Summary of the Case
Mr. Petermann served in the United States Army from September 1988 to September 2010. During his separation examination, he reported having episodes of diabetic ketoacidosis, tingling and numbness in his hands due to low blood sugar, and the use of an insulin pump. In May of 2011, Mr. Petermann was granted service connection for diabetes mellitus type 2 with a 20 percent disability rating. He continued to appeal this decision to the Board of Veterans’ Appeals. In an October 2015 Board of Veterans’ Appeals hearing, the Veteran stated that he was treated by a paramedic in 2010 for a hypoglycemic reaction. The Board granted an increased rating of 40% for his diabetes, but denied a rating in excess of that.
Board denies increased rating for diabetes and declines extraschedular referral
On February 11, 2016, the Board issued a decision that denied an increased rating for Mr. Petermann’s diabetes and declined to refer this issue for extraschedular consideration. The Board found that Mr. Petermann’s diabetes has been managed by insulin, restricted diet, and regulation of activities. However, his symptomatology does not meet the schedular requirements for the 60 percent disability rating. Additionally, the Board held that this issue did not warrant extraschedular consideration because the manifestations of his diabetes are contemplated by the schedular criteria and his 40 percent rating represents the average impairment in earning capacity resulting from his diabetes.
CCK presents an oral argument at Court
CCK successfully appealed to the Court of Appeals for Veterans Claims the Board decision that denied an increased rating for Mr. Petermann’s diabetes and declined to refer this issue for extraschedular consideration. In June of 2017, CCK obtained a decision from the Court that vacated the Board’s February 2016 decision and remanded the case back to the Board. However, VA filed a motion for reconsideration in July of 2017. Subsequently, in February of 2018, CCK delivered an oral argument before the Court in Washington, D.C. CCK argued that the Board’s finding that all of Mr. Petermann’s diabetic symptoms are contemplated by the assigned 40 percent rating is contrary to the facts and misinterprets the extraschedular referral analysis. CCK did acknowledge that Mr. Petermann cannot attain a higher rating by more nearly approximating that rating under DC 7913 because of its successive criteria. Nonetheless, CCK asserted that the extraschedular referral was warranted to consider Mr. Petermann’s uncompensated symptoms.
Court agrees with CCK’s arguments
CCK argued, and the Court agreed, that the Board erred in finding that all of Mr. Petermann’s diabetes symptoms were contemplated by the 40 percent disability rating criteria. The Court held that because the rating criteria for diabetes are successive, his 40 percent disability rating only contemplates his insulin use, restricted diet, and regulation of activities, not the other symptoms that are potentially relevant to a 60 percent rating. Accordingly, the Court decided that a remand was required for the Board to provide an adequate statement of reasons and bases for its extraschedular consideration.
Bailiff: All rise. Oyez! Oyez! Oyez!. The United States Court of Appeals for Veterans Claims is now in session. The honorable William S. Greenberg presiding. All who have business before this court draw near and it shall be heard. God bless the United States and this honorable court. Please be seated.
Judge Greenberg: Good afternoon. This is Petermann. 16-1093. Will council enter their appearances please?
Christian: Good afternoon, your honor. Christian McTarnaghan from the law firm Chisholm Chisholm & Kilpatrick and with me at counsel table, April O’ Donahower, also of the firm.
Nathan: Good afternoon, your honor. Nathan Kirschner representing the Secretary with me at counsel table, Richard Daley, Deputy Chief Counsel.
Judge Greenberg: Thanks very much. Do you reserve any time?
Christian: Yes, your honor. 10 minutes, please.
Judge Greenberg: Fine, thank you. Proceed.
