[00:00:01] Speaker 04:
Our next and final case this morning is Matthew Shealy versus the Secretary of Veterans Affairs, Mr. Carpenter.

[00:00:12] Speaker 03:
May it please the court, Kenneth Carpenter.

[00:00:14] Speaker 03:
I appear on behalf of the interveners in this matter, Attorneys Gentile and Hoffman.

[00:00:20] Speaker 03:
Mr. Shealy is the original applicant or, excuse me, appellant in the proceedings below.

[00:00:26] Speaker 03:
He is not participating in these proceedings.

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The issue before this court is whether or not the interveners, as the former attorneys... Is your contention, Mr. Carpenter, that the retention agreement here effectively assigned the legal fees to counsel?

[00:00:46] Speaker 01:
Yes.

[00:00:47] Speaker 01:
It doesn't say that expressly.

[00:00:49] Speaker 03:
No, it does not use the term assignment.

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It uses terms relative to the cooperation of the appellant

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And just to clarify, are you saying that the agreement, the fee agreement, assigned the right to seek the statutory EJA fees over to the attorneys to file the EJA application in court?

[00:01:24] Speaker 03:
In the context of this case, yes, Your Honor.

[00:01:28] Speaker 03:
And that was because of the decision by Mr. Shealy that he would not proceed, which effectively... Okay, okay, that's different.

[00:01:36] Speaker 03:
I'm sorry.

[00:01:38] Speaker 00:
It sounds like, as I understood your argument, it was, in your briefing, it was because Mr. Shealy elected not to pursue his statutory right to eutrophies,

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Then under the contract in your view the council were permitted to then file those Egypt fee applications on Mr. Shealy's behalf that is correct as I understood judge Dyches question.

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His question was, did that fee agreement between counsel and Mr. Shealy assign the right that Mr. Shealy possesses by statute over to his counsel for his counsel to be able to file the each of fee application because now they have the statutory right that was initially and always assigned.

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were given, conferred to Mr. Shealy.

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Mr. Shealy as a party, that's correct.

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And to the extent that I responded in the affirmative, then I did not intend to go that far.

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However, I believe that the practical effect is the answer that I gave to Judge Dyke, is that the practical effect is that there is an assignment of the right to proceed to those fees.

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Because all that is recovered under the IJA statute

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are those fees and expenses incurred by counsel.

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And that is the same in every attorney-client relationship in proceedings before the Veterans Court.

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And the Veterans Court, by statute, requires the attorney to file the fee agreement.

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And the fee agreement is filed with the court, and that establishes the status of the attorneys as a party at interest

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in the proceedings under IJA.

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Now the proceedings under IJA only come at the end of the litigation and they are predicated by meeting certain statutory requirements that there is a prevailing party and that the government's position is not substantially justified and the fees sought are reasonable.

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The question in this case is merely standing.

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do these former attorneys, as a result of their fee agreement with the appellant, have the legal standing to participate, even to the extent of filing the application, to recover the fees for the services that they provided to the appellant before Mr. Shealy chose to terminate their services?

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And the counsel are seeking to file for those fees

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In your view, on behalf of Mr. Shealy, not on their own behalf.

[00:04:27] Speaker 00:
Is that how I understood your argument in your gray brief?

[00:04:33] Speaker 03:
Yes, Your Honor.

[00:04:34] Speaker 01:
The problem here is that we're dealing with a legal... If that were the case, then you're foreclosed by Willis.

[00:04:39] Speaker 01:
Because Willis says they don't, the attorneys don't have prudential standing to seek the fees on behalf of the client.

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distinguishing Kaplan and Drysdale, which nobody bothers to discuss, but you probably should have.

[00:04:56] Speaker 01:
I think you're dead on that theory.

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The distinction that exists in this case is the right to initiate those proceedings.

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And the right to initiate those proceedings flows from the fee agreement.

[00:05:17] Speaker 01:
It does not.

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But it could only flow from the fee agreement if the fee agreement constituted an assignment.

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And even if it were an assignment, you would run into problems under the Anti-Assignment Act that you'd have to show that the government acquiesced in the assignment, which it very much doesn't look as though they've done here.

