        UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS


        NO . 04-2395(E)

        ALFRED W. VAHEY , APPELLANT ,

        V.


        R. JAMES NICHOLSON ,
                      SECRETARY OF VETERANS AFFAIRS, APPELLEE .


                        On Appellant's Application for Attorney Fees and Expenses

   (Argued March 21, 2006                                                       Decided        July 21, 2006       )


        Landon Overby (non-attorney practitioner), of Washington, D.C., for the appellant.

      Yvette R. White, Esq., with whom Tim S. McClain, General Counsel; R. Randall
Campbell, Assistant General Counsel; and Richard Mayerick, Deputy Assistant General
Counsel, all of Washington, D.C., were on the pleading for the appellee.

        Before KASOLD, MOORMAN, and LANCE, Judges.

      KASOLD, Judge, filed the opinion of the Court. MOORMAN, Judge, filed a
concurring opinion. LANCE, Judge, filed a concurring opinion.

        KASOLD, Judge: Before the Court is veteran Alfred W. Vahey's June 30, 2005,
application pursuant to the Equal Access to Justice Act, 28 U.S.C. 2412(d) (EAJA), for an
award of attorney fees and expenses in the amount of $864.00. The Secretary has filed a
response in which he argues that Mr. Vahey is not a prevailing party, and in the alternative,
that the Secretary's position was substantially justified. For the reasons set forth below, the
Court will deny Mr. Vahey's application.

                                                I. BACKGROUND
On December 17, 2004, Mr. Vahey filed a Notice of Appeal from an August 24, 2004, Board of
 Veterans' Appeals (Board) decision that denied entitlement to separate 10% disability ratings
  for bilateral.....1   On February 11, 2005, before briefing had been initiated, the Court granted the parties' joint

   motion to stay proceedings pending the Court's disposition of various appeals involving bilateral tinnitus. On
April 5, 2005, the Court held in Smith v. Nicholson, 19 Vet.App. 63, 75 (2005), that the plain language of 38 C.F.R.
§ 4.25(b) (2002) provided for an award of two 10% disability ratings under 38 C.F.R. § 4.87, Diagnostic Code (DC)
    6260 ,,,,,2 one for each ear, to veterans exhibiting recurrent bilateral .....3 See Smith, 19 Vet.App. at 75. Shortly
 thereafter, on May 4, the Court issued an order in this appeal dissolving the stay of proceedings and indicating that
 the case would be remanded "for readjudication in light of Smith," unless either party objected within 21 days from
  the date of that order. On June 2, the Court, having received no objection from either party, remanded the matter
                  "for readjudication in light of Smith . . . , and issuance of a replacement decision."
         In his EAJA application, Mr. Vahey argues that he is a prevailing party because the Board committed the same
error observed in Smith. EAJA Application (Application) at 3-4. Moreover, he contends that the government's legal
position was not substantially justified as its interpretation underlying the denial of separate 10% disability ratings for
each ear was contrary to the plain meaning of the relevant regulations. Id. at 5. The Secretary counters, inter alia, that
Mr. Vahey is not a prevailing party because the Court never reached the merits of the case and therefore there was no
change in the legal relationship of the parties as required by the U.S. Court of Appeals for the Federal Circuit's (Federal
Circuit) decision in Akers v. Nicholson, 409 F.3d 1356 (Fed. Cir. 2005). In the alternative, the Secretary asserts that his
legal position before the Board was substantially justified because he was relying on the state of the law extant at the time
of the Board decision. Secretary's Response at 7.



