Cooper v. McDonough

57 F.4th 1366

• Court: Court of Appeals for the Federal Circuit
• Decided: January 23, 2023
• Docket: 21-2023
• Status: Published

Opinion

Case: 21-2023 Document: 56 Page: 1 Filed: 01/23/2023

United States Court of Appeals for the Federal Circuit ______________________

ROBERT E. COOPER, JR., Claimant-Appellant

v.

DENIS MCDONOUGH, SECRETARY OF VETERANS AFFAIRS, Respondent-Appellee ______________________

2021-2023 ______________________

Appeal from the United States Court of Appeals for Veterans Claims in No. 19-2009, Judge Amanda L. Mere- dith, Judge Coral Wong Pietsch, Judge Joseph L. Toth. ______________________

Decided: January 23, 2023 ______________________

CHRIS ATTIG, Attig Curran Steel PLLC, Little Rock, AR, argued for claimant-appellant. Also represented by HALEY SMITH; JUDY JOANNE DONEGAN, The Veterans Con- sortium Pro Bono Program, Washington, DC.

JOSHUA E. KURLAND, Commercial Litigation Branch, Civil Division, United States Department of Justice, Wash- ington, DC, argued for respondent-appellee. Also repre- sented by BRIAN M. BOYNTON, ELIZABETH MARIE HOSFORD, PATRICIA M. MCCARTHY; JONATHAN KRISCH, Y. KEN LEE, Case: 21-2023 Document: 56 Page: 2 Filed: 01/23/2023

Office of General Counsel, United States Department of Veterans Affairs, Washington, DC. ______________________

Before PROST, CHEN, and STOLL, Circuit Judges. CHEN, Circuit Judge. Robert Cooper appeals a decision by the United States Court of Appeals for Veterans Claims (Veterans Court) af- firming a decision by the Board of Veterans’ Appeals (Board) that denied Mr. Cooper’s request to exclude state unemployment compensation payments from his annual income for purposes of calculating his non-service-con- nected (NSC) pension. The Veterans Court found that un- employment compensation payments are not excluded from a veteran’s annual income under an exception for “do- nations from public or private relief or welfare organiza- tions.” 38 U.S.C. § 1503(a)(1). Because we agree that state unemployment compensation payments are not “dona- tions,” we affirm. BACKGROUND I A veteran who served during a period of war and is “permanently and totally disabled from non-service-con- nected disability not the result of the veteran’s willful mis- conduct” may be entitled to an NSC pension. 38 U.S.C. § 1521(a), (j). NSC pensions are need based, and thus the maximum annual rate of pension is “reduced by the amount of the veteran’s annual income.” Id. § 1521(b); see also Review of the Non-Service-Connected Pension Pro- gram: Hearing on H.R. 904, H.R. 2120, H.R. 9000, H.R. 10173, etc. Before the Subcomm. on Comp., Pension, & Ins. of the H. Comm. on Veterans’ Affs., 95th Cong. 127 (1978) (statement of Rep. G.V. Montgomery, Chairman, Subcomm. on Comp., Pension, & Ins.) (“The non-service- connected pension program is a needs program. The Case: 21-2023 Document: 56 Page: 3 Filed: 01/23/2023

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amount of pension paid . . . relates specifically to the amount of other income which the individual has available to him.”). In general, a veteran’s “annual income” includes “all payments of any kind or from any source.” 38 U.S.C. § 1503(a). Congress, however, excluded certain categories of payments, including “donations from public or private relief or welfare organizations.” Id. § 1503(a)(1). II Mr. Cooper served on active duty in the United States Marine Corps from March to September 1972 and from February to April 1973. Cooper v. McDonough, 33 Vet. App. 341, 343 (2021). In 2008, the Department of Veterans Affairs (VA) granted Mr. Cooper entitlement to an NSC pension. Id. In 2014, the VA notified Mr. Cooper that it had adjusted his income from December 2008 through 2010 based on his collection of unemployment compensation from the state of Wisconsin, which resulted in an overpay- ment of $13,094. Id. Mr. Cooper appealed to the Board, which agreed with the VA that “there is no applicable ex- clusion” from income for state unemployment compensa- tion and denied Mr. Cooper’s request to exclude his unemployment compensation payments from his annual income for NSC pension purposes. Id. at 344. III Mr. Cooper appealed to the Veterans Court, arguing that unemployment compensation payments are “dona- tions from public or private relief or welfare organizations” that should be excluded from his annual income. Id. The Veterans Court disagreed. Starting with § 1503(a)’s statutory language and rely- ing on dictionary definitions, the Veterans Court found that “donations” are “voluntary gifts of, typically, money from one party to another and often involve[] a charity.” Id. at 347. The court also found that “public . . . relief or Case: 21-2023 Document: 56 Page: 4 Filed: 01/23/2023

