[00:00:00] Speaker 04:
Argument next in number 19-2116, Batcher versus Wilkie, Ms.

[00:00:06] Speaker 04:
Helen.

[00:00:08] Speaker 00:
Thank you, Your Honors, and may it please the court.

[00:00:11] Speaker 00:
This is a case about preemption.

[00:00:14] Speaker 00:
Specifically, it's about the Court of Appeals for Veterans Claims, or the CAVC, majority panel error in interpreting an apportionment statute, 38 USC 5307A2,

[00:00:27] Speaker 00:
to improperly preempt state domestic relations law.

[00:00:31] Speaker 00:
The CIBC failed to consider the preclusive effect here of a state- I don't think that's quite right.

[00:00:37] Speaker 04:
I don't think that's what the government is urging here, that it completely preempts state law.

[00:00:44] Speaker 04:
The issue is whether the state law governs the distributions that are being made by the VA.

[00:00:52] Speaker 04:
In other words, whether

[00:00:53] Speaker 04:
the VA has to distribute according to state law or whether state law has to kick in after the distributions are made.

[00:01:03] Speaker 00:
Well, Judge Dyche, here I think there's a lot that goes on in the government's brief that is not directly applicable to the facts of this case.

[00:01:12] Speaker 00:
I agree with you that we're not discussing whether there's a general preemption for the statute here for state domestic relations law in general.

[00:01:21] Speaker 00:
But I think what the failure of the CAVC decision really to acknowledge was the specific state agreement at issue here.

[00:01:30] Speaker 00:
And so, many of the cases that we talk about and that are cited here, this isn't a case about a percentage distribution or where there's some vested interest that has to be adjusted.

[00:01:43] Speaker 00:
That's sort of the whole point of our argument is that.

[00:01:47] Speaker 04:
I don't think you're really addressing the point that I was making.

[00:01:50] Speaker 04:
It seems to me.

[00:01:51] Speaker 04:
that the decision of the Veterans Court and the government's position allows the state court to make all sorts of orders about these funds once they're received by the veteran or by his spouse, or former spouse in this case now.

[00:02:13] Speaker 04:
All it's saying is that that becomes a matter that has to be dealt with by the state court

[00:02:20] Speaker 04:
after the funds are distributed and the state law can't tell the Veterans Administration how to make the distributions in the first instance?

[00:02:31] Speaker 00:
Well, yes.

[00:02:33] Speaker 00:
Okay, Judge Dyke.

[00:02:35] Speaker 00:
We agree the state law can't tell the VA how to make these distributions.

[00:02:39] Speaker 00:
However, what it seems like the CABC failed to acknowledge is that the state law order here

[00:02:49] Speaker 00:
had already covered any and all distributions that either were made or could be made going forward.

[00:02:57] Speaker 00:
That was very clear.

[00:02:58] Speaker 00:
Both parties agreed to that.

[00:03:01] Speaker 00:
Both parties were represented by council.

[00:03:04] Speaker 00:
And in fact, at several stages of the VA proceedings here, the VA acknowledged that as well.

[00:03:12] Speaker 04:
Twice, in fact, the department... That may be so, but once the...

[00:03:17] Speaker 04:
ex-spouse gets the money, the state court can order her to pay it back, potentially, if that's the right construction of the state court decree.

[00:03:24] Speaker 04:
There's nothing in the Veterans Court decision or the government's position that would prevent that from happening.

[00:03:30] Speaker 04:
Why isn't that a perfectly adequate remedy for you?

[00:03:36] Speaker 00:
Well, it seems just a little to be doing it a little backwards here.

[00:03:40] Speaker 00:
If that were the case, the Veterans Administration would be

[00:03:46] Speaker 00:
going contra to what the Supreme Court said, I believe, and Rose v. Rose, which is the veterans, the VA should not be serving as some sort of a collections agency, where if an agreement is made in state court, and that agreement should cover everything, past, current, and future, and then there's some adjustment that one of the parties needs to be made, that adjustment should be made at the state court level.

[00:04:14] Speaker 00:
It should not be made

[00:04:16] Speaker 00:
by going to the veteran's court.

[00:04:18] Speaker 00:
And here what happened is Mrs. Batcher went and basically sought a readjustment of the funds.