                                                    II. ANALYSIS
                                              A. Preliminary Matters
 The Court has jurisdiction to award reasonable attorney fees. See 28 U.S.C. § 2412(d). The
EAJA application under review 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 content requirements because it
contains (1) a showing that the appellant is a prevailing party, (2) a showing that the appellant
    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, 407-08 (2004); Cullens v. Gober, 14 Vet.App.
                                             234, 237 (2001) (en banc).
                                             B. Prevailing-Party Status
 Prevailing-party status is a requisite for any award of EAJA fees and "requires some judicial
   action that changes the legal relationship between the parties on the merits of the claim."
 Akers, 409 F.3d at 1359. Prevailing-party status is established either through a merits-stage
remand predicated upon the Court's finding of error or a concession of error by the Secretary.
    See Scarborough v. Nicholson, 19 Vet.App. 253, 259 (2005); see also Gordon v. Principi,
17 Vet.App. 221, 223-24 (2003) (holding that remand for consideration of an issue for the first
    time by the Board does not confer prevailing-party status on the appellant); Briddell v.
 Principi, 16 Vet.App. 267, 271-72 (2002) (concluding that there must be explicit connection
  between asserted administrative error and Court's remand for readjudication); Sumner v.
Principi, 15 Vet.App. 256, 260-61, 264-65 (2001) (en banc), aff'd sub nom. Vaughn v. Principi,
 336 F.3d 1351 (Fed. Cir. 2003) ("[A] remand does not constitute 'some relief on the merits'
unless that remand is predicated upon administrative error."). Where "an appellant receives
 a remand in order for VA to address a new legal theory that arose from an intervening court
decision, . . . the appellant is not a prevailing party because . . . the appellant[] receive[d] 'only
 the opportunity for further adjudication.'" Zuberi v. Nicholson, 19 Vet.App. 541, 546 (2006)
 (quoting Akers, 409 F.3d at 1359). In such an instance, the requisite material change in the
 legal relationship of the parties does not exist. See Vaughn, 336 F.3d at 1356-57. Moreover,
  when the Court seeks to determine whether a party is a prevailing party, the Court at that
stage will look only to what actions it actually took in its disposition of the underlying appeal.
  See Briddell , 16 Vet.App. at 272 (the Court will look to the actual language of the remand
order in determining whether administrative error exists); see also Buckhannon Bd. and Care
Home, Inc. v. W. Va. Dep't of Health and Human Res., 532 U.S. 598, 609 (2001) (a "'request
    for attorney's fees should not result in a second major litigation'" (quoting Hensley v.
  Eckerhart, 461 U.S. 424, 437 (1983)); McCormick v. Principi, 16 Vet.App. 407, 411 (2002)
 (Court will not investigate at the EAJA prevailing-party stage the validity, type, or nature of
                   any administrative error that is either conceded or found).
       Mr. Vahey's contention that he secured a remand from the Court "based in part on the
Board's error in failing to apply the plain language of § 4.25(b)" is unfounded. Application at
4. This case was remanded, along with a host of other cases involving tinnitus, so that the Board
might consider, in the first instance, the applicability of the holding in Smith. As the Secretary
notes, and contrary to Mr. Vahey's contentions, there was no explicit finding of error in the June
2, 2005, remand. See Briddell, supra. Moreover, there is no implicit acknowledgment of error
in this case because the Court did not address whether the Board incorrectly interpreted § 4.25(b).
See Gordon, 17 Vet.App. at 224 (rejecting the appellant's contention that the Court "implicitly"
recognized administrative error where the Court ordered remand to consider a regulation that the
Board failed to discuss). Moreover, because the parties did not object to the May 4 order, the
matter was remanded before the record on appeal or any briefing had been filed with the Court,
thus rendering to speculation any conclusions regarding possible assertions of error.
       Finally, despite Mr. Vahey's assertion in his EAJA application that the Board committed
the same error as it did in Smith, the Court will not now investigate whether Mr. Vahey would
have been successful in a merits determination of his appeal. See Briddell, supra; see also
Buckhannon and McCormick, both supra. Because there has been neither a finding of
administrative error nor a concession of error – rather, the case was remanded for further
adjudication in light of Smith – Mr. Vahey is not a prevailing party, and the EAJA application
must be denied. See Vaughn and Zuberi, both supra.


                                       III. CONCLUSION
Upon consideration of the foregoing analysis, Mr. Vahey's June 30, 2005, EAJA application is
                                             DENIED.
       APPLICATION DENIED.


       MOORMAN, Judge, concurring: I concur with the reasoning and the result of the
majority opinion. I write separately to note an alternative basis for denying the EAJA application.
Although the Court did not reach the question of whether the Secretary's position was
substantially justified because the appellant was not a prevailing party, I agree with Judge
Lance's opinion that the Secretary's position was substantially justified, but I stress that I believe
that, notwithstanding the decision of the United States Court of Appeals for the Federal Circuit
in Smith v. Nicholson, __ F.3d __, No. 05-7168 (Fed. Cir. June 19, 2006), the Secretary's position
was substantially justified. See Pierce v. Underwood, 487 U.S. 552, 566 n.2 (1988) ("[A] position
can be justified even though it is not correct, and we believe 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.").


