Opinion
CV-20-00445-TUC-DCB (DTF)
03-30-2022
Bruce Johnson, Plaintiff, v. Commissioner of Social Security Administration, Defendant.
REPORT AND RECOMMENDATION
Honorable D Thomas Ferraro United States Magistrate Judge
Plaintiff Bruce Johnson (Johnson) brought this action pursuant to 42 U.S.C. § 405(g) seeking judicial review of the final decision by the Commissioner of Social Security (Commissioner) finding he was not disabled. (Doc. 1.) The parties have fully briefed the issues. (Docs. 23, 27, 28.) This matter was referred to the undersigned United States Magistrate Judge for a Report and Recommendation. (Doc. 14.) As more fully set forth below, based on the pleadings and the submitted administrative record (AR), the Court recommends the District Court, after its independent review, vacate the decision of the Commissioner and remand for further proceedings because the ALJ failed to provide sufficient explanation to allow for judicial review as required.
I. BACKGROUND
Johnson was born in 1964. (AR 30.) He completed the eleventh grade but did not graduate or complete the GED test. Id. From 1989 until 2013, Johnson was self-employed as the owner of a limousine business. (AR 183.) Johnson has a history of degenerative disc disease, atrophy of lower left extremity, and torn rotator cuffs. (AR 263, 403, 500.)
On October 20, 2017, Johnson applied for Supplemental Security Income disability beginning on October 1, 2016. (AR 159.) At the date of alleged onset, Johnson was considered closely approaching advanced age. (AR 54.) Johnson alleged the following conditions rendered him disabled: bilateral shoulder arthritis, torn right rotator cuff, lower back issues, nerve damage, no calf muscle in left leg, numbness in left leg, anxiety, residual headaches, memory loss, and PTSD. (AR 181.)
On March 6, 2018, Johnson's claims were initially denied. (AR 52.) The disability adjudicator at the initial level spoke with Johnson regarding his past work experience. (AR 71.) She reported that Johnson told her he spent three to four hours a week managing "the financial end" of the limousine company, including collecting receipts, going to the bank, doing bookkeeping for expenses/profits, arranging for advertising, and doing payroll. Id. The adjudicator concluded Johnson had skills that could transfer to bookkeeper, accounting clerk, and payroll clerk. Id. Johnson reportedly earned $40,000 a year. (AR 210.) On June 5, 2018, his claims were denied on reconsideration. (AR 73.) He then filed a request for a hearing. (AR 105.) On October 4, 2019, Administrative Law Judge (ALJ) Peter J. Baum held an administrative hearing. (AR 26.)
At the administrative hearing, Johnson and Vocational Expert (VE) Thomas Linvilltestified. (AR 26.) Johnson's attorney characterized his work at the limousine business as "collecting the case, taking it to the bank, and tallying it manually on paper." (AR 29.) Johnson further described that he started the limousine business in 1989, that he initially drove one of the limousines, but that by 1999 his pain prevented him from driving for the business. (AR 34.) Johnson explained he had hired a full-time manager to run the business and, thus other than driving, he was "not very involved." (AR 33.) The manager store, washed, and fueled the vehicles. Id. He would hire, fire, dispatch, and discipline drivers. (AR 33, 43.) On Mondays, Johnson would retrieve receipts, money, and paperwork that the manager had prepared and organized. (AR 34.) Johnson took the money to the bank and put the paperwork in a file. (AR 34-35.) At the end of the year, Johnson separated the paperwork into the appropriate category, calculate the total amount in each category, and write the totals for the accountant. (AR 35.) Additionally, Johnson would approve the manager's expenditure requests, e.g. vehicle repair requests. (AR 43.) The ALJ agreed this sounded like passive ownership. (AR 35.) During this time, Johnson attempted to work as a realtor; he reported only selling one house. (AR 35-36.) The limousine business declined rapidly after 2008. (AR 32.) By 2012, Johnson put the vehicles on the market, and in 2013, he finished selling the vehicles. (AR 31.)
In the transcript, the VE's name is spelled “Linville.” (AR 26.) However, the Court will defer to the VE's resume. (AR 252.)
