government could
point to no statute or regulation that justifies withholding
benefits before the VA actually makes a determination
that the veteran cannot competently manage his own
financial affairs. The government argued that 38 C.F.R.
§ 3.353(b)(2) allows the VA to withhold benefits until it
makes a competency determination. Oral Arg. at 22:40–
24:50. Section 3.353(b)(2), however, applies only “[w]here
the beneficiary is rated incompetent . . . .” § 3.353(b)(2)
(emphasis added). At best, it stands for the proposition
that the VA can withhold benefits after it has determined
the veteran is incompetent for VA purposes. The government
admits that the Veteran was not rated incompetent
until January 2007 and that the September 27, 2006
letter merely proposed a finding of incompetency. The
government thus withheld disability benefits from the
HILES 4 v. SHULKIN
Veteran from February 2006 until January 2007 without
any rating of incompetency having occurred. There is no
dispute: the Veteran was entitled to these disability
benefits. Three days after issuance of the January 17
letter, however, the Veteran died, and according to the
government with him went his accrued benefits.
At no point while it was withholding the disability
benefits from the Veteran did the VA appoint a fiduciary.
Both the Veteran and his son had repeatedly requested
that the VA appoint his son, who held his power of attorney,
to receive these benefits on his behalf. But the
government was withholding benefits and unwilling to
appoint a fiduciary until after the Veteran was rated
incompetent. Thus, the Veteran never received the additional
disability benefits which the VA determined he was
entitled to from February 2006–January 2007 because of
his possible incompetency. Inexplicably, however, the
Veteran did throughout this time continue to receive his
original 20% disability payments. According to the government,
it ought not to award the additional disability
benefits to a potentially incompetent veteran, but it can
continue to award his original disability benefits to him.
If the Veteran could not competently handle his newly
awarded benefits, why did the VA think him competent to
handle other VA benefits? Despite a lack of law or logic
justifying the government’s withholding of disability
benefits, we must affirm.
The Veterans Court correctly denied Mr. Hiles’ appeal
because Mr. Hiles does not have standing to recover the
Veteran’s accrued benefits under 38 U.S.C. § 5121(a). We
have jurisdiction over Veterans Court decisions concerning
“all relevant questions of law, including interpreting
constitutional and statutory provisions.” 38 U.S.C.
§ 7292(d)(1). We review its statutory interpretation de
novo. Hudgens v. McDonald, 823 F.3d 630, 634 (Fed. Cir.
2016). Pursuant to § 5121(a), only certain survivors of
deceased veterans may be entitled to accrued benefits.
HILES v. SHULKIN 5
Mr. Hiles does not dispute that he is not among those
listed in § 5121(a). He therefore cannot recover his father’s
accrued benefits. See Youngman v. Shinseki, 699
F.3d 1301, 1304 (Fed. Cir. 2012) (“[T]he veteran’s fiduciary
does not have standing or authority to receive accrued
benefits that were unpaid at the veteran’s death, other
than in accordance with payments as provided in 38
U.S.C. § 5121(a), to designated family members or for
reimbursement of the expenses of last sickness and burial.”).
The Veterans Court therefore correctly denied Mr. Hiles’ appeal for lack of standing.
Mr. Hiles also argues the VA’s handling of the incompetency and fiduciary issues violated his father’s due process rights. We are sympathetic to this argument for
all the reasons discussed above. We also have no doubt that the Veteran had a due process interest in his accrued benefits. The VA determined he was entitled to an increase in benefits, and it is “well established that disability benefits are a protected property interest and may not be discontinued without due process of law.” Cushman v. Shinseki, 576 F.3d 1290, 1296 (Fed. Cir. 2009); see also id. at 1298. Yet even if Mr. Hiles were found to have been his father’s fiduciary and had standing to bring this due process claim on behalf of his deceased father, he would not be able to recover his father’s accrued benefits because that property interest was statutorily extinguished at the Veteran’s death. See Youngman, 699 F.3d at 1304 (holding that because the veteran “died without any heirs in the categories qualifying under § 5121, his unpaid benefits died with him”). Indeed, at oral argument, counsel for Mr. Hiles conceded the monetary remedy underlying the
due process claim would be based on the Veteran’s accrued benefits. Oral Arg. at 8:24–9:48. We have considered
Mr. Hiles’ remaining arguments and find them
unpersuasive. Thus, even if the government wrongfully
withheld the Veteran’s disability benefits, these are
accrued benefits, and Mr. Hiles does not qualify under the
HILES 6 v. SHULKIN
statute to receive them after the Veteran’s death. Accordingly,
we affirm the Veterans Court’s denial of Mr. Hiles’
appeal.
CONCLUSION
For the foregoing reasons, the decision of the Veterans
Court is affirmed.
AFFIRMED
COSTS
No costs.

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