United States Court of Appeals for the Federal Circuit
NATIONAL ORGANIZATION OF VETERANS’
ADVOCATES, INC., PETER CIANCHETTA,
MICHAEL REGIS, ANDREW TANGEN,
Petitioners
v.
SECRETARY OF VETERANS AFFAIRS,
Respondent
2020-1321
Petition for review pursuant to 38 U.S.C. Section 502.
Decided: September 20, 2022
BLAKE E. STAFFORD, Latham & Watkins LLP, Washington,
DC, argued for petitioners. Also represented by
SHANNON MARIE GRAMMEL, ROMAN MARTINEZ.
MOLLIE LENORE FINNAN, Commercial Litigation
Branch, Civil Division, United States Department of Justice,
Washington, DC, argued for respondent. Also represented
by BRIAN M. BOYNTON, ERIC P. BRUSKIN, MARTIN F.
HOCKEY, JR.; JULIE HONAN, Y. KEN LEE, Office of General
Counsel, United States Department of Veterans Affairs,
Washington, DC.
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2 NOVA v. SECRETARY OF VETERANS AFFAIRS
Before NEWMAN, PROST, and CUNNINGHAM, Circuit
Judges.
Opinion for the court filed by Circuit Judge CUNNINGHAM.
Dissenting opinion filed by Circuit Judge PROST.
CUNNINGHAM, Circuit Judge.
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.
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NOVA v. SECRETARY OF VETERANS AFFAIRS 3
BACKGROUND
I. The VA’s Interpretation of DC 5055
Petitioners seek review of two interpretive rules. To
introduce the VA’s interpretation of DC 5055, we must
turn back to the claim at issue in Hudgens. In that case,
the VA regional office (“RO”) denied Michael A. Hudgens,
a U.S. Army veteran, a 100-percent disability evaluation
for his partial prosthetic knee replacement under DC 5055
because the RO found that DC 5055 applied only to total
knee replacements. Hudgens, 823 F.3d at 632–33. The
Board of Veterans’ Appeals and the United States Court of
Appeals for Veterans Claims both affirmed the RO’s conclusion
that DC 5055 did not apply to Mr. Hudgens’s partial
knee replacement claim. Id. at 633–34. Mr. Hudgens
then appealed to this court. Id. at 634.
On July 16, 2015, twelve days before the Secretary’s final
brief in Hudgens was due with this court, the VA published
the Knee Replacement Guidance. Id. The Guidance
stated that the VA was providing notice of the agency’s
“longstanding interpretation of DCs 5051 to 5056” as
providing for a 100-percent evaluation “when the total
joint, rather than the partial joint, has been replaced by a
prosthetic implant.” 80 Fed. Reg. at 42,040. The VA also
announced in the Guidance that an “explanatory note”
would be added to 38 C.F.R. § 4.71a stating that the “term
‘prosthetic replacement’ in diagnostic codes 5051 through
5056 means a total replacement of the named joint.”1 Id.
at 42,041.
In Hudgens, we nevertheless reversed the judgment of
the Veterans Court and remanded for further proceedings.
1 The VA also included an exception to this interpretation
for DC 5054, which relates to hip replacements.
Knee Replacement Guidance, 80 Fed. Reg. at 42,041–42.
That exception is not relevant here.
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4 NOVA v. SECRETARY OF VETERANS AFFAIRS
823 F.3d at 640. We held that DC 5055 “does not unambiguously
exclude [partial knee] replacements.” Id. at 637
(emphasis omitted). We further concluded that the Secretary’s
interpretation of DC 5055 could not be afforded Auer
deference for two reasons. First, the Secretary’s interpretation
“conflict[ed]” with “numerous inconsistent rulings by
the Board” holding that partial knee replacements could be
evaluated under DC 5055. Id. at 638–39. Second, the Knee
Replacement Guidance was a “post hoc rationalization”
“conveniently adopted to support the Veterans Court’s interpretation
in this case.” Id. at 639. Finally, we held that
Mr. Hudgens’s “interpretation of DC 5055 is permitted by
the text of the regulation,” meaning that we had to apply
the pro-veteran canon, see id.; see also Brown v. Gardner,
513 U.S. 115, 117–18 (1994), and “resolve any doubt in the
interpretation of DC 5055 in his favor,” Hudgens, 823 F.3d
at 639. His claim, therefore, could be evaluated under
DC 5055. Id.
On November 21, 2016, six months after our decision
in Hudgens, the VA informed RO adjudicators of how the
agency intended to reconcile our decision in that case with
the Knee Replacement Guidance. J.A. 4, 28. In the Knee
Replacement Manual Provision, the VA directed RO adjudicators
to not evaluate under DC 5055 any claims for partial
knee replacements “filed and decided on or after July
16, 2015.” J.A. 28. Claims filed before July 16, 2015, and
pending as of that date were to be evaluated under
DC 5055 if doing so would be more favorable than evaluating
the same claims under another applicable diagnostic
code. Id. Finally, claims filed before July 16, 2015, and
adjudicated before that date were not to be revised. Id.
Four years later, the VA amended DC 5055 following
notice-and-comment to “clarify VA’s intent to provide a
minimum evaluation following only total joint replacement.”
Schedule for Rating Disabilities: Musculoskeletal
System and Muscle Injuries, 85 Fed. Reg. 76,453, 76,454,
76,456 (Nov. 30, 2020). The change was effective February
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NOVA v. SECRETARY OF VETERANS AFFAIRS 5
7, 2021. Id. at 76,453. On February 8, the VA rescinded
the Knee Replacement Manual Provision. J.A. 246–47.
But “the new Manual provisions still reference the historical
Knee Replacement Manual Provision because adjudicators
use the historical guidance to rate claims that were
pending as of February 7, 2021[,] and that include rating
periods prior to that date.” Resp’t’s Br. 12; see J.A. 318.
