BVA9504672 
DOCKET NO. 94-30 665                      DATE JAN 04 1995

THE ISSUE

Eligibility for payment of attorney fees from past-due benefits.

ATTORNEY FOR THE BOARD

E. J. McCafferty, Counsel

INTRODUCTION

This matter relating to attorney fees arises out of proceedings and
an appeal to the United States Court of Veterans Appeals (Court) in
[citation redacted], in
which the Court granted a joint motion for a remand and vacated the
decision of the Board of Veterans' Appeals (Board) of December 19,
1990.  In that decision, the Board denied entitlement to an
increased rating for residuals of a shell fragment wound of the
lumbar spine, evaluated as

20 percent disabling and denied entitlement to an increased rating
for residuals of shell fragment wound of the dorsal spine,
evaluated at 10 percent disabling.

Pursuant to the Courts directive, the case was returned to the
Board and in March 1994, the Board entered a decision allowing an
increased rating from 20 percent to 40 percent for residuals of a
shell fragment wound of the lumbar spine.  An increased rating for
residuals of shell fragment wound of the dorsal spine was again
denied.  Pursuant to the Board's decision, the regional office (RO)
assigned a 40 percent rating for the veteran's shell fragment wound
of the lumbar spine, effective from March 17, 1989.  As a result of
this rating action, the veteran's combined rating was increased
from a combined 30 percent to a combined 50 percent disability
rating.  This entitled the veteran to the payment of the monetary
difference between the 30 percent and 50 percent combined ratings,
beginning in April 1989.

In correspondence from the RO, dated in August 1994, the veteran
and his attorney, who were the parties to the fee agreement
executed in November 1991 and amended in May 1993, were advised
that the case was being transferred to the Board for a
determination concerning eligibility for payment of attorney fees
from past-due benefits, and that any additional evidence or
argument concerning the attorney fee agreement should be submitted
to the Board within 30 days.  No additional evidence or argument
was received from either party during that period and the case is
now ready for review by the Board.

CONTENTIONS

No contentions with respect to the validity of the fee agreement
have been advanced by either party.

DECISION OF THE BOARD

In accordance with the provisions of 38 U.S.C.A. 7104 (West 1991),
and based upon consideration of all evidence and material of record
in the claims and attorney fee folders, and for the following
reasons and bases, it is the decision of the Board that the
evidence is against eligibility for payment of attorney fees from
past-due benefits.

FINDINGS OF FACT

1.   The Board entered a decision on the underlying claim in
December 1990.

2.   The notice of disagreement by which the veteran initiated the
appeal denied by the Board in December 1990 was received by the VA
after November 17, 1988.

3.   Within one year of the Board's December 1990 decision the
veteran and the attorney signed an attorney client fee agreement,
and properly submitted copies thereof to the VA; the parties
amended the fee agreement in May 1993.

4.   Services were rendered by the veteran's attorney upon appeal
of the Board's decision to the Court and in conjunction with the
further decision of the Board in March 1994.

5.   Past-due benefits on the underlying claim are now payable to
the veteran.

6.   The fee agreement, as amended, is in writing and signed by
both the veteran and his attorney.  It calls for a fixed fee of
$2,000 and a total fee equal to 20 percent of the total amount of
past-due benefits, less the fixed fee.  The past-due benefits were
to be paid to the attorney by the VA.

CONCLUSIONS OF LAW

1.   The criteria for a valid fee agreement between the attorney
and the veteran for representational services before VA, including
the Board of Veterans' Appeals, have been met. 38 U.S.C.A.
5904(c)(1) (West 1991); 38 C.F.R. 20.609(c), (g) (1993).

2.   The criteria for eligibility for payment of attorney fees from
past-due benefits have not been met. 38 U.S.C.A. 5904(d) (West
1991); 38 C.F.R. 20.609(h) (1993).

REASONS AND BASES FOR FINDINGS AND CONCLUSIONS

38 U.S.C.A. 5904(c) and (d) (West 1991) permit VA claimants and
appellants to enter into agreements with attorneys and agents for
the payment of fees for services in representing them in
proceedings before VA, provided the fees are neither "excessive"
nor "unreasonable". 38 C.F.R. 20.609(c) (1993), implementing 38
U.S.C.A. 5904(c)(1) (West 1991), provides that a fee may be charged
of the claimant or appellant if the following conditions are met:

(1)  A final decision has been promulgated by the Board of
Veterans' Appeals with respect to the issue, or issues, involved;

(2)  The Notice of Disagreement which preceded the Board of
Veterans' Appeals decision with respect to the issue, or issues,
involved was received by the agency of original jurisdiction on or
after November 18, 1988; and

(3)  The attorney-at-law or agent was retained not later than one
year following the date that the decision by the Board of Veterans'
Appeals with respect to the issue, or issues, involved was
promulgated....