       LANCE, Judge, concurring: I concur with the conclusion reached by the majority that the
appellant is not eligible for an award under the EAJA. That is the appropriate disposition in light
of the recent decision in Smith v. Nicholson, __ F.3d __, No. 05-7168 (Fed. Cir. June 19, 2006)
(Smith II) (reversing this Court's decision for failure to give appropriate deference to the
Secretary's interpretation of his own regulations). I write separately because I believe that our
review of Mr. Vahey's EAJA application should not be governed by an analysis of whether the
Clerk's June 2, 2005, remand order contained an explicit finding of error, but rather by the
Federal Circuit's decision. Based on the Federal Circuit's decision in Smith II, the Secretary's
legal position was more than justified–it was correct. Accordingly, I believe it is within our power
to reject Mr. Vahey's application solely because the Secretary's position was substantially
justified. See Commissioner, INS v. Jean, 496 U.S. 154, 160 (1990) ("The single finding that the
Government's position lacks substantial justification, like the determination that a claimant is a
'prevailing party,' thus operates as a one-time threshold for fee eligibility."); see also Johnson v.
Principi, 17 Vet.App. 436, 440 (2004); Swiney v. Gober, 14 Vet.App. 65, 70 (2000).
       The majority opinion concludes that Mr. Vahey is not a prevailing party because there is
no explicit finding of error in the Court's remand order. This holding belies the nature of the
cases stayed by this Court pending its decision in Smith v. Nicholson, 19 Vet.App. 63 (2005)
(Smith I). In this instance, Mr. Vahey's appeal was stayed pursuant to a joint motion. The parties
recognized that there were "numerous" other cases pending before the Court "in which the issue
presented is identical to the instant appeal, i.e., whether the VA rating schedule . . . entitles a
veteran with service-connected tinnitus in both ears . . . to two separate 10 percent ratings to be
combined in accordance with 38 C.F.R. § 4.25 (2003)." Joint Motion (Mot.) at 1 (emphasis
added). The reason that the parties appropriately noted that the issue was "identical" was that
the Board decision in Mr. Vahey's case–like many dozens of others on appeal at that time–was
based on a ruling of law that was not fact specific, i.e., the Board's holding that dual ratings for
bilateral tinnitus are never permitted. The motion to stay filed by the parties further provided that
       [d]isposition of the pending cases in which briefing is complete and the appeals
       have been submitted to the Court will likely control the disposition of this appeal.
       A stay of proceedings in this case is in the interest of judicial efficiency because
       such a stay will eliminate the need for processing by the Clerk's office, the Central
       Legal Staff, and one or more judges of the Court.

Id. at 2 (emphasis added). Accordingly, the parties clearly believed that the fate of Mr. Vahey's
appeal would turn solely on the correctness of the determinative ruling of law in whichever
pending case first reached that issue.
       After the parties filed their joint motion, the Court's decision in Smith I held that "[b]ased
on the plain language of the regulations [(38 C.F.R. § 4.25(b) (2005) and DC 6260)], the . . . pre-
1999 and pre-June 13, 2003, versions of DC 6260 required the assignment of dual ratings for
bilateral tinnitus." Smith I, 19 Vet.App. at 78. Thus, the Court reversed the Board's decision that
under 38 C.F.R. § 4.87a (2005), DC 6260, bilateral tinnitus does not entitle a veteran to two 10%
ratings, one for each ear, and remanded the matter for readjudication to determine whether the
appellant had bilateral tinnitus, and, if so, for assignment of a rating consistent with the Court's
opinion. Id. In so doing, the Court invalidated a VA General Counsel precedential opinion,
which held that separate ratings for bilateral tinnitus may not be assigned under DC 6260. Id.
The Court's decision in Smith I was not based on the facts of that case or any application of the
law to the evidence. Rather, it was purely a ruling of law that dual ratings for bilateral tinnitus
were authorized by regulation.
         The ruling in Smith I resulted in a May 4, 2005, order from the Court dissolving the stay
of proceedings and indicating that Mr. Vahey's case would be remanded "for readjudication in
light of Smith," unless either party objected within 21 days from the date of that order. After no
objection was received, the Clerk of the Court issued a June 2, 2005, order that remanded the
appeal "for readjudication in light of Smith." The face of the Clerk's June 2 remand order
reflected the parties' prior agreement and understanding that Smith I had resolved the only issue
on appeal.
         As we recently recognized, the fundamental question controlling an analysis of prevailing-
party status is whether the remand "changed the relationship between the parties on the merits."
Zuberi v. Nicholson, 19 Vet.App. 541, 546-47 (2006) (citing Former Employees of Motorola
Ceramic Prods. v. United States, 336 F.3d 1360, 1366 (Fed. Cir. 2003)); see also Tex. State
Teachers Ass'n v. Garland Indep. Sch. Dist., 489 U.S. 782, 792-93 (1989). We also reaffirmed in
Zuberi that for purposes of this analysis, it is not relevant whether the appellant will necessarily
prevail in obtaining the benefit sought. 19 Vet.App. at 547. In Mr. Vahey's case, the Board
originally held that the appellant was barred from the benefit he sought because it did not exist
as a matter of.....1    Regardless of whether our remand order explicitly stated that the Board erred, on remand the