II. The VA’s Interpretation of DC 5257
The second rule was stated in the Knee Joint Stability
Manual Provision. When this Manual provision was promulgated
in 2018, J.A. 111, 113, DC 5257 assigned a 10-percent
rating for “Slight” knee instability, a 20-percent rating
for “Moderate” instability, and a 30-percent rating for “Severe”
instability. 38 C.F.R. § 4.71a (2018). The Knee Joint
Stability Manual Provision directed RO adjudicators to determine
whether a claimant had slight, moderate, or severe
instability by measuring the amount of movement in the
joint. J.A. 113. The Manual provision associated slight instability
with 0–5 millimeters of joint translation, moderate
instability with 5–10 millimeters of joint translation,
and severe instability with 10–15 millimeters of joint
translation. Id. On January 21, 2021, following our decision
in National Organization of Veterans’ Advocates, Inc.
v. Secretary of Veterans Affairs, 981 F.3d 1360 (Fed. Cir.
2020) (en banc) (“NOVA 2020”), the VA rescinded the Knee
Joint Stability Manual Provision. J.A. 183, 228.
III. The Instant Appeal
On January 3, 2020, NOVA filed a petition for review
of the Knee Replacement Manual Provision and the Knee
Joint Stability Manual Provision. NOVA 2020, 981 F.3d at
1365–66. NOVA later amended the petition to add Messrs.
Cianchetta, Regis, and Tangen—three members of
NOVA—as petitioners and to challenge the Knee Replacement
Guidance. Id. at 1368. In NOVA 2020, we held that
NOVA has associational standing to challenge the Guidance
and both Manual provisions. Id. at 1371. We further
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6 NOVA v. SECRETARY OF VETERANS AFFAIRS
held that we have jurisdiction under 38 U.S.C. § 502 to review
the VA’s interpretation of DCs 5055 and 5257.2 Id. at
1378, 1382. It was left for a merits panel to determine
whether the Knee Replacement Guidance or the Knee Replacement
Manual Provision constitutes an independently
reviewable interpretive rule and to render a decision on the
merits of the petition. Id. at 1383, 1386.
DISCUSSION
I. The Knee Replacement Manual Provision
We begin by resolving the jurisdictional question left
open by NOVA 2020. We hold that the Knee Replacement
Guidance—not the Knee Replacement Manual Provision—
constitutes the final agency action subject to review under
§ 502. As we explained in NOVA 2020: “Manual provisions
that merely republish prior agency interpretations or restate
existing law . . . are not reviewable under section
502.” Id. at 1382.
The Knee Replacement Guidance predates the Knee
Replacement Manual Provision, and the Manual provision
makes no “substantive change” to the Guidance. Id.; see
J.A. 1, 25, 28–29. The Manual provision takes as its key
date July 16, 2015, the day the VA promulgated the Guidance.
J.A. 1, 28. For partial knee replacement claims filed
on or after that date, the Manual provision directs RO adjudicators
not to award evaluations under DC 5055,
thereby implementing the rule put forward in the Guidance.
J.A. 1, 28. The Manual provision even explains that
its rule stems from the explanatory note added by the Guidance.
J.A. 28. Under the Manual provision, partial knee
2 Specifically, we have jurisdiction over the amended
petition because either the Knee Replacement Guidance or
the Knee Replacement Manual Provision is reviewable under
§ 502, regardless of which is the reviewable interpretive
rule under § 552(a)(1). NOVA 2020, 981 F.3d at 1382.
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NOVA v. SECRETARY OF VETERANS AFFAIRS 7
replacement claims filed before July 16, 2015, may still be
evaluated under DC 5055, such that the Knee Replacement
Guidance has no effect on their adjudication. J.A. 28–29.
Petitioners contend that this “temporal limitation is
not contained in the Knee Replacement Guidance,” so the
Manual provision is substantively different from the Guidance.
Pet’rs’ Br. 50. But there is no suggestion in the Guidance
that it is to have retroactive effect; indeed, the
Guidance states that it has an effective date of July 16,
- J.A. 1. Thus, the Manual provision does not provide
instructions to RO adjudicators that are substantively inconsistent
with the Knee Replacement Guidance. Because
it “merely republish[es]” the Guidance, the Knee Replacement
Manual Provision is not a final agency action subject
to review under § 502. NOVA 2020, 981 F.3d at 1382–83.
II. The Knee Replacement Guidance
Having concluded that the Knee Replacement Guidance
is the reviewable agency action, we now consider
whether the Guidance is arbitrary and capricious. We conclude
that it is.
A. Standard of Review
“We review petitions under 38 U.S.C. § 502 in accordance
with the standard set forth in the Administrative Procedure
Act (‘APA’), 5 U.S.C. §§ 701–706.” Paralyzed
Veterans of Am. v. Sec’y of Veterans Affs., 345 F.3d 1334,
1339 (Fed. Cir. 2003) (citing Nyeholt v. Sec’y of Veterans
Affs., 298 F.3d 1350, 1355 (Fed. Cir. 2002)). Under the
APA, we “hold unlawful and set aside agency action” that
is “arbitrary [and] capricious,” is “not in accordance with
law,” or is promulgated “without observance of procedure
required by law.” 5 U.S.C. §§ 706(2)(A), (D).
B. The Text of DC 5055
We are asked to determine whether the VA’s interpretation
of DC 5055 is arbitrary and capricious or contrary to
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8 NOVA v. SECRETARY OF VETERANS AFFAIRS
law. As always, we begin our analysis by looking to the
regulatory text. See Chase Bank USA, N.A. v. McCoy, 562
U.S. 195, 204 (2011). “[I]f there is only one reasonable construction
of a regulation,” then a court should not defer to
any conflicting agency interpretation. Kisor v. Wilkie, 139
S. Ct. 2400, 2415 (2019).
We look to the text of DC 5055 on the date that the VA
promulgated the Knee Replacement Guidance. See Chase
Bank, 562 U.S. at 204. On July 16, 2015, DC 5055 stated:
5055 Knee replacement (prosthesis).
Prosthetic replacement of knee joint:
For 1 year following implantation of prosthesis
………………… 100
With chronic residuals consisting of severe
painful motion or weakness in the affected extremity
………………… 60
With intermediate degrees of residual
weakness, pain or limitation of motion rate
by analogy to diagnostic codes 5256, 5261,
or 5262.
