Legal Meets Practical

by Sarah Schauerte

The Department of Veterans Affairs (“VA”) is amending its regulations in a way that may impact veterans with service-connected traumatic brain injury (“TBI”). Under its proposed amendments, five diagnosable illnesses will be considered secondary to service-connected TBI (the “Secondary Disabilities”). If a veteran has a rating for TBI, and also suffers from a Secondary Disability, he or she will be presumed to be entitled to disability compensation for the Secondary Disability.

The five Secondary Disabilities are:

• Parkinson following moderate or severe TBI;
• Unprovoked seizures following moderate or severe TBI;
• Dementias (presenile dementia of the Alzheimer type and post-traumatic dementia) if manifested within 15 years following moderate or severe TBI;
• Depression if manifested within three years of moderate or severe TBI, or within 12 months of mild TBI; and
• Disease of hormonal deficiency that result from hypothalamo-pituitary changes if manifested within 12 months of moderate or severe TBI.

Under these amended regulations (codified at 38 CFR 3.310), a veteran will be presumed to have these disabilities as secondary to service-connected TBI unless there is “clear and convincing” evidence to the contrary. Evidence of “clear and convincing” evidence to the contrary includes: 1) evidence that the Secondary Disability predated the TBI (and was therefore not caused by the TBI); 2) medical evidence that another disability (other than TBI) caused the Secondary Disability; or 3) medical evidence showing that the Secondary Disability is unrelated to the TBI.

TBI is rated under VA Diagnostic Code 8045, which explains the ten different facets of TBI impairment. These include, among others: memory, attention, concentration, executive functions; judgment; social interaction; orientation; and subjective symptoms. The VA rates a veteran who claims disability caused by TBI under each facet, and the highest rating assigned to any facet controls. Under the wording of the amended regulation, in order to be entitled to the presumption as it relates to the Secondary Disabilities, a veteran must be rated as a “two” under at least one TBI facet (or 40%), which entitles him or her to a “moderate” rating for TBI.

This development follows a report issued by the National Academy of Sciences, Institute of Medicine (“IOM”), Gulf War and Health, Volume 7: Long-Term Consequences of Traumatic Brain Injury (the “NAS Report”). This report analyzes the association between TBI and the Secondary Disabilities, finding that there is “sufficient evidence of an association” between moderate or severe levels of TBI and the Secondary Disabilities. Based on the evidence presented by the NAS Report, the Secretary of the VA determined that a revision to its regulations is warranted.

This amendment is the first regulation change affecting TBI disability compensation claims in four years. In October 2008, the VA revised the rating criteria for TBI, which was considered by both the VA and veterans advocates alike as inadequate to compensate for the disabilities caused by TBI. Under the previous rating criteria, most veterans who suffered from TBI were awarded only a 10% evaluation for disabilities that may have been moderately severe, very severe, or totally disabling. Complaints that the previous schedule was inadequate to adequately compensate veterans for the many and complex residuals of TBI brought about VA’s revision of the TBI rating criteria.

Similarly, this new amendment reflects efforts to adequately compensate veterans who suffer from other disabilities caused by TBI. The presumption contained within the rule will eliminate hoops veterans must generally jump through to receive compensation – rather than having to prove service-connection, a diagnosis of the disability will suffice.

Comments must be received on or before February 8, 2013 to be considered by the VA. For a complete copy of the rule and instructions for providing comments, please visit: http://www.gpo.gov/fdsys/pkg/FR-2012-12-10/pdf/2012-29709.pdf.

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In a huge defeat for service-disabled veteran-owned small businesses (SDVOSBs), on November 29th the Court of Federal Claims (CoFC) ruled that the Department of Veterans Affairs (VA) acted reasonably in determining that it need not set aside Federal Supply Schedule (FSS) contracts for SDVOSBs.

This decision, issued by Judge Nancy Firestone, follows two Government Accountability Office (GAO) decisions that followed the same fact pattern: Aldevra and Kingdomware. In both instances, the GAO sustained the protests on the grounds that under the Veterans Benefits, Health Care, and Technology Act (the “Act”), the VA should have conducted market research to determine whether an FSS solicitation should be issued as an SVOSB set-aside . (Aldevra, B-406205, March 14, 2012; Kingdomware Technologies, B-406507, May 30, 2012).

In order for Judge Firestone to overturn the VA’s decision not to set aside an FSS acquisition for SDVOSBs, the plaintiffs bore the heavy burden of demonstrating that the VA acted “arbitrarily, capriciously, or contrary to law.” As federal government contractors who have been involved in disputes with the government know, this is an incredibly difficult standard to meet. And here, according to Judge Firestone, Kingdomware did not.

Chevron Deference

Judge Firestone analyzed the VA’s decision using Chevron deference. (Chevron, U.S.A. v. National Resources Defense Council, 467 U.S. 837 (1984)). Chevron deference is the standard used by a court to determine whether to grant deference to an agency’s interpretation and application of its own statute (a statute created to apply to the agency). The decision to grant deference is based on a two-part test.

First, the court will determine whether Congress spoke directly to the question at issue. If so, that is the end of the matter, as the court must give effect to an unambiguous interpretation provided by Congress. This makes sense given that while the legislature writes the law, the judiciary interprets it. If the law is clear, the judiciary cannot assign another meaning.

If, however, Congress has not spoken to the precise issue at hand, the judiciary proceeds to the second step. It must determine whether the agency has assigned a permissible definition to the law. This definition must be reasonable.

Chevron Deference Applied to Kingdomware

Because in this instance, the VA was interpreting and applying its own statute, Chevon deference applied. Thus, Judge Firestone proceeded with applying its two-step test.