Johnson's testimony also indicated that he stopped driving in 2009 or 2010; he later clarified or changed his testimony. (AR 33-34.) The ALJ seemed to credit the 1999 stop date. (AR 41.)
In 2018, Johnson began driving for rideshare companies, such as Uber or Lyft. (AR 37.) He worked 20 hours or less a week and made approximately $750 a month. Id. These companies provided flexibility, allowing Johnson to work only when his ailments permitted. (AE 38.)
In response to the ALJ's questioning, VE Linvill testified accounting clerk best described Johnson's active role in the limousine business. (AR 44.) VE Linvill also testified that, as generally performed, this position would require reaching in all directions, which would be outside of the capabilities posited by the ALJ. (AR 46.) However, as actually performed by Johnson, reaching was intermittent and well within the restrictions put forth by the ALJ. (AR 47.) VE Linvill acknowledged that as actually performed the position was more clerical than accounting and required less skill, so he classed it as a 4 SVP position. (AR 49.)
On October 31, 2019, the ALJ issued his unfavorable decision. (AR 10.) At step one, the ALJ determined Johnson had not engaged in substantial gainful activity since October 18, 2017. (AR 15.) At step two, the ALJ found Johnson had the following severe impairments: lumbar and cervical degenerative disc disease, and bilateral rotator cuff tear. Id. At step three, the ALJ determined that none of Johnson's severe impairments-alone or in combination-were equal to those listed in 20 C.F.R. Part 404, Subpart P, App. 1. (AR 17.) Between steps three and four, the ALJ determine Johnson had a residual function capacity ("RFC") to perform sedentary work, with several additional limitations. Id. Specifically, Johnson was able to occasionally lift or carry 10 pounds and frequently lift or carry less than 10 pounds. Id. He was also capable of standing or walking with normal breaks for two hours in an eight-hour workday and sit with normal breaks for six hours in an eight-hour workday. Id. Johnson's ability to push and pull with upper extremities and lower left extremity was limited. Id. He could not climb ladders, ropes, or scaffolds. Id. Johnson should not reach overhead or in front bilaterally but can reach laterally occasionally with the left arm and frequently with the right arm. Id.
At step four, the ALJ concluded Johnson's past relevant work was best described as "accounting clerk (small business proprietor)." (AR 20.) The ALJ determined that this was substantial gainful activity, that Johnson had performed it long enough to achieve average performance, and that Johnson had performed it during the relevant period. Id. The ALJ then agreed with the VE that Johnson could perform the work as actually performed. Id. Thus, the ALJ resolved that Johnson was not disabled. Id.
On August 18, 2020, the Appeals Council denied Johnson's request for review. (AR 1-3.) On October 16, 2020, Johnson filed a complaint challenging the ALJ's unfavorable decision. (Doc. 1.) The District Court has jurisdiction pursuant to § 405(g).
II. ISSUES ON REVIEW
Johnson raises two issues. (Doc. 23.) First, he argues the ALJ improperly found Johnson performed his self-employment to substantial gainful activity (SGA) levels, rendering it past relevant work (PRW). Id. at 2. He contends, in the alternative, that the VE's testimony was unreliable as to the reaching requirements of his PRW and that the ALJ erred in relying on it. Id. Thomas does not challenge the medical findings. Id. at 3. III. STANDARD ON REVIEW
Courts review only those issues raised by the party challenging the ALJ's decision. See Lewis v. Apfel, 236 F.3d 503, 517 n.13 (9th Cir. 2001). A person is disabled if their "physical or mental impairment or impairments are of such severity" that they are unable to do both their previous work and, considering their "age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy, regardless of whether such work exists" in their immediate area, whether a specific job vacancy exists for them, or whether they would be hired if they applied for work. 42 U.S.C. §§ 423(d)(2)(A), 1382c(a)(3)(B).
