Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-00628/USCOURTS-casd-3_16-cv-00628-0/pdf.json

Nature of Suit Code: 864
Nature of Suit: Social Security - SSID Title XVI
Cause of Action: 42:1383 Review of HHS Decision (regarding payment of benefits)

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

FREDY ZARAGOZA,

Plaintiff,

v.

NANCY A. BERRYHILL, Acting 

Commissioner of Social Security,

Case No. 16-cv-00628-BAS-WVG

ORDER:

(1) GRANTING IN PART 

PLAINTIFF’S MOTION FOR 

SUMMARY JUDGMENT;

(2) DENYING DEFENDANT’S 

CROSS-MOTION FOR 

SUMMARY JUDGMENT; AND

(3) REMANDING CASE FOR 

FURTHER PROCEEDINGS

Defendant.

Plaintiff Fredy Zaragoza seeks judicial review of a final decision by the Acting 

Commissioner of Social Security (“Commissioner”) denying his application for 

supplemental security income benefits under Title XVI of the Social Security Act, 42 

U.S.C. §§ 401–433 (2012). For the reasons that follow, the Court grants in part 

Plaintiff’s Motion for Summary Judgment (ECF No. 12), and denies the 

Commissioner’s Cross-Motion for Summary Judgment (ECF No. 15). The matter will 

be remanded to the ALJ for further proceedings.

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BACKGROUND

A. Plaintiff’s Condition

On March 24, 2009, Zaragoza was admitted to Alvarado Parkway Institute 

Behavioral Health System due to psychosis. (Administrative Record (“AR”) 246.) A 

mental status examination (“MSE”) conducted that day showed Zaragoza was 

exhibiting “thought blocking” and paranoia, and he was assessed a Global Assessment 

of Functioning (“GAF”) score of 30.

1

(Id.) Zaragoza was discharged three weeks later.

(AR 248.) 

On October 16, 2011, Zaragoza was hospitalized at his family’s request after 

he decided to shave his entire body in public while sitting on his family’s deck. (AR 

263.) Zaragoza was diagnosed with schizophrenia and discharged four days later. (AR 

263, 270.) In early November of the same year, Zaragoza started seeing Dr. Arash

Khatami. (AR 345.) Dr. Khatami diagnosed Zaragoza with undifferentiated type 

schizophrenia and assessed a GAF score of 45.2(Id.) Dr. Khatami continued to treat 

Zaragoza until June 12, 2012. (AR 331–45.)

On October 7, 2012, Zaragoza was brought to Scripps Mercy Hospital’s

emergency room for repeatedly striking himself. (AR 422.) He said he heard voices 

that told him to hit himself. (AR 422, 451.) Zaragoza was evaluated and given a GAF 

score of 20.3(AR 452.) He was discharged on October 16, 2012, and then readmitted 

 

1 The GAF scale is used by mental health practitioners to assess an individual’s level of 

psychological, social, and occupational functioning. American Psychiatric Association, Diagnostic 

and Statistical Manual of Mental Disorders 30 (4th ed. 1994) (“DSM-IV”). A GAF between 21 and 

30 indicates that a patient’s behavior is “considerably influenced by delusions or hallucinations or 

serious impairment in communication or judgment” or suggests an “inability to function in almost 

all areas.” DSM-IV at 32.

2 A GAF between 41 and 50 indicates “[s]erious symptoms (e.g., suicidal ideation, severe obsessional 

rituals, frequent shoplifting) or any serious impairment in social, occupational or school functioning 

(e.g., no friends, unable to keep a job).” DSM-IV at 32.

3 A GAF between 11 and 20 indicates “some danger of hurting self or others (e.g., suicide attempts 

without clear expectation of death; frequently violent; manic excitement) or occasional[] fail[ure] to 

maintain minimal personal hygiene (e.g. smears feces) or gross impairment in communication (e.g., 

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the next day because the voices had returned and he was hitting himself again. (AR 

372.) Two weeks later, Zaragoza was discharged and assessed a GAF score of 25–30. 

(AR 396–97.) On November 5, 2012, Zaragoza was readmitted to Scripps Mercy 

Hospital for cutting himself. (AR 367.) He was discharged ten days later. (AR 323.)

During the remainder of 2012, and from 2013 through the beginning of 2014, 

Zaragoza continued to receive treatment at the University of California San Diego 

Gifford Clinic from four different doctors. (AR 308–30.) These doctors noted that 

Zaragoza was improving—for example, they found that he was able to sleep a full 

eight hours and go to church. (Id.) But despite this general improvement, none of these

doctors assessed Zaragoza a GAF score higher than 48. (Id.) At the time of the hearing

before the administrative law judge (“ALJ”), Zaragoza had not been hospitalized since 

November of 2012.