welfare organization[]” pertains to “a governmental entity providing aid or assistance to a population in need” or one “formed for the purpose of providing financial or other as- sistance to individuals or communities in need.” Id. at 347–48. Applying those definitions, the Veterans Court held that unemployment compensation payments are not donations from public relief or welfare organizations be- cause “the words donation, relief, and welfare in 38 U.S.C. § 1503(a) all connote payments premised upon the recipi- ent’s need, whereas unemployment compensation turns on the recipient’s employment status without regard to need.” Id. at 350. Relevant here, the Veterans Court also rejected Mr. Cooper’s argument that it would be absurd to include state unemployment compensation payments as income but exclude payments from VA Compensated Work Ther- apy (CWT) programs. The court explained that, unlike un- employment compensation, Congress specifically excluded CWT payments from income in 38 U.S.C. § 1718(g)(3). Id. at 351–52. The Veterans Court thus affirmed the Board’s decision to deny Mr. Cooper’s request to exclude his state unemployment compensation payments from his annual income. Id. at 352–53. Mr. Cooper timely appealed. DISCUSSION We have exclusive jurisdiction to “review and decide any challenge to the validity of any statute or regulation or any interpretation thereof” by the Veterans Court “and to interpret constitutional and statutory provisions, to the ex- tent presented and necessary to a decision.” 38 U.S.C. § 7292(c). We review the Veterans Court’s interpretation of 38 U.S.C. § 1503(a) de novo. See Cook v. Wilkie, 908 F.3d 813, 817 (Fed. Cir. 2018). “In statutory construction, we begin ‘with the language of the statute.’” Kingdomware Techs., Inc. v. United States, 579 U.S. 162, 171 (2016) (quoting Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002)). “The first step is to deter- mine whether the language at issue has a plain and Case: 21-2023 Document: 56 Page: 5 Filed: 01/23/2023

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unambiguous meaning with regard to the particular dis- pute in the case.” Barnhart, 534 U.S. at 450 (internal quo- tation marks and citation omitted). “The inquiry ceases if the statutory language is unambiguous and the statutory scheme is coherent and consistent.” Id. (internal quotation marks and citation omitted). We agree with the Veterans Court that the plain and unambiguous meaning of “donations from public or private relief or welfare organizations” in § 1503(a)(1) does not in- clude unemployment compensation payments. A “dona- tion” is “a gift, esp. to a charity; something, esp. money, that someone gives to a person or an organization by way of help.” Donation, Black’s Law Dictionary (11th ed. 2019). A “gift” is a “voluntary transfer of property to another with- out compensation.” Gift, Black’s Law Dictionary (11th ed. 2019). Read together, a “donation” is a voluntary transfer of property to another without compensation, especially to a charity. Unemployment compensation does not meet this definition. Individuals are not eligible for unemployment compensation unless they were previously employed and paid taxes—i.e., compensation—to the government. Be- cause receipt of unemployment compensation payments is contingent on prior compensation to the government, un- employment compensation payments are not donations. To explain, Congress incentivized states to establish state unemployment compensation programs through a tax offset in the Social Security Act of 1935. See Social Security Act of 1935, Pub. L. No. 74-271, 49 Stat. 620; see also Soc. Sec. Admin., Annual Statistical Supplement to the Social Security Bulletin 65 (2013). Although the details were left to state discretion, state unemployment compensation pro- grams are generally “modeled after an actuarial insurance scheme.” Gillian Lester, Unemployment Insurance and Wealth Redistribution, 49 UCLA L. Rev. 335, 343 (2001); see also Charity Versus Social Insurance in Unemployment Case: 21-2023 Document: 56 Page: 6 Filed: 01/23/2023

Compensation Laws, 73 Yale L.J. 357, 368–70 (1963). 1 Thus, in each state, an employee, or their employer on their behalf, pays payroll taxes to the state and federal govern- ment while that individual is employed, and in return, the employee collects payments from the state government if they become unemployed through no fault of their own. See Lester, supra, at 340–48. Because receipt of unemploy- ment compensation payments requires prior contribution from the employee to the government in the form of payroll taxes, unemployment compensation payments are not gifts, and thus they are not donations. Put another way, an individual cannot receive unem- ployment payments unless they were previously employed and paid into the state’s unemployment fund through taxes. Soc. Sec. Admin., supra, at 66 (“Unemployment ben- efits are available as a matter of right (without a means test) to unemployed workers who have demonstrated their attachment to the labor force by a specified amount of recent work or earnings in covered employment.” (emphasis added)); Lester, supra, at 346 (“Eligibility is limited to workers who have some minimum level of employment ex- perience and continuity . . . .”). Indeed, most states use some minimum threshold of earnings during a “base pe- riod” preceding application for benefits in order to qualify

