The Court of Veterans Appeals found that the Department of Veterans Affairs’ (VAs’) recoupment of overpayment from Veterans’ monthly benefits due to its failure to pay their representative’s fee as set forth in fee agreements was not a reduction in benefits but a deduction of a debt the Veterans owed; in addition, the court found that the Board had erred in failing to address alleged defects in the VA’s notice. Gladish v. Collins, No. 24-2638, No. 24-3371 (Vet. App. Nov. 24, 2025).
Two Veterans, Alan Gladish and Joseph Burwell, entered into fee agreements as permitted by 38 U.S.C. § 5904(d) with James Perciavalle, an accredited claims agent, to assist them in obtaining an increase in their benefits. Under the fee agreements, James was entitled to receive 20 percent of the Veterans’ past-due benefits directly from the VA. However, the VA paid the full amount of past-due benefits to the Veterans and failed to pay James. The VA then sought to correct its error by paying James the amount owed to him and recovering the overpayments from the Veterans by deducting the funds from their monthly benefits.
The Veterans appealed to the Board of Veterans Appeals, arguing that the VA was not entitled to recover the overpayments because they were the sole fault of the VA. The Board found that the VA’s recovery of the overpayments by deducting them from the Veterans’ past-due benefits was not a reduction or discontinuation of benefits under 38 U.S.C. § 5112(b)(10) and was permitted. Alan Gladish also argued that the VA’s notification letters failed to comply with 38 U.S.C. § 5104, but the Board did not address that issue. Both Veterans appealed.
The Court of Veterans Appeals consolidated the two Veterans’ appeals. The court noted that 38 U.S.C. § 5112(b)(10) provides that, to protect VA beneficiaries when the VA has made an erroneous award based solely on an administrative error or an error in judgment, the effective date of a reduction or discontinuance of (1) compensation for a serviced-connected disability, (2) dependency and indemnity compensation (a benefit for eligible survivors of service members who died in the line of duty or from a service-connected disability, or (3) a pension for low-income wartime Veterans with a non-service-connected disability is the date of the last payment, meaning that the reduction is prospective only.
The court looked to Casey v. Wilkie, 31 Vet. App. 260, 267 (2019), in which it had held that, in a situation involving the payment of an incorrect amount rather than an erroneous award, the VA could recoup an overpayment caused by its failure to withhold attorney’s fees in the context of accrued benefits through future offsets because doing so would be the collection of a debt rather than a reduction in benefits. Under 38 U.S.C. § 5314(a), the VA is required to deduct any debts resulting from a person’s participation in a VA program from future payments to them. In contrast to section 5314(a), which addresses the VA’s authority to recoup an overpayment, section 5112(b)(10) governs when a reduction due to an administrative error may take place, i.e., the effective date of the reduction is the date of the last payment.
Further, in Casey, the court held that section 5112(b)(10) was inapplicable because the total benefit, which should have been apportioned between the claimant and the attorney, was not reduced by the VA’s recoupment of an overpayment to the claimant. The court also determined that section 5112(b)(10) did not apply to a one-time payment of past-due benefits but was instead intended to deal with a reduction of ongoing monthly benefits; it did not address whether it applied in situations involving both a retroactive one-time payment and recurring monthly benefits.
In the present case, the court determined that its reasoning in Casey was equally applicable to the context of back pay, whether in the form of monthly benefits or a lump sum. In both situations, the VA’s payment of part of the benefits to the claimant’s attorney or agent and part to the claimant is an allocation of payment to two payees rather than a reduction in the claimant’s benefits. Taking a portion of the Veterans’ monthly benefits to repay their debt to the government does not reduce the amount to which they were entitled but modifies that entitlement by deducting the amount owed, which would have been a substantial windfall if they had been permitted to keep it.
The court also found that the Board had erred in failing to address Alan Gladish’s argument that the VA had failed to provide him with the notice required by 38 U.S.C. § 5104. The court rejected the VA’s assertion that under 38 C.F.R. § 20.802(a), it lacked the authority to remand for correction of notice defects and was limited to remanding to remedy predecisional duty-to-assist errors if correction would have a reasonable possibility of substantiating the claim. The court found that section 20.802(a) empowered the Board to remand to correct other errors, including notice deficiencies, if fixing the errors could help substantiate the claim. Further, the Board’s error was not harmless, and Alan should be permitted to raise his notice argument on remand.
The court affirmed the Board’s decision with respect to Joseph Burwell but set aside and remanded its decision in Alan Gladish’s appeal.
Subscribe to the Knowledge Bank.