B. Procedural History

On December 29, 2011, Zaragoza filed an application for supplemental security 

income under Title XVI of the Social Security Act. (AR 29.) The claim was denied 

on initial review and on reconsideration. (Id.) Thereafter, Zaragoza requested a 

hearing before an ALJ. (Id.) ALJ Jesse Pease heard the case and determined Zaragoza 

was not disabled as defined under the Social Security Act. (AR 29–37.) The Appeals 

Council denied Zaragoza’s request for review, and Zaragoza now seeks judicial 

review of the ALJ’s decision.

LEGAL STANDARD

An applicant for supplemental security income may seek judicial review of a 

final decision of the Commissioner in federal district court. 42 U.S.C. § 405(g). 

Federal courts will uphold a Commissioner’s disability determination “unless it 

contains legal error or is not supported by substantial evidence.” Garrison v. Colvin, 

759 F.3d 995, 1009 (9th Cir. 2014) (citing Stout v. Comm’r Soc. Sec. Admin., 454 F.3d 

 

largely incoherent or mute).” DSM-IV at 32.

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1050, 1052 (9th Cir. 2006)).

“‘Substantial evidence’ means more than a mere scintilla, but less than a 

preponderance; it is such relevant evidence as a reasonable person might accept as 

adequate to support a conclusion.” Lingenfelter v. Astrue, 504 F.3d 1028, 1035 (9th 

Cir. 2007). The court must consider the record as a whole in determining whether the 

Commissioner’s decision is supported by substantial evidence. See Ghanim v. Colvin, 

763 F.3d 1154, 1160 (9th Cir. 2014) (holding that the court may not decide by 

isolating a ‘specific quantum of supporting evidence’) (citing Hill v. Astrue, 698 F.3d 

1153, 1159 (9th Cir. 2012)). However, “[w]here evidence is susceptible to more than 

one rational interpretation, the ALJ’s decision should be upheld.” Ryan v. Comm’r of 

Soc. Sec., 528 F.3d 1194, 1198 (9th Cir. 2008) (internal quotation marks and citation 

omitted).

The court “review[s] only 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.” 

Garrison, 759 F.3d at 1010 (citation omitted).

THE ADMINISTRATIVE DECISION

A. Standard for Determining Disability

The Social Security Act (“the Act”) defines “disability” as the “inability to 

engage in any substantial gainful activity by reason of any medically determinable 

physical or mental impairment which . . . has lasted or can be expected to last for a 

continuous period of not less than 12 months.” 42 U.S.C. § 423(d)(1)(A). Under the 

Act’s implementing regulations, the Commissioner applies a five-step sequential 

evaluation process to determine whether an applicant is disabled. See 20 C.F.R. § 

416.920(a). “The burden of proof is on the claimant at steps one through four, but 

shifts to the Commissioner at step five.” Bray v. Comm'r of Soc. Sec. Admin., 554 F.3d 

1219, 1222 (9th Cir. 2009).

At step one, the ALJ must determine whether the claimant is engaged in 

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“substantial gainful activity.”4 20 C.F.R. § 416.920(a)(4)(i). If so, the claimant is not 

disabled and does not receive benefits. If not, the ALJ proceeds to step two.

At step two, the ALJ must determine whether the claimant has a severe medical 

impairment, or combination of impairments, that meets the duration requirement in 

the regulations. Id. § 416.920(a)(4)(ii). If the claimant's impairment or combination of 

impairments is not severe, or does not meet the duration requirement, the claimant is 

not disabled. If the impairment is severe, the analysis proceeds to step three.

At step three, the ALJ must determine whether the severity of the claimant's 

impairment or combination of impairments meets or medically equals the severity of 

an impairment listed in the Act's implementing regulations.5Id. § 416.920(a)(4)(iii). 

If so, the claimant is disabled and receives benefits. If not, the analysis proceeds to 

step four.

At step four, the ALJ must determine whether the claimant's residual functional 

capacity (“RFC”)—that is, the most he can do despite his physical and mental 

limitations—is sufficient for the claimant to perform his past relevant work. Id. § 

416.920(a)(4)(iv). The ALJ assesses the RFC based on all relevant evidence in the 

record. Id. §§ 416.945(a)(1), (a)(3). If the claimant can perform his past relevant work, 

he is not disabled. If not, the analysis proceeds to the fifth and final step.

