Shealey v. Wilkie

946 F.3d 1294

• Court: Court of Appeals for the Federal Circuit
• Decided: January 6, 2020
• Docket: 19-1057
• Status: Published

Opinion

United States Court of Appeals for the Federal Circuit ______________________

MATTHEW SHEALEY, JR., Claimant

v.

ROBERT WILKIE, SECRETARY OF VETERANS AFFAIRS, Respondent-Appellee

MEGHAN GENTILE, HAROLD H. HOFFMAN, III, Intervenors-Appellants ______________________

2019-1057 ______________________

Appeal from the United States Court of Appeals for Veterans Claims in No. 17-298, Judge Coral Wong Pietsch, Judge Margaret C. Bartley, Judge Michael P. Allen. ______________________

Decided: January 6, 2020 ______________________

KENNETH M. CARPENTER, Law Offices of Carpenter Chartered, Topeka, KS, argued for intervenors-appellants.

JOSHUA E. KURLAND, Commercial Litigation Branch, Civil Division, United States Department of Justice, 2 SHEALEY v. WILKIE

Washington, DC, argued for respondent-appellee. Also represented by JOSEPH H. HUNT, CLAUDIA BURKE, ROBERT EDWARD KIRSCHMAN, JR.; Y. KEN LEE, ANDREW J. STEINBERG, Office of General Counsel, United States De- partment of Veterans Affairs, Washington, DC. ______________________

Before LOURIE, DYK, and CHEN, Circuit Judges. DYK, Circuit Judge. Meghan Gentile and Harold Hoffman (“intervenors”) appeal a decision from the United States Court of Appeals for Veterans Claims (“Veterans Court”) dismissing their claim for attorney’s fees and other expenses (hereinafter “attorney’s fees”) under the Equal Access to Justice Act, 28 U.S.C. § 2412(d) (“EAJA”). We conclude that the interve- nors lack standing to pursue a claim for attorney’s fees and affirm. BACKGROUND This case involves a recurring problem—a claim for statutory attorney’s fees by counsel where the client de- clines to authorize the request for fees. Matthew Shealey (“client”) served on active duty in Vi- etnam from February 1967 to March 1969. He filed a claim for entitlement to service connection for a cervical spine disability, major depressive disorder, and shortness of breath, which he contended were incurred during his active military service. On July 1, 2015, the Board of Veterans’ Appeals (“Board”) issued a decision finding that Mr. Shea- ley was dishonorably discharged from military service, and that the character of his discharge was a statutory bar to veteran’s benefits. Mr. Shealey three times filed for recon- sideration, all of which were denied by the Board. Before filing his third motion for reconsideration, Mr. Shealey ob- tained a favorable decision from the Army Board for Cor- rection of Military Records, which upgraded his discharge SHEALEY v. WILKIE 3

to “under honorable conditions.” J.A. 31. Despite this, the Board denied reconsideration. Mr. Shealey appealed to the Veterans Court and—like many other similarly situated veterans—sought assistance from a legal aid organization. Ms. Gentile and Mr. Hoffman are attorneys of the Vet- erans Legal Advocacy Group (“VetLAG”), a nonprofit law firm that offers legal representation for veterans. On Feb- ruary 18, 2017, Mr. Shealey engaged the intervenors to represent him in his appeal and entered into a fee agree- ment. Under the fee agreement, VetLAG “[would] not charge a fee to represent [Mr. Shealey] in [his] case,” and “if the [Veterans] Court grant[ed] attorney’s fees, VetLAG may keep the full amount of the award.” J.A. 35. Mr. Shea- ley agreed that (1) “VetLAG may apply for attorney’s fees and litigation expenses with respect to [his] case under the [EAJA],” and (2) he would “provide any assistance or infor- mation the attorneys of VetLAG may need to prepare their request for attorney’s fees.” Id. On February 13, 2017, Ms. Gentile and Mr. Hoffman entered appearances on behalf of Mr. Shealey. Over the next three months Ms. Gentile and Mr. Hoffman reviewed the record, researched the legal issues that the case pre- sented, and advised Mr. Shealey on his case. On May 17, 2017, they participated in a Rule 33 pre-briefing confer- ence, where the government stated its intent to file a mo- tion for dismissal. Based on the possibility of dismissal, Ms. Gentile and Mr. Hoffman advised Mr. Shealey to file a new claim to reopen his case. But Mr. Shealey disagreed with this advice—so much so that he discharged his coun- sel. Mr. Shealey was represented by new counsel for the remainder of his appeal. On August 21, 2017, the Veterans Court issued an order effectively vacating and remanding the Board’s denial of Mr. Shealey’s claim. The government did not dispute that Mr. Shealey was the “prevailing party” on his appeal. 4 SHEALEY v. WILKIE

