            UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS

                                                 No. 17-3296(E)

                                        SHAWN P. LACEY, APPELLANT,

                                                         V.

                                         ROBERT L. WILKIE,
                              SECRETARY OF VETERANS AFFAIRS, APPELLEE.

                      On Appellant's Application for Attorney Fees and Expenses

                                          (Decided August 18, 2020)

         Jennifer A. Zajac, of Oceanside, California, was on the pleading for the appellant.

       William A. Hudson, Jr., Acting General Counsel; Mary Ann Flynn, Chief Counsel; Edward
V. Cassidy, Jr., Deputy Chief Counsel; Megan C. Kral, Deputy Chief Counsel, all of Washington,
D.C., were on the pleading for the appellee.

         Before ALLEN and TOTH, Judges, and SCHOELEN,1 Senior Judge.

       SCHOELEN, Senior Judge, delivered the opinion of the Court. ALLEN, Judge, filed a
concurring opinion. TOTH, Judge, filed a dissenting opinion.

         SCHOELEN, Senior Judge: Before the Court is the application of the appellant, Shawn P.
Lacey, for an award of legal fees and expenses under the Equal Access to Justice Act (EAJA),
28 U.S.C. § 2412(d), in the amount of $35,666.33, for the work of his lawyer, Jennifer A. Zajac,
Esq., and her co-counsel, Linda E. Blauhut, Esq. See Appellant's Application for an Award of
Attorney Fees, Costs and Other Expenses Under the Equal Access to Justice Act (Appl.) at 1-11.
The Secretary filed an opposition to that application. See Secretary's Response to Appellant's
Application for Attorney Fees and Expenses (Secretary's Resp.) at 1-11. The Court grants
entitlement to attorney fees, costs, and expenses for the entire period requested and orders a staff
conference to be held under Rule 33 of the Court's Rules of Practice and Procedure to discuss the
reasonableness of the amount of requested fees and expenses.




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         Judge Schoelen is a Senior Judge acting in recall status. In re Recall of Retired Judge, U.S. VET. APP. MISC.
ORDER 04-20 (Jan. 2, 2020).
                                         I. BACKGROUND
       The Veterans Retraining Assistance Program (VRAP) was a short-lived program intended
to provide older veterans with job retraining for various high-demand occupations. VA denied
Army veteran Shawn P. Lacey's application for VRAP benefits because he sought to use them to
pursue a bachelor's degree at Medaille College, a 4-year college, rather than an associate's degree
(or a certificate attesting to a degree of similar nature) at a community college or technical school.
In construing the VRAP statute, the Board invoked the negative implication canon of statutory
interpretation in reasoning that Congress, by mentioning community colleges and technical
schools, sought intentionally to exclude from the program 4-year institutions such as colleges and
universities. Record (R.) at 9-10.
       Mr. Lacey appealed to this Court, arguing that the VRAP statute Congress passed only
required a veteran to take a course or courses that are offered by a community college or technical
school and did not require the veteran to take such courses at a community college or technical
school. The Court held that the VRAP statute
       is at least ambiguous in this regard, as it provides no clear answer to whether
       benefits can be used at four-year colleges or are limited only to community colleges
       or technical schools. Further, because VA never issued any regulations or guidance
       interpreting the statute, there is no agency position that warrants deference. In the
       absence of any considered agency position, and having exhausted the traditional
       tools of statutory construction, the Court concludes that the pro-veteran canon
       requires us to read the statute as including four year colleges and institutions when
       the course at issue is offered by a community college or technical school and did
       not require the veteran to take such course at a community college or technical
       school.

Lacey v. Wilkie, 32 Vet.App. 71, 73-74 (2019). Of significance in determining Mr. Lacey's
entitlement to legal fees and expenses under EAJA, the Court rejected the reasoning of the Board
at the administrative level, concluding that the Board's "invo[cation of] the non-implication canon
as decisive in its reading of the [VRAP] statute . . . . carries little probative weight in determining
a statutory meaning, because Mr. Lacey's program of education appears to fall within the definition
provided by Congress" of a "program of education." Id. at 78 (citation omitted). The Court
explained that the Board's analysis "overlooks the salient fact that Congress expressly defined
'program of education' . . . [to] contain[] an expansive list of the types of courses at an 'educational
institution' . . . [and] defined 'educational institution' to expressly include 4-year colleges and



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universities." Id. The Court also found that "the Board's citation to regulations from VA and other
federal agencies for guidance . . . is misplaced where Congress provided its own definition[s]" by
reference of "program of education" and "educational institution." Id.