At step five, the Commissioner bears the burden of proving that the claimant 

can perform other work that exists in significant numbers in the national economy, 

taking into account the claimant's RFC, age, education, and work experience. Id. § 

416.920(a)(4)(v); see also Id. § 416.920(g). The ALJ usually meets this burden 

through the testimony of a vocational expert, who assesses the employment potential 

of a hypothetical individual with the claimant's physical and mental limitations that 

are supported by the record. Hill, 698 F.3d at 1161–62 (citations omitted). If the 

 

4

“Substantial gainful activity” is work activity that (1) involves significant physical or mental duties 

and (2) is performed for pay or profit. 20 C.F.R. § 416.910.

5 The relevant impairments are listed at 20 C.F.R. part 404, subpart P, appendix 1.

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claimant is able to perform other available work, he is not disabled. If the claimant 

cannot make an adjustment to other work, he is disabled. Id. § 416.920(a)(4)(v).

B. The ALJ’s Disability Determination

On April 10, 2014, the ALJ issued a written decision concluding that Zaragoza 

was not disabled within the meaning of the Act. (AR 37.) At step one, the ALJ found 

that Zaragoza had not engaged in substantial gainful activity since December 29, 

2011, the application date. (AR 31.)

At step two, the ALJ found that Zaragoza had two severe impairments—

“schizophrenia” and “history of polysubstance abuse.” (Id.) The ALJ relied on 

objective medical evidence and the opinions of the physicians to establish the severity 

of the impairments. (Id.)

At step three, the ALJ determined that Zaragoza’s impairments, alone and in 

combination, did not meet or medically equal the severity of one of the listed 

impairments in 20 C.F.R. part 404, subpart P, appendix 1. (Id.) Of the listings in the 

appendix, the ALJ considered the criteria in “paragraph B” of listing 12.03—which 

covers schizophrenic disorders—and “paragraph C” of listing 12.06—which covers 

anxiety related disorders. (AR 31–32.) The ALJ relied on treatment records, a 

psychiatric consultative examiner report, and Zaragoza’s statements about his 

condition to reach his conclusion. (AR 31.) 

At step four, the ALJ determined that Zaragoza’s RFC had no exertional 

limitations6and the following nonexertional limitations7: simple and routine tasks in 

a non-public environment; non-intense interaction with co-workers and supervisors;

 

6 Exertional limitations are limitations on a person’s ability to meet the “strength demands of jobs,” 

including limitations on “sitting, standing, walking, lifting, carrying, pushing, and pulling.” 20 

C.F.R. § 416.969(b).

7 Nonexertional limitations are limitations, other than strength demands, that limit a person’s ability 

to meet the demands of jobs. Such limitations may include difficulty maintaining attention or

concentrating, and difficulty understanding or remembering detailed instructions. 20 C.F.R. § 

416.969(c).

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work that does not require hypervigilance; work that does not make him responsible 

for the safety of others; and work that does not include hazardous machinery and 

unprotected heights. (AR 32.)

In determining the above RFC, the ALJ considered statements by Zaragoza

about his symptoms, the objective medical evidence, and an opinion from the state 

examining physician. The ALJ applied the required two-step process to determine the 

credibility of Zaragoza’s statements about his symptoms.8(Id.) First, the ALJ 

concluded that Zaragoza’s medical impairments could reasonably be expected to 

cause the alleged symptoms. (AR 34.) Second, the ALJ evaluated the intensity, 

persistence, and limiting effects of Zaragoza’s symptoms. (Id.) Although the ALJ 

found Zaragoza’s testimony to be credible for part one of the analysis, the ALJ held 

that the “claimant’s statements concerning the intensity, persistence and limiting 

effects of these symptoms are not entirely credible for the reasons explained in this 

decision.” (Id.) 

After discussing Zaragoza’s testimony, the ALJ assigned weight to each of the 

physician’s opinions. The ALJ gave little to no weight to the opinion of Zaragoza’s 

treating physician, Dr. Khatami, who found extreme limitations in Zaragoza’s ability 

to work. (AR 35, 295.) Instead, the ALJ gave “significant weight” to an examination 

conducted by Dr. Gregory Nicholson, a state agency physician. (AR 34–35.) Dr. 

Nicholson concluded Zaragoza had moderate limitations in his ability to work. (AR 

35.) Based on the weight given to each opinion, the ALJ determined Zaragoza’s 

limitations would not preclude him from substantial gainful activity. (AR 36.) Then, 

 

8

“To determine whether a claimant's testimony regarding subjective pain or symptoms is credible, 

an ALJ must perform a two-step analysis.” Lingenfelter, 504 F.3d at 1035–36. “First, the ALJ must 

determine whether the claimant has presented objective medical evidence of an underlying 

impairment ‘which could reasonably be expected to produce the pain or other symptoms alleged.’ ” 

Id. at 1036. Second, if the first step is satisfied, “the ALJ can reject the claimant's testimony about 

the severity of her symptoms only by offering specific, clear and convincing reasons for doing so.” 