Minimum rating ………………… 30
38 C.F.R. § 4.71a (2015).
In Hudgens, we held that DC 5055 does not unambiguously
exclude partial knee replacements. 823 F.3d at 637.
Accordingly, the text of DC 5055 does not resolve whether
the Knee Replacement Guidance is arbitrary and capricious.
Id. at 637–38. The Secretary argues that we are not
bound by this holding in Hudgens because DC 5055 has
subsequently been “clarified” by the addition of the explanatory
note. Resp’t’s Br. 31. The Secretary asserts that the
explanatory note is “plain and unambiguous” in stating
that “the term ‘prosthetic replacement’ in diagnostic
codes 5051 through 5056 means a total replacement of the
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NOVA v. SECRETARY OF VETERANS AFFAIRS 9
named joint.” Id. at 30 (quoting 38 C.F.R. § 4.71a,
DCs 5051–56, Note (2020)).
We reject this circular argument. We are evaluating
whether the Guidance constitutes a valid interpretation of
DC 5055. The Guidance itself inserted the explanatory
note into DC 5055. J.A. 1–3. The Secretary would have us
hold that the Guidance articulates the only reasonable
reading of DC 5055 because the Guidance itself says so.
See generally Resp’t’s Br. 29–31. That cannot be correct.
Indeed, the Secretary’s argument contravenes a basic tenet
of administrative law. Agencies must “use the same procedures
when they amend or repeal a rule as they used to
issue the rule in the first instance.” Perez v. Mortg. Bankers
Ass’n, 575 U.S. 92, 101 (2015); see 5 U.S.C. § 551(5).
The VA promulgated DC 5055 following notice-and-comment
rulemaking procedures in 1978. Updating the Schedule
for Rating Disabilities, 43 Fed. Reg. 45,348, 45,348–50
(Oct. 2, 1978). Therefore, the Secretary cannot have
amended DC 5055 without going through notice-and-comment.
In Hudgens, we considered the same version of
DC 5055 that existed when the VA promulgated the Knee
Replacement Guidance. Compare 38 C.F.R. § 4.71a (2015),
with Hudgens, 823 F.3d at 632 (quoting 38 C.F.R. § 4.71a).
We thus follow Hudgens and conclude that DC 5055 is ambiguous
as to whether it includes partial knee replacements.
C. Deference
We next consider, as we did in Hudgens, whether we
must defer to the Secretary’s interpretation under Auer v.
Robbins, 519 U.S. 452 (1997). We conclude that Hudgens
is still controlling precedent and so we cannot afford the
Secretary’s interpretation Auer deference.
In Hudgens, we gave two reasons for why the Secretary’s
interpretation of DC 5055—excluding partial knee
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10 NOVA v. SECRETARY OF VETERANS AFFAIRS
replacements—was not entitled to Auer deference. 823
F.3d at 638–39. First, “the agency’s interpretation conflict[
ed] with a prior [agency] interpretation”—namely,
“numerous inconsistent rulings by the Board.” Id. at 638
(second brackets in original) (quoting Christopher v.
SmithKline Beecham Corp., 567 U.S. 142, 155 (2012)). Second,
the Secretary’s interpretation was a “post hoc rationalization”
“adopted to support the Veterans Court’s
interpretation.” Id. at 639. The second reason regarding
post hoc rationalization is not relevant here as we are addressing
only the interpretation put forward in the Knee
Replacement Guidance, not a previous agency interpretation
that the Secretary is justifying with the Knee Replacement
Guidance. See Oral Arg. at 01:47–02:07, available at
https://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
-1321_12092021.mp3 (“Q: [G]oing forward, if [the Guidance]
therefore is not to advance a defense of past agency
action, we are now talking about using it to defend subsequent
agency action. To me, that’s a real distinction that
has heft, right? A [from petitioners]: I agree it’s a distinction,
your honor.”). Therefore, this leaves our first reason
in Hudgens that “numerous inconsistent rulings by the
Board” foreclose the VA’s interpretation. 823 F.3d at 638.
The Secretary contends that we should not characterize
Board interpretations “as representing the agency’s official
position.” Resp’t’s Br. 33–35. The Secretary notes
that “to receive Auer deference, ‘the interpretation must at
least emanate from those actors, using those vehicles, understood
to make authoritative policy in the relevant context.’”
Id. at 34 (internal brackets omitted) (quoting Kisor,
139 S. Ct. at 2416). The Board is not such an authoritative
actor, the Secretary asserts, because it issues more than
100,000 non-precedential decisions a year where the judges
act individually rather than in panels. Id. at 35 (citing
Board of Veterans’ Appeals Annual Report to Congress
(FY 2020), https://www.bva.va.gov/docs/Chairmans_Annual_
Rpts/BVA2020AR.pdf). In the Secretary’s view, these
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NOVA v. SECRETARY OF VETERANS AFFAIRS 11
facts, together with our statement in NOVA 2020 that
Board decisions “appear not to be entitled to Auer deference,”
981 F.3d at 1382 n.14, “erodes the foundation” of our
holding in Hudgens, Oral Arg. at 29:50–52.
The Secretary’s argument is beside the point. Neither
in Hudgens nor in this case is the issue whether Board decisions
are entitled to Auer deference. See id. at 17:28–
18:00 (petitioners emphasizing that they are not arguing
that Board decisions should be entitled to Auer deference).
