NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with
Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted August 3, 2010*
Decided August 4, 2010
Before
ILANA DIAMOND ROVNER, Circuit Judge
DIANE S. SYKES, Circuit Judge
JOHN DANIEL TINDER, Circuit Judge
No. 09‐3149
SHARON FRONCHECK, Appeal from the United States District
Plaintiff‐Appellant, Court for the Southern District of Illinois.
v. No. 08‐CV‐50‐DRH
MICHAEL J. ASTRUE, Commissioner of David R. Herndon,
Social Security, Chief Judge.
Defendant‐Appellee.
O R D E R
Sharon Froncheck contests the denial of social security disability benefits that she
sought after suffering a stroke. The Administrative Law Judge denied the application after
determining that Froncheck was gainfully employed as the owner and operator of a tavern
*
After examining the briefs and the record, we have concluded that oral argument is
unnecessary. Thus, the appeal is submitted on the briefs and the record. See FED. R. APP. P.
34(a)(2).
No. 09‐3149 Page 2
during the time she claimed to be disabled. We agree with the district court that substantial
evidence supports the ALJ’s denial.
According to her application for benefits, Froncheck suffered a stroke in 1998 that
caused brain damage and left her unable to work. An ALJ denied her application,
concluding that she was barred by statute from obtaining benefits because her work at the
tavern was both substantial and gainful within the meaning of the Social Security Act.
42
U.S.C. § 423(d)(1)(A). The Appeals Council vacated that decision and remanded the case for
further proceedings on the issue whether Froncheck was gainfully employed during her
disability period.
At the supplemental hearing the ALJ focused on Froncheck’s involvement with the
tavern between her alleged onset date of July 2000 and the expiration of her insured status
in March 2001. Froncheck detailed her responsibilities at the tavern, most of which were
managerial. She said she made all of the hiring and firing decisions and kept the tavern’s
payroll. The tavern’s monthly expenses—mortgage payments, cleaning services, supplier
invoices—were drawn from her personal checking account, and she authorized all
payments before they were sent to suppliers. She explained that her impairment limited the
time she could spend at the tavern to three days each week, three hours each day, but that
she continued to oversee the tavern’s operations from home, checking in through daily
phone calls, and instructing her manager to close shop during slow periods in order to save
costs. When she did not come in to balance the register herself, tavern employees would
deliver cash‐register receipts to her house, where she maintained business records.
From Froncheck’s personal tax filings, the ALJ was able to get a rough sketch of the
tavern’s finances. The tax returns show a business loss of $3,838 in 2000 based on $75,000 in
gross receipts, and a loss of $1,330 in 2001 based on nearly $84,000 in gross receipts. In 2005
the tavern was sold for $123,000. Froncheck testified that she limited her own income to
$200 each month, but the ALJ expressed skepticism that she was disclosing proceeds from
the tavern’s poker machines, income from which she did not report in her tax filings.
The sole issue before the ALJ was whether Froncheck was engaged in substantial
gainful activity during her disability period. See
42 U.S.C. § 423(d)(1)(A); Liskowitz v. Astrue,
559 F.3d 736, 740 (7th Cir. 2009). Because Froncheck was self‐employed during the relevant
nine‐month period, the ALJ applied
20 C.F.R. § 404.1575(a)(2)(iii), which provides that the
work of a self‐employed claimant is substantial and gainful if “clearly” worth more than the
amounts set forth in the Commissioner’s earnings guidelines—here, $700 per month for
2000 and $740 per month for 2001,
Id. § 404.1574(b)(3)— “when considered in terms of its
value to the business, or when compared to the salary that an owner would pay an
employee to do the [same work].” The ALJ concluded that Froncheck’s contribution to the
No. 09‐3149 Page 3
tavern was clearly worth more than the threshold amounts in the earnings guidelines
because her services were critical to operation of the tavern. Specifically, the ALJ found that
Froncheck made all essential management decisions, maintained records and receipts, and
supervised the tavern both on‐site and while away. The ALJ also noted that Froncheck was
not candid about her activities at the tavern and appeared to be “consciously minimizing”
the extent of her involvement. The ALJ’s denial of benefits was affirmed by the district
court.
Froncheck’s primary argument on appeal is that the ALJ misapplied
§ 404.1575(a)(2)(iii) by failing to obtain evidence from outside the record to determine the
comparable worth of her services. Without such evidence, she contends, the ALJ had no
objective basis for concluding that the value of her work exceeded the threshold amounts.
For guidance on how to apply § 404.1575(a)(2)(iii), an ALJ need look no further than
the Commissioner’s policy statements in Social Security Ruling 83‐84. That ruling makes
clear that the facts of a given case control whether an ALJ must obtain evidence outside the
record in determining the worth of a claimant’s services. SSR 83‐84,
1983 WL 31256, at *8.
When there is reason to doubt that the value of the claimant’s services is greater than the
threshold amounts, the ALJ may need to develop the record with evidence reflecting what
value a similar employer would pay for the claimant’s services.
Id. However, where the
value of the claimant’s work clearly exceeds the threshold amounts in the earnings
guidelines, the ALJ need not obtain additional evidence.
Id.
Froncheck’s argument overlooks the ALJ’s stated basis for his opinion: that
Froncheck’s management of the tavern was so integral to the tavern’s operation as to
remove any doubt that it was worth more than $700 per month in 2000 or $740 in 2001. The
ALJ was not required to look outside the record for new evidence unless he had reason to
doubt the value of Froncheck’s work. See SSR 83‐84,
1983 WL 31256, at *8. Froncheck fails
to contest not only this aspect of the ALJ’s decsion, but any of the findings undergirding the
ALJ’s conclusion that the economic value of her services clearly eclipsed the monthly
threshold amounts. Having addressed only one prong of the two‐prong test set out in
§ 404.1575(a)(2)(iii), Froncheck’s appeal must fail.
We could affirm on that basis alone, but we note that substantial evidence also
supports the ALJ’s uncontested conclusion that Froncheck was gainfully employed during
the disability period. The evidence confirms the ALJ’s finding that Froncheck, apart from
being the tavern’s proprietor, was also its chief executive officer, charged with managing its
affairs and making all top‐level discretionary decisions. She kept the tavern staffed, hiring
its employees, assigning their responsibilities, and paying their salaries. She kept it stocked,
purchasing supplies, setting aside capital to pay distributors, and authorizing specific
No. 09‐3149 Page 4
payment amounts at the end of each week. She kept it solvent, tallying receipts, monitoring
cash flow, and passing along relevant records to an accountant. When considered in light of
the tavern’s gross receipts during the relevant period—more than $75,000 in 2000 and
nearly $84,000 in 2001—it was not unreasonable for the ALJ to conclude that Froncheck’s
contributions were clearly worth more than the threshold amounts. We have upheld the
denial of benefits to self‐employed applicants with similar management roles. See Brewer v.
Chater,
103 F.3d 1384, 1391 (7th Cir. 1997) (upholding determination that part‐time, self‐
employed owner of tax preparation and dry‐cleaning businesses was engaged in substantial
gainful activity), overruled on other grounds by Johnson v. Apfel,
189 F.3d 561, 562 (7th Cir.
1999); Callaghan v. Shalala,
992 F.2d 692, 695‐96 (7th Cir. 1993) (upholding determination that
self‐employed owner of upholstery business engaged in substantial gainful activity by
administering the company part‐time); see also Johnson v. Sullivan,
929 F.2d 596, 598 (11th
Cir. 1991) (upholding determination that supervisory activities of self‐employed land
surveyor were substantial and gainful).
AFFIRMED.