Id.

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because Zaragoza had no past relevant work, the ALJ proceeded to step five. (Id.)

At step five, a vocational expert testified that an individual with Zaragoza’s age, 

education, work experience, and RFC could work as a packager, an inspector, or an 

assembler. (AR 36–37.) Based on this testimony, the ALJ determined that Zaragoza 

was capable of making a successful adjustment to available work in the national 

economy, and thus was “not disabled” under the meaning of the Act. (AR 37.)

DISCUSSION

Zaragoza challenges the ALJ’s decision on the grounds that the ALJ legally 

erred by giving little to no weight to the opinion of Dr. Khatami. The Commissioner 

contends that the ALJ properly evaluated the opinion of Dr. Khatami. The parties also 

dispute the appropriate remedy, should the Court find the ALJ committed legal error.

A. Legal Standard for Treating Physicians

A treating doctor’s opinion is entitled to greater weight than the opinion of 

doctors who do not treat the claimant. Lester v. Chater, 81 F.3d 821, 830 (9th Cir. 

1995) (citation omitted). “The rationale for giving greater weight to a treating 

physician's opinion is that he is employed to cure and has a greater opportunity to 

know and observe the patient as an individual.” Sprague v. Bowen, 812 F.2d 1226, 

1230 (9th Cir. 1987) (citation omitted).

The degree of deference afforded to a treating physician's opinion depends 

partly upon whether, and to what extent, that opinion is contradicted. An 

uncontradicted opinion by a treating doctor is given “controlling weight” if it is “wellsupported by medically acceptable clinical and laboratory techniques” and is “not 

inconsistent with the other substantial evidence in [the] case record.” 20 C.F.R. § 

416.927(c)(2). A contradicted opinion by a treating doctor is still owed deference and 

will often be “entitled to the greatest weight . . . even if it does not meet the test for 

controlling weight.” Garrison, 759 F.3d at 1012 (quoting Orn v. Astrue, 495 F.3d 625, 

633 (9th Cir. 2007)).

Where a treating doctor’s opinion is contradicted by another doctor, an ALJ 

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may only reject the treating doctor’s opinion with “specific and legitimate reasons that 

are supported by substantial evidence.” Garrison, 759 F.3d at 1012 (quoting Ryan, 

528 F.3d at 1198). An ALJ satisfies the substantial evidence requirement by “setting 

out a detailed and thorough summary of the facts and conflicting clinical evidence, 

stating his interpretation thereof, and making findings.” Id. (quoting Reddick v. 

Chater, 157 F.3d 715, 725 (9th Cir. 1998)). “The ALJ must do more than state 

conclusions. He must set forth his own interpretations and explain why they, rather 

than the doctors’, are correct.” Reddick, 157 F.3d at 725.

B. Dr. Khatami’s Opinion

Dr. Khatami began treating Zaragoza in early November 2011. (AR 345.) 

Zaragoza visited Khatami seven times over the span of eight months. (AR 331–45.)

His last visit occurred on June 12, 2012. (AR 331.) At the initial visit, Khatami 

performed a MSE and determined that Zaragoza had exhibited paranoia and thought 

blocking. (AR 345.) Khatami assessed Zaragoza’s GAF score to be 45, indicating a 

serious impairment in social, occupational or school functioning. (Id.)

Throughout subsequent treatment sessions, Khatami repeatedly noted that 

Zaragoza was responding to internal stimuli and talking to himself in the hallways and 

during interviews. (AR 335, 337, 341, 343.) On several reports, Khatami listed that 

Zaragoza had poor insight into his illness, and that he denied having delusions. (AR 

332, 333, 335, 337, 341, 343.) Khatami also stated that Zaragoza exhibited prominent 

poverty of thought and speech. (Id.)

In March and April of 2012, Khatami noted some improvement in Zaragoza. 

(AR 335, 337.) He stated that Zaragoza was “observed to be responding to internal 

stimuli on several occasions,” but that it was “less than previous visits.” (Id.) In 

Zaragoza’s final visit on June 12, 2012, Khatami assessed a GAF score of 40.9(AR 

 

9 A GAF between 31 and 40 indicates “some impairment in reality testing or communication (e.g., 

speech is at times illogical, obscure, or irrelevant) or major impairment in several areas, such as work 

or school, family relations, judgment, thinking or mood (e.g., depressed person avoids friends, 

neglects family, and is unable to work).” DSM-IV at 32.