"The ALJ is responsible for determining credibility, resolving conflicts in medical testimony, and for resolving ambiguities." Andrews v. Shalala, 53 F.3d 1035, 1039 (9th Cir. 1995) (citing Magallanes v. Bowen, 881 F.2d 747, 750 (9th Cir. 1989)). The findings of the Commissioner are meant to be conclusive if supported by substantial evidence. 42 U.S.C. §§ 405(g), 1383(c)(3). Substantial evidence is "more than a mere scintilla but less than a preponderance." Tackett v. Apfel, 180 F.3d 1094, 1098 (9th Cir. 1999) (quoting Matney ex rel. Matney v. Sullivan, 981 F.2d 1016, 1018 (9th Cir. 1992)).
Courts may overturn the decision to deny benefits only "when the ALJ's findings are based on legal error or are not supported by substantial evidence in the record as a whole." Aukland v. Massanari, 257 F.3d 1033, 1035 (9th Cir. 2001). This is because the ALJ "and not the reviewing court must resolve conflicts in the evidence, and if the evidence can support either outcome, the court may not substitute its judgment for that of the ALJ." Matney ex rel. Matney, 981 F.2d at 1019; see Batson v. Comm'r of Soc. Sec. Admin., 359 F.3d 1190, 1198 (9th Cir. 2004). The Commissioner's decision, however, "cannot be affirmed simply by isolating a specific quantum of supporting evidence." Sousa v. Callahan, 143 F.3d 1240, 1243 (9th Cir. 1998). Reviewing courts must consider the evidence supporting as well as detracting from the Commissioner's conclusion. Day v. Weinberger, 522 F.2d 1154, 1156 (9th Cir. 1975).
Even if the ALJ made an error, courts may affirm if the error was harmless; in other words, it was "inconsequential to the ultimate nondisability determination." Fordv. Saul, 950 F.3d 1141, 1154 (9th Cir. 2020) (quoting Tommasetti v. Astrue, 533 F.3d 1035, 1038 (9th Cir. 2008)). "A reviewing court may only consider the reasons provided by the ALJ in the disability determination and 'may not affirm the ALJ on a ground upon which he did not rely.'" Luther v. Berryhill, 891 F.3d 872, 875 (9th Cir. 2018) (quoting Garrison v. Colvin, 759 F.3d 995, 1010 (9th Cir. 2014)); see Stout v. Comm'r, Soc. Sec. Admin., 454 F.3d 1050, 1054 (9th Cir. 2006) (stating courts cannot "affirm the denial of benefits on a ground not invoked by the Commissioner in denying the benefits originally" (quoting Pinto v. Massanari, 249 F.3d 840, 847-48 (9th Cir. 2001))); see also Marsh v. Colvin, 792 F.3d 1170, 1172 (9th Cir. 2015). For this reason, the ALJ must "set forth the reasoning behind its decisions in a way that allows for meaningful review." Brown-Hunter v. Colvin, 806 F.3d 487, 492 (9th Cir. 2015).
IV. DISCUSSION
Self-Employment Considered Past Relevant Work (PRW)
The regulations present a specific rule to determine if self-employed activity is considered substantial gainful activity. 20 C.F.R. § 416.975. This rule emphasizes the value of the person's services over the person's income. § 416.975(a). There are three specific tests to consider:
(1) Test One: You have engaged in substantial gainful activity if you render services that are significant to the operation of the business and receive a substantial income from the business. Paragraphs (b) and (c) of this section explain what we mean by significant services and substantial income for purposes of this test.
(2) Test Two: You have engaged in substantial gainful activity if your work activity, in terms of factors such as hours, skills, energy output, efficiency, duties, and responsibilities, is comparable to that of unimpaired individuals in your community who are in the same or similar businesses as their means of livelihood.
(3) Test Three: You have engaged in substantial gainful activity if your work activity, although not comparable to that of unimpaired individuals, is clearly worth the amount shown in § 416.974(b)(2) when considered in terms of its value to the business, or when compared to the salary that an owner would pay to an employee to do the work you are doing.Id. Particularly, in a business with multiple people, a person provides "significant services" if they "contribute more than half the total time required for the management of the business, or [they] render management services for more than 45 hours a month regardless of the total management time required by the business." § 416.975(b)(1). If the ALJ relies on Test Two, they must specifically develop each work factor. Titles II & Xvi: Determining Whether Work Is Substantial Gainful Activity-Self-Employed Persons, SSR 83-34 ("Each work factor cited above must be described in detail, showing its contribution to the business operation."). If there is any doubt regarding the comparability or worth of services (Tests Two and Three respectively), the ALJ must obtain evidence from authoritative sources in the community. Id.