Christian: Good afternoon, your honors. May it please the court. Mr. Petermann’s 40% rating contemplates only his use of insulin, his regulation of activities, and his restricted diet. It does not contemplate the severity of his diabetes overall, and his other diabetes symptoms to include his use of a continuous insulin pump, his frequent interactions with his medical care providers, and his kidney disease with hypertension. These symptoms are identical to or close to those noted in both the 60 and the 100% rating criteria and should’ve led the Board to refer his claim for an extraschedular consideration. Your honors, the Board used the wrong rule. The question is whether the severity of Mr. Petermann’s diabetes disability and the symptoms of that diabetes disability are contemplated by his assigned rating, not the rating schedule as a whole. The language of the clarified regulation speaks to this where to accord a justice in the exceptional case where the schedular evaluation is in adequate to rate a service connected disability and extraschedular rating is warranted.
Judge Greenberg: So, what do you want us to do?
Christian: We would like this court to hold that the threshold comparison is between the severity of the disability and the symptoms of the disability to the rating assigned, your honor, not the diagnostic code as a whole. This court’s case law in Thun supports that where the severity of the service connected disability is a consideration in the threshold determination. This court’s case in Yancy, this court’s holding in Yancy, that the Board must first compare the veteran’s symptoms to the assigned schedular rating. It was ratings in that case but that’s because it was the combined effect of multiple service connected disabilities and this court’s most recent decision in King supports it. The extraschedular rating in this case is what allows Mr. Petermann’s average impairment of earned capacity, the impairment in earning capacity that’s caused by his cluster of diabetes symptoms to be adequately compensated. It’s the symptom X, your honors. Without that, the average impairment in earning capacity that Mr. Petermann suffers as a result of the cluster of diabetes symptoms in his particular case, that’s higher than what is contemplated by the 40% rating, by his assigned 40% rating.
Judge Allen: This is a slightly off the beaten path question here, but, so there was an amendment to 3.321b that went into effect on January 8th, I’m sure you know about that.
Christian: Yes, your honor. Clarification.
Judge Allen: Right. Well, it changed the rule and it changed it with respect to multiple disabilities and that’s not an issue here for Mr. Petermann, right?
Christian: It is not, your honor.
Judge Allen: But the rule also did some potentially other things and I want to get your take on whether there’s any relevance to this at all. That is in a separate appeal pending of the court, Morgan, we ask for supplemental briefing including from your firm on a question of whether or not the removal of certain language from 3.321b and then the omission of the word ‘referred,’ or ‘referral’ had an impact on single disability claims and the Secretary informed us in their supplemental briefing that while not entirely eliminating referral to the Director, that in many cases going forward, the extraschedular decision would be made essentially by the RO itself in the first instance without referral. Does that have any implication at all on Mr. Petermann’s appeal?
Christian: I don’t think it does, your honor. The position that we took, my understanding of the position that we took in Morgan is that there would still have to be some sort of way for the normal adjudication process to happen in order to get it back to the Board. So, in this case, I think it doesn’t have an effect because the remedy here would be remand because there are still some unanswered factual questions that I think the Board has to answer before we’re able to get the appropriate understanding of the threshold element here.
Judge Greenberg: What are they? Assuming we remand it, what are you going to argue back there?
Christian: That the manifestations of his service-connected diabetes disability, the continuous use of insulin, the nephropathy with the hypertension, your honor, that those are facts that demonstrate to the Board if they had used the correct rule and that’s what we’re asking this court to do.
Judge Toth: Let me ask you about that, the nephropathy.
Christian: Kidney disease.
Judge Toth: Yeah. I mean, so that is a non-compensable complication, right? In a 60% rating of the diabetes complications that would not be compensable is separately evaluated? That would include nephropathy.
Christian: Yes, your honor.
Judge Toth: And if it were compensable, then it would be in the 100% rating, that would be complications that would be compensable and separately evaluated. Are you saying that they should do extraschedular analysis on the 40% for nephropathy simply because it’s not there in that section of the DC?
Christian: Yes, your honor. That’s exactly our argument, that it’s the rating assigned that is integral –.
Judge Toth: Isn’t that the whole point of the successive, cumulative ratings? It rolls up symptoms and as you roll up more symptoms, you ascend the higher scale of ratings. I mean, that’s the whole purpose of this type of DC, right?