appellant was armed with a decision by this Court that stated in no uncertain terms that the benefit did exist. Moreover,
that was the decision cited by the Court as its basis for ordering the remand. Hence, on remand the appellant was facing
only an evidentiary hurdle instead of a complete legal prohibition. If that decision is not sufficient to establish a material
change in the relationship of the parties for purposes of prevailing-party status, then we have set the bar too high. Indeed,
if that decision is not enough, then the Court has imposed a new requirement that the veteran obtain nothing short of a
complete victory on remand–in contrast with existing precedent. See Former Employees of Motorola, 336 F.3d at 1366
("[W ]here the plaintiff secures a remand requiring further agency proceedings because of alleged error by the agency,
the plaintiff qualifies as a prevailing party (1) without regard to the outcome of the agency proceedings where there has
been no retention of jurisdiction by the court, or (2) when successful in the remand proceedings where there has been
a retention of jurisdiction.").

         The majority erroneously asserts that the Court "never reached the merits of the case."
If this statement were true, then the Court's June 2, 2005, order was ultra vires. The Court has
the power to remand a case to the Board only where it is "appropriate" to do so. 38 U.S.C. §
7252. In this case, the only possible appropriate basis suggested by the Court's order is that the
Board's decision was erroneous because its ruling of law was incorrect. If the Court did not
conclude that Smith I was controlling on the legal issue that was the sole basis for the Board's
decision on appeal, then it should not have remanded matter. Moreover, it is not clear how the
majority imagines that the Board could have concluded that Smith I was not controlling on
remand had it been affirmed. Although Mr. Vahey may not have been awarded benefits, the
Board was obligated to recognize that the legal bar it previously asserted did not exist. The
majority simply does not explain how the Court could have determined that this case was
"appropriate" for remand without a joint motion by the parties unless the Court looked at the
basis of the Board decision and identified Smith I as dispositive of the legal issue that was the sole
basis of that decision. To believe that the merits were not reached by the Court is to believe that
this case was chosen at random by the Clerk, who arbitrarily cited Smith I in issuing his May 4
and June 2, 2005, orders.              That simply did not occur.              The Court exercised deliberate
decisionmaking in identifying this case and ordering that it be remanded under Smith I.
Prevailing-party status should not be a semantics game, but should be based on the substantive
reason that the Court concluded was an appropriate basis for the exercise of our power to
remand.
         To be clear, there are many times where it is appropriate to remand a case to the Board
without a finding of error. For example, a remand without error is appropriate based on an
intervening change in relevant law. See, e.g., Vaughn v. Principi, 336 F.3d 1351 (Fed. Cir. 2003)
(finding no prevailing-party status for remand based on the passage of the Veterans Claims
Assistance Act of 2000, Pub. L. No. 106-475, 114 Stat. 2096 (2000)). Another example of a
remand without error would be where a factual issue arises on appeal to this Court that is
properly addressed by the Board in the first instance. See, e.g., Gordon v. Principi, 17 Vet.App.
221, 224 (2003) (finding no prevailing-party status where the appellant raised for the first time
on appeal an issue that required a remand to the Board for initial factfinding); see also Rice
Servs., Ltd. v. United States, 405 F.3d 1017, 1025 (Fed. Cir. 2005). However, this case does not
involve either an intervening change in law or an analysis that was in any way factual. In this
case, the Board made a decision that was purely a ruling of law and the Court remanded the
matter by citing a case that unquestionably reversed the specific ruling of law relied upon by the
Board. Under these circumstances, either the citation to Smith I was controlling or the order was
devoid of any appropriate basis for ordering a remand.
       Finally, I would note that the language of the remand order may be critical where there
is more than one possible appropriate basis for a remand and not all possible bases would lead
to prevailing-party status. However, this is not that case. The Court's action in this case was