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332.)

On June 12, 2012, Khatami completed a mental impairment questionnaire 

(“Questionnaire”) that concluded Zaragoza had marked and extreme functional 

limitations in his ability to work in a regular work setting. (AR 293–98.) Khatami 

supported this conclusion with clinical findings, including his assessment that

Zaragoza had “difficulty with sustained attention [and] concentration, poor problem 

solving skills, persistent paranoid ideations, limited social skills, [and] 

communication.” (AR 293.) Khatami found that due to Zaragoza’s cognitive 

impairment, he could not “sustain attention adequately and cannot communicate 

appropriately to function in a work environment.” (AR 295.) Khatami also wrote that 

Zaragoza’s “paranoia and delusions make it difficult for him to interact appropriately 

with peers and public.” (AR 296.) As a result of his condition, Khatami estimated that 

Zaragoza would miss more than four work days per month. (AR 298.) The ALJ largely 

rejected Khatami’s opinion. (AR 35.)

C. The ALJ’s Decision to Reject Khatami’s Opinion is not Supported by 

Substantial Evidence

The ALJ gave five reasons for rejecting Khatami’s opinion. (AR 35.) First, the 

ALJ wrote that Khatami did not provide an explanation for his assessment, did not 

propose any specific functional limitations that would prevent Zaragoza from 

working, and did not provide an opinion on what Zaragoza could still do despite his 

limitations. (Id.) Second, the ALJ stated that Khatami’s opinion was not supported by 

medically acceptable clinical or diagnostic findings. (Id.) Third, the ALJ asserted that 

the opinion was inconsistent with Dr. Nicholson’s examination on April 27, 2012, and 

with the medical record as a whole. (Id.) Fourth, the ALJ asserted that the opinion was 

contradicted by Zaragoza’s admitted daily activities. (Id.) Finally, the ALJ argued that 

Zaragoza was responding positively to his treatment. (Id.)

The Court finds that none of the reasons proffered by the ALJ constitute specific 

and legitimate reasons supported by substantial evidence.

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First, the ALJ’s argument that Khatami’s assessment was not explained and was 

incomplete is not supported by the record. In the Questionnaire, Khatami provided 

multiple reasons why Zaragoza had functional limitations that would prevent him 

from working in a competitive environment, including “difficulty with sustained 

attention [and] concentration, poor problem solving skills, persistent paranoid 

ideations, limited social skills, [and] communication.” (AR 293.) These reasons were 

not unsupported conjecture; they were cited as clinical findings. Khatami also wrote 

that Zaragoza would not be able to function in a work environment because he could 

not “sustain attention adequately [or] communicate appropriately.” (AR 295.) Given 

this documentation, the ALJ’s assertion that Khatami did not explain his assessment 

is belied by the record.

The ALJ is correct that Khatami did not state what Zaragoza could still do, but 

as Zaragoza points out, there is no legal rule requiring a treating physician to assess a 

patient’s ability to work specific jobs for that physician’s opinion to receive deference. 

Thus, the only thing the ALJ has put forward are conclusory assertions regarding the 

insufficiency of Khatami’s opinion. This does not meet the ALJ’s obligation to discuss 

the evidence and state the reasons for his determination. See Reddick, 157 F.3d at 725.

Therefore, the ALJ’s unsupported assertion regarding the lack of explanation 

underpinning Khatami’s opinion is not a legally sufficient reason to reject Khatami’s 

opinion.

Second, the ALJ’s argument that Khatami’s opinion is not supported by 

medically acceptable or clinical findings is conclusory and simply incorrect. “The ALJ 

must do more than state conclusions. He must set forth his own interpretations and 

explain why they, rather than the doctors’, are correct.” Reddick, 157 F.3d at 725. The 

ALJ claims Khatami primarily summarized Zaragoza’s complaints. (AR 35.) That is 

not the case. Khatami’s progress reports contain medically acceptable clinical findings 

that support his assessment. He diagnosed Zaragoza’s condition, performed multiple 

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MSEs,10 assessed Zaragoza’s GAF, and took notes evaluating Zaragoza’s condition at 

each of their treatment sessions. (AR 331–46.) Further, the ALJ provided no support 

for how MSEs, GAF scores, and treatment notes do not meet medically acceptable 

clinical or diagnostic findings. Thus, the ALJ’s conclusory assertions on this point are

not a legally sufficient reason to reject Khatami’s opinion.