Rather, the issue is whether the existence of conflicting
prior Board decisions can preclude the application of Auer
deference to the subsequent VA interpretation in the Knee
Replacement Guidance. As we explain below, no relevant
law or facts have changed since our decision in Hudgens,
and so we continue to be bound by our conclusion that prior
conflicting Board decisions interpreting DC 5055 preclude
application of Auer deference to the Knee Replacement
Guidance.
Since our decision in Hudgens, the Supreme Court has
addressed Auer deference in Kisor. In Kisor, the Court
found “it worth reinforcing some of the limits inherent in
the Auer doctrine.” 139 S. Ct. at 2415. First, the Supreme
Court held that before applying Auer deference, courts
must “carefully consider the text, structure, history, and
purpose of a regulation” and conclude that “the regulation
is genuinely ambiguous.” Id. Second, the agency’s interpretation
must also be “reasonable” and “come within the
zone of ambiguity the court has identified after employing
all its interpretive tools.” Id. at 2415–16. Third, “a court
must make an independent inquiry into whether the character
and context of the agency interpretation entitles it to
controlling weight.” Id. at 2416. This third part of the Auer
inquiry is relevant here. The Supreme Court gave a list of
several “especially important markers for identifying when
Auer deference is and is not appropriate” given the character
and context of the interpretation. Id.
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12 NOVA v. SECRETARY OF VETERANS AFFAIRS
The first of these markers, the Court explained, is that
only “authoritative” agency interpretations should be afforded
Auer deference. Id. “That constraint follows from
the logic of Auer deference—because Congress has delegated
rulemaking power, and all that typically goes with it,
to the agency alone.” Id. In other words, Auer deference is
available only when agencies exercise their “delegated
rulemaking power.”
But not all agency actions exercising such power can
receive Auer deference. See Kristin E. Hickman & Richard
J. Pierce, Jr., Administrative Law § 3.8.3 (6th ed. 2022)
(summarizing that under Kisor an agency interpretation
being “authoritative” is one of five conditions that must be
met before that interpretation can receive Auer deference).
The Supreme Court proceeded to separately summarize
case law holding that an agency interpretation should not
receive Auer deference when it conflicts with a prior interpretation
and “creates ‘unfair surprise’ to regulated parties.”
Kisor, 139 S. Ct. at 2417–18 (quoting Long Island
Care at Home, Ltd. v. Coke, 551 U.S. 158, 170 (2007)). Such
agency actions do not reflect the “fair and considered judgment”
of the agency. Id. at 2417 (quoting Christopher, 567
U.S. at 155). Where there is such an “upending of reliance,”
the lack of “‘fair warning’ outweigh[s] the reasons to apply
Auer.” Id. at 2418 (quoting Christopher, 567 U.S. at 156).
Accordingly, the primary concern of this constraint on Auer
deference is the expectations that the agency has previously
engendered.
Indeed, an agency can create such expectations even if
it has not previously put forward an “authoritative” agency
interpretation. Id. at 2418 (“[T]he upending of reliance
may happen without such an explicit interpretive
change.”); see also Romero v. Barr, 937 F.3d 282, 291 (4th
Cir. 2019) (“[T]he upending of reliance may happen without
such an explicit interpretive change. Rather, an agency
may—instead of issuing a new interpretation that conflicts
with an older one—set forth an interpretation for the first
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NOVA v. SECRETARY OF VETERANS AFFAIRS 13
time that is contrary to an established practice to which the
agency has never objected.” (internal citation omitted)). As
Kisor explains, in Christopher, the Supreme Court “refused
to defer to an interpretation that would have imposed retroactive
liability on parties for longstanding conduct that
the agency had never before addressed.” Kisor, 139 S. Ct.
at 2418 (citing Christopher, 567 U.S. at 155–56). In other
words, even the absence of prior agency action can cause a
new interpretation to be an “upending of reliance,” preventing
that interpretation from receiving Auer deference.
Christopher, 567 U.S. at 155–58. Kisor merely reiterated
that conflicting agency interpretations cannot receive Auer
deference because they cause “unfair surprise” or an “upending
of reliance.” 139 S. Ct. at 2417–18 (quoting Long
Island, 551 U.S. at 170); accord Charles H. Koch, Jr. &
Richard Murphy, 3 Administrative Law & Practice § 10:26
(3d ed. 2022) (“In Christopher . . . the circumstance that
mattered most to the Court was the element of unfair surprise.”).
Kisor did not change the exception to Auer deference
applied in Hudgens. See Hudgens, 823 F.3d at 638–39
(citing Christopher, 567 U.S. at 155).
The fact that the Board, as it did before Hudgens, issues
numerous non-precedential decisions by single judges
each year does not alter our decision. Of the relevant Board
decisions issued before the VA promulgated the Guidance,
the vast majority applied DC 5055 to partial knee replacements.
Id. at 637–38 & n.3 (noting Mr. Hudgens’s argument
that 17 out of 21 Board decisions issued prior to
Hudgens interpreted DC 5055 to cover partial knee replacements);
Hudgens v. Gibson, 26 Vet. App. 558, 566
(2014) (“Gibson”) (Kasold, C.J., dissenting) (noting that
there were “at least 11 Board decisions that have interpreted
DC 5055 to cover partial knee replacements and
only 3 that have interpreted it as limited solely to total
knee replacements”), rev’d sub nom. Hudgens v. McDonald,
823 F.3d 630 (Fed. Cir. 2016). And although Board decisions
are non-precedential and issued by single judges,
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14 NOVA v. SECRETARY OF VETERANS AFFAIRS
they are—as we held in Hudgens—“the final decision[s] for
the Secretary on all questions in matters affecting the provision
of benefits” and provide persuasive authority to the
Veterans Court on the interpretation of regulations. Hudgens,
823 F.3d at 638 (quoting Gibson, 26 Vet. App. at 566
(Kasold, C.J., dissenting) (citing 38 U.S.C. § 7104(c))). As
such, there is “weight accorded to Board interpretations of
VA regulations” that can engender reliance interests and
foreclose application of Auer deference to the later conflicting
Knee Replacement Guidance.3 Id.