                                           II. ANALYSIS
       This Court has jurisdiction to award attorney fees under 28 U.S.C. § 2412(d)(2)(F). The
appellant's EAJA application was filed within the 30-day EAJA application period set forth in
28 U.S.C. § 2412(d)(1)(B), and the application meets the statutory content requirements because
it contains (1) a showing that the appellant is a prevailing party; (2) a showing that he is a party
eligible for an award because his net worth does not exceed $2,000,000; (3) an allegation that the
Secretary's position was not substantially justified; and (4) an itemized statement of the attorney
fees and expenses sought. See 28 U.S.C. § 2412(d)(1)(A), (1)(B), (2)(B); Scarborough v. Principi,
541 U.S. 401, 408 (2004).
       The Secretary argues that the appellant's EAJA application should be denied because the
Secretary's position was substantially justified. Secretary's Resp. at 4-10. Alternatively, he
contends that the Court should exercise its authority and discretion to reduce the fees requested
because the number of hours billed is unreasonable. Id. at 10-15.
                                    A. Substantial Justification
       This Court will award attorney fees to a prevailing party "unless the Court finds that the
position of the United States was substantially justified" or that the other statutory requirements
were not met. 28 U.S.C. § 2412(d)(1)(A); Cycholl v. Principi, 15 Vet.App. 355, 359 (2001).
Because in the instant case the appellant has alleged, pursuant to section 2412(d)(1)(B), that the
Secretary's position was not substantially justified, the Secretary "has the burden of proving that
his position was substantially justified . . . to defeat the appellant's EAJA application." Vaughn v.
Gober, 14 Vet.App. 92, 95 (2000) (citing Stillwell v. Brown, 6 Vet.App. 291, 301 (1994)). The
Secretary must establish that his position was substantially justified at both the Board level and
before this Court. Id.; see Locher v. Brown, 9 Vet.App. 535, 537 (1996); ZP v. Brown, 8 Vet.App.
303, 304 (1995).
       "[A] position can be justified even though it is not correct," and "it can be substantially
(i.e., for the most part) justified if a reasonable person could think it correct, that is, if it has a
reasonable basis in law and fact." Stillwell, 6 Vet.App. at 302 (quoting Pierce v. Underwood,



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487 U.S. 552, 566 n.2 (1988)). In determining substantial justification, the Court's inquiry must
focus on the "totality of the circumstances" pertinent to the Government's position on the issue on
which the claimant prevailed, including the "state of the law at the time the position was taken."
Smith v. Principi, 343 F.3d 1358, 1363 (Fed. Cir. 2003). In doing so, the Court should look at
factors including the "merits, conduct, reasons given, and consistency with judicial precedent and
VA policy with respect to such position, and action or failure to act," along with any other
applicable circumstances. Stillwell, 6 Vet.App. at 302; see Cline v. Shinseki, 26 Vet.App. 325, 327
(2013). However, no one factor is dispositive. Patrick v. Shinseki, 668 F.3d 1325, 1332 (Fed. Cir.
2011).
         The Secretary avers that, at the time of the Board's decision, the issue in the underlying
case – whether a 4-year college met the requirements of VRAP – was one of first impression that
had not yet been addressed by VA or this Court, and he argues that this factor weighs in favor of
reasonableness of VA's position at the administrative level. Secretary's Resp. at 7. He further
argues that the Board's interpretation of the VRAP statute was reasonable because it "appropriately
employ[ed] the canons of statutory construction" and relied on "analogous regulations[] and
Congressional intent." Id. at 8; see R. at 7-10.
         This Court has determined that the Government's position was substantially justified where
that position was invalidated in a case of first impression. See Felton v. Brown, 7 Vet.App. 276,
283 (1994) (finding the Secretary's position substantially justified in a case of first impression
"[g]iven the statutory silence on the particular matter and the lack of a conflict with adverse
precedent"). However, in Felton, the Court emphasized that it was not adopting a "per se rule that
a case of first impression will always render the Government's position substantially justified." Id.
at 281. Rather, the Government must still show that its interpretation was "reasonable, albeit
incorrect." Patrick, 668 F.3d at 1330; see also Gordon v. Peake, 22 Vet.App. 265, 269 ("In cases
of first impression the Court must determine whether the issue presented 'close' questions, and
whether the Secretary sought an unreasonable interpretation or resolution of the matter.") (citing
Felton, 7 Vet.App. at 282); Cline, 26 Vet.App. at 330 (stating that although it was a case of first
impression, it did not present a "close" question on which the Secretary had a "reasonable"
interpretation). When the Secretary's adopted interpretation is "wholly unsupported by either the
plain language of the statute or its legislative history," Patrick, 668 F.3d at 1333, such
interpretation "weighs heavily against a finding of substantial justification, and, while not