Third, the ALJ adopted an overly narrow view of the medical record to support 

his conclusion that Khatami’s opinion is inconsistent with that record. An ALJ cannot 

ignore contrary evidence in the record when coming to his conclusion. Meuser v. 

Colvin, 838 F.3d 905, 912 (7th Cir. 2016) (per curiam). “Cherry-picking” is especially 

troublesome when an individual has a mental issue because “a person who suffers 

from a mental illness will have better days and worse days, so a snapshot of any single 

moment says little about [his] overall condition.” Id. (quoting Punzio v. Astrue, 630 

F.3d 704, 710 (7th Cir. 2011)). The ALJ gave Dr. Nicholson’s opinion “significant 

weight” because it was consistent with “the medical records as a whole,” and gave 

Khatami’s opinion “less weight” because it was “inconsistent with the objective 

medical evidence.” (AR 35–36.) However, the ALJ did not acknowledge the totality 

of the objective medical evidence presented. At several points in his decision, the ALJ 

dismissed low GAF scores given by Zaragoza’s treating physicians and instead relied 

on the claimant’s testimony where he denied having adverse effects and suicidal 

ideation. (AR 34–35.) This was improper because the medical record provides 

substantial evidence to support Khatami’s clinical findings that Zaragoza had poor 

insight into his own condition. A progress note from October 29, 2012 is especially 

telling—at that session, Zaragoza both acknowledged and denied outright that he was 

hearing voices. (E.g., AR 393.) 

Additionally, the ALJ glossed over unfavorable portions of Dr. Nicholson’s 

 

10 The MSE is a structured framework used by mental health professionals to observe and describe 

a patient’s psychological functioning at a given point in time. See Paula T. Trzapacz & Robert W. 

Baker, The Psychiatric Mental Status Examination (1993).

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examination. The ALJ did not mention the following findings in Dr. Nicholson’s 

exam: Zaragoza stated his mother had to cook for him; Zaragoza could not spell 

“world” backwards when asked to do so; Zaragoza’s mother said she had to pay him 

to shower; and Zaragoza responded “you would not get any change back” when asked 

how much change there would be if two oranges costing ten cents each were 

purchased with a dollar. (AR 286–87.) Presumably, these findings were part of the 

reason why Dr. Nicholson gave Zaragoza a GAF score of 40. 

Further, while the ALJ acknowledged that Dr. Nicholson gave Zaragoza a GAF 

score of 40, elsewhere in his opinion the ALJ dismissed the score’s significance 

stating it was “not consistent with the findings in the medical report because a low 

GAF score indicates suicidal ideation . . . [and] claimant denied having suicidal 

ideation.” (AR 34–35.) The key point, however, is that the findings in the medical 

record actually refute Zaragoza’s denial. On October 7, 2012, Zaragoza was seen 

hitting himself in the head. (AR 451.) Ten days later he was “expressing auditory 

hallucinations which were . . . telling him to hurt himself and kill himself.” (AR 414.) 

On October 20, 2012, he was quoted as saying “the voices are telling me to hurt myself 

and hurt other people.” (AR 398.) Thereafter, on November 5, 2012, he was 

readmitted to the hospital for cutting himself. (AR 367.) By failing to consider the 

record as a whole, the ALJ found inconsistencies that were not, in fact, 

inconsistencies. Thus, the ALJ’s assertion that Khatami’s opinion was inconsistent 

with the record is not a legally sufficient reason to reject that opinion. 

Fourth, the ALJ’s suggestion that Zaragoza’s ability to carry out certain daily 

activities undermines Khatami’s opinion is unconvincing. Working eight hours a day 

in a competitive environment is not easily comparable to activities of daily living. See 

Fair v. Bowen, 885 F.2d 597, 603 (9th Cir. 1989) (“[M]any home activities are not 

easily transferable to what may be the more grueling environment of the workplace, 

where it might be impossible to periodically rest or take medication.”). Only where a 

claimant’s level of daily activity is inconsistent with the alleged limitations can those 

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activities be treated as evidence of an ability to work. See Reddick, 157 F.3d at 722.

On March 7, 2012, Zaragoza filled out an Adult Function Report (“AFR”). (AR 

197–204.) The ALJ relied on specific statements in the AFR to support his RFC 

determination of “moderate limitations.” In his analysis, the ALJ pointed out that

Zaragoza stated he can cook eggs and hot dogs, he can dress and bathe himself, he can 

go out on his own, and he can handle his own bills and cash appropriately. (AR 33.) 