In this case, a notice of disagreement with the assignment of a 20
percent rating for the shell fragment wound residuals of the lumbar
spine was received in March 1990.  Thereafter, in December 1990,
the Board denied the veteran's claim for increase for residuals of
shell fragment wounds of the lumbar spine.  An appeal was taken to
the Court, and in November 1991, the veteran and his attorney
executed a fee agreement which was amended in May 1993.  The Court
vacated the December 1990 decision and remanded the case to the
Board in March 1993.  A March 1994 decision by the Board granted an
increase in the veteran's rating for residuals of a shell fragment
wound of the lumbar spine from 20 percent to 40 percent.  This 40
percent rating, when combined with the veteran's 10 percent rating
for residuals of shell fragment wound of the dorsal spine, resulted
in a combined 50 percent rating.  The RO assigned a March 17, 1989
effective date for the 50 percent rating replacing the 30 percent
rating that had previously been in effect.

The record demonstrates the existence of a valid attorney fee
agreement; that is, one which substantially complies with the
requirements of 38 U.S.C.A. 5904(c) (West 1991) and 38 C.F.R.
20.609(c)(g) (1993).

It remains to be determined whether the criteria for eligibility
for payment of attorney fees from past-due benefits have also been
met. 38 C.F.R. 20.609(h)(1) (1993), implementing 38 U.S.C.A.
5904(d) (West 1991), authorizes payment of attorney's fees directly
by VA from past-due benefits if the following conditions are met:

(i)  The total fee payable (excluding expenses) does not exceed 20
percent of the total amount of the past-due benefits awarded,

(ii) The amount of the fee is contingent on whether or not the
claim is resolved in a manner favorable to the claimant or
appellant, and

(iii) The award of past-due benefits results in a cash payment to
a claimant or an appellant from which the fee may be deducted....

The attorney fee agreement of November 1991, as amended, provides
for payment of a fee directly by the VA in the event of a favorable
disposition of the veteran's claim and, in addition, the amount of
the fee to be charged was not in excess of 20 percent of past-due
benefits awarded.  The fixed fee charged by the attorney was to be
included in calculating the 20 percent of past-due benefits to be
paid to the attorney.  In the present case, the fee to be paid to
the attorney under the fee agreement is not a contingency fee as
required by statute.  The fee at issue is a hybrid fee combining a
flat fee and contingency fee.  The agreement provides that the
attorney receives a $2,000 fixed fee up front and if the attorney
is successful in recovering back benefits, then the fixed fee of
$2,000 will be included in calculating the 20 percent fee due to
the attorney.  The attorney has assured himself a $2,000 fee in the
case, whether he wins or loses.  If unsuccessful, the attorney has
his $2,000 fixed fee, but if successful and 20 percent of the total
amount of the past-due benefits awarded exceeds the $2,000 fixed
fee, the attorney would also be entitled to the additional amount.
Clearly, this does not represent a true contingency fee as
contemplated by the statute.

The view that the fee agreement in this case does not meet the
above statutory provisions is supported by the recently enacted
Persian Gulf legislation contained in

Public Law 103-446.  Section 504 of that law (Clarification of
Payment of Attorney Fees) was enacted, in part, to clarify the
point that a prerequisite for payment of attorney's fees from past
due benefits is that the total amount of the fee payable to the
attorney is contingent on whether or not the matter is resolved in
a manner favorable to the claimant.  This clarification indicates
the intent of Congress with respect to contingency fees at the time
of the enactment of the statutory provisions discussed above.  The
fee agreement at issue in this case does not fall within the
statutory guidelines of 38 U.S.C.A. 5904 calling for a contingent
fee as a prerequisite for direct payment to the attorney by the VA
from past due benefits.

Since all of the requirements for payment of a fee from past-due
benefits to an attorney have not been met, such payment is not
warranted.  In conclusion, we would note that the finding here
involves only the attorney's right to be paid from past-due
benefits by the VA and does not affect the attorney's right to
collect said payments directly from the veteran.

ORDER

Eligibility for payment of attorney's fees from past due benefits
is denied.

BRUCE E. HYMAN
Member, Board of Veterans' Appeals

The Board of Veterans' Appeals Administrative Procedures
Improvement Act, Pub. L. No. 103-271, 6, 108 Stat. 740,_(1994),
permits a proceeding instituted before the Board to be assigned to
an individual member of the Board for a

determination.  This proceeding has been assigned to an individual
member of the Board.

NOTICE OF APPELLATE RIGHTS.  Under 38 U.S.C.A. 5904(c)(2) (West
1991), a finding or order of the Board of Veterans' Appeals upon
review of an agent's or attorney's fee agreement may be reviewed by
the United States Court of Veterans Appeals under 38 U.S.C.A.
7263(d) (West 1991).  Under 38 U.S.C.A. 7266 (West 1991), a final
decision of the Board of Veterans' Appeals may be appealed to the
United States Court of Veterans Appeals by a person adversely
affected by the decision within 120 days from the date of mailing
of notice of the decision.  The date which appears on the face of
this decision constitutes the date of mailing and the copy of this
decision which you have received is your notice of the action taken
by the Board of Veterans' Appeals.