On September 19, 2017, Ms. Gentile and Mr. Hoffman filed an EAJA application in Mr. Shealey’s name. In their application, Ms. Gentile and Mr. Hoffman sought $4,061.60 for “work performed while representing [Mr. Shealey].” 1 J.A. 52–53. The government did not oppose the fee award. However, Mr. Shealey filed three objections to the EAJA application on October 3, November 8, and November 13, 2017, stating, among other things, that Ms. Gentile and Mr. Hoffman pressured him to drop his claim, delayed his case, and did not perform any work that contributed to Mr. Shealey prevailing in his appeal. As the Veterans Court observed, Mr. Shealey “made it very clear that he opposed the EAJA application.” J.A. 79. The court allowed Ms. Gentile and Mr. Hoffman to intervene but dismissed the EAJA application based on a determination that Ms. Gen- tile and Mr. Hoffman lacked standing to seek fees under the EAJA. Ms. Gentile and Mr. Hoffman appeal the Veter- ans Court’s dismissal. We have jurisdiction under 38 U.S.C. § 7292(a). DISCUSSION The scope of this court’s review of a decision of the Vet- erans Court is governed by 38 U.S.C. § 7292(d). We have jurisdiction to review “all relevant questions of law, includ- ing interpreting constitutional and statutory provisions.” 38 U.S.C. § 7292(d)(1). Standing is a question of law that this court reviews de novo. Coach Servs. v. Triumph Learn- ing LLC, 668 F.3d 1356, 1376 (Fed. Cir. 2012).

1 The government did not dispute that the interve- nors performed this work or that this work is eligible for attorney’s fees under the EAJA. See Bowling v. Principi, 15 Vet. App. 379, 386 (2002) (holding that an attorney’s withdrawal from the case “pose[d] no barrier to an EAJA award by the Court”). SHEALEY v. WILKIE 5

The issue here is whether Ms. Gentile and Mr. Hoff- man have standing to file a claim for attorney’s fees under the EAJA when Mr. Shealey, the “prevailing party” under the statute, has objected to such an application. Section 2412(d) provides that “a court shall award to a prevailing party . . . fees and other expenses . . . in any civil action . . . brought by or against the United States . . . un- less the court finds that the position of the United States was substantially justified.” 28 U.S.C. § 2412(d). “Con- gress enacted [the] EAJA . . . in 1980 ‘to eliminate the bar- riers that prohibit small businesses and individuals from securing vindication of their rights in civil actions and ad- ministrative proceedings brought by or against the Federal Government.’” Starry Assocs. v. United States, 892 F.3d 1372, 1377 (Fed. Cir. 2018) (second alteration in original) (quoting Scarborough v. Principi, 541 U.S. 401, 406 (2004)). There are three theories on which Ms. Gentile and Mr. Hoffman might have standing to sue the government for attorney’s fees under the EAJA. I First, Ms. Gentile and Mr. Hoffman assert that they have suffered an injury in fact affording them standing be- cause there has been “an invasion of a legally protected in- terest.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). They assert that “by virtue of the EAJA statute, they have a legal right to reimbursement from the Secre- tary of the cost of their attorney fees and expenses.” Inter- venors’ Reply Br. 3. They argue that because Mr. Shealey’s substantive right to fees “is derived from the services per- formed . . . by [Ms. Gentile and Mr. Hoffman],” they have an “ancillary” substantive right “to apply for and collect EAJA fees.” Id. at 16–17. They contend that they are the real parties in interest. See Fed. R. Civ. P. 17(a). 6 SHEALEY v. WILKIE