1 For the same reason, unemployment compensation is often referred to by state and the federal governments as “unemployment insurance.” Soc. Sec. Admin., supra, at 65 (“Unemployment Insurance”); Wis. Stat. § 108 (“Unemploy- ment Insurance”); see also Lester, supra, at 340–41; Unem- ployment Insurance, Black’s Law Dictionary (11th ed. 2019) (“A type of social insurance that pays money to work- ers who are unemployed for reasons unrelated to job per- formance. Individual states administer unemployment insurance, which is funded by payroll taxes. Also termed unemployment compensation.” (emphasis added)). Case: 21-2023 Document: 56 Page: 7 Filed: 01/23/2023

COOPER v. MCDONOUGH 7

for unemployment compensation. Lester, supra, at 346–47; see also id. at 346 (“[Unemployment insurance], in contrast with welfare . . . provide[s] benefits only to those workers who have ‘earned’ them through some mini- mum level of past workforce participation.”); Soc. Sec. Ad- min., supra, at 66 (“A worker’s monetary benefit rights are based on his or her employment in covered work over a prior reference period called the base period . . . .”). In sum, we find that unemployment compensation payments are not donations within the meaning of 38 U.S.C. § 1503 and instead are more akin to an insurance contributory pro- gram. Mr. Cooper’s arguments fail to convince us that this statutory interpretation is incorrect. We first reject his ar- gument that unemployment compensation is a noncontrib- utory benefit—i.e., a benefit that does not require prior compensation to the government—because it is often funded through taxes on businesses rather than individu- als and does not need to be reimbursed by the recipient. Appellant’s Br. 17, 33–34, 36. But the fact that unemploy- ment compensation payments need not be reimbursed does not make them a noncontributory benefit. Regardless of whether it is the employees or their employers that make advance payments into the program, unemployment com- pensation payments are paid based on those prior contribu- tions; Mr. Cooper’s no-reimbursement argument is thus beside the point. We also perceive no substantive difference based on whether the employee or employer pays the taxes that fund unemployment compensation. First, employers do not pay payroll taxes for individuals not in their employ. See, e.g., Wis. Stat. § 108.01(1) (employers “financ[e] benefits for [their] own unemployed workers”). Unemployment com- pensation programs are funded through taxes tied to a spe- cific employee’s wages and employment term. Second, even when employers pay taxes to fund unemployment compen- sation programs, research indicates that employers pass Case: 21-2023 Document: 56 Page: 8 Filed: 01/23/2023

those payments on to employees through lower wages. Lester, supra, at 379 (citing research finding that a tax on labor like the unemployment compensation tax is ulti- mately borne by workers rather than employers); see also Cong. Budget Off., Unemployment Insurance in the Wake of the Recent Recession, Pub. No. 4525, at 13 (Nov. 2012) (“Although levied as a payroll tax on employers, the portion of the cost of [unemployment insurance] taxes that does not vary among firms within a local labor market is ultimately paid by workers in the form of reduced wages.”). Third, applying this distinction in practice would mean that vet- erans in states where employers pay the applicable taxes would be able to exclude unemployment compensation pay- ments as “donations,” but veterans in states where employ- ees pay the taxes would not. We are not convinced that Congress intended disparate outcomes for veterans de- pending on their state of residence. We further reject Mr. Cooper’s attempt to bolster his argument by comparing unemployment compensation to the noncontributory programs listed in 38 C.F.R. § 3.262(f), which are not included in a veteran’s annual income for NSC pension purposes. Appellant’s Br. 28. Even assum- ing, for argument’s sake, that 38 C.F.R. § 3.262(f) is rele- vant here, Mr. Cooper misapplies that regulation’s distinction between contributory programs, like old age and survivor’s insurance and disability insurance (OASDI), and noncontributory programs, like supplemental security income (SSI) and aid to dependent children (now called Temporary Assistance for Needy Families (TANF)). 38 C.F.R. § 3.262(f); Soc. Sec. Admin., supra, at 60. OASDI, for example, provides monthly benefits to qualified retired and disabled workers, their dependents, and survivors. Soc. Sec. Admin., supra, at 9. An individual and their em- ployer contribute to the OASDI fund through payroll taxes while the individual is employed, and, in turn, the individ- ual receives payments from the government when they re- tire based on their prior contributions, not their need. Id. Case: 21-2023 Document: 56 Page: 9 Filed: 01/23/2023

