Leopoldo Leon v. Nancy Berryhill , 880 F.3d 1041 ( 2017 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
LEOPOLDO N. LEON, No. 15-15277
Plaintiff-Appellant,
D.C. No.
v. 2:14-cv-00093-
DGC
NANCY A. BERRYHILL, Acting
Commissioner Social Security,
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the District of Arizona
David G. Campbell, District Judge, Presiding
Submitted January 12, 2017*
San Francisco, California
Filed November 7, 2017
Before: J. Clifford Wallace and Milan D. Smith, Jr.,
Circuit Judges, and Ralph R. Erickson,** District Judge.
Opinion by Judge Wallace
*
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
**
The Honorable Ralph R. Erickson, United States District Judge for
the District of North Dakota, sitting by designation.
2 LEON V. BERRYHILL
SUMMARY***
Social Security
The panel affirmed the district court’s decision to remand
for further administrative proceedings in a claimant’s action
seeking Title II disability insurance benefits under the Social
Security Act; and clarified that remand to the administrative
law judge (“ALJ”) should be with an open record on the issue
of whether the claimant’s fatigue related to his capacity to
undertake full time employment.
The “credit-as-true rule” permits, but does not require, a
direct award of benefits on review but only where the ALJ
has not provided sufficient reasoning for rejecting testimony
and there are no outstanding issues on which further
proceedings in the administrative court would be useful.
Under these circumstances, if a claimant’s testimony is
credited as true, an award of benefits may be appropriate.
Treichler v. Comm’r of Soc. Sec. Admin., 775 F.3d 1090,
1101-02 (9th Cir. 2014).
The panel held that the district court erred in its
application of the three-step credit-as-true rule, outlined in
Varney v. Secretary of Health & Human Services, 859 F.2d
1396, 1400-01 (9th Cir. 1988), because contrary to the district
court’s order, the Varney rule did not require the court to
remand for an immediate award of benefits when the three
Varney rule conditions were met.
***
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
LEON V. BERRYHILL 3
The panel held that the ALJ in this case failed to consider
evidence related to claimant’s claim of fatigue properly. The
panel further held that the rare circumstances that result in a
direct award of benefits on review were not present in this
case. The panel held that on remand the district court should
specify the scope of its remand. The panel remanded on an
open record because there was serious doubt as to whether
claimant was in fact disabled given that the district court
upheld the ALJ’s other findings. In addition, the panel
directed that on remand claimant shall be permitted to cross-
examine the Commissioner’s medical consultants, but only to
the extent such cross-examination concerned the issue of
claimant’s fatigue.
COUNSEL
Eric G. Slepian, Phoenix, Arizona, for Plaintiff-Appellant.
Erin Highland, Assistant Regional Counsel; David Morado,
Regional Chief Counsel, Seattle Region X; Office of the
General Counsel, Social Security Administration, Seattle,
Washington; for Defendant-Appellee.
OPINION
WALLACE, Circuit Judge:
The credit-as-true analysis has evolved in our circuit over
time, thus providing a challenge for application by the district
court. The rule itself permits, but does not require, a direct
award of benefits on review but only where the administrative
law judge (ALJ) has not provided sufficient reasoning for
4 LEON V. BERRYHILL
rejecting testimony and there are no outstanding issues on
which further proceedings in the administrative court would
be useful. Then, and only under these circumstances, if a
claimant’s testimony is credited as true an award of benefits
may be appropriate. Treichler v. Comm’r of Soc. Sec. Admin.,
775 F.3d 1090, 1101–02 (9th Cir. 2014). Once the claimant’s
testimony on the severity of his symptoms is credited as true,
see Varney v. Secretary of Health & Human Services.,
859 F.2d 1396, 1400–01 (9th Cir. 1988), then the court
should “determine whether the record, taken as a whole,
leaves ‘not the slightest uncertainty as to the outcome of [the]
proceeding.’” Treichler, 775 F.3d at 1101, quoting NLRB v.
Wyman-Gordon Co., 394 U.S. 759, 766 n. 6 (1969). An
automatic award of benefits in a disability benefits case is a
rare and prophylactic exception to the well-established
ordinary remand rule. Id. at 1100. Here, the petitioner argues
that we should reverse the district court’s remand and direct
the district court to award benefits. We affirm the district
court but clarify the remand order.
I.