However, the Supreme Court expressly rejected such an argument in Astrue v. Ratliff, 560 U.S. 586 (2010). In Ratliff, the Court explained that the statutory right granted by the EAJA is limited to the “prevailing party”— in this case, Mr. Shealey—and not to the “attorney who performed the work that generated the fees.” Id. at 591. “The fact that the statute awards to the prevailing party fees in which [its] attorney may have a beneficial interest or a contractual right does not establish that the statute ‘awards’ the fees directly to the attorney.” Id. at 593. Even before Ratliff, we held in Willis v. Government Ac- countability Office, 448 F.3d 1341 (Fed. Cir. 2006), that with respect to a similar fee-shifting statute, “only the pre- vailing party and not the attorney has the right to assert a claim for attorney’s fees under the statute.” Id. at 1346. Under the plain text of the EAJA, Ms. Gentile and Mr. Hoffman lack any substantive rights sufficient to confer standing. II The second theory Ms. Gentile and Mr. Hoffman might assert is that they have a right through assignment of Mr. Shealey’s EAJA claim under the fee agreement. Indeed, the Supreme Court has explained that an assignment of a claim may be sufficient to confer standing. Sprint Com- muns. Co., L.P. v. APCC Servs., 554 U.S. 269, 271–72, 285– 86 (2008) (holding that an assignee of a statutory claim un- der 47 U.S.C. § 226 satisfied Article III standing); id. at 290 (holding that once a claim is assigned, the assignee sues based on “legal rights of their own” and do not trigger pru- dential limitations such as third-party standing). How- ever, because the claim for fees here is against the government, Ms. Gentile and Mr. Hoffman would have to overcome the Anti-Assignment Act, 31 U.S.C. § 3727 (“AAA”), which generally prohibits the assignment of claims against the government unless the government has SHEALEY v. WILKIE 7

waived an objection to the assignment. 2 See Tuftco Corp. v. United States, 614 F.2d 740, 745 (Ct. Cl. 1980) (holding that the government waived an objection to the AAA when it “was aware of, assented to, and recognized the assign- ments”). This assignment theory is unavailable here, because the fee agreement on its face does not purport to assign Mr. Shealey’s EAJA claim to intervenors, and the intervenors expressly disclaimed such a theory at oral argument. III Third, a party “generally must assert [its] own legal rights and interests, and cannot rest [its] claim to relief on the legal rights or interests of third parties.” Kowalski v. Tesmer, 543 U.S. 125, 129 (2004) (quoting Warth v. Seldin, 422 U.S. 490, 499 (1975)). But Ms. Gentile and Mr. Hoff- man assert that in the unusual circumstances here they have third party standing to sue for fees on Mr. Shealey’s behalf. This theory is foreclosed because Ms. Gentile and Mr. Hoffman do not meet the requirements of third-party standing. “[P]rudential standing requirements consist of ‘judicially self-imposed limits on the exercise of federal ju- risdiction.’” Willis, 448 F.3d at 1348 (quoting Allen v. Wright, 468 U.S. 737, 751 (1984)). In those unusual cir- cumstances where third-party standing is asserted, the

2 In Kerr v. Commissioner of Social Security, 874 F.3d 926 (6th Cir. 2017), the Sixth Circuit held that “a fee award under [the] EAJA is ‘a right to demand money from the United States,’” and could not be assigned to another party’s lawyer “[u]nless the government waives application of the AAA.” Id. at 937 (quoting United States v. Kim, 806 F.3d 1161, 1171 (9th Cir. 2015)). The Sixth Circuit ob- served that “[a]lthough the Court never mentioned the AAA [in Ratliff], it was undoubtedly aware of the preva- lence of attorney fee assignments.” Id. at 935. 8 SHEALEY v. WILKIE