[00:05:39] Speaker 01:
They didn't acquiesce in any assignment.

[00:05:41] Speaker 03:
No, no.

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They did not, Your Honor.

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However,

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These are the statutory rules under which attorneys operate within the confines of Title 38.

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And Title 38 requires the filing of a fee agreement so that the court and the parties, including the government, are on notice of what the relationship is.

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And the relationship under the terms of this contract required the assistance of Mr. Sheeler in

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filing that application and that application is filed on Mr. Shealy's behalf.

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Is there a factual distinction between the case you have here and what happened in Willis?

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I believe there is.

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I didn't see any discussion in your briefs about Willis, particularly this prudential standing defect that

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existed in Willis.

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The factual distinction here is that this case is about standing and how standing does or does not arise.

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That wasn't the issue in Willis?

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I thought it was.

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I thought Willis said there's no Article 3 standing and likewise in the alternative there's no prudential standing.

[00:07:04] Speaker 03:
That's correct.

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So what's the daylight

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if any, between the facts of Willis and the facts here that could assist you in saying, well, Willis cannot control.

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Because the holding in Willis goes to whose fees those are.

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And the interveners are not making an assertion that those fees are theirs until such time as

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the application is decided.

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And at the time in which the application is decided, they have both a contractual and an equitable interest in the fees that are granted.

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In Willis, the attorney there didn't have a contractual or equitable interest in the fees in the same way that the counsel here do?

[00:07:54] Speaker 03:
I don't believe so, Your Honor, because I don't believe there was a requirement in Willis for the filing of the fee agreement.

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that put all parties, including the government, on notice of what the legal relationship was pursuant to that fee agreement.

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In this fee agreement, the interveners agreed to represent at no charge to the veteran.

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They complied with that and provided those services until such time as Mr. Shealy decided that he did not want their representation anymore.

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At that juncture, they had an interest

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in the work that had been performed in the event that he succeeded.

[00:08:34] Speaker 01:
Are you saying they had an interest in the fee, or are you saying that they acquired an interest in pursuing the fee on behalf of the client?

[00:08:42] Speaker 03:
The latter, Your Honor.

[00:08:43] Speaker 03:
I'm sorry.

[00:08:43] Speaker 03:
If I inaccurately spoke, that's what I meant to say.

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What's the work that the Council did here?

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It seemed like it was a pretty short period of time.

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It wasn't clear to me what they actually did, and it appeared to be that it was the next council that was representing Mr. Shealy that succeeded in getting the joint remand.

[00:09:13] Speaker 03:
That would be incorrect, Your Honor.

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The work that they did is required in order to participate in the pre-briefing conference that was held in this matter.

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In order to prepare for that pre-briefing conference,

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for the appellant is required to prepare a memorandum of the issues that were at stake in the proceeding or the appeal that was being presented.

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In order to do that, counsel needed to review the record on appeal, the proceedings before the agency, and prepare a memorandum.

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And it was on the basis of that memorandum that this matter was

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from the government's point of view, prepared to be resolved.

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So everything was done except that Mr. Shealy would not agree to the joint motion for remand.

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The subsequent counsel apparently persuaded Mr. Shealy that that was the correct way to proceed and she did not either file an application for fees because I presume she's in a non-profit situation in which their job is to work with other lawyers to act in the capacity

[00:10:26] Speaker 03:
of representing the appellants.

[00:10:31] Speaker 04:
You have plenty of rebuttal time.

[00:10:34] Speaker 04:
Apparently, you wish to save it.

[00:10:35] Speaker 03:
I would like to, Your Honor.

[00:10:36] Speaker 04:
Thank you.

[00:10:37] Speaker 04:
Mr. Kurland.

[00:10:51] Speaker 02:
Good morning, Your Honors, and may it please the Court.

[00:10:55] Speaker 02:
Any way you cut it in this case, what the appellants are asking for is to be able to file an EJA application in their former client, Mr. Shealy's name, over his objection.

[00:11:07] Speaker 01:
You admit that EJA fees are out, right?

[00:11:11] Speaker 02:
The VA below did not contest the merits of the EJA application.

[00:11:17] Speaker 02:
I don't think VA got into the amount that was claimed.