lawful only if it concluded that Smith I was on point. The majority does not offer any appropriate
basis for vacating the Board decision in this case if Smith I was not on point. Accordingly, there
is no ambiguity to be resolved by a close reading of the language of the order.
       Although I respectfully disagree with the majority's holding that the appellant is not a
prevailing party, I am more troubled by its discussion of prevailing-party status in the first place.
The fundamental issue in resolving prevailing-party status in this case comes down to the
interpretation of the Court's May 4 and June 2, 2005, orders. These orders are so brief and vague
that it is quite possible that when deciding not to object based on the May 4, 2005, order or not
file a motion to vacate the June 2, 2005, order, both the appellant and the Secretary had opposing,
yet reasonable, views that the prevailing-party issue would be resolved in his own favor. The
appellant could easily (and correctly in my view) have believed that the Court determined that
Smith I was controlling in his case, while the Secretary arguably could have believed that the
Court determined only that Smith I was potentially applicable. The ambiguity in these orders is
the fault of the Court, not the parties, and the confusion caused by the Court's imprecise drafting
should not be a basis for determining whether EAJA fees should be awarded.
       The simple fact of the matter is that the Court remanded Mr. Vahey's claim, as well as
dozens of others, for the sake of efficiency–an otherwise honorable goal. However, the Court's
decision holds that its actions in those cases have foreclosed the possibility of an EAJA award.
I am loathe to think that the Court has frustrated the purposes of EAJA in the pursuit of judicial
economy. See Sullivan v. Hudson, 490 U.S. 877, 883 (1989) (noting that prior to the EAJA,
parties found it more practical to endure injustice in the face of governmental action than to
contest it.). Moreover, I do not believe that these purposes are inconsistent. Had the Clerk's order
been drafted with more clarity, so that the "appropriate" basis for the remand order was stated
in no uncertain terms, then this issue could have been avoided altogether without unnecessarily
consuming the Court's resources. In short, I suspect that this case is a prime example of the
adage that "bad facts make bad law."
         The Court is not without recourse as the Federal Circuit has provided the Court with a
basis on which to dispose of the issue at hand rather than delving into a mire of our own making:
Because the Secretary's legal position before the Board has been vindicated, the appellant's EAJA
application must be denied as it has not met the requirements under 28 U.S.C. § 2412(d)(1)(A)
(precluding EAJA award if the Court determines that the position of the United States was
substantially justified). The Federal Circuit's decision notwithstanding, I would have concluded
that the Secretary's legal position was "justified to a degree that could satisfy a reasonable
person." Pierce v. Underwood, 487 U.S. 552, 565 (1988). However, a more thorough discussion
of that position is unnecessary in light of Smith II. Accordingly, I would deny this EAJA
application on this basis only.
          .....us" is "a noise in the ears, such as ringing, buzzing, roaring, or clicking." D O RLAN D 'S I LLU STRATED M EDICAL
D ICTIO N ARY 1914 (30th ed. 2003).
          ,,,,,version of § 4.87, containing the diagnostic codes relating to diseases of the ear, remained in effect until
2003, when the Secretary amended the regulation specifically to preclude separate disability ratings for bilateral tinnitus.
See 68 Fed. Reg. 25,822 (M ay 14, 2003). These ratings occur in increments of 10% and correspond to reductions in
earning capacity from specific injuries or combinations of injuries. See 38 U.S.C. § 1155. Each diagnostic code in this
schedule relates to a specific disease of the ear and assigns a disability rating according to symptoms or the severity of
those symptoms set forth therein. DC 6260 assigns a 10% disability rating for recurrent tinnitus.
          .....as subsequently reversed. See Smith v. Nicholson, No. 05-7168 (Fed. Cir. June 19, 2006), rev'g 19 Vet.App.
63 (2005).
          .....e Court was able to identify the substance of the Board's decision in Mr. Vahey's case, as well as all other
identical tinnitus cases because, pursuant to Rule 4(c) of this Court's Rules of Practice and Procedure, the Secretary must
file with the Clerk a copy of the Board's decision in every case within 30 days of the Clerk's Notice of Docketing. See
also Joint Mot. at 1.
