The U.S. Department of Veterans Affairs escaped court-ordered sanctions on Monday after a federal appellate panel signed off on the department's plan to remedy harm to veterans caused by a 2011 rule eliminating certain appellate rights before the agency's Board of Veterans' Appeals.

"Today's ruling is a significant victory for veterans," said Roman Martinez of Latham & Watkins, who argued the case on behalf of the National Organization of Veterans' Advocates (NOVA). "The decision will ensure that any veterans who suffered harm as a result of the VA's unlawful conduct will be able to obtain the benefits they have earned. NOVA looks forward to working with the VA to implement their plan."

The ruling by a three-judge panel of the U.S. Court of Appeals for the Federal Circuit came in National Organization of Veterans' Advocates v. Shinseki, a case dating to 2011.

In September 2011, NOVA petitioned the appellate court to review the 2011 rule, which became effective immediately and which removed certain procedural and appellate rights that veterans had under a prior regulation. NOVA argued that the new rule had been issued without following the mandatory notice-and-comment requirements of the Administrative Procedure Act and that it harmed veterans' seeking benefits under the law.

During briefing in the case, the government admitted that the 2011 rule violated the Administrative Procedure Act. Beginning on March 5, 2012, the VA petitioned the court for multiple delays so that it could address the problem, including by repealing the rule. In those petitions for more time, the agency promised it would not apply the rule going forward and that it would rectify any cases in which the rule had been applied.

Despite the agency's repeated commitments to the court and to NOVA, the court panel found that the VA had not kept its promises. NOVA had discovered that the rule had been applied in a substantial number of cases after March 5, 2012, and the VA had failed to rectify the harms caused by its application of the invalid rule.

On March 21 of this year, the three-judge panel, in an opinion harshly critical of the government, issued an order to show cause why it should not sanction the agency for its failure to keep its commitments. However, as an alternative to possible sanctions, the court offered to review any plan from the government explaining how the VA intended to identify and rectify that harms caused by its conduct. It imposed a deadline on the VA for submission of a plan.

That proposed plan was submitted to the court on May 20. Under the proposal, the VA agreed to issue a notice to every claimant who had a hearing before the Board of Veterans' Appeals during the relevant period and who had received a final board decision in which the claimant did not receive a full grant of relief and the decision had not been appealed or remanded.

The notice offers to vacate the affected board decisions and to provide each claimant with a new hearing and an opportunity to submit new evidence followed by a new decision. The VA offered that relief even if relevant deadlines otherwise would have expired. For cases that had moved beyond the board, the VA, at the urging of the court, said it would file a joint motion for remand in the appropriate courts to regain jurisdiction.

"We express satisfaction with the Government's Response, including its supplemental clarifications," Judge S. Jay Plager wrote for himself and judges Kathleen O'Malley and Jimmie Reyna. "We find the Proposed Plan as amended addresses the identified problems for veterans created by the VA's invalid 2011 rule-making and the proceedings conducted thereunder."

The panel said it expected the VA to collaborate with NOVA throughout the implementation process. But, Plager added, "We note with some concern that, despite efforts of the board leadership, the record indicates that some board judges and attorneys continued to misapply the invalid 2011 Rule even after instructed otherwise. We trust that VA will take firm steps to ensure full compliance by all board and staff with the Proposed Plan."

The panel said it would retain jurisdiction of the case until it received and reviewed a joint motion by the government and NOVA indicating that the plan had been implemented fully and all harm to affected veterans had been remedied.

Contact Marcia Coyle at mcoyle@alm.com.