Petitioner Leon has a sixth-grade education and is a
former landscaper and foreman. The ALJ found he had
developed severe impairments including degenerative joint
disease of the knees, degenerative disc disease of the lumbar
spine, diabetes with nephropathy, and hypertension. Leon
testified that he also suffered from other impairments that the
ALJ ultimately concluded were not supported by medical
evidence, including renal failure, poor vision, obstructive
sleep apnea, fibromyalgia, rheumatoid arthritis, depression,
and anxiety. While he is not capable of performing past work,
the ALJ found that Leon has the residual functional capacity
to perform light work as defined in 20 C.F.R. § 404.1567(b),
LEON V. BERRYHILL 5
with some physical limitations. At issue in this appeal is
Leon’s alleged fatigue due to a combination of impairments
and medications, and whether the extent of the fatigue is so
extreme that it would prevent him from undertaking full time
employment in a job identified by a vocational expert before
the agency.
II.
Leon filed a Title II application for disability insurance
benefits on September 27, 2010. This followed prior
applications in 2009 that were denied on February 5, 2010,
and the period of disability now at issue began on February
6, 2010. We do not review the applications denied prior to
that date. After initial denial and reconsideration, Leon
appeared and testified at a hearing on June 11, 2012, and the
ALJ issued its decision shortly thereafter, finding Leon was
not disabled under sections 216(i) and 223(d) of the Social
Security Act.
Leon appeals from the district court’s order remanding for
further proceedings the final decision of the Commissioner of
Social Security. Although the district court remanded to the
agency for further proceedings, Leon may appeal from that
order because the relief requested, a direct award of benefits,
was not granted. See Forney v. Apfel, 524 U.S. 266, 271
(1998). We have jurisdiction under 28 U.S.C. § 1291, and we
review the decision to remand for further proceedings for
abuse of discretion. Treichler, 775 F.3d at 1100. All other
issues are reviewed de novo. Garrison v. Colvin, 759 F.3d
995, 1010 (9th Cir. 2014).
6 LEON V. BERRYHILL
III.
When the ALJ denies benefits and the court finds error,
the court ordinarily must remand to the agency for further
proceedings before directing an award of benefits. Treichler,
775 F.3d at 1099. Where an ALJ improperly rejects a
claimant’s pain testimony as incredible without providing
legally sufficient reasons, the reviewing court may grant a
direct award of benefits when certain conditions are met.
Varney, 859 F.2d at 1400–01. The three-part analysis for such
conditions is known as the “credit-as-true” rule. Garrison,
759 F.3d at 1019. First, we ask whether the “ALJ failed to
provide legally sufficient reasons for rejecting evidence,
whether claimant testimony or medical opinion.” Id. at 1020.
Next, we determine “‘whether there are ‘outstanding issues
that must be resolved before a disability determination can be
made,’ . . . and whether further administrative proceedings
would be useful.” Treichler, 775 F.3d at 1101, quoting Moisa
v. Barnhart, 367 F.3d 882, 887 (9th Cir. 2004). When these
first two conditions are satisfied, we then credit the
discredited testimony as true for the purpose of determining
whether, on the record taken as a whole, there is no doubt as
to disability. Id.
The application of the Varney rule for a direct award of
benefits was intended as a rare and prophylactic exception to
the ordinary remand rule when there is no question that a
finding of disability would be required if claimant’s
testimony were accepted as true. Id. As emphasized in
Treichler, the three-step Varney rule may result in a direct
award of benefits only if the first two conditions are satisfied
and further administrative proceedings would not be useful.
Even if we reach the third step and credit the claimant’s
testimony as true, it is within the court’s discretion either to
LEON V. BERRYHILL 7
make a direct award of benefits or to remand for further
proceedings. Id. In these circumstances, the ALJ’s failure to
provide sufficient reasoning despite a fully developed record,
without any conflicts, gaps, or ambiguities, does not
automatically result in a determination that the claimant is
therefore credible and should be awarded benefits
immediately. Before Treichler, our court prescribed
“flexibility” even when a claimant would be otherwise
entitled to benefits under the credit-as-true analysis in
Varney, when the record as a whole creates serious doubt as
to disability. Garrison, 759 F.3d at 1021. An award under this
rule is a rare exception, and the rule was intended to deter
ALJs from providing boilerplate rejections without analysis.
“Where . . . an ALJ makes a legal error, but the record is
uncertain and ambiguous, the proper approach is to remand
the case to the agency.” Treichler, 775 F.3d at 1105.