[00:04:25] Speaker 00:
We believe that any and all funds that could be distributed by the VA to Mr. Batcher were appropriately considered in the original state court stipulated agreement.

[00:04:35] Speaker 00:
And then the CAVC accorded, agreed to accord those funds and said, Mr. Batcher, veteran, if you have a problem with this, then you can go to state court.

[00:04:45] Speaker 00:
and, you know, suit for breach of contract or seek readjustment there.

[00:04:50] Speaker 00:
And our position is that's backwards from what the Supreme Court seems to have indicated should be the case in the precedent.

[00:05:03] Speaker 00:
And that Mrs. Thatcher should have gone to the state court to seek adjustment.

[00:05:07] Speaker 00:
And if she believed she was entitled due to whatever circumstances of hardship that she might have put forward,

[00:05:14] Speaker 00:
here to the Veterans Administration, she should have been putting that to the state court.

[00:05:19] Speaker 00:
And the state court would have been within its right, as we agree with the cases, that the state court isn't authorizing any sort of distribution of the veteran disability benefits per se.

[00:05:32] Speaker 00:
We know that's not community property.

[00:05:34] Speaker 00:
We know that's not something the state court has the right to adjust.

[00:05:37] Speaker 00:
But I think the Supreme Court's made clear multiple times, and most recently in the Howell case,

[00:05:42] Speaker 00:
that the state court can still take full consideration of monies that might be content.

[00:05:52] Speaker 00:
And the part to do that, and it seems like that is part of the picture.

[00:06:01] Speaker 04:
Judge Clavinger, we can't hear you, I think.

[00:06:03] Speaker 05:
Can you hear me now?

[00:06:05] Speaker 04:
Yes.

[00:06:06] Speaker 05:
Yes.

[00:06:06] Speaker 05:
I'm sorry.

[00:06:08] Speaker 04:
You are losing you again.

[00:06:10] Speaker 05:
I'm sorry.

[00:06:12] Speaker 05:
Can you hear me now?

[00:06:14] Speaker 04:
You're pretty faint.

[00:06:17] Speaker 01:
Judge Clebinger, are you on a speakerphone or a handheld device?

[00:06:21] Speaker 05:
Yeah, does that hurt on speakerphone?

[00:06:24] Speaker 01:
Yeah, if you're on speakerphone, if you just sit a bit closer.

[00:06:28] Speaker 05:
OK.

[00:06:29] Speaker 05:
Can you hear me now?

[00:06:31] Speaker 01:
Yeah.

[00:06:31] Speaker 01:
That's much better.

[00:06:33] Speaker 05:
Yes.

[00:06:34] Speaker 05:
As I looked at the order that we had of the state court, the order in essence told

[00:06:42] Speaker 05:
the Mrs. not to ask for any more money.

[00:06:46] Speaker 05:
It didn't order the VA not to process a claim.

[00:06:55] Speaker 05:
So I don't see a conflict at all.

[00:06:57] Speaker 05:
I mean, the order said to her, you have no basis for asking for any more money.

[00:07:06] Speaker 05:
So she's violating the order when she asks for more money.

[00:07:09] Speaker 05:
The order doesn't say anything about barring

[00:07:12] Speaker 05:
from the VA from processing a claim?

[00:07:19] Speaker 00:
Yes.

[00:07:20] Speaker 00:
Yes, that's correct.

[00:07:21] Speaker 00:
The order didn't say that.

[00:07:22] Speaker 00:
I'm not sure the order could say that.

[00:07:26] Speaker 00:
But what the order did plainly cover and that the transcript from the argument, I think, makes clear is that the agreement covered everything.

[00:07:34] Speaker 00:
It covered things that might happen in the future.

[00:07:37] Speaker 00:
And so she

[00:07:39] Speaker 00:
in full awareness, you know, represented by council, everything, agreed to that.

[00:07:44] Speaker 00:
And by so doing, she agreed that she would not then go back to another course to try and seek some... And so she... We can't hear you, Judge Clarence, sir.

[00:08:04] Speaker ?:
I know.

[00:08:09] Speaker 01:
Yes.

[00:08:09] Speaker 05:
Okay.

[00:08:12] Speaker 05:
And here, Anthony?

[00:08:14] Speaker 01:
Yes, you're in and out.

[00:08:17] Speaker 05:
Okay.