Christian: When it comes to using that to rate on the schedule, your honor, yes, because 4.7% as a matter of law, blocks a veteran who has additional symptoms, a more severe disability, if you will, from getting or more nearly approximating a higher rating. And so, the available ratings to Mr. Petermann and that’s consistent with Thun, the available schedule of rating for him is only the 40% rating and so, he’s left uncompensated for those additional symptoms and so, extraschedular is what, for a lack of a better way to describe it would make Mr. Petermann whole in the sense that the extraschedular evaluation is necessary in order to get Mr. Petermann.
Judge Toth: But make him whole in what sense? I mean, the Secretary makes a policy determination that based on certain symptoms, this would be the average earnings impairment. If the person simply doesn’t have the symptoms for that earnings impairment, what are we making whole? I mean, the idea of extraschedular, there’s something unusual about this factual scenario beyond simply, it doesn’t qualify for the next higher rating. I mean, what would be unusual about a symptom not being present, that, if present, would give you a higher rating?
Christian: Well, what’s unusual about it on these facts, your honor, is that they are unaccounted for in his 40% rating. So, maybe I should have used a different wording, but what I was trying to get at is that the average impairment in earning capacity that the Secretary attached, for a lack of a better word to describe it, to the 40% rating doesn’t contemplate all of the symptoms in the severity of Mr. Petermann’s diabetes disability. So, the severity element of Thun becomes of the utmost importance. So, what makes this disability picture unusual or exceptional, your honor, is when you compare it to the 40% rating. It’s the appropriate comparison that makes it unusual, your honor.
Judge Greenberg: Extra schedular is statutory? Is it statutory or by regulation?
Christian: By regulation, your honor. 3.321, I believe it comes from the general statute.
Judge Greenberg: What was the intent?
Christian: Well, we know the intent–
Judge Greenberg: No, what was the intent of this regulation?
Christian: From the federal register, your honor, in the most recent clarification to the regulation, the Secretary relates that since 1936, his intent is to provide for an extraschedular evaluation for each service-connected disability for which the scheduler evaluation is inadequate based upon the regulatory criteria.
Judge Greenberg: Why isn’t that applicable in every case? It is.
Christian: I’m not sure if I’m understanding your question —
Judge Greenberg: Well, you either have a determination in the expertise of the Secretary, certain percentages are equal to certain conditions or manifestations and you reach a point where you have 40 or 60 or 80 or 100% and then you bring extraschedular in to what? Fill in the gap between 40 and 60 that you can’t get by looking at the schedule?
Christian: Yes, your honor, because in that hypothetical scenario, the veteran is unable, pursuant to, the facts of this case worked perfectly to show how and why an extraschedular rating or referral is required.
Judge Greenberg: But isn’t that just maybe, as Judge Toth was, I think, endeavoring to calculate, when is, and broadly speaking, an extraschedular application appropriate? Just because you haven’t reached the 60% or 80% from the 40%?
Christian: No, your honor. It’s appropriate when you meet the test that set forth in the Thun analysis. An exceptional or unusual disability picture, in Thun, the court tried to lend some guidance to adjudicators in order to make that determination and the threshold determination is comparing the severity of the disability and the symptoms of the disability to, in our opinion, the rating criteria insofar as the assigned schedular rating and I think Yancy supports that.
Judge Allen: And we’d agree that the extra scheduler route is all things being equal, harder for a claimant
Christian: I think sometimes it can be, your honor.
Judge Allen: Well, I mean, it’s meant to be exceptional, right? And so, the mere fact that you get blocked, for a lack of a better word, on the schedular path, it’s not as if you get to go to this other bucolic world and will magically get the benefit that you’re looking for because you have to establish things on the extraschedular side of the house that you don’t on the schedular. For example, an impact on employment generally, right? So, these are just, they may be ending up at the same place trying to compensate the veteran and to make them whole, in your words, but if a veteran’s able to get there on the schedular side, that’s easier than having to prove that they’re exceptional in their own personal circumstance, generally speaking, right?
Christian: I think it can be, but as you noted, it is a continuation of the road to the appropriate level of compensation for the average impairment and earning capacity, that veteran suffers when it’s more.
