The court said the U.S. Department of Veterans Affairs had shortchanged veterans by not paying them all the money they were owed.

Under the ruling, veterans with prostate cancer -- a disease added to the list of ailments connected to Agent Orange exposure in 1996 -- will receive benefits dated to the time they first filed a claim.

In 1994, the VA said there was no link between prostate cancer and Agent Orange. Two years later, the National Academy of Sciences said the VA was wrong, forcing the agency to reverse its position.

But the VA argued it did not owe retroactive payments to veterans whose claims were rejected before it changed its position in 1996.

The three-judge appeals panel disagreed.

Judge Dorothy Nelson said ailing Vietnam veterans should not bear the financial burden of government delays in acknowledging the "devastating effects" of Agent Orange.

Joining in the opinion were judges John Noonan and Michael Hawkins.

AFFECTS VETS WITH DIABETES

The opinion also affects veterans who filed claims for adult-onset -- or Type 2 -- diabetes, which was added to the list in 2000.

The appeals court also upheld another provision in a 2000 ruling by U.S. District Judge Thelton Henderson, who told the VA to provide retroactive payments to the estates of veterans who were owed money, but died before the VA got around to paying them.

SERIES OF VICTORIES

The ruling is the latest in a string of court victories by the National Veterans Legal Services Program, a Washington, D.C., group that sued the VA in 1986 on behalf of veterans exposed to Agent Orange.

"All I can tell you is for the last 20 years the VA has dragged its feet on the Agent Orange issue," said Bart Stichman, the lead attorney on the case. "They try every way they can to come up with theories to why they shouldn't give benefits."

THOUSANDS QUALIFY

Stichman said more than 1,200 veterans with prostate cancer and more than 10,000 veterans with adult-onset diabetes will now qualify for additional disability payments totaling more than $24.5 million.

Charles Miller, a spokesman for the U.S. Department of Justice, which represented the VA, said the agency will review the decision.

"We will made a determination as to what our next step will be in the near future," he said.

The U.S. military sprayed 17.6 million gallons of Agent Orange to defoliate forests and destroy crops in Vietnam. Agent Orange contains dioxin, one of the world's most carcinogenic substances.

LINK TO DOZENS OF DISEASES

Since Congress passed the Agent Orange Act of 1991, the government has linked more than three dozen diseases to exposure to the chemical, including lung cancer, Hodgkin's disease and bone marrow cancer.

Michael Blecker, executive director of Swords to Plowshares, a San Francisco veterans' advocacy group, said it is discouraging that Vietnam veterans have to battle their government for benefits guaranteed under a 1991 court order by Henderson.

"Still the VA fought it," Blecker said. "They're just trying to save themselves some money."