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dispositive, makes it difficult to establish substantial justification." Butts v. McDonald,
28 Vet.App. 74, 83 (2016) (citing Patrick, 668 F.3d at 1331) (internal quotation marks omitted).
        Although there was no clear precedent at the time of the Board's decision in this case,
applying the totality of the circumstances test, the Secretary does not demonstrate that his position
at the administrative level was reasonable. In the merits decision, the Court pointed out that VA
took no action "to issue official guidance as to the agency's position on issues raised by the [VRAP]
statute," and that if there had been such guidance, "this case may very well have turned out
differently." Lacey, 32 Vet.App. at 80; see Stillwell, 6 Vet.App. at 302 (stating that pertinent factors
to consider under the "totality of the circumstances" test include "VA policy with respect to [the]
position" at issue, and the agency's "action or failure to act"); see also Cline, 26 Vet.App. at 327.
More significantly, the Court struck down the Board's interpretation of the VRAP statute,
concluding the Board's use of "the negative implication canon carries little probative weight in
determining a statutory meaning" because "Mr. Lacey's program of education appears to fall within
the definition[s] provided by Congress." Lacey, 32 Vet.App. at 78. Similarly, regarding the
"Board's citation to regulations from VA and other federal agencies for guidance as to various
definitions," the Court held that such citations were "misplaced where Congress provided its own
definition[s]." Id. Indeed, in Butts, upon which the Secretary relies as support for finding
substantial justification in this case, the Board was following guidance that the Court itself had set
out in existing precedent that was overturned subsequent to the Board decision, and even under
those circumstances, the Court found that the Board's position was not substantially justified where
other factors weighed more heavily toward a finding of unreasonableness. 28 Vet.App. at 82
("[U]nder the totality-of-the-circumstances test, the Secretary's compliance with precedent does
not relieve the Court of its duty to evaluate the reasonableness of the Secretary's regulatory
interpretation and his conduct at the administrative level" in a case involving an issue of first
impression); see also Patrick, 668 F.3d at 1332 ("[t]he fact that the Veterans Court had previously
upheld the VA's erroneous interpretation of [a statute] does not . . . resolve the substantial
justification inquiry.").
        In sum, the Court concludes that the totality of circumstances in this case shows that the
Secretary has not satisfied his burden to show that the Board's interpretation of the statute was
reasonable, as no "reasonable person could think it correct." See id. at 1330 (citing Pierce, 487
U.S. at 566). Thus, the Secretary has not met his burden to show that his administrative position