Judge Greenberg: So, in other words, you’re saying that the Secretary, by analogy, the Congress, congress in a statute can’t account for any conceivable situation and therefore, leaves it to administrative agency to fill in the gaps by regulation or adjudication otherwise. Are you drawing an analogy here to this regulation but extrascheduling being the Secretary’s way of dealing with unanticipated situations in the percentage?
Christian: I think it can work like that when the elements are met and I think the elements are met when the particular service-connected disability is compared to the rating assigned and so, that is the Roe construction of the rating criteria. So, what Congress intended what the Secretary described is this is what 40% equates to in terms of dollars and cents and these are the symptoms and the severity that those dollars and cents sort of equate to, but when that doesn’t work, when the cluster of symptoms or the severity of the disability causes an additional, on average, a higher impairment of earning capacity, that is the regulation that the Secretary can use to make sure that veterans will be fully compensated for the disabilities that stem from their time in service. I think that’s a long yes, your honor.
Judge Greenberg: Alright.
Judge Toth: I want to sort of rewind you and forgive me if you’ve covered this, but so earlier, you were arguing about viewing the contemplated question in terms of the component parts of the DC. What was the support that you cited for that? Is there a case or anything that’s done that sort of broke DC into parts and viewed whether the symptom was contemplated or not, just really by one aspect of the DC?
Christian: And by one aspect of the Diagnostic Code, do you mean an assigned rating?
Judge Toth: Take a 40%, right? Whether it contemplates something, obviously, the 60 may, the 100 May, something that breaks the diagnostic code down into component parts and sort of does it.
Christian: The case that comes to mind most closely to this situation is that the Yancy court used the word ‘rating assigned,’ ‘the schedular rating,’ ‘the rating assigned,’ so I think that speaks to what the appropriate comparison is and in this particular case, because the higher schedular evaluations are unavailable to Mr. Petermann, because of section 4.7, I think that makes the analysis even more directly related to the comparison between his schedular rating that he has and the symptoms and severity of his disability as a whole because on page 115 of Thun, they set out that two part test, the court sets out that two part test, but on the previous page, on page 114, the umbrella of extraschedular ratings are when the available schedular evaluations for that service-connected disability are inadequate. And here, the available schedular evaluation, Mr. Petermann’s 40% rating is inadequate to compensate him fully for the occupational effects of the service-connected disabilities. As noted by those symptoms that he has being in those higher rating criterias, that in and of itself shows that these are typically more severe symptoms and symptoms that cause, on average, a higher level of impairment of earning capacity than what the 40% contemplates which is only the use of insulin, the restricted diet, and his regulation of activities.
Judge Greenberg: Anything else?
Christian: If there are no further questions, your honors.
Judge Greenberg: We’ll wait to hear from you on rebuttal.
Christian: Thank you, your honors.
Judge Greenberg: Secretary?
Nathan: Your honors, may it please the court. The Secretary urges the court to affirm the Board’s decisions specifically that part which declined to refer appellant’s diabetes for an extraschedular evaluation. Your honors, section 3.321 applies to extraschedular evaluations, not intra-schedular evaluations. This case is about manifestations contemplated by the rating schedule, specifically diagnostic code 7913. This court, and the federal circuit in Middleton, have held that diagnostic code 7913 is a part of a structured scheme of specific successive cumulative criteria for establishing a disability rating. Each higher rating includes the same criteria as the lower rating plus distinct new criteria. Nothing appellate points to here and nothing in the record demonstrates any kind of disability that is not already contemplated by diagnostic code 7913.