Treichler, which was not available to the district judge as
it was published only days after the district court’s order,
examined the extent of that “flexibility,” emphasizing the
court’s discretion is a departure from the ordinary remand
rule. See id. at 1101. Contrary to the district court’s order, the
Varney rule does not require the court to remand for an
immediate award of benefits when the three Varney rule
conditions have been satisfied. Further consideration of the
record is needed to proceed to a disability determination
without serious doubt.
IV.
The ALJ in this case failed to consider evidence related to
Leon’s claim of fatigue properly. An ALJ must make two
findings before making a credibility determination. “First, the
ALJ must determine whether the claimant has presented
8 LEON V. BERRYHILL
objective medical evidence of an underlying impairment.” Id.
at 1102, quoting Lingenfelter v. Astrue, 504 F.3d 1028, 1036
(9th Cir. 2007). Then, if such evidence is introduced and “the
ALJ has not determined that the claimant is malingering, the
ALJ must provide ‘specific, clear and convincing reasons for’
rejecting the claimant’s testimony regarding the severity of
the claimant’s symptoms.” Id., quoting Smolen v. Chater,
80 F.3d 1273, 1281 (9th Cir. 1996). While the ALJ found that
Leon had “not described significant fatigue to his doctors”
and only one doctor had observed sleepiness, the record
indicates that two nurse practitioners also observed Leon’s
symptoms of fatigue. At the time Leon’s claim was filed, the
opinions of nurse practitioners as treating sources were not
given the same weight as physicians’ opinions. Prior to
March 27, 2017, nurse practitioners were not included in the
Social Security Administration’s definition of medical
sources, but the ALJ was required, at the least, to provide
germane reasons for rejecting testimony that corroborates a
claimant’s pain testimony. See Taylor v. Comm’r of Soc. Sec.
Admin, 659 F.3d 1228, 1234 (9th Cir. 2011); see also
20 C.F.R. § 404.1527 (evaluating opinion evidence for claims
filed before March 27, 2017).
Leon testified that his impairments and medications cause
him sleep loss and extreme fatigue, and require him to take
several naps per day. He also testified that his medications
require him to lie down for thirty to sixty minutes at a time.
Furthermore, he testified that he frequently faints. Leon’s
stepdaughter corroborated his fatigue testimony. A germane
explanation is required to reject lay witness testimony, such
as that of Leon’s stepdaughter, who stated that he wakes in
the night with pain, and the ALJ failed to provide any such
explanation. Taylor, 659 F.3d at 1234; see also Treichler,
775 F.3d at 1098. Nor did the ALJ provide clear and
LEON V. BERRYHILL 9
convincing reasons for rejecting Leon’s testimony about his
fatigue. Valentine v. Comm’r of Soc. Sec. Admin., 574 F.3d
685, 694 (9th Cir. 2009) (if an ALJ provided clear and
convincing reasons for rejecting a claimant’s subjective
complaints, and lay testimony was similar to such complaints,
it follows that the ALJ also gave germane reasons for
rejecting the lay witness testimony).
Without the benefit of Treichler, the district court did not
apply the credit-as-true standard properly here. The district
court found that the ALJ committed legal error because she
“did not give clear and convincing reasons for rejecting
Plaintiff’s testimony about his fatigue.” This satisfies the first
part of the analysis. But Treichler provides a second part of
the analysis that asks “whether the record has been fully
developed, whether there are outstanding issues that must be
resolved before a determination of disability can be made,
and whether further administrative proceedings would be
useful.” Treichler, 775 F.3d at 1101 (citations and internal
quotation marks omitted). A district court cannot proceed
directly to credit a claimant’s testimony as true and then look
to the record to determine whether any issues are outstanding,
as “this reverses the required order of analysis.” Dominguez
v. Colvin, 808 F.3d 403, 409 (9th Cir. 2015).
The second step of the credit-as-true analysis requires us
to determine whether the record has been developed
thoroughly and is free of conflicts, ambiguities, or gaps.
Treichler, 775 F.3d at 1103; see also Dominguez, 808 F.3d at
410 (district court did not abuse its discretion in remanding to
the ALJ for further proceedings where there were
“inconsistencies, conflicts, and gaps, in the record”). When
there are outstanding issues that must be resolved before a
determination can be made, or if further administrative
10 LEON V. BERRYHILL
proceedings would be useful, a remand is necessary. See
Varney, 859 F.2d at 1399 (9th Cir. 1988).