3 The dissent concludes that the Guidance does not
upend reliance because it applies prospectively and not retrospectively.
Diss. at 3. But the dissent does not identify
cases where courts have relied on a distinction between
prospective and retrospective conflicting agency interpretations.
Instead, the Supreme Court has held that the “disruption
of expectations may occur when an agency
substitutes one view of a rule for another.” Kisor, 139 S Ct.
at 2418. An agency interpretation is not entitled to Auer
deference when the interpretation “does not reflect the
agency’s fair and considered judgment,” which may occur
“when the agency’s interpretation conflicts with a prior interpretation”
or is a “post hoc rationalization.” Christopher,
567 U.S. at 155. Thus, courts have not given Auer
deference to conflicting agency interpretations that are applied
in subsequent proceedings. See, e.g., Romero, 937
F.3d at 296–97 (declining to give Auer deference to precedential
decision of Attorney General that Board of Immigration
Appeals applied to end administrative closure of
case); Rafferty v. Denny’s, Inc., 13 F.4th 1166, 1187 (11th
Cir. 2021) (declining to give Auer deference to agency Opinion
Letter issued prior to filing of complaint at issue). The
Guidance, like the Board decision in Hudgens, conflicts
with prior interpretations, which forecloses Auer deference.
See Hudgens, 823 F.3d at 637–38 & n.3.
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NOVA v. SECRETARY OF VETERANS AFFAIRS 15
We are thus still bound by the conclusion in Hudgens
that the interpretive rule embodied in the Knee Replacement
Guidance cannot qualify for Auer deference because
it conflicts with most prior Board decisions interpreting
DC 5055. See id. at 638–39.
D. Pro-Veteran Canon of Construction
We also must follow Hudgens, apply the pro-veteran
canon, and defer to Petitioners’ interpretation of DC 5055.4
We held in Hudgens that “[e]ven if the government’s asserted
interpretation of DC 5055 is plausible, it would be
appropriate under [the pro-veteran canon] only if the [regulatory]
language unambiguously supported the government’s
interpretation.” Id. at 639 (cleaned up) (quoting
Sursely v. Peake, 551 F.3d 1351, 1357 (Fed. Cir. 2009)). Petitioners’
interpretation of DC 5055, which is the same as
that of Mr. Hudgens, “is permitted by the text of the regulation.”
Id. “DC 5055 is under the heading ‘Prosthetic Implants’
and merely lists a schedule of ratings for the
condition ‘Knee replacement (prosthesis),’ without elaboration
or limitation of the condition.” Id. (citing 38 C.F.R.
§ 4.71a (2015)). The Secretary argues that we are not
bound by the analysis of the pro-veteran canon in Hudgens
only because the VA has subsequently added the explanatory
note. Resp’t’s Br. 36–37. But we have already concluded
that the explanatory note cannot influence our
interpretation of DC 5055. So, we follow Hudgens, apply
4 “This court has not definitively resolved at what
stage the pro-veteran canon applies and whether it precedes
any claims of deference to an agency interpretation.”
Roby v. McDonough, 2021 WL 3378834, at *8 (Fed. Cir.
Aug. 4, 2021). Because we conclude that the Secretary’s
interpretation is not entitled to Auer deference, we decline
to opine on whether the pro-veteran canon precedes or follows
Auer deference.
Case: 20-1321 Document: 147 Page: 15 Filed: 09/20/2022
16 NOVA v. SECRETARY OF VETERANS AFFAIRS
the pro-veteran canon, and resolve any doubt in Petitioners’
favor.
For these reasons, we conclude that the Secretary’s interpretation
of DC 5055 is arbitrary and capricious and vacate
the Knee Replacement Guidance.
III. The Knee Joint Stability Manual Provision
Finally, we turn to the Knee Joint Stability Manual
Provision. The parties agree that this issue is moot because
the Secretary rescinded the Manual provision.
Pet’rs’ Br. 54–55; Resp’t’s Br. 55–56. We concur. Although
Petitioners ask us to declare that the Manual provision is
invalid ab initio, see Pet’rs’ Br. 55, we do not have the authority
to make such a ruling on the merits when the issue
is moot, see Powell v. McCormack, 395 U.S. 486, 496 n.7
(1969).
CONCLUSION
Accordingly, we grant the petition as to the Knee Replacement
Guidance and dismiss the petition as to the
Knee Replacement Manual Provision and Knee Joint Stability
Manual Provision.
GRANTED-IN-PART, DISMISSED-IN-PART
COSTS
No costs.
Case: 20-1321 Document: 147 Page: 16 Filed: 09/20/2022
United States Court of Appeals
for the Federal Circuit
NATIONAL ORGANIZATION OF VETERANS’
ADVOCATES, INC., PETER CIANCHETTA,
MICHAEL REGIS, ANDREW TANGEN,
Petitioners
v.
SECRETARY OF VETERANS AFFAIRS,
Respondent
2020-1321
Petition for review pursuant to 38 U.S.C. Section 502.
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
Case: 20-1321 Document: 147 Page: 17 Filed: 09/20/2022
2 NOVA v. SECRETARY OF VETERANS AFFAIRS
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.
I
I begin with Hudgens and my disagreement that it resolves
this case. In Hudgens, we found DC 5055 ambiguous.
Id. at 637. We withheld Auer deference from the
Secretary’s interpretation, however, which he published
during that appeal. Id. at 638. We did so for two reasons,
both drawn from the Supreme Court’s decision in Christopher
v. SmithKline Beecham Corp., 567 U.S. 142, 155
(2012). Because I conclude that neither of those reasons
applies in the context of this case, I disagree that Hudgens
precludes us from deferring to the Guidance, and I ultimately
conclude that’s what we should do.
One reason we gave for declining to defer in Hudgens
was that the Guidance was an improper post-hoc rationalization.