Here, the ALJ simply labeled Johnson's previous work for his limousine company as accounting clerk (small business proprietor) and stated it "was substantial gainful activity, was performed long enough for [Johnson] to achieve average performance, and was performed within the relevant period." (AR 20.) There is no further explanation. Id. Because the decision was issued on October 31, 2019, the ALJ could only consider work history after 2004, after Johnson had limited his role in the limousine company. See Argueta v. Berryhill, 703 Fed.Appx. 460, 460 (9th Cir. 2017); AR 10, 15, 41.
Johnson alleges the ALJ erred in finding his previous self-employment was substantial gainful activity. (Doc. 23 at 7-10.) In defending the ALJ's conclusion, the Commissioner examines all three tests, but does state that because test one is met there is no need to continue to the other two. (Doc. 27 at 6-7.) The Commissioner does not and cannot tell the Court which test the ALJ relied on because the ALJ did not indicate which one he considered. (AR 20.) While the Court will not fault the ALJ for explanations that are "less than ideal clarity," the ALJ is required to set forth reasoning sufficient for a meaningful review. Brown-Hunter, 806 F.3d at 492 (quoting Treichler v. Comm'r of Soc. Sec. Admin., 775 F.3d 1090, 1099 (9th Cir. 2014)). Based on the ALJ's failure to provide sufficient reasoning, the Court must find error because it is unable to review the decision. Id.
Thus, the Court considers if this error was harmful. See Ford, 950 F.3d at 1154. First, it is unclear if Johnson's past work was substantial gainful activity. Test One is not clearly satisfied because the record does not support a finding that Johnson performed more than half the total time required for management of the business or more than 45 hours a month. § 416.975(b)(1); AR 34-35. Second, the record lacks any information as to whether Johnson's work activity was "comparable to that of unimpaired individuals in [his] community who are in the same or similar businesses as their means of livelihood" or the value of the work to the business or what salary an owner would pay for the work Johnson did. § 416.975(a)(2-3). Third, the Court may not make independent findings because courts "are constrained to review the reasons the ALJ asserts." Brown-Hunter, 806 F.3d at 492 (quoting Connett v. Barnhart, 340 F.3d 871, 874 (9th Cir. 2003); see also Luther, 891 F.3d at 875; Stout, 454 F.3d at 1054; Marsh, 792 F.3d at 1172. Finally, if this past work was not substantial gainful activity, then Johnson would not have past work that he could perform. (See AR 20.) Thus, this decision was not "inconsequential to the ultimate nondisability determination." See Ford, 950 F.3d at 1154. As such, the Court recommends finding error here that is not harmless.
Reaching Requirement of Previous Work
Johnson argues, in the alternative, the VE failed to consider whether he could perform the part-time work had it been performed full-time and the ALJ erred by relying on the VE's faulty testimony. (Doc. 23 at 10-12.) The District Court should only reach this issue if it finds that Johnson's previous employment for the limousine company was substantial gainful activity.
First, the Commissioner claims Johnson waived this argument by failing to object during the hearing. (Doc. 27 at 8.) Johnson does not respond to this argument. (Doc. 28 at 5.) Represented claimants "must raise issues at their administrative hearings in order to preserve them on appeal" Meanel v. Apfel, 172 F.3d 1111, 1115 (9th Cir. 1999), as amended (June 22, 1999); see also Shaibi v. Berryhill, 883 F.3d 1102, 1109 (9th Cir. 2017) (relying on Meanel to find claimants objection to VE testimony was waived). While Johnson did raise this issue to the Appeals Council, he did not raise it before the ALJ. (AR 26-51, 259.) The Court recommends rejecting this argument as waived based on Meanel, 172 F.3d at 1115.
If the District Court disagrees, then it should continue to the merit of the claim. Johnson argues "if a person who works for one or two hours per week uses his hands frequently or constantly for those two hours, it cannot be said that that person would use his hands only 'occasionally' were those two hours extrapolated to an eight hour workday (or even part time work)." (Doc. 28 at 5.) The Commissioner argues this position does not need to be extrapolated to more hours than what Johnson actually performed. (Doc. 27 at 9.)