As it relates to the first step, Judge Firestone found that Congress had not spoken directly to the issue of whether the VA was required to conduct mandatory procurements for SDVOSBs under the “Rule of Two.” The “Rule of Two” under the Act provides that a contracting officer must have a reasonable expectation that an award can be made to two or more SDVOSBs at a fair and reasonable price. A contracting officer will conduct market research, such as by searching through small business databases, to determine whether the Rule of Two is satisfied.

Judge Firestone found that Congress had not addressed the mandatory nature of the Rule of Two. In noting that “the 2006 Act must be construed in light of its goal-setting provisions,” she found that “the statute is at best ambiguous as to whether it mandates a preference for SDVOSBs and VOSBs for all VA procurements.”

This is the part of the decision that most SDVOSBs have trouble understanding – after all, the statute contains mandatory “shall” language. Nonetheless, Judge Firestone held that the phrase “shall” must be read in connection with the other terms in the 2006 Act. On the whole, these terms demonstrate that the Act is goal-setting in nature. Thus, that the term “shall” does not clearly show that the VA must conduct set-asides for SDVOSBs under the Rule of Two.

Because Judge Firestone concluded that the Act was not unambiguous, she proceeded to the second step, which was to determine whether the VA assigned a permissible definition to the applicable provision. In applying the “substantial deference” afforded to an agency’s application of its own statute, Judge Firestone held that the VA’s interpretation was reasonable. In a lengthy analysis, Judge Firestone pointed to the VA’s consistent application of this interpretation, as well as the fact that this interpretation does not conflict with the rest of the Act or the VA Acquisition Regulation.

So What Now?

SDVOSBs across the board had expected Judge Firestone’s decision to establish once and for all that the VA must conduct set-asides under the Rule of Two. This, of course, did not happen. Going forward, what can SDVOSBs do?

First, Kingdomware might choose to appeal the decision before the U.S. Court of Appeals for the Federal Circuit. Several sources confirm that Kingdomware is contemplating this option. While this is a costly alternative, given the broad sweeping effect of the decision, the benefit is worth it. Further, veterans organizations will surely want to get involved (and perhaps chip in for cost). Given the high profile, this is also a perfect pro bono case for a large law firm.

Second, SDVOSBs may choose to accept the decision. Given the backlash from the veteran community, however, this likely will not happen. This decision affects hundreds, if not thousands, of veteran-owned businesses. No matter what, they will stand behind Kingdomware in its push forward.

Third, SDVOSBs can attempt to obtain legislative clarification of the meaning of the word “shall” as it relates to the Rule of Two, or push for an amendment to clarify. This might actually be the most viable solution, as it is not as though Judge Firestone came to her decision lightly. She carefully analyzed the history of the Act, as well as the VA’s tradition of implementation and interpretation. Given the substantial deference given to agency interpretation of its own statute, it may be difficult to receive a more favorable decision at the U.S. Court of Appeals. If Congress did intend for the statute to mandate set-asides, it could verify that intention.

Time will dictate this decision’s impact. Clearly, however, it stands to be one of the most important decisions affecting veteran-owned businesses. Stay tuned to this blog for updates on how it plays out over the next months.

A copy of the Kingdomware decision may be accessed here.

This Monday, I heard something quite shocking on CNN: ecstasy, the illegal drug most frequently used in clubs, may be a viable means to alleviating the symptoms of post-traumatic stress disorder (PTSD). Ecstasy dramatically reduces immediate anxieties, allowing a user to open up emotionally, even as the body and brain are energized by the drug.

CNN reported the effects of a study conducted by the National Center for PTSD (the “Center”). The Center conducted a long-term follow-up assessment of 171 rape victims who had been treated for PTSD by the administration of ecstasy. The Center found that after ten years, fully 80% experienced milder symptoms than they did previously.

Shortly before the CNN story hit airwaves, a husband-and-wife team were featured in the New York Times. The husband is a psychiatrist and the wife is a nurse, and they are conducting a study with 24 veterans suffering from PTSD. This study will combine controlled doses of ecstasy with psychotherapy in treating PTSD. According to the couple, they have been contacted by over 250 veterans eager to take part in the study. 250 veterans, for 24 spots. For these veterans, traditional methods of treatment are not working.

Surprisingly enough, this isn’t new news. On July 19, 2010, the Journal of Psychopharmacology reported the results of the first randomized, controlled trial of ecstasy (known to chemists as 3,4-methylenedioxymethamphetamine, or MDMA). The study’s authors gave MDMA or a placebo to patients with post-traumatic stress disorder (PTSD).  The study showed that ecstasy is not only safe when administered in controlled settings but also remarkably effective in treating PTSD in conjunction with psychotherapy.

The Journal of Psychopharmacology paper marked the first time the FDA and the Drug Enforcement Administration had allowed a scientific study on MDMA. The authors spent more than a decade getting approval for the research, which began in 2004.

And now, for the first time, the national media has caught hold of this story. Sure, maybe it isn’t new news, but it affects many PTSD-sufferers. For example, I’m sure those 226 veterans on the waiting list for the experimental study covered in the New York Times would appreciate another opportunity. Perhaps with this “new” public focus, additional studies will follow.

For more information on PTSD, visit the Center’s website at: http://www.ptsd.va.gov/public/pages/what-is-ptsd.asp. The New York Times article is available at: http://www.nytimes.com/2012/11/20/health/ecstasy-treatment-for-post-traumatic-stress-shows-promise.html?ref=posttraumaticstressdisorder.

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