[00:11:24] Speaker 02:
I think that's a separate issue.

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But the fact that VA did not contest that below, it's obviously not VA's right to determine whether Mr. Shealy objects or not to the application.

[00:11:35] Speaker 02:
But in terms of the prevailing party status, so on and so forth, I think does a lot of damage to

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one aspect of the appellant's arguments that Your Honor didn't get into in the opening remarks, which is this idea that

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to the extent what they really have here is a potential breach of contract action that that wouldn't be prosecutable in the state court.

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We are aware of no reason why.

[00:11:56] Speaker 01:
Yeah, I think they would have a breach of contract action against the client for failing to pursue the fees.

[00:12:01] Speaker 01:
So put that aside.

[00:12:02] Speaker 01:
But let me ask you a hypothetical.

[00:12:04] Speaker 01:
Suppose, contrary to Mr. Carpenter's position here, we had a fee agreement which provided for an actual assignment of the legal fees from

[00:12:16] Speaker 01:
the client to the attorneys.

[00:12:19] Speaker 01:
I guess my questions are, one, would that give the attorneys standing to pursue the fees?

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And two, would the government acquiesce in such an arrangement under the Anti-Assignment Act?

[00:12:35] Speaker 02:
Sure, Your Honor.

[00:12:36] Speaker 02:
Just to put the nail in the coffin to make sure we're clear about what our understanding is that the appellants are or are not arguing, I should point out as an initial matter that at page three of the appendix, that's the Veterans Court's decision, page three, footnote three, the veteran code's

[00:12:55] Speaker 02:
court explicitly articulated its understanding that the appellants were not arguing that there was an assignment and he said that this morning, they're not right.

[00:13:06] Speaker 02:
On the issue of whether that would change anything, that's an issue that the Seventh Circuit addressed in its Harrington v. Berryhill decision that we cited in our briefs.

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Harrington v. Berryhill is a decision that came out after the Supreme Court's more general decision in Ratliff that said that these rights belong to the litigant and not to the attorneys.

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The Seventh Circuit in Harrington took on the question of whether the fact that there was an assignment in that case

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changed the analysis at all, and it determined that it did not.

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So although it's always difficult for us to speculate about issues that are not before the court, at least one sister circuit of this court has come to the conclusion that an assignment... Why did the Seventh Circuit conclude it didn't change the situation?

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The Seventh Circuit concluded that any assignment didn't overcome the language of the statute, which

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You know, the clear language says prevailing party and makes it the property, these fee applications, the right and property of the prevailing party.

[00:14:13] Speaker 02:
I think it just said there may be an assignment here, but we don't think that changes the analysis.

[00:14:18] Speaker 02:
It went through a very similar analysis.

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If there had been an assignment, would the government acquiesce in that under the Anti-Assignment Act?

[00:14:25] Speaker 02:
Unfortunately, Your Honor, I can't speculate.

[00:14:27] Speaker 02:
It's not an issue that we've discussed with VA that I would know the answer to.

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But I do think there is a two-fold problem with the nature of the claim that is before the court, which is this idea that the fee agreement creates a derivative or ancillary right to seek fees on behalf of the former client.

[00:14:52] Speaker 01:
it wouldn't be a frivolous contention under Kaplan and Drysdale.

[00:14:56] Speaker 01:
Are you familiar with that, Ryan?

[00:14:58] Speaker 02:
I'm familiar with the court's decision in Willis and its discussion of Kaplan and Drysdale in that case.

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There is one minor distinction between this case and Willis that is relevant to the outcome here, and if anything, helps us.

[00:15:14] Speaker 02:
But it makes the prudential standing issue, I think, less relevant here as compared to the constitutional and statutory standing issues that we've raised.

[00:15:21] Speaker 02:
One distinction in Willis was that the party in that case had both sought some of the fees that her former counsel had incurred and also refused to seek some of the fees that the former counsel incurred.

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The court's description was that she turned some of the fees excessive.

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And my reading of the court's decision on prudential standing relates to the portion of the claim.

[00:15:48] Speaker 02:
I'm sorry.

[00:15:49] Speaker 02:
One other important fact there is that both the client and her former attorneys appealed up through the MSPB board, but then only the attorneys came here to the federal circuit.