Here, Johnson reported working for three or four hours every week doing financial activities for the limousine company. (AR 71.) Based on Johnson's testimony, he was only working a few hours each week. (AR 34-35.) Johnson would gather the paperwork and money, which his manager organized for him, and he would file the paperwork and deposit the money. Id. Then Johnson would calculate the total of each file for the accountant every year. Id. The VE stated that with Johnson's restrictions he could not perform this position as generally performed but that he could perform it as actually performed. (AR 47.) The ALJ adopted this conclusion. (AR 20.) The ALJ concluded Johnson could perform his previous work as actually performed, even with his restrictions. Id.
At step four, the ALJ may deny benefits if the claimant has the RFC to perform either the actual functional demands and job duties of a past relevant job or the functional demands and job duties of the occupation as generally required in the national economy. Pinto, 249 F.3d at 844-45. Claimants can be participating in substantial work activity even if they work less than part time. 20 C.F.R. § 416.972(a). Thus, if Johnson's previous employment was substantial work activity, even at a few hours a week, and he can perform the activity with his current RFC, then he could perform the position as actually performed. See id.; cf. King v. Colvin, No. 12-cv-390-JPH, 2013 WL 5652358, at *6 (E.D. Wash. Oct. 15, 2013) ("The ALJ accurately observes working less than full time does not preclude earning amounts that constitute substantial gainful activity, and if a claimant is able to earn SGA, a claimant is found able to work." (citation to record omitted)). Thus, the Court recommends finding no error here, assuming the District Court finds the previous employment was substantial work activity.
V. REMEDY
Johnson requests an award of benefits. (Doc. 23 at 1, 12.) The Commissioner argues that, if there is reversible error, the appropriate course is to remand for further investigation or explanation. (Doc. 27 at 10-11.)
A federal court may affirm, modify, reverse, or remand a social security case. § 405(g). The proper course is generally to remand to the agency for additional investigation or explanation. Treichler, 775 F.3d at 1099. Under a "rare exception" to this rule, the Court may remand for an immediate award of benefits after conducting a three-part inquiry, often labeled the "credit-as-true" rule:
First, [the Court] ask[s] whether the ALJ failed to provide legally sufficient reasons for rejecting evidence, whether claimant testimony or medical opinion. Next, [the Court] determine[s] whether there are outstanding issues that must be resolved before a disability determination can be made, and whether further administrative proceedings would be useful. When these first two conditions are satisfied, [the Court will] 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.Leon v. Berryhill, 880 F.3d 1041, 1045 (9th Cir. 2017) (internal quotation marks and citations omitted). The Court has discretion to remand for further proceeding even if it reaches the third step. Id. "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." Id. (quotation marks and alteration omitted).
Here, the Court recommends the District Court find that the first step is satisfied. The ALJ failed to provide sufficient reasons for finding Johnson's previous employment was substantial gainful activity.
Applying step two, the Court recommends the District Court find there is an outstanding issue that must be resolved before a disability determination can be made. Accordingly, this matter should be remanded for the ALJ to consider or explain whether Johnson's previous employment is substantial gainful activity, especially with some inconsistencies in the record. Further administrative proceedings and findings would be useful.
VI. RECOMMENDATION
Based on the foregoing, the Magistrate Judge RECOMMENDS that the District Court, after its independent review, enter an order vacating the Commissioner's final decision and remanding this matter for proceedings consistent with its opinion.
This Recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Fed. R. App. P., should not be filed until entry of the District Court's judgment.
However, the parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the District Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a, d), 72(b). Thereafter, the parties have fourteen (14) days within which to file a response to the objections. No reply briefs shall be filed unless the District Court grants leave to do so. The Clerk of Court is directed to terminate the referral of this matter. Filed objections should bear the following case number: CV 20-00445-TUC-DCB. Failure to timely file objections to any factual or legal determination of the Magistrate Judge may be considered a waiver of a party's right to de novo consideration of the issues. See United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003).