[00:08:17] Speaker 05:
Well, go ahead.

[00:08:19] Speaker 05:
Proceed with the argument.

[00:08:20] Speaker 04:
Maybe if you pick up the phone and stop using the speaker, it might be clearer.

[00:08:26] Speaker 05:
Okay.

[00:08:31] Speaker 05:
Okay.

[00:08:35] Speaker 01:
Judge Clevenger?

[00:08:42] Speaker 01:
Judge Covinger, can you hear me?

[00:08:44] Speaker 05:
Yes, I can.

[00:08:45] Speaker 01:
Okay.

[00:08:47] Speaker 01:
If the court's ready, I can resume the clock.

[00:08:50] Speaker 05:
Okay, good.

[00:08:51] Speaker 05:
Thank you.

[00:08:54] Speaker 04:
Go ahead, Ms.

[00:08:55] Speaker 04:
Helen.

[00:08:58] Speaker 00:
Okay.

[00:09:01] Speaker 00:
Judge Dyk, I think what you were saying is whether Ms.

[00:09:07] Speaker 00:
Batcher could go back and seek an apportionment under the VA

[00:09:11] Speaker 00:
regulations and statutes after she had already agreed to the state court stipulation that all of the maintenance, health insurance, obligations, et cetera, were accounted for.

[00:09:25] Speaker 00:
Our position is that she could not.

[00:09:28] Speaker 00:
That was not the appropriate venue to do that.

[00:09:30] Speaker 00:
And the VA regional office told her that, and we believe that was correct.

[00:09:37] Speaker 00:
They examined the evidence of the record, and they clearly said,

[00:09:40] Speaker 00:
to Ms.

[00:09:41] Speaker 00:
Batcher, she had reached an agreement that precludes her from making any and all requests for further contribution.

[00:09:49] Speaker 04:
What's the problem that exists about dealing with this in the state court and not entangling the VA in the interpretation of these state court decrees?

[00:10:01] Speaker 04:
Why not just let the VA decide what it wants to do, and then the state court can deal with what to do about those funds once they

[00:10:11] Speaker 04:
reach the hands of the spouse or, in another case, in the hands of the veteran?

[00:10:17] Speaker 04:
What's the problem with that?

[00:10:19] Speaker 00:
Well, that's an excellent question.

[00:10:21] Speaker 00:
And I think there is a problem.

[00:10:23] Speaker 00:
And the problem was, in fact, shown by the way her request was analyzed at the BVA.

[00:10:30] Speaker 00:
And if you recall, what she did is she went and she asked for an apportionment.

[00:10:34] Speaker 00:
And under the apportionment statute, there are two forms of apportionment.

[00:10:38] Speaker 00:
You can see general apportionment and special apportionment.

[00:10:41] Speaker 00:
And I believe this evidence demonstrates that the BDA was not in an appropriate position to make this assessment.

[00:10:52] Speaker 00:
They, in fact, said they were having trouble and they couldn't, on the evidence before them, even tell whether the veteran was reasonably discharging his responsibility for the spouse's support.

[00:11:03] Speaker 00:
And so they essentially just jumped over

[00:11:05] Speaker 00:
the general apportionment statute because they weren't the right body to adjudicate it and they couldn't do it on the evidence before them.

[00:11:12] Speaker 00:
And they skipped over it and went to the special apportionment statute.

[00:11:16] Speaker 00:
And that special apportionment statute will grant some apportionment if you just have a showing of hardship.

[00:11:21] Speaker 00:
And Ms.

[00:11:22] Speaker 00:
Batcher put forward a showing of hardship.

[00:11:24] Speaker 00:
And in so doing, as we said in our briefing, this sort of creates a hardship exception to New York state law.

[00:11:31] Speaker 00:
And we think it's a good example of exactly why the VA is not the appropriate body to be assessing that.

[00:11:38] Speaker 00:
And that's the type of evidence that a state court should look at.

[00:11:41] Speaker 00:
And as the Supreme Court has told us, there are many reasons why you would want the state court to be evaluating that sort of evidence relating to domestic relations law, to family engagement.

[00:11:55] Speaker 00:
We believe the holding in Rose v. Rose is entirely applicable here.