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was substantially justified, Locher, 9 Vet.App. at 537, and, therefore, the Court need not address
whether he was substantially justified at the litigation stage, see Cycholl, 15 Vet.App. at 361
(holding that the Court need not address the Secretary's position at the litigation stage where the
Secretary failed to carry his burden of demonstrating that his position was substantially justified
at the administrative stage).
                             B. Reasonableness of Fees and Expenses
        Typically, once the Court determines that an appellant has met the threshold requirement
for receiving EAJA fees and expenses, the Court must determine the reasonableness of the fees
and expenses. See Uttieri v. Brown, 7 Vet.App. 415, 418 (1995) (citing Comm'r, INS v. Jean,
496 U.S. 154, 160-61 (1990)). The Court "has wide discretion in the award of attorney fees under
the EAJA." Chesser v. West, 11 Vet.App. 497, 501 (1998) (citing Hensley v. Eckerhart, 461 U.S.
424, 437 (1983)). Because the only remaining issue is the reasonableness of the fees to be awarded,
the Court will order a staff conference to be held under Rule 33 of the Court's Rules of Practice
and Procedure to discuss the reasonableness of the requested fees and expenses. See U.S. VET.
APP. R. 39(c) (permitting the Court to direct the parties in a fee dispute to attend a staff conference);
U.S. VET. APP. INTERNAL OPERATING P. XII(a) ("If reasonableness of the requested fee is the only
contested issue, [Central Legal Staff] conducts a conference with the parties to attempt to resolve
the disagreement."). The Court will provide the parties 30 days following the staff conference to
reach a settlement based on the Court's holding. If no agreement on fees and expenses is made
within the allotted time, the Court will determine a reasonable amount of fees, costs, and expenses
owed by the Government to the appellant.


                                         III. CONCLUSION
        Upon consideration of the foregoing, it is
        ORDERED that entitlement to attorney fees, costs, and expenses for the entire period
requested is GRANTED. It is further
        ORDERED that a Rule 33 staff conference be scheduled. It is further
        ORDERED that within 30 days of the staff conference, the parties shall inform the Court
of the status of their settlement efforts. And it is further
        ORDERED that if an agreement is not reached, that the matter be returned to the panel at
the expiration of the 30-day period following the staff conference absent further order of the Court.



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       Allen, Judge, concurring: I join the opinion of the Court in full. I write separately to
underscore that in my view the plain language of the statute creating the VRAP dictated the result
the Court reached in the underlying appeal. See Lacey v. Wilkie, 32 Vet.App. 71, 80-82 (2019)
(Allen, J., concurring in the judgment). While there are no bright line rules for determining the
substantial justification of the Government's litigation position – and I recognize the Court does
not reach this issue in the majority opinion– both this Court and the Federal Circuit have
recognized that it is difficult for the Government to carry its burden in this regard when the
statutory language is clear. See Patrick v. Shinseki, 668 F.3d 1325, 1330-31 (Fed. Cir. 2011); Butts
v. McDonald, 28 Vet.App. 74, 80 (2016) (en banc). As I explained in my concurring opinion in
the merits portion of this appeal, the statutory language we had to consider was susceptible of only
one meaning. In my view, this clarity of statutory language provides an independent basis to grant
the EAJA application before us because it renders the Government's litigation position
unreasonable. With this comment, I join Judge Schoelen's opinion for the Court without
reservation.


       TOTH, Judge, dissenting: "The government can establish that its position was substantially
justified if it demonstrates that it adopted a reasonable, albeit incorrect, interpretation of a
particular statute or regulation." Patrick v. Shinseki, 668 F.3d 1325, 1330 (Fed. Cir. 2011). This
rule should foreclose EAJA fees here, since our opinion on the merits made clear that the
Secretary's position was based on a "reasonable" reading of the statute and stood on "solid footing."
Lacey v. Wilkie, 32 Vet.App. 71, 78, 80 (2019); see also id. at 79 ("On this question, the statute
stands closer to equipoise between the respective positions of the parties."). Considering the
totality of the circumstances simply reinforces this conclusion. The statutory question was one of
first impression for any court; both the Board's and the Secretary's legal analyses were based on
the statute's text and the congressional purpose; and VA did not take a position that was
inconsistent with any regulation or other official interpretation previously adopted. The majority
doesn't disagree. Instead, it contends that the Secretary acted unreasonably "at the administrative
level." Ante at 5. Why? Because the Board undertook the same sort of analysis advanced by the
Secretary before us—one we found ultimately erroneous, but indisputably reasonable. Simply put,
the basis for such a substantial justification distinction in this case eludes me. For these reasons, I
respectfully dissent.



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