court looks at three factors in determining whether third party standing is available: “the relationship of the litigant to the person whose rights are being asserted; the ability of the person to advance his own rights; and the impact of the litigation on third-party interests.” Caplin & Drysdale v. United States, 491 U.S. 617, 623 n.3 (1989). In Willis, this court applied the Caplin & Drysdale fac- tors to facts similar to those here and found that the attor- ney lacked standing. In Willis, the appellant, an attorney seeking a fee award under 5 U.S.C. § 7701(g)(1), argued that she had third-party standing to pursue her client’s fee award, including fees that the client had “expressly de- clined to request.” Willis, 448 F.3d at 1343. We found that the first factor weighed in favor of third- party standing because the appellant “ha[d] an attorney- client relationship with [the client], which the Supreme Court recognized as being ‘of special consequence.’” Id. at 1348. However, as to the second and third factors, we found that the client was “clearly free to assert the fee claim,” and that “there [was] no need to recognize [the ap- pellant’s] standing in order to avoid impairment of [the cli- ent’s] right to attorney’s fees.” Id. at 1348–49. We noted that “[the client’s] ability to claim fees would be impaired if [her attorney] were afforded standing because [the cli- ent’s] ability to resolve her fee claim by settlement with the government, and her ability to present her best case for a fee award, would be undermined if [her attorney] could in- dependently pursue an award.” Id. at 1349. Third-party standing requires “that [the litigant’s] interests are aligned with those of the party whose rights are at issue.” Id. (em- phasis added) (quoting Pony v. Cty. of L.A., 433 F.3d 1138, 1147 (9th Cir. 2006)). The intervenors attempt to distinguish Willis on the basis that their “primary theory of standing is based on their fee agreement with Mr. Shealey.” Intervenors’ Reply Br. 5. They rely on the provision of the agreement SHEALEY v. WILKIE 9

authorizing counsel to “apply for attorney’s fees and litiga- tion expenses with respect to [Mr. Shealey’s] case under the applicable provisions of the [EAJA].” J.A. 35. The problem for the intervenors is that Mr. Shealey revoked this author- ity through his objection to their EAJA application. That revocation may have been a breach of the fee agreement— an issue that we do not decide here—but Mr. Shealey’s rev- ocation of authorization deprived intervenors of the author- ity to seek fees on his behalf. The prudential concerns identified in Caplin & Drysdale remain. Like the appellant in Willis, Ms. Gentile and Mr. Hoff- man have a relationship “of special consequence” with Mr. Shealey, but the other two factors weigh against a finding of third-party standing. Like the client in Willis, Mr. Shea- ley is clearly free to assert or not to assert his EAJA claim. And as in Willis, the interests of a client such as Mr. Shea- ley—including the ability to resolve their fee claim by set- tlement with the government and the ability to decline pursuing an EAJA claim at all—would be impaired if their attorneys were afforded standing to file a claim on their behalf when that authority has been revoked. Affording standing to Ms. Gentile and Mr. Hoffman over Mr. Shea- ley’s objections would “would contravene the policies and rationale on which the doctrine of third-party standing is based.” Willis, 448 F.3d at 1349 (quoting Pony, 433 F.3d at 1148). “Under these circumstances an attorney cannot sat- isfy the requirements for prudential standing.” Id. IV Finally, Ms. Gentile and Mr. Hoffman assert that “[w]ithout a merits decision from the Veterans Court on their entitlement to an EAJA award[, they] will have no basis to seek a remedy against their former client” in state court for breach of the fee agreement. Intervenors’ Br. 1– 2. They argue that they “would not be able to prove dam- ages from [Mr. Shealey’s] breach because there could be no way to establish that an EAJA payment would have been 10 SHEALEY v. WILKIE

awarded by the Veterans Court.” Intervenors’ Reply Br. 24. This argument ignores the authority of state courts to “render binding judicial decisions that rest on their own in- terpretations of federal law.” ASARCO, Inc. v. Kadish, 490 U.S. 605, 617 (1989). Nor is it at all clear that the state court would lack authority to compel Mr. Shealey to au- thorize a fee application. The utility of obtaining a Veter- ans Court decision of entitlement to a fee award cannot confer jurisdiction on the Veterans Court to adjudicate these state law breach of contract and unjust enrichment claims that intervenors potentially have against their for- mer client. See Wick v. Brown (In re Wick), 40 F.3d 367, 370–73 (Fed. Cir. 1994). Nor does the Veterans Court have authority to render an advisory opinion on this issue. See Flast v. Cohen, 392 U.S. 83, 96–97 (1968). AFFIRMED COSTS No costs.