However, taken as a whole, the record and the AFR paint a picture of an individual 

who is significantly less functional than the ALJ suggests. In the AFR, Zaragoza stated 

that his mom cooks for him because he does not understand that he cannot eat burnt 

food. (AR 199.) He wrote that he only wears two outfits, and that he showers twice a 

week only because his mother insists. (AR 198.) Even Dr. Nicholson reported that 

Zaragoza’s mother had to pay him fifty cents to shower and brush his teeth. (AR 284.) 

Zaragoza also stated in the AFR that he can only go out by himself if the destination 

is close to home (“like 5 minutes”), otherwise he needs his mother with him. (AR 

200.) Zaragoza also stated that he does not “understand the value of money or how to 

handle it.”11 (Id.) Thus, in reaching his conclusion, the ALJ cherry-picked evidence to 

portray Zaragoza as more functional than a reading of the entire record shows. 

Moreover, the ALJ provided no support for why Zaragoza’s alleged daily activities 

are relevant to his ability to work. On this record, the Court finds that Zaragoza’s 

ability to engage in certain daily activities is not a legally sufficient reason to reject 

Khatami’s opinion.

Finally, the ALJ’s contention that Khatami’s opinion deserves less weight 

because Zaragoza has responded to medication is unavailing. Improvement must be 

viewed in relation to the “overall diagnostic picture.” See Holohan v. Massanari, 246 

F.3d 1195, 1205 (9th Cir. 2001) (holding that “some improvement does not mean that 

the person’s impairments no longer seriously affect his ability to function in a 

 

11 Dr. Nicholson’s exam supports this statement because he noted Zaragoza’s failure in making 

change for a dollar. (AR 287.)

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workplace”). “Occasional symptom-free periods—and even the sporadic ability to 

work—are not inconsistent with disability.” E.g., Lester, 81 F.3d at 833.

Khatami filled out the Questionnaire on June 12, 2012. (AR 298.) The ALJ 

correctly noted that Zaragoza’s condition had been improving at the time of Khatami’s 

assessment. But after three more months of continued improvement, the record 

indicates that Zaragoza’s condition declined in early October 2012. (AR 451–52.) 

Zaragoza spent the rest of October and the first half of November 2012 in the hospital 

receiving treatment. (AR 367–452.) Zaragoza was discharged on November 15, 2012, 

and has not since been hospitalized.

Despite Zaragoza’s lack of hospitalization, all four physicians who treated 

Zaragoza in 2013 and 2014 never gave him a GAF score higher than 48. (AR 309–

18.) Those GAF scores are consistent with the GAF scores assessed by Khatami 

during his treatment sessions. (AR 332, 343.) Medication can help an individual 

without enabling him to participate in a competitive work environment. See Wright 

v. Astrue, 624 F. Supp. 2d 1095, 1109 (N.D. Cal. 2008) (holding that a plaintiff can 

make great improvement after taking his medication, while still remaining limited in 

important areas of function). When considered in relation to the overall diagnostic 

picture, Zaragoza’s improvement is not a legally sufficient reason to reject Khatami’s 

opinion.

* * *

In sum, the Court finds the ALJ did not provide specific and legitimate reasons 

supported by substantial evidence to reject Khatami’s opinion. Thus, the ALJ 

committed legal error.

D. Harmless Error Analysis

Having concluded the ALJ erred in giving little to no weight to Khatami’s 

opinion, the Court must now determine whether such error was harmless. “[A]n ALJ's 

error is harmless where it is ‘inconsequential to the ultimate nondisability 

determination.’” Molina v. Astrue, 674 F.3d 1104, 1115 (9th Cir. 2012)

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(quoting Carmickle v. Comm’r Soc. Sec. Admin., 533 F.3d 1155, 1162 (9th Cir. 

2008)). The court assesses whether an error is harmless by “look[ing] at the record as 

a whole to determine whether the error alters the outcome of the case.” Id.

Here, the ALJ’s error was not harmless. In step three of the five-step disability 

evaluation, the ALJ did not consider Khatami’s findings of marked and extreme 

functional limitations in his analysis. Step three requires the ALJ to analyze 

Zaragoza’s impairment—schizophrenia—against a list of factors outlined in 20 C.F.R. 

part 404, subpart P, appendix 1. The factors for schizophrenia listed in “paragraph B” 

of section 12.03 would be met by an individual with “marked” and “extreme”

limitations. Khatami’s opinion, if credited, creates the possibility of finding Zaragoza 

disabled at step three. Additionally, in determining Zaragoza’s RFC, the ALJ 

incorrectly placed significant weight on Dr. Nicholson’s diagnosis of “moderate 

limitations,” while ignoring Khatami’s diagnosis of “marked” and “extreme”

limitations. This led to an RFC assessment that overstated Zaragoza’s ability to work,

and in turn, affected the Vocational Expert’s testimony about available jobs that 

Zaragoza could perform. Thus, the ALJ’s errors influenced the ultimate disability 

determination. Accordingly, the Court finds the ALJ committed harmful legal error.