Judge Allen: So, could I ask a question here? Let’s just assume, right, it’s not assumption, this is what I think, because I wrote it in King, that the extraschedular and the schedular analysis are simply two means to accomplish the same goal, okay? Let’s just start with that assumption, okay? If that’s the case, then, the idea of the successive rating criteria on the schedular side, in some measure, that’s more difficult than your garden variety schedular thing to meet because it builds, as you say, A, plus A plus B, A plus B plus C, et cetera. So, that means that all things being equal, a claimant might have a harder time establishing a harder time establishing a higher schedular rating because they don’t get the benefit of 4.7, right? They really have to get to fully to that next level, but why should that mean anything for extraschedular, right? In other words, all that could do is say, okay, you get shunted then in your particular situation to the extraschedular side of the house where you’re going to have to show us things that you wouldn’t have to establish under the schedular side, right? Because somebody who is in a successive rating criteria situation could also be as exceptionally disabled, if you will, as somebody who isn’t. And so, why should we foreclose the extraschedular rating just because a higher level of rating has a symptom?
Nathan: Well, two things, your honor, first, this case is distinguishable from King and that King, appellate alleged that there were symptoms or effects of the disability that were not already contemplated by the diagnostic code itself. I think there were dizziness or some other things that the appellant there was alleging, were his symptoms in that disability. Here, all of the manifestation of the diabetes are specifically contemplated in the success of and cumulative scheme of the rating code. The other part is, well, perhaps in a successive cumulative scheme such as this one, it may be more difficult to obtain an extraschedular evaluation. It’s not impossible, as long as the first step of Thun is met and there are symptoms as Yancy said that are not contemplated by the rating schedule, if, for example, if the appellant’s diabetes were to manifest with nosebleeds or something like that, it still would be possible for him to have an extraschedular evaluation.
Judge Allen: But it is the secretary’s decision that assume that you’re working your way up the rating, 10%, 30%, 50%, and when you take the rating schedule in a successive rating situation, if you take the full range of the schedule and it has symptomatology from A through M, okay? It is your position that nothing from A through M could be used at the first step of Thun to satisfy it, right?
Nathan: Correct. As long as they contemplate about the criteria, your honor.
Judge Allen: So, see, what I’m trying to figure out is what’s the logic of that if what we’re doing is trying to contemplate a veteran? Assume that a veteran has a 30% rating and the M, the symptom M is at a 100, right? It turns out that that veteran also has symptom M but nothing else, and it actually causes him to have marked interference with employment. Let’s just assume that. What logic would it be to say that because that symptom, just that one, happens to be at the way end of the diagnostic code up at the 100, but because it happens to be there, we won’t even look to see that it is an exceptional disability picture.
Nathan: I think that’s the point, your honor. The disability picture here, definitely in this case, is not exceptional, it’s expected and 7252b prohibits the court from examining or interfering with the rating schedule sort of as it is as it’s written and the policy decision here for DC 7913 was for the Secretary to give ratings at 10, 20, 40, 60 and 100% levels. What appellant seeks to do is use 3.321 to create out of a whole cloth, a 50% evaluation whether it’s not, but the Secretary would make a policy decision if the ratings were to go from 40% to 60% and the court is prohibited from reviewing that.
Judge Allen: Well, you should say more about that then because if we’re actually prohibited from doing that, that’s jurisdiction and that should be the first thing, right?
Nathan: Well, your honor, I mean, as we put in our 30b in Marcelino, that’s one of the things that the court should not be reviewing, is the content of the rating schedule itself. Now, that’s not exactly what appellant is arguing. Appellant is arguing that his symptoms which fall in the middle of the rating schedule should instead be taken outside of that rating schedule and be placed into the gap, into the void, outside of the rating schedular criteria which is the gap that 3.321 was designed to fill. So, we have to get outside of the schedule before 3.321 certification number.
Judge Allen: So, does the secretary now that the court lacks jurisdiction or not? I mean, because that’s a binary question. It’s like being pregnant, you either are or you aren’t, right?
Nathan: No, your honor. Unlike being pregnant, it depends.
Judge Allen: Yeah, you should talk to my wife about that.
Nathan: So, the question is, if the court were to use 3.321 to, in effect, make a 50% evaluation within this criteria, I think the court will be prohibited from doing that jurisdictionally because it can’t revise the rating schedule. However, the court would not be prohibited from a narrower ruling that I don’t think would be in appellant’s favor either in any way of this case, but, for example, to use the nosebleeds again, if appellant exhibited a symptom that was outside of the rating criteria, 3.321 would still be okay to apply. But I think that is, again, not something that we have here because the appellant acknowledges all of his symptoms were contemplated by the rating criteria. The continuous insulin pump is contemplated by the criteria, the hypoglycemic time when he was treated by an EMT in 2010.