[00:11:59] Speaker 00:
And what the CAVC really should have done when this came up to them is they should have done a proper preemption evaluation and either explained why Rose, which related to child support, would be able to support here, or if they thought not, you know, at least give some rationale so that you now at the federal circuit could have some basis to evaluate this potential preemption.

[00:12:22] Speaker 00:
But instead, the CAVC didn't do that.

[00:12:25] Speaker 00:
They just said, here, we're giving this to Ms.

[00:12:28] Speaker 00:
Batcher.

[00:12:28] Speaker 00:
If Mr. Batcher has a problem with it, he can go back and fight it in state court.

[00:12:33] Speaker 00:
And this sort of creates perverse incentives where the VA is ultimately going to be dragged into these things and serve as some sort of a close to being a collections agency where they'll be fighting in both courts.

[00:12:46] Speaker 00:
And our position is that this should be in the state court all along.

[00:12:50] Speaker 00:
And that's exactly what Judge Greenberg said in his dissent.

[00:12:54] Speaker 00:
As you know, the CAVC decision was a two to one.

[00:12:57] Speaker 00:
And Judge Greenberg said, these issues have been settled in state court a decade ago.

[00:13:02] Speaker 00:
The VA should not be impairing a contract sanctioned by a state court in an area of law that the Supreme Court has long held as the exclusive provinces of the state.

[00:13:10] Speaker 00:
And we cite a bevy of case law, which of course you're aware of, that there's a presumption against preemption for all state law governing domestic relations.

[00:13:19] Speaker 00:
And that's exactly what this is.

[00:13:23] Speaker 04:
Okay, Ms.

[00:13:24] Speaker 04:
Helm, if you want to reserve some rebuttal time, maybe we should hear from Mr. Curlin, unless my colleagues have questions.

[00:13:33] Speaker 04:
Hearing none, why don't we hear from Mr. Curlin?

[00:13:37] Speaker 00:
Certainly, I would just like to let you know that we are splitting the argument today, so my colleague, Mr. Riley, will be attending to the rebuttal portion.

[00:13:44] Speaker 04:
I understand.

[00:13:46] Speaker 04:
Mr. Curlin?

[00:13:50] Speaker 03:
Good morning, Your Honors, and may it please the court.

[00:13:54] Speaker 04:
Just to be clear, you're not saying the government's position is that the state court could order the funds received from the VA and paid to the ex-spouse here, that the state court has authority to distribute those funds or require they be repaid or whatever.

[00:14:16] Speaker 04:
Your only position, if I understand correctly,

[00:14:19] Speaker 04:
is that the state decree is not something that the VA has to concern itself with?

[00:14:26] Speaker 03:
That's correct, Your Honor.

[00:14:27] Speaker 03:
And that may be an important point of clarification here.

[00:14:32] Speaker 03:
The Veterans Court held that this case was controlled by preemptive federal law.

[00:14:38] Speaker 03:
But its approach did not place the federal special apportionment right, that is the sole issue here.

[00:14:48] Speaker 03:
in actual conflict with the alleged stipulation or contract for New York State.

[00:14:54] Speaker 03:
It is only Mr. Bacher's position that attempts to place the two of them in conflict.

[00:15:01] Speaker 03:
And then, of course, if they were in conflict, one runs into the federal preemption issue.

[00:15:06] Speaker 03:
It's clearly the case that federal law controls here.

[00:15:10] Speaker 03:
But this case presents the flip side of the issue that the Supreme Court decided in how

[00:15:19] Speaker 03:
As the Veterans Court indicated, special apportionment is its own separate federal benefit.

[00:15:28] Speaker 03:
And by its terms under 38 U.S.C.

[00:15:31] Speaker 03:
3.451, special apportionment does not even depend on the amount of maintenance or support that has been awarded to the spouse at the state court level as a consequence.

[00:15:45] Speaker 03:
And, of course, as a consequence of the Supremacy Clause.

[00:15:48] Speaker 03:
Special apportionment cannot be extinguished any more than in Howell, the state court, through contractor stipulation, could have extinguished the veteran's right to waive a portion of his retirement in order to accept disability.

[00:16:06] Speaker 04:
Well, wait a moment.

[00:16:07] Speaker 04:
Now you're confusing me, because that sounds as though you're saying that the federal decision on apportionment is binding on the state court and that the state court has to

[00:16:18] Speaker 04:
allow the ex-spouse to receive this money without paying it back to the veteran under the state court decree.

