# United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 9, 2008 Decided June 24, 2008

No. 07-5130

A NTONIA R OSSELLO

, ON BEHALF OF J OAQUIN R OSSELLO AND C RISTINA R OSSELLO

, A PPELLANT

v.

M ICHAEL J. A STRUE

, C OMMISSIONER OF S OCIAL S ECURITY

, A PPELLEE

Appeal from the United States District Court
for the District of Columbia (No. 01cv02694)

Jennifer Arnett argued the cause for appellant. With her
on the briefs was James Bernard

.

Fred E. Haynes , Assistant U.S. Attorney, argued the cause for appellee. With him on the brief were Jeffrey A. Taylor , U.S. Attorney, and R. Craig Lawrence , Assistant U.S. Attorney.

Before: G INSBURG , B ROWN , and K AVANAUGH

, Circuit Judges

.2

Opinion for the Court filed by Circuit Judge

K AVANAUGH

.

K AVANAUGH

, Circuit Judge : Cristina Rossello has a history of serious mental illne ss. In 1993, her father, Joaquin Rossello, applied for Social S ecurity “childhood disability”
benefits on behalf of Cristina. He asserted that Cristina has been continuously disabled since before age 22, which is the relevant statutory trigger for those benefits. In 1995, the Social Security Administration initially denied the Rossellos’ claim. The Rossellos then unsuccessfully pursued five years of administrative appeals until the agency issued its final decision denying their claim. In 2000, the Rossellos sought judicial review of the agency ’s final decision. In 2007, the District Court ultimately affirmed the agency’s decision denying Cristina benefits.

We conclude that the Social Security Administration’s denial of benefits was not suppo rted by substantial evidence.
We therefore reverse the District Court’s judgment and direct
the District Court to remand th e case to the Social Security Administration. Given the amount of time that has passed
since the Rossellos’ initial 1993 application for benefits, we anticipate that the District Cour t will quickly issue an order remanding the case and that the Social Security Administration then will prio ritize the matter and promptly
determine Cristina’s entitleme nt to disability benefits.

I

The Rossello family’s journey through the Social Security Administration’s hearing process began more than 15 years ago. To appreciate the Rossellos’ story, one must begin with an understanding of th e Social Security disabilitybenefits scheme.3

One way for disabled adul ts to obtain government benefits is to qualify based on their parents’ status in the Social Security system. Under Title II of the So cial Security Act, a disabled adult like Cristin a whose parent is entitled to Social Security retirement bene fits may herself receive Social Security childhood disability benefits if she has been continuously disabled since be fore the age of 22 and is dependent on her parent. 42 U.S.C. § 402(d)(1)(B).

The key issue before the Soci al Security Administration
was whether Cristina Rossello has been continuously “disabled” since before the age of 22 – that is, whether she has been unable since turning 22 “to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.” § 423(d)(1)(A). To determine whether an individual has been continuously disabled, the Social Security Administration first considers
whether the individual’s work activity since turning 22, if any, constitutes “substantial ga inful activity”; if so, that disqualifies the claimant from benefits. 20 C.F.R. § 404.1520(a)(4)(i); see also § 404.1571 (“If y ou are able to engage in substantial gainful activity, we will find that you are not disabled.”). The Social Security Administration then considers the medical severity of the individual’s impairment and whether the claimant has suffered from that impairment since before turning 22, among other factors. § 404.1520(a)(4)(ii)-(v); see also § 404.1520a (relating to mental impairments).

The Rossellos’ odyssey began in February 1993 when Joaquin Rossello applied for Social Security retirement benefits. At the same time, Joaquin also sought childhood disability benefits on behalf of his daughter Cristina, who was then 28 years old and had a history of debilitating mental illness. Joaquin submitted extensive medical evidence4

showing that Cristina had been diagnosed with chronic mental illness and had been hospitalized multiple times.

In 1995, the Social Security Administration denied
Cristina’s claim for benefits because the Rossellos had not submitted medical evidence establishing that Cristina’s condition began before she turned 22 in 1986, as required by
law.

The Rossellos appealed the denial to an administrative law judge and submitted additional medical evidence, including a doctor’s certification that Cristina had been diagnosed with and treated for mental disorders from 1980 to 1983 (when she was 16 to 19 years old) and that she had been institutionalized for part of that time. The ALJ nonetheless
denied Cristina’s claim. The AL J ruled that the record did not support Cristina’s claim that she was disabled before turning
22 because the medical certificate describing her treatment
from 1980 to 1983 did not constitute medical evidence of Cristina’s condition during that time.