823 F.3d at 639. The majority acknowledges, and
I agree, that this rationale doesn’t apply in the circumstances
of this case. Maj. 10. So that pillar of Hudgens is
gone.
That “leaves our [other] reason” for withholding deference
in Hudgens, Maj. 10—i.e., that the Guidance “conflicts
with a prior [agency] interpretation.” 823 F.3d at 639 (alteration
in original) (quoting Christopher, 567 U.S. at 155).
More than six years ago, in Hudgens, we looked backwards
and noted that prior Board decisions “favor[ed]
Case: 20-1321 Document: 147 Page: 18 Filed: 09/20/2022
NOVA v. SECRETARY OF VETERANS AFFAIRS 3
Mr. Hudgens’s view.” Id. “The precise number,” we continued,
was “not important.” Id. at 638 n.3. Perhaps it was
“11 out of 14,” id. at 637, or even “17 out of 21 according to
[Mr. Hudgens’s] count,” id. at 638 n.3. “What [was] important,”
we said, was that these embodied “the vast majority
of Board decisions considering the question.” Id.
The “primary concern” underlying this rationale was
“the expectations that the agency ha[d] previously engendered.”
Maj. 12. That is, “unfair surprise,” upending of
“reliance,” and lack of “fair warning” ultimately outweighed
the reasons to apply Auer. Christopher, 567 U.S.
at 156–57; see Maj. 12. This remaining pillar of Hudgens,
the majority believes, still stands. In my view, it doesn’t.
Specifically, this Hudgens rationale is inapplicable for a
straightforward reason: in Hudgens, the Secretary tried to
apply the Guidance retrospectively to Mr. Hudgens’s claim,
but it now applies only prospectively—signifying both the
presence of “fair warning” and the absence of “unfair surprise”
or upended “reliance” here. As the majority recognizes,
the Secretary implemented Hudgens by indicating
that DC 5055 would cover both partial and total knee replacements
for claims filed before the Guidance (like
Mr. Hudgens’s) but would cover only total knee replacements
(per the Guidance) for future claims (like the relevant
claims here). Maj. 4. So, where’s the unfair surprise?
The upending of reliance? The lack of fair warning? There
is none.
The majority downplays this distinction and instead
relies on the same handful of “[d]ecisions issued before the
[Secretary] promulgated the Guidance,”1 Maj. 13
1 Notably, in view of Kisor v. Wilkie, “Board decisions
. . . appear not to be entitled to Auer deference.” Nat’l
Org. of Veterans’ Advocs., Inc. v. Sec’y of Veterans Affs.,
981 F.3d 1360, 1382 n.14 (Fed. Cir. 2020) (en banc) (citing
139 S. Ct. 2400, 2424 (2019) (stating that the Solicitor
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4 NOVA v. SECRETARY OF VETERANS AFFAIRS
(emphasis added), which petitioners say “still create the
conflict today,” Oral Arg. at 10:35–40, No. 20-1321.2 I
doubt the majority would say that, whenever the Secretary
corrects a Board interpretation, Auer is forever unavailable;
indeed, that position seems contrary to Hudgens itself:
“If the Secretary is dissatisfied with the Board’s interpretation
. . . , the Secretary may instruct the Board regarding
what the Secretary believes is the correct interpretation.”
Hudgens, 823 F.3d at 638.
II
My conclusion above—that neither of the two Auer-defeating
rationales of Hudgens applies—leaves me in quite
a different place from the majority. Because the majority
calls upon the pro-veteran canon after taking Auer off the
table, Maj. 15–16, it does not find itself caught between two
rules that “counsel contrary outcomes.” See Hudgens,
823 F.3d at 639 n.5. It erroneously avoids that predicament
the same way Hudgens did, by deciding there are
“firm grounds upon which to conclude that Auer deference
does not apply.” Id.
Having concluded that those grounds (whatever their
initial firmness) have given way, however, I do not have the
same luxury. I must answer the “difficult and unresolved”
question of which of these two ambiguity-resolving rules
“gets triggered first”—Auer or the pro-veteran canon. See
Kisor v. McDonough, 995 F.3d 1347, 1358 (Fed. Cir. 2021)
(Prost, C.J., concurring in denial of rehearing en banc)
General suggested Auer deference may be inappropriate
for Board decisions)). True, that’s not the issue here,
Maj. 11, but Kisor at minimum provides reason to question
the “weight” Hudgens assigned those decisions. Hudgens,
823 F.3d at 638.
2 https://oralarguments.cafc.uscourts.gov/default.as
px?fl=20-1321_12092021.mp3.
Case: 20-1321 Document: 147 Page: 20 Filed: 09/20/2022
NOVA v. SECRETARY OF VETERANS AFFAIRS 5
(“Prost Kisor Concurrence”). At least regarding the ambiguity
presented in this case, I conclude the answer is Auer.
I begin with two preliminary points. One, the Supreme
Court has never applied the pro-veteran canon to a regulation,
and Hudgens was the only decision of this court, until
today, to do so. As I’ve said before, “if the pro-veteran
canon is based on the theory that it is a proxy for congressional
intent, one wonders why it should apply to regulations
as well as statutes, or at least whether it would apply
with equal force.” Prost Kisor Concurrence, 995 F.3d
at 1349 n.2. Neither Hudgens nor the majority attempts to
justify why it should so apply.
Two, even if I agreed with the majority that Auer is off
the table and the canon is the appropriate tool to employ
here, the majority’s application of the canon—hinging on
Hudgens’s statement that the veteran’s interpretation is
“permitted by the text of the regulation,” is flawed. Maj. 15
(emphasis added) (quoting 823 F.3d at 639). Hudgens, importantly,
was decided before the Supreme Court decided
Kisor v. Wilkie. On remand following the Court’s decision,
we said the pro-veteran canon “does not apply unless ‘interpretive
doubt’ is present,” and that “[t]hat precondition
is not satisfied where a sole reasonable meaning is identified
through the use of ordinary textual analysis tools[] before
consideration of the pro-veteran canon.” Kisor v.