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So the client had effectively given up.

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And I think that's where the prudential standing issue arose.

[00:16:03] Speaker 02:
It was for the portion of the claim where the client had claimed the fees and then refused to continue, and the attorney was then on her own in also claiming the fees.

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And the court said there may be, to the extent that the attorney is claiming fees that the client supports, that may be sufficient for constitutional standing, but it doesn't satisfy prudential standing.

[00:16:28] Speaker 02:
We certainly would agree that, and indicated in our brief, that for the same reasons that the attorneys didn't satisfy prudential standing in Willis, the attorneys here don't satisfy prudential standing under the Kaplan and Drysdale test.

[00:16:44] Speaker 02:
We don't think the court needs to go that far here.

[00:16:47] Speaker 02:
It seems like it's really a matter of statutory standing.

[00:16:50] Speaker 02:
All of the authorities on this issue in various ways, including instances where parties have either

[00:16:56] Speaker 02:
waived in settlement agreements or otherwise not supported their attorneys move for fees, the courts have all said this is a right under the plain language of IJA that belongs to the litigant and not the attorneys.

[00:17:08] Speaker 01:
Yeah, yeah, but the theory under Kaplan-Dysdale is that the counselor is suing on behalf of the client, and that's where the prudential standing problem comes in.

[00:17:20] Speaker 01:
They would seem to have Article III standing,

[00:17:26] Speaker 01:
under Kaplan and Drysdale because they have an interest in the fee recovery?

[00:17:33] Speaker 02:
Your Honor, I think, again, that it is both part of the analysis but also a basic assumption of what was going on in Willis and hence Kaplan and Drysdale, that the parties were aligned in that sense.

[00:17:44] Speaker 02:
In Willis, the underlying client, Ms.

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Davis, had sought these fees and the court had cut the fees back

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And she had given up, and the attorney said, no, no, no, I want my full fees.

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And hence, they were lying.

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There might be constitutional standing because the attorney was again just asserting the right of the former client that the former client wanted to assert.

[00:18:05] Speaker 02:
The difference here

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is that Mr. Shaley does not in any way, shape, or form and object it, I think, four times below to any type of pursuit of fees by the appellants.

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I think that makes this both different from Willis and Kaplan and Drysdale.

[00:18:21] Speaker 02:
But even if one were to apply the analysis, as this court discussed in Willis, part of the analysis for prudential standing is the idea that the attorney and the client are aligned.

[00:18:33] Speaker 02:
Obviously, in that case, you have some of the special circumstances of criminal forfeiture.

[00:18:37] Speaker 02:
Here, we believe there's a simpler answer, which is that the court can, as we indicated in our briefs, can reach statutory standing before it reaches Article III constitutional standing.

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And here, it's a matter of statute.

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But these attorneys are not the folks who Congress intended to make liable.

[00:18:56] Speaker 01:
I think that argument seems to run into Willis.

[00:18:58] Speaker 01:
I mean, neither one of you likes Willis here.

[00:19:01] Speaker 01:
But I don't think that's open to you under Willis.

[00:19:05] Speaker 02:
Well, we do like Willis, Your Honor.

[00:19:07] Speaker 02:
We just think that the claim here implicates the first part of Willis.

[00:19:12] Speaker 02:
That said, to the extent the attorney in Willis was seeking fees that the former client did not support, that that attorney lacked standing.

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And that's what's going on here.

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But again, we certainly agree that prudential standing is lacking here under Willis.

[00:19:29] Speaker 02:
The key fact, and this is something that Willis discussed, at 1344, Willis, alluding back to the Supreme Court's decision in War III Selden, explained that standing often turns on the nature and source of the claim asserted.

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So taking that to heart, one can look, for example, at the appellant's reply brief.

[00:19:52] Speaker 02:
I don't think there's any way to get around, despite some

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some different statements that the plaintiffs, I'm sorry, the appellants locate the source of the right that they're claiming, not in the Aegis statute itself, but in their fee agreement with Mr. Shaley or some combination of the two.

[00:20:11] Speaker 02:
It's repeated to tick off a non-exclusive list.