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In contrast, SSI provides monthly payments to adults and children with a disability or blindness who have income and resources below specific financial limits. Supple- mental Security Income, Soc. Sec. Admin., https://www.ssa.gov/benefits/ssi (last visited Dec. 16, 2022). Unlike OASDI, SSI is “funded by general tax reve- nues (not Social Security taxes),” and is distributed based on need, not employment status. Id. We find that unemployment compensation payments are more similar to contributory programs like OASDI than noncontributory programs like SSI. Like OASDI, an individual or their employer pays into the unemployment compensation program while the individual is employed, and the individual receives payments based on those prior contributions and their employment status, not their need. It is unlike SSI, for which the payments come from a gen- eral fund with no relationship to the recipient and are paid based on need, not prior employment. Thus, we disagree with Mr. Cooper’s argument that unemployment compen- sation should be excluded from his annual income because it is similar to the noncontributory programs listed in 38 C.F.R. § 3.262(f). Mr. Cooper also asserts that unemployment compensa- tion payments should be considered donations because the word “donation” implies giving something of value to help a person in a time of need or to relieve suffering. Appel- lant’s Br. 33–34, 37–38. Mr. Cooper’s argument, however, ignores the fact that unemployment compensation is paid based on the fact that an individual is unemployed, regard- less of their need. Indeed, Congress intended unemploy- ment compensation to provide “partial replacement of wages” to allow a recipient to search for other employment “without having to resort to relief” or “turn[] to welfare, or private charity.” Cal. Dep’t of Hum. Res. Dev. v. Java, 402 U.S. 121, 131–32 (1971) (citations omitted). Congress spe- cifically declined to institute a “means” or “needs” test to receive unemployment compensation payments to avoid Case: 21-2023 Document: 56 Page: 10 Filed: 01/23/2023

the “stigma of charity.” See H.R. Rep. No. 74-615, at 7 (1935) (“Unemployment compensation is greatly preferable to relief because it is given without any means test.”); S. Rep. No. 74-268, at 11 (1935) (“Unemployment compensa- tion differs from relief in that payments are made as a mat- ter of right, not on a needs basis . . . .”); see also Charity Versus Social Insurance, supra, at 359 (“[B]oth the tech- niques of giving charity, particularly the ‘means’ or ‘needs’ test, and the psychological impact of receiving ‘charity,’ un- dermined the self-respect and independence of the unem- ployed.”); Lester, supra, at 341–42 (“[M]uch of the rhetoric surrounding passage of the legislation . . . augured that [unemployment insurance] would preserve the dignity of working people who lost their jobs by distinguishing them from welfare recipients.”). The result was a two-tiered so- cial safety net: (1) unemployment compensation, which “was designed for workers with stable labor market attach- ment, without regard to their means,” and (2) welfare, which was “designed for workers lacking attachment, and [therefore] was based on means.” See Lester, supra, at 343. Thus, unemployment compensation payments are paid re- gardless of need, and we reject Mr. Cooper’s argument. We also are not persuaded by Mr. Cooper’s arguments, based on various hypotheticals, that our holding would pro- duce disparate and absurd outcomes that run contrary to congressional intent. Appellant’s Br. 19–24. Mr. Cooper again confuses unemployment compensation with welfare programs, like SSI and TANF. Mr. Cooper’s first hypothet- ical asks us to compare two veterans—one receiving unem- ployment compensation and one who is employed but who also receives TANF payments. Mr. Cooper argues that the result of our holding would be that “the more needy of the two veterans – the one without any income at all – is get- ting the lower NSC pension amount.” Appellant’s Br. 20. This is doubly wrong. First, the veteran receiving unem- ployment compensation is not without income. The vet- eran receives income through their unemployment Case: 21-2023 Document: 56 Page: 11 Filed: 01/23/2023