McDonough, 995 F.3d 1316, 1325–26 (Fed. Cir. 2021)
(quoting Brown, 513 U.S. at 117–18), cert. denied,
142 S. Ct. 756 (2022).3 At the same time, we rejected the
view that applying the canon is proper so long as the text
does not “preclude[]” or “expressly exclude the veteran’s interpretation.”
See id. at 1336–37 (Reyna, J., dissenting);
3 The Supreme Court subsequently declined the invitation
to address “the appropriate use of the pro-veteran
canon.” See Petition for Writ of Certiorari at 11, Kisor,
142 S. Ct. 756 (No. 21-465).
Case: 20-1321 Document: 147 Page: 21 Filed: 09/20/2022
6 NOVA v. SECRETARY OF VETERANS AFFAIRS
see also Kisor, 995 F.3d at 1372 (O’Malley, J., dissenting
from denial of rehearing en banc) (advocating that the
canon applies “[w]here differing plausible, reasonable interpretations
of the terms of a regulation are possible” (emphasis
added)). As I’ve said at length elsewhere, we
shouldn’t apply the pro-veteran canon “merely because a
veteran-friendly construction is possible.” Prost Kisor Concurrence,
995 F.3d at 1355.
With those important preliminaries out of the way, I
conclude for the reasons below that the pro-veteran canon
does not preclude Auer deference here because (A) it is not
one of the “traditional tools” we must apply before deferring
under Auer and (B) resolution of the ambiguity here is
best understood as delegated to the agency, not the courts.
A
In view of the Supreme Court’s instruction that “a
court must exhaust all the ‘traditional tools’ of construction”
before finding ambiguity and deferring under Auer,
Kisor, 139 S. Ct. at 2415 (cleaned up), I must first consider
the suggestion that the pro-veteran canon is “one such traditional
tool,” Pet’rs’ Br. 35, 44 n.10 (quoting Procopio v.
Wilkie, 913 F.3d 1371, 1383 (Fed. Cir. 2019) (en banc)
(O’Malley, J., concurring)); see also Kisor v. Shulkin,
880 F.3d 1378, 1381 (Fed. Cir. 2018) (O’Malley, J., dissenting
from denial of rehearing en banc) (“The [pro-veteran
canon] is one of those rules of statutory construction.”). I
conclude it is not.
Although the Court has not expressly disabused us of
the notion that the pro-veteran canon is one of the “traditional
tools,” it has made clear that not all canons fall
within this category.4 One example is a similar tiebreaking
4 Kisor repeatedly describes the “traditional tools” as
at least including “text, structure, history, and purpose.”
E.g., 139 S. Ct. at 2415. The Court’s omission of the pro-
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NOVA v. SECRETARY OF VETERANS AFFAIRS 7
rule, the rule of lenity. In Yates v. United States, the Court
stated that “[f]inally, if our recourse to traditional tools of
statutory construction leaves any doubt . . . , we would invoke
the rule that ambiguity concerning the ambit of criminal
statutes should be resolved in favor of lenity.”
574 U.S. 528, 547–48 (2015) (cleaned up). And more recently
in Shular v. United States, the Court explained that
lenity “applies only when, after consulting traditional canons
of statutory construction, we are left with an ambiguous
statute.” 140 S. Ct. 779, 787 (2020). As I’ve observed,
the Supreme Court’s invocation of the pro-veteran canon
across its “relatively short” history—typically just to “further
confirm an interpretation that [the Court] reached by
analyzing text and context”— resembles the rule of lenity
and reflects this same order of operations. See Prost Kisor
Concurrence, 995 F.3d at 1350–55.5
The pro-veteran canon’s normative character also supports
my conclusion that it is not one of the contemplated
“traditional tools.” Descriptive canons, like the traditional
tools mentioned in Kisor, “are just specific applications of
the basic goal of interpretation: finding the ordinary
veteran canon from this list might be unremarkable except
that one of the two questions presented in Kisor at the certiorari
stage was whether Auer should yield to the pro-veteran
canon. The Court did not grant certiorari on that
question.
5 A different (and more dubious) conception of the
pro-veteran canon is not as a tiebreaking rule, but as a
broad liberal-construction principle. Prost Kisor Concurrence,
995 F.3d at 1351–54. This view ignores that “[l]egislation
is . . . the art of compromise, the limitations
expressed in statutory terms [are] often the price of passage,
and no statute yet known pursues its stated purpose
at all costs.” Henson v. Santander Consumer USA Inc.,
137 S. Ct. 1718, 1725 (2017) (cleaned up).
Case: 20-1321 Document: 147 Page: 23 Filed: 09/20/2022
8 NOVA v. SECRETARY OF VETERANS AFFAIRS
meaning of statutory text.” Arangure v. Whitaker, 911 F.3d
333, 340 (6th Cir. 2018). But the pro-veteran canon is a
substantive canon that “enter[s] the calculus when judges
‘need some way to finish the job and to pick from among
the possible meanings that their primary interpretive tools
have identified.’” Prost Kisor Concurrence, 995 F.3d
at 1350 (quoting Caleb Nelson, What Is Textualism?,
91 Va. L. Rev. 347, 394 (2005)); see also Vitol, Inc. v. United
States, 30 F.4th 248, 253 (5th Cir. 2022) (“[O]nly . . . after
plain meaning and application of the interpretive canons
are found lacking . . . do the so-called substantive canons
. . . come into play.” (cleaned up)). They “express the law’s
supposed preferences when certain close interpretive calls
arise.” Calderon v. Sixt Rent a Car, LLC, 5 F.4th 1204,
1219 (11th Cir. 2021) (Newsom, J., concurring). Accordingly,
“[a]mbiguity canons merely instruct courts on how to
‘choos[e] between equally plausible interpretations of ambiguous
text.’” W. Virginia v. EPA, 142 S. Ct. 2587, 2620
n.3 (2022) (Gorsuch, J., concurring) (second alteration in
original) (quoting Amy Coney Barrett, Substantive Canons
and Faithful Agency, 90 B.U. L. Rev. 109, 109 (2010)). Any
other role makes no sense “as a logical matter.” Prost Kisor
Concurrence, 995 F.3d at 1354. “[I]f ‘interpretive doubt’ is
a precondition for applying the canon,” then “the existence
of interpretive doubt must be determined without employing
the canon.” Id. “Otherwise, circularity results.” Id.