[00:20:16] Speaker 02:
It's at pages two to three, four, five, six, I'm sorry, six, eight to nine, 11, 12 to 13, 13.

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and 22.

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Page 6 is a particular example where the plaintiffs or appellants argue that it is the terms of the agreement on which they rely for standing.

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That's what the Veterans Court below recognized.

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The nature and the source of the right here is really the contract.

[00:20:44] Speaker 02:
That's why the Veterans Court recognized that this is effectively a common law breach of contract claim and that that remedy is open to the plaintiffs and frankly has been

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throughout this period in which they've sought to litigate this issue.

[00:20:59] Speaker 02:
They haven't pursued that.

[00:20:59] Speaker 02:
I mean, that's how they should proceed.

[00:21:01] Speaker 04:
You say they haven't pursued it.

[00:21:03] Speaker 02:
Well, I should say, to our knowledge, they haven't pursued it.

[00:21:07] Speaker 02:
I suppose counsel could correct me if I've gotten that wrong.

[00:21:10] Speaker 01:
That's pretty unrealistic, that someone, a former counsel would sue the veteran for breach of contract for failing

[00:21:23] Speaker 01:
I say it's pretty unrealistic to think that the lawyers are going to sue the former client for the fees.

[00:21:31] Speaker 02:
Well, it's not our role to step in.

[00:21:35] Speaker 02:
I think a consistent thread through the jurisprudence on these issues, including some of what the Supreme Court said in Ratliff and a number of the other cases that are adjacent,

[00:21:45] Speaker 02:
is that it's really not our business to be getting into that type of dispute.

[00:21:52] Speaker 02:
That's something for the client and the attorney to work out as part of their contractual relationship, not part of each other.

[00:21:58] Speaker 04:
Anything further, counsel?

[00:21:59] Speaker 02:
No, Your Honors.

[00:22:00] Speaker 02:
We request that the court affirm the decision below.

[00:22:03] Speaker 04:
Thank you.

[00:22:03] Speaker 04:
Thank you.

[00:22:04] Speaker 04:
Mr. Coppenter has some rebuttal time.

[00:22:07] Speaker 03:
Thank you.

[00:22:09] Speaker 03:
I'd like to go back to Willis and the distinctions between the factual situation there and the factual situation here.

[00:22:17] Speaker 03:
In Willis, it was a proceeding that was underway with the agreement of the party that Willis, or excuse me, that the appellant in Willis agreed with counsel to proceed under Egypt.

[00:22:34] Speaker 03:
This case is at the starting gate.

[00:22:37] Speaker 03:
Willis was after there was a decision on the merits of the EJA application.

[00:22:44] Speaker 03:
There has been no decision on the merits of the EJA application.

[00:22:48] Speaker 03:
This puts these interveners in a position in which, as opposed to being able to rely upon the contract that they were required to submit to the court,

[00:22:58] Speaker 03:
to not be able to utilize that contract in order to ensure that there is an EJA application.

[00:23:05] Speaker 03:
Now what happens after the result of the EJA application is frankly a matter for another day.

[00:23:12] Speaker 03:
But the Egypt statute is the only mechanism in which there is a determination as to what the value of the services were that were performed.

[00:23:22] Speaker 03:
And those services were only performed under the auspices of Egypt.

[00:23:28] Speaker 03:
And respectfully, Your Honor, I don't believe that there is a state court that would be able to address whether or not the parties were or were not entitled to a fee under Egypt.

[00:23:40] Speaker 03:
So it seems to me that the distinction here merits at least the prudential standing to get this initiated and make a determination.

[00:23:51] Speaker 03:
The result of that determination would be that Mr. Shealy would be entitled to that fee.

[00:23:57] Speaker 03:
We do not dispute that Mr. Shealy is the owner of that fee.

[00:24:02] Speaker 03:
Now, what happens after there is a judgment

[00:24:05] Speaker 03:
And whether or not he does or does not then comply with the fee agreement is then a matter that is subject for jurisdiction within the state court system.

[00:24:15] Speaker 03:
Unless there are further questions, I have nothing further.

[00:24:18] Speaker 04:
Thank you, counsel.

[00:24:19] Speaker 04:
The case is submitted.