COOPER v. MCDONOUGH 11

compensation payments. Second, eligibility for TANF is based on an individual’s income and wealth, and Mr. Cooper does not point us to any statute or regulation that treats income from wages and income from unemploy- ment compensation differently in determining TANF eligi- bility. Thus, in both cases, wages and unemployment compensation are counted in the veteran’s annual income, and any TANF payments are excluded from the veteran’s income as donations. Mr. Cooper then asks us to consider a hypothetical in which an employed veteran collecting TANF loses his job and begins collecting unemployment compensation. Appel- lant’s Br. 20–21. Mr. Cooper asserts that the veteran could no longer exclude the TANF payments from their annual income for NSC pension purposes, but this is incorrect. TANF payments are excluded as donations, and Mr. Cooper again cites no statute or regulation indicating that an individual who loses their job and collects unem- ployment would be ineligible for TANF. Finally, Mr. Cooper asks us to compare two hypothet- ical veterans who both lose their employment, but one vet- eran collects state unemployment and the other receives the same amount in donations from a private community welfare organization. Mr. Cooper argues that there is “nothing in the language of [§ 1503(a)(1)] that suggests Congress intended to incentivize and reward veterans who receive private relief from unemployment with a higher NSC pension rate, and punish veterans who receive public relief from unemployment with a lower NSC pension rate.” Appellant’s Br. 22. We disagree. Congress explicitly ex- cluded donations from private relief organizations from in- come under § 1503(a)(1). In sum, we are not convinced by Mr. Cooper’s hypotheticals that our holding produces dis- parate and absurd outcomes. Mr. Cooper also revives his argument made to the Vet- erans Court that unemployment compensation payments Case: 21-2023 Document: 56 Page: 12 Filed: 01/23/2023

and CWT payments are similar, and thus it would be ab- surd to exclude CWT payments from a veteran’s annual in- come but not exclude unemployment compensation. Appellant’s Br. 39–41. The two programs, however, are not similar. Unemployment compensation, as already ex- plained, is earned through prior employment, and as the Supreme Court noted, it was intended to stabilize demand across the economy while providing recipients time to search for gainful employment without resorting to relief or welfare. Java, 402 U.S. at 131–33. In contrast, CWT is a “vocational rehabilitation program” that “provide[s] sup- port to Veterans living with mental illness or physical im- pairment with barriers to employment to secure and maintain community based competitive employment.” In- formation for Veterans – Compensated Work Therapy, Vet- erans Health Admin., https://www.va.gov/HEALTH/cwt/ veterans.asp (last visited Dec. 16, 2022). Congress recog- nized that a veteran might not be motivated to participate in CWT if the money earned reduced other VA payments, including payments from an NSC pension, and thus explic- itly excluded CWT payments from a veteran’s income for NSC pension purposes. 38 U.S.C. § 1718(g)(3); see also H.R. Rep. No. 102-622, at 8 (1992) (“[L]oss of earnings as a result of participating in a rehabilitative program would serve as a disincentive for entering or continuing the pro- gram and would therefore defeat the program’s therapeutic purpose. Further, reduction or termination of VA benefits as a result of earnings from the program might decrease a veteran’s motivation.” (internal quotations omitted)). This same logic does not apply to unemployment compensation, where there is no need to incentivize a veteran to partici- pate. Congress explicitly excluded payments from CWT as income, but it has not done so for unemployment compen- sation, and thus it is not absurd to treat the two programs differently. Two final arguments are worth addressing. Mr. Cooper asks the court to apply the pro-veteran canon. Appellant’s Case: 21-2023 Document: 56 Page: 13 Filed: 01/23/2023

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Br. 32. Under the pro-veteran canon, “interpretive doubt is to be resolved in the veteran’s favor.” Brown v. Gardner, 513 U.S. 115, 118 (1994). Because there is no interpretive doubt in this case, the pro-veteran canon does not apply. Rudisill v. McDonough, No. 2020-1637, 2022 WL 17685435, at *6 (Fed. Cir. Dec. 15, 2022) (en banc) (explain- ing that the pro-veteran canon “plays no role where the lan- guage of the statute is unambiguous”). Mr. Cooper also argues that the Veterans Court erred when it relied on a tax law principle from Abrahamsen v. United States, 228 F.3d 1360, 1362–63 (Fed. Cir. 2000). Appellant’s Br. 24–29. First, we are not convinced that the Veterans Court relied on Abrahamsen, for it never invoked that opinion in its analysis after its initial citation. Second, any perceived error would be harmless. As we explained above, unemployment compensation payments are not “do- nations” within the meaning of § 1503. That conclusion re- lies on the plain text of the statute; it does not rely on a tax law principle. Thus, the Veterans Court’s judgment is cor- rect, and even if the Veterans Court erred, that error does not compel reversal. Wavetronix LLC v. EIS Elec. Inte- grated Sys., 573 F.3d 1343, 1345 n.1 (Fed. Cir. 2009). CONCLUSION We have considered Mr. Cooper’s remaining argu- ments and find them unpersuasive. For the foregoing rea- sons, we find that unemployment compensation payments are not “donations” within the meaning of 38 U.S.C. § 1503, and thus we affirm. AFFIRMED