[00:16:26] Speaker 04:
I thought you were saying only that the Veterans Administration should do its job, make its determination, and that what happens to the money in state court is a matter that the Veterans Administration need not concern itself with.

[00:16:43] Speaker 03:
Yes, I agree with that, Your Honor, and I'm sorry if I created any confusion.

[00:16:48] Speaker 03:
I think the point I was trying to get at, and I think this is actually put very succinctly by one of Mr. Batcher's cases, the Kansas case that they cite as an example of post-Howell treatment of this issue.

[00:17:04] Speaker 03:
We don't agree with their characterization of the case, but the Kansas court in that case in the matter of Babin at page 991 made a pretty succinct explanation of Howell.

[00:17:15] Speaker 03:
and said Howell, quote, overruled cases relying on the sanctity of contract to escape federal preemption.

[00:17:22] Speaker 03:
Here, I think as Your Honor has articulated, the Veterans Court did not find that there was necessarily a conflict between the spouse, Mrs. Batcher, exercising her federal right to apportionment, which again is a separate federal right.

[00:17:42] Speaker 03:
It's not maintenance under New York State law.

[00:17:45] Speaker 03:
And Mr. Bacher's arguments that in doing so, that constituted a breach of contract, a common law, effectively, state court breach of contract or breach of the stipulation that the state court had entered into in the separation proceedings.

[00:18:03] Speaker 03:
I don't think we need to get into it, but I should note for the record here that we've gone through the evidence here.

[00:18:11] Speaker 03:
It's worth mentioning that there's absolutely nothing in the record that indicates that when the parties were entering into that November 2006 stipulation, which arose from the fact that Mr. Batcher was not paying his support from the original judgment of separation,

[00:18:33] Speaker 03:
which all of which proceeded until right before that last November 2006 stipulation, his actual application for and receipt of disability benefits.

[00:18:43] Speaker 03:
So I don't think we are conceding that what happened in the state court order here is that Ms.

[00:18:53] Speaker 03:
Thatcher waived her right to the extent that she has a right to receive a portion of the disability benefits.

[00:19:01] Speaker 03:
But as Your Honor's articulated, that's not what the Veterans Court could or should have gotten into here.

[00:19:07] Speaker 03:
That's a common law state court breach of contract action.

[00:19:11] Speaker 03:
And in this case, the Veterans Court correctly said if that's what you believe occurred, then the appropriate remedy is to pursue that in state court.

[00:19:23] Speaker 03:
It is really reminiscent and certainly analogous to,

[00:19:27] Speaker 03:
and the issue that was very recently before this court in the Shaley decision.

[00:19:32] Speaker 03:
We understand it's a different context that involved a state law contract having to do with a fee agreement.

[00:19:40] Speaker 03:
But the concept is the same.

[00:19:42] Speaker 03:
In that case, the appellants were arguing that the, in that case, the veteran had breached a state law fee agreement by refusing to support their EJA application.

[00:19:54] Speaker 03:
The court recognized that

[00:19:56] Speaker 03:
the decision whether or not to seek EJA fees was the veteran's right in that case.

[00:20:02] Speaker 03:
And that it may very well have been, and in fact, I would argue in that case it was, you know, the potential breach was much more explicit.

[00:20:11] Speaker 03:
The contract at issue specifically talked about the veteran authorizing the parties to file.

[00:20:19] Speaker 03:
And both the Veterans Court and this court recognized that the right, the federal right was the Veterans right.

[00:20:26] Speaker 03:
To the extent it was potentially a breach of contract, that was a matter of state law that could be enforced here.

[00:20:31] Speaker 03:
But, you know, merely for convenience of the fact that it helped the appellants in that case didn't bring that state law breach of contract issue under the ambit of the Veterans Court.

[00:20:43] Speaker 03:
The same thing applies here.

[00:20:44] Speaker 03:
And although I think I heard

[00:20:48] Speaker 03:
appellants walk away from this rest judicata issue.

[00:20:54] Speaker 03:
They didn't raise it.

[00:20:56] Speaker 03:
Since they briefed it, it's important to add that rest judicata really can't apply here because the counterparty in this action is VA.

[00:21:04] Speaker 03:
The VA's distribution of benefits.