Judge Toth: I mean, what about appellate. I mean, I don’t want to mischaracterize appellant’s argument but basically, if one symptom and presented with such severity that even though it showed up lower on the rating, it’s now prodded into an unusual picture. I mean, what would you say to that argument? You can have an isolated symptom which doesn’t show up but it can manifest in such a severe form that it can present an unusual disability pictures, extraschedular warranted.
Nathan: I think that’s hypothetically impossible, your honor, but again, I don’t think that’s what we have here. None of these symptoms are exceptional or unusual. I don’t want to foreclose a hypothetical scenario but I think, certainly, in the cases of the specific successive cumulative criteria like you have in diagnostic code 7913, you really need to have that symptom that is not contemplated and here, we have quite an array of symptoms and even complications that are contemplated by this diagnostic code. So, it’s a very comprehensive diagnostic code and I think to get on to the extraschedular path, it’s more difficult than in other cases, but I think here, it’s the correct result.
Judge Toth: Extraschedular on referral is discretionary, right? I mean, the Board could refer anybody for any reason that wanted for an extraschedular. I mean, I suppose they would have to provide the examiner some type of explanation but it need not provide us with one.
Nathan: Well, it would need to at least show and find to make a factual finding that the first and second Thun criteria are met before it would refer and here, we have the Board making precisely the opposite —
Judge Toth: That’s an internal policy. I mean, the Board has the authority intra VA to refer for whatever reason, it walks out, it may not be mandated to refer, but it can refer under its discretion just like it can grant under its discretion or not.
Nathan: I suppose that’s true, your honor, but again, the board doesn’t make such a finding without the appropriate factual findings. So, it’d make Thun one, it would check the box for Thun one, pardon me, then check Thun 2 and then it would proceed to refer, your honor.
Judge Toth: Nosebleeds, extra schedular.
Judge Greenberg: Nosebleeds. I got one. Any more?
Judge Allen: Yes, I have one. I have another. I want to ask you the same question that I asked, the appellant’s counsel. Is there any impact on our decision in this appeal of the position that the change to 3.321b goes beyond collective disabilities and will affect the manner in which individual extraschedular disabilities are evaluated?
Nathan: No, your honor. This is the Secretary, says there’s no change based on the revision to the 3.321 on this case.
Judge Allen: So, there’s no impact. No impact although, the secretary does believe that or is going to change the referral mechanism —
Nathan: Correct, as we said and I believe it was Morgan.
Judge Allen: Morgan.
Nathan: Yes, your honor. Nothing further? The Secretary urges the court to affirm. Thank you.
Judge Greenberg: Thank you. Rebuttal?
Christian: Your honors, King controls here. Mr. Petermann is not compensated for the severity in symptoms that he has that are insufficient to get him to the next higher rating. The Secretary is looking to the wrong comparison. The comparison must be between the veteran’s assigned rating and the symptoms and severity of the veteran’s condition overall. This isn’t a challenge to the rating schedule, your honors. This isn’t a case where appellant is challenging the fact that here is a 0% rating in the rating criteria. This isn’t a case that involves a challenge to the trauma requirement, the trauma requirement in the diagnostic code. This isn’t a case that involves challenging the fact that obesity is not in the regulations, not in the regulations for directly compensable disability. This case involves the proper interpretation and then application of 3.321.
Judge Toth: Anything?
Judge Greenberg: Anything else?
Christian: No, your honors. I would just ask that this court please hold that the threshold element requires a comparison between the severity and symptomatology of the veteran’s disability in the assigned rating.
Judge Greenberg: Thank you.
Christian: Thank you very much —
Judge Greenberg: We understand your argument. The briefs and the argument were excellent. We will greet counsel and reserve an opinion.