Sample Case Law Developments from January/February 2010 issue
Federal and State Entitlement Programs
VA Benefits; Altered Medical Record; CUE;
Substantially Gainful Employment

As a matter of first impression, the Federal Circuit ruled that a veteran’s entitlement to disability benefits is a property interest under the Due Process Clause. Thus, the Board of Veterans’ Appeals’ (BVA) consideration of an unlawfully altered medical record, rather than the unaltered record, in declining benefits violated the veteran’s due process right to a fair hearing, where a reasonable probability existed that the hearing result would have been different in the presence of the unaltered record. However, the BVA’s statutory construction and interpretation of the employability standard did not constitute clear and unmistakable error (CUE) based on the unlawfully altered medical record before it. Cushman v. Shineski, 576 F.3d 1290 (Fed. Cir. 2009).

Upon learning that prior denials of his 1977, 1989, and 1982 requests for a rating of total disability as to individual unemployability (TDIU) were based on an unlawfully altered medical record, Philip Cushman sought reversal of such denials. Namely, one of the doctor’s entries had been altered to change the language “Is worse + must stop present type of work” to instead read “Is worse + must stop present type of work, or at least [] bend []stoop lift.” The altered record also contained the additional entry, “says he is applying for reevaluation of back condition.” Cushman was finally granted his TDIU rating, effective August 1994. The BVA denied reversal, and the U.S. Court of Appeals for Veterans Claims affirmed. 2008 WL 2129877 (Vet. Ct. App. Feb. 29, 2008).

The Federal Circuit vacated and remanded, ruling that a veteran’s entitlement to disability benefits is a property interest that is protected by the Due Process Clause. The U.S. Supreme Court has not resolved the specific question of whether applicants who have not yet been adjudicated as entitled to benefits possess a property interest in those benefits. See Lyng v. Payne, 476 U.S. 926 (1986). The Court has noted that the individual must have a legitimate claim of entitlement to the benefits, which cannot be discretionary. See Town of Castle Rock, Colo. v. Gonzales, 545 U.S. 748, 756 (2005). The Court also has implied that certain due process protections apply to the adjudicative administrative proceedings associated with Social Security disability claim hearings. See Richardson v. Perales, 402 U.S. 389 (1971). The protected property interests implicated in these proceedings provide a helpful analogy in assessing the property interests of veterans seeking service-connected disability benefits. As with entitlement to Social Security benefits, entitlement to veterans benefits arises from a source that is independent from the proceedings themselves. See 38 U.S.C. §1110.

The Ninth Circuit has held that applicants for, and recipients of, service-connected death and disability benefits possess a constitutionally protected property interest in those benefits. See National Ass’n of Radiation Survivors v. Derwinski, 994 F.2d 583, 588 n.7 (9th Cir. 1992). Of the seven circuits that have addressed the issue, all have ruled that benefits applicants and recipients may possess a property interest in the receipt of public welfare entitlements. See Kapps v. Wing, 404 F.3d 105, 115 (2d Cir. 2005); Kelly v. Railroad Ret. Bd., 625 F.2d 486, 489-90 (3d Cir. 1980); Mallette v. Arlington County Employees’ Supplemental Ret. Sys. II, 91 F.3d 630, 634-35 (4th Cir. 1996), 20 MPDLR 850; Hamby v. Neel, 368 F.3d 549, 559-60 (6th Cir. 2004), 28 MPDLR 515; Wright v. Califano, 587 F.2d 345, 354 (7th Cir. 1978), 3 MDLR 330; Daniels v. Woodbury County, Iowa, 742 F.2d 1128, 1132 (8th Cir. 1984); Gonzalez v. Sullivan, 914 F.2d 1197, 1203 (9th Cir. 1990), 15 MPDLR 85; Ressler v. Pierce, 692 F.2d 1212, 1214 (9th Cir. 1982); Griffeth v. Detrich, 603 F.2d 118, 119 (9th Cir. 1979); Cook v. Principi, 318 F.3d 1334, 1352 (Fed. Cir. 2002), 27 MPDLR 326. Veterans benefits are nondiscretionary, statutorily mandated benefits to which veterans are entitled upon a showing that they meet the eligibility requirements set forth in the relevant statutes and regulations.

Cushman’s due process right was violated by the process he received from the Regional Office (RO), the BVA, and the Veterans Court. Cushman acquired a legitimate claim of entitlement to veterans benefits due to a spinal injury while serving in a combat infantry battalion in Vietnam. That Cushman received numerous hearings was not relevant to the question of whether he received a fair hearing. His initial TDIU determination was tainted by the altered medical record, and that taint affected all subsequent hearings. Thus, none of the subsequent hearings satisfied Cushman’s due process right to a fair hearing. The altered record was prejudicial, since a reasonable probability existed that, absent that record, the result of Cushman’s TDIU hearing would have been different. See Kyles v. Whitley, 514 U.S. 419, 434 (1995). That altered record was the only piece of medical evidence that addressed Cushman’s then-current employability, and the substance of the alterations spoke directly to the type of work that Cushman could perform in light of his progressing disability. The altered record indicated that Cushman was more employable than did the unaltered record. Thus, the BVA remanded to the RO to consider the medical evidence.

However, the BVA’s statutory construction and interpretation of the relevant employability standard did not constitute CUE based on the unlawfully altered medical record before it. Although the BVA used the incorrect term “unemployable”—which, under 38 C.F.R. §4.18, requires an individual to satisfactorily show preclusion from all further employment—in the last line of its decision, the BVA used the correct term “substantially gainful employment” throughout its decision. The use of the incorrect term appeared to be a clerical, rather than a substantive, error. Cushman failed to show that the outcome of his case would have been different had the BVA construed the term “substantially gainful employment” as he proposed. Therefore, the court denied Cushman’s request for an order directing the grant of an earlier TDIU effective date. He is free to argue on remand that his service-connected disability precluded work that was substantially gainful.

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FindLaw Link: Cushman v. Shinseki

United States Court of Appeals, Federal Circuit.
Philip E. CUSHMAN, Claimant-Appellant, v. Eric K. SHINSEKI, Secretary of Veterans Affairs, Respondent-Appellee.
No. 2008-7129.
Decided: August 12, 2009