[00:21:07] Speaker 03:
They were not a party to either the contract stipulation or the state court proceeding.

[00:21:12] Speaker 03:
So this is just not a case of rest judicata.

[00:21:19] Speaker 04:
Okay.

[00:21:19] Speaker 04:
Anything further, Mr. Curlin?

[00:21:22] Speaker 03:
Nothing further.

[00:21:24] Speaker 03:
We're certainly here to answer any questions the court has on the issue.

[00:21:29] Speaker 03:
We respectfully request that the court affirm the judgment of the Veterans Court.

[00:21:33] Speaker 04:
Okay.

[00:21:33] Speaker 04:
Hearing no further questions, let's hear from Mr. Riley.

[00:21:38] Speaker 04:
I don't know how much time you have left.

[00:21:41] Speaker 04:
You may have gone over the original.

[00:21:44] Speaker 01:
He has two and a half minutes for rebuttal.

[00:21:46] Speaker 04:
Okay.

[00:21:48] Speaker 02:
go ahead mister rock uh... thank you your honor and may it please the court uh... to begin i'd just like to point out a factual question that the government highlighted which is it notes that there was no explicit discussion of mister batter's disability benefits in the the state court hearing transcript of course as the government aware mister backer had begun receiving disability benefits by that time there's no reason to think that the disability benefits weren't in the minds of the party

[00:22:17] Speaker 02:
at that time when they were deciding a method to end all further support and obligations present and future owing from Mr. and Ms.

[00:22:26] Speaker 02:
Batcher.

[00:22:28] Speaker 04:
This argument seems to me to show exactly why the VA shouldn't be resolving these issues.

[00:22:33] Speaker 04:
The state court is in a much better position to know what its decree meant and it's better to have them decide what the decree meant rather than force the VA to decide what the decree meant.

[00:22:47] Speaker 02:
Well, but, Your Honor, as we pointed out in our opening brief at page 20, the VA is frequently called upon to interpret state court rulings or state court evidence.

[00:23:00] Speaker 02:
This is no different than the examples we cite where, you know, in Yemen B West, the Federal Circuit discussed VA consideration of willful misconduct.

[00:23:08] Speaker 02:
under state law or the VA looking to common law spouses under state law.

[00:23:15] Speaker 02:
There's no particular reason that VA is unable to assess this court ordered stipulation between the parties.

[00:23:23] Speaker 02:
And if I just may, Your Honor, the government brings up the Shealy case again.

[00:23:27] Speaker 02:
A key difference between the Shealy case and this case is that the Shealy case focused on a purely private contract.

[00:23:36] Speaker 02:
between the parties.

[00:23:37] Speaker 02:
This is a court-ordered stipulation.

[00:23:40] Speaker 02:
This is something that the parties entered into before the court and the court issued as an order of the court.

[00:23:46] Speaker 02:
The government presents no reason that the VA is unable to recognize the preclusive effect of that state decree.

[00:23:54] Speaker 02:
And just one last point.

[00:23:57] Speaker 02:
I know I'm running very short here.

[00:24:00] Speaker 02:
If VA decides, as it wants to, that it will refuse to concern itself with this sort of state decree, then it essentially does preempt the state law of domestic relations.

[00:24:11] Speaker 02:
It undoes what the state has done here in determining what the proper allocation of money is as agreed by the parties.

[00:24:20] Speaker 02:
That order of the state court has been undone by CAVC's decision and will be undone should this court affirm.

[00:24:27] Speaker 02:
And therefore, with respect, Your Honor, if there are no further questions, we urge you to reverse the opinion of the CABC.

[00:24:35] Speaker 04:
Okay.

[00:24:35] Speaker 04:
Thank you, Ms.

[00:24:36] Speaker 04:
Helm.

[00:24:36] Speaker 04:
Mr. Riley, was this a pro bono representation?

[00:24:40] Speaker 00:
Yes, it was, Your Honor.

[00:24:42] Speaker 04:
Okay.

[00:24:43] Speaker 04:
The Court thanks you for undertaking the case.

[00:24:46] Speaker 04:
And thank all counsel for the argument.

[00:24:49] Speaker 04:
That concludes our session for this morning.

[00:24:51] Speaker 04:
This space is submitted.

[00:24:54] Speaker 01:
The Honourable Court is adjourned until tomorrow morning at 10am.