APPROPRIATE REMEDY

The parties disagree over the proper remedy should the Court find the ALJ 

committed harmful legal error. Zaragoza urges the Court to remand for an immediate 

award of benefits. He contends that the record has been fully developed, and that under 

the “credit as true” rule, crediting Khatami’s opinion compels a finding that Zaragoza 

is disabled under the meaning of the Act. (Pl.’s Mot. Summ. J. 13.) The Commissioner 

argues that should the Court overturn the agency’s decision, the correct approach is to 

remand for further proceedings. The Commissioner states that there is conflicting and 

ambiguous evidence that must be resolved before a finding of disability under the 

“credit as true” rule can be made. (Def.’s Mot. Summ. J. 10–11.) The Court agrees 

that remanding for further proceedings is the proper course.

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“The proper course, except in rare circumstances, is to remand to the agency 

for additional investigation or explanation.” Hill, 698 F.3d at 1162 (quoting Benecke

v. Barnhart, 379 F.3d 587, 595 (9th Cir. 2004)). When an ALJ makes a legal error, 

but there are ambiguities and outstanding issues in the record, the proper approach is 

to remand for further proceedings, not to apply the “credit as true” rule.12 See 

Treichler, 775 F.3d at 1105.

In this case, the Court finds there are gaps in the record concerning the proper 

weight to give to Khatami’s opinion. The ALJ did not adequately assess Khatami’s 

opinion when determining whether or not to give it controlling weight. The ALJ made 

a blanket statement claiming Khatami “did not provide medically acceptable clinical 

or diagnostic findings,” but provided no evidence to support that statement. The ALJ 

also ignored the multiple MSEs Khatami conducted in his treatment sessions with 

Zaragoza that indicated significant functional limitations. Even when a treating 

physician’s opinion does not meet the criteria for controlling weight, the ALJ must 

assess the opinion using the factors outlined in 20 C.F.R. §§ 416.927(c)(2)-(6). These 

factors include: the length of the treatment relationship and the frequency of 

examination, the extent to which the opinion is supported by medical signs and 

laboratory findings, the consistency of the opinion with the record as a whole, and 

whether or not the treating source is a specialist regarding the issue in question. Id. In 

his decision, the ALJ did not mention, let alone analyze, any of these factors when he 

decided to give Khatami’s opinion “less weight.” (AR 35.) A contradicted opinion by 

a treating doctor is still owed deference and will often be “entitled to the greatest 

weight . . . even if it does not meet the test for controlling weight.” Garrison, 759 F.3d 

at 1012 (quoting Orn, 495 F.3d at 633).

 

12 An immediate award for benefits under the “credit as true” rule is appropriate if three requirements 

are met: “(1) the ALJ failed to provide legally sufficient reasons for rejecting the evidence; (2) there 

are no outstanding issues that must be resolved before a determination of disability can be made; and 

(3) it is clear from the record that the ALJ would be required to find the claimant disabled were such 

evidence credited.” E.g., Benecke, 379 F.3d at 593.

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In sum, the Court finds there are gaps in the record concerning the weight to 

ascribe to Khatami’s opinion. These gaps must be filled before an accurate disability 

determination can be made. Thus, the Court remands this case to the ALJ for further 

proceedings. 

CONCLUSION AND ORDER

For the foregoing reasons, the Court finds that the ALJ legally erred when he 

rejected the opinion of Dr. Khatami. The Court also finds that there are gaps in the 

record such that there are substantial issues that have not been resolved. Accordingly, 

the Court REVERSES the Commissioner’s decision and REMANDS the case for 

further administrative proceedings consistent with this opinion. On remand the ALJ 

must (1) adhere to the treating physician rule when determining the proper weight to 

assign Khatami’s opinion, and analyze the relevant factors if the opinion is not given 

controlling weight, and (2) re-evaluate step three of the five-step disability test with 

Khatami’s opinion included in the analysis. Plaintiff’s Motion for Summary Judgment 

is GRANTED IN PART (ECF No. 12) and the Commissioner’s Cross-Motion for 

Summary Judgment is DENIED (ECF No. 15). 

IT IS SO ORDERED.

DATED: July 12, 2017

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