Leon testified quite clearly that he sleeps poorly at night
due to sleep apnea, and that he believes his medications cause
drowsiness. He testified that he needs to take two to three
naps during the day, lasting between 15 minutes and one
hour. He also testified that he would be required to miss work
sometimes due to pain. The record does not reflect that any of
his doctors observed fatigue to this extent, although he has
been treated for sleep apnea and was prescribed use of a
CPAP machine to assist with his sleep. In Brown-Hunter v.
Colvin, 806 F.3d 487, 495–96 (9th Cir. 2015), we held that
although the ALJ committed legal error, further
administrative proceedings were useful because questions
existed about the extent to which the claimant’s symptoms
rendered her disabled—much as is the case here. Remand is
also useful here because “the presentation of further evidence
. . . may well prove enlightening in light of the passage of
time,” regarding whether Leon’s symptoms are or would be
significantly reduced with proper use of the CPAP machine.
Treichler, 775 F.3d at 1101 (internal quotation marks
omitted).
Even if the record was fully developed and the improperly
discredited evidence is credited as true, it is not certain that
the ALJ would be required to find Leon legally disabled
under the third part of the credit-as-true standard. For
instance, although a doctor and two nurse practitioners
observed Leon’s fatigue, and Leon’s stepdaughter confirmed
that he sleeps during the day, it is unclear whether Leon needs
to sleep during working hours, or that his fatigue would cause
him to miss so much work that the ALJ is certain to make a
disability finding.
LEON V. BERRYHILL 11
The rare circumstances that result in a direct award of
benefits are not present in this case. We have previously
awarded benefits without further administrative proceedings
only when the record clearly contradicted an ALJ’s
conclusory findings and no substantial evidence within the
record supported the reasons provided by the ALJ for denial
of benefits. For example, in Trevizo v. Berryhill, 871 F.3d
664 (9th Cir. 2017), the ALJ failed to provide clear and
convincing reasons supported by substantial evidence to
disregard the treating physician’s opinion. The physician
treated the claimant extensively and examined her at least
16 times in four years. Id. at 677. The medical opinion was
supported by other doctors’ diagnoses, and a vocational
expert addressed the physical limitations outlined by the
physician and testified that the claimant was unable to do any
full-time work. Id. at 683. The ALJ rejected the claimant’s
pain testimony because the pain was not as severe as alleged,
although the claimant’s testimony as to her own limitations
was not inconsistent with the medical opinions and
observations in the record. Id. at 679–80. The administrative
record in Trevizo was extensive and without inconsistencies
in the claimant’s primary physician’s medical opinions.
Furthermore, the vocational expert in that case “specifically
opined regarding the inability of an individual with Trevizo’s
physical and intellectual limitations as described by [the
physician] to sustain work.” Id. at 683. The analysis in
Trevizo supports its holding that “exceptional facts” weighed
strongly in favor of an immediate payment of benefits, and
that further development of the administrative record would
not be useful. Id. The circumstances in Leon’s case are not
such, and we do not reach step three in crediting his pain
testimony as true for the purpose of a disability
determination, because at step two, it is clear that further
12 LEON V. BERRYHILL
administrative proceedings are needed to make a disability
determination.
Unaided by Treichler, the district court did not specify the
scope of its remand. On remand, the district court should do
so. If Leon’s testimony is credited as true, the district court
found there was insufficient testimony from the vocational
expert to require a finding of disability. But because the
district court did not consider the second part of the credit-as-
true standard properly, we remand on an open record because
there is serious doubt as to whether Leon is in fact disabled,
given that the district court upheld the ALJ’s other findings.
See Brown-Hunter, 806 F.3d at 495 (“We may remand on an
open record for further proceedings when the record as a
whole creates serious doubt as to whether the claimant is, in
fact, disabled . . . .”) (internal quotation marks omitted).
V.
We AFFIRM the district court’s decision to remand for
further administrative proceedings, but instruct the district
court to remand to the ALJ consistent with Treichler’s
requirements, with an open record on the issue of Leon’s
fatigue related to his capacity to undertake full time
employment. Accordingly, on remand Leon shall be
permitted to cross-examine the Commissioner’s medical
consultants, but only to the extent such cross-examination
concerns the issue of Leon’s fatigue.
AFFIRMED in part with instructions.