For these reasons, the pro-veteran canon is not one of
the “traditional tools” we must apply before concluding that
a regulation is ambiguous. Rather, it kicks in after a conclusion
of ambiguity—similar to the way lenity, Chevron,
Auer, and other ambiguity-triggered rules do.6
6 Concluding otherwise would mean “the VA, alone
among the executive agencies, is not entitled to deference
in interpreting its regulations,” which “would be
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NOVA v. SECRETARY OF VETERANS AFFAIRS 9
B
Having concluded that the pro-veteran canon need not
be applied before finding ambiguity and applying Auer, I
also conclude that Auer provides the proper resolution of
the ambiguity in this case. In my view, deciding which rule
applies here requires recognizing that “ambiguity is essentially
a delegation of policymaking authority to the governmental
actor charged with interpreting” the relevant
provision, and that the pro-veteran canon and Auer deference
are each a type of delegation—just to different actors.
See Barrett, supra, at 123. Like Chevron deference, which
“treat[s] statutory ambiguity as a delegation of gap-filling
authority to an administrative agency,” id. at 182 n.66,
Auer deference is similarly “rooted in a presumption about
congressional intent,” i.e., “that Congress would generally
want the agency to play the primary role in resolving regulatory
ambiguities,” Kisor, 139 S. Ct. at 2412, as well as
an “awareness that resolving genuine regulatory ambiguities
often entails the exercise of judgment grounded in policy
concerns,” id. at 2413 (cleaned up). “[T]he core theory
of Auer deference is that sometimes the law runs out, and
policy-laden choice is what is left over.” Id. at 2415.
In a similar vein, “a judge applying a canon like lenity”—
or the pro-veteran canon—“to implement unclear text
is not deviating from her best understanding of Congress’s
instructions”—that “Congress left the problem to her.” See
Barrett, supra, at 123. Accordingly, “we presume[] Congress
intended to invest interpretive power in whichever
actor was best positioned to develop expertise about the
given problem,” Kisor, 139 S. Ct. at 2417 (cleaned up), including
“as between agencies and courts,” id.
anomalous to say the least.” Kisor, 995 F.3d at 1361
(Hughes, J., concurring in denial of rehearing en banc).
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10 NOVA v. SECRETARY OF VETERANS AFFAIRS
Here, the ambiguity is in a gap-filling regulation on a
matter well within the agency’s expertise: the coverage of
a medical diagnostic code. See id. at 2413 (“Agencies (unlike
courts) have unique expertise, often of a scientific or
technical nature, relevant to applying a regulation to complex
or changing circumstances.” (cleaned up)). Specifically,
DC 5055 sets forth ratings for knee replacements as
a subsection of 38 C.F.R. § 4.71a. That regulation, in turn,
is authorized by 38 U.S.C. § 1155, which broadly instructs
that “[t]he Secretary shall adopt and apply a schedule of
ratings of reductions in earning capacity from specific injuries
or combination of injuries.” And the Secretary’s explanation
for his interpretation is “[t]he progression of this
area of medical science.” J.A. 1.7
Conceivably, some regulatory ambiguities might be
better resolved by courts applying the pro-veteran canon.
Perhaps, for example, “[w]hen the agency has no comparative
expertise in resolving a regulatory ambiguity,” since in
such a case “Congress presumably would not grant it that
authority.” Kisor, 139 S. Ct. at 2417 (indicating that
“[s]ome interpretive issues,” like “the elucidation of a simple
common-law property term” or “the award of an attorney’s
fee,” “may fall more naturally into a judge’s
bailiwick”). But that’s not what we have here. Rather, the
most logical conclusion is that Congress delegated resolution
of the ambiguity here to the agency, which must “fill
7 “The field of orthopedic medicine has progressed to
such a degree that total prosthetic replacement of a joint is
not always necessary. . . . Partial replacement has the benefit
of not requiring the same length of time for convalescence.
The progression of this area of medical science has
raised an issue as to whether a veteran who undergoes a
partial replacement of a joint is entitled to the 100-percent
rating evaluation during the convalescent period under
DCs 5051 through 5056.” J.A. 1 (footnote omitted).
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NOVA v. SECRETARY OF VETERANS AFFAIRS 11
out the regulatory scheme Congress has placed under its
supervision.” Id. at 2418. Indeed, we’ve deferred for similar
reasons in the closely related Chevron context. In Buffington
v. McDonough, for example, we did so where the
Secretary “filled a statutory gap.” 7 F.4th 1361, 1367
(Fed. Cir. 2021). There, we also declined to apply the proveteran
canon. Compare id. at 1366 n.5, with id.
at 1374–75 (O’Malley, J., dissenting). Likewise in Terry v.
Principi we deferred under Chevron to fill a gap instead of
applying the pro-veteran canon. 340 F.3d 1378, 1383
(Fed. Cir. 2003). Accordingly, the ambiguity in this case
implicates the rationales underlying Auer, not the pro-veteran
canon.
III
The Guidance we review here is a forward-looking prescription,
not a post-hoc rationalization or a reliance-upending
departure from a prior agency position. With Auer
still on the books after Kisor, we must defer to it absent any
other applicable exceptions. Nothing in Hudgens prevents
us from doing so in this case. I respectfully dissent.
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