The Rossellos sought relief fr om the Social Security Administration’s Appeals C ouncil, which exercises discretionary review of ALJ d ecisions. 20 C.F.R. §§ 404.968, 404.970. The Appeals Council granted review but explained that Cristina’s earnings in 1986 and 1987 (when she was 22 and 23 years old) suggested sh e had performed substantial gainful activity since turning 22 – meaning she could not meet the statutory requirement that a claimant be continuously disabled since before the age of 22. The Appeals Council
noted that Cristina earned an average of $334.42 per month in 1986 and $587.04 per month in 1987. Under the Social Security regulations, average m onthly earnings of more than $300 in 1986 or 1987 create a presum ption that an individual “engaged in substantial gainfu l activity.” § 404.1574(b)(2)(i)5

& tbl.1. Average monthly earnings below $190 create a presumption that an individual did not engage in substantial gainful activity. See SSR 83-33, Titles II and XVI: Determining Whether Work is Substantial Gainful Activity– Employees, 1983 WL 31255, at *2 (Soc. Sec. Admin. Nov. 30, 1982). As a result of Cristin a’s monthly earnings in 1986 and 1987, it appeared to the A ppeals Council th at Cristina

was not continuously disabled since before the age of 22 and therefore did not qualify for childhood disability benefits. See 20 C.F.R. § 404.1520(a)(4)(i).

Before making a final ruling, the Appeals Council
allowed the Rossellos to submit re buttal evidence to show that Cristina’s earnings in 1986 a nd 1987 were “subsidized” – meaning that the work was done under special conditions because of Cristina’s impairment and that her earnings exceeded the reasonable value of her work. § 404.1574(a)(2). Any portion of wages that is considered a subsidy does not count as “earnings” in determ ining whether an individual performed substantial gainful activity. See id. If Cristina’s earnings in 1986 and 1987 were subsidized and her average monthly unsubsidized earnings fell below the $300 threshold in the Social Security regulati ons, then the presumption that she had engaged in substantia l gainful activity would drop

out.

Under the Social Security regulations, subsidization occurs, for example, “when a person with a serious impairment does simple tasks under close and continuous supervision.” Id. Circumstances in dicating a “strong possibility” that earnings are su bsidized include that “the employee receives unusual help from others in doing the work,” that there “appears to be a marked discrepancy between the amount of pay and the value of the services,” or that “[m]ental impairment is involved.” SSR 83-33, 1983 WL6

31255, at *4. As the Social Security Administration has explained, “An employer may, because of a benevolent attitude toward a handicappe d individual, subsidize the employee’s earnings by paying more in wages than the
reasonable value of the actual se rvices performed. When this occurs, the excess will be regard ed as a subsidy rather than earnings.” Id. at *3.

The Rossellos produced signifi cant, uncontested evidence that Cristina’s earnings were subsidized. They submitted multiple affidavits describing Cristina’s jobs in 1986 and 1987 as provided “by the gene rosity and compassion of family or acquaintances that would not have hired her
otherwise because of her serious mental limitations.” Affidavit of Maria Antonia Rossello (July 19, 2000), Joint Appendix (“J.A.”) 153. A ccording to the Rossellos, Cristina’s primary job in 1986 a nd 1987 consisted of working in an office for her uncle (with whom she was living at the time). Cristina’s uncle stated that Cristina was “not productive and performed onl y basic tasks like stuffing envelopes and elementary clerical work.” Affidavit of Jorge Rossello (June 16, 2000), J.A. 158; see also id. (“had she not been my niece, we would not have hired her”). Cristina’s uncle offered her the job because he “could provide her with a sheltered environment where she could be supervised all the
time.” Id.

In its final ruling, the A ppeals Council nonetheless denied the Rossellos’ app eal. Relying on 20 C.F.R. § 404.1574(b), the Appeals Council ruled that Cristina’s average monthly earnings of more than $300 in 1986 and 1987 indicated that she had pe rformed substantial gainful activity since turning 22. The Appeals Council never expressly mentioned subsidizat ion or analyzed Cristina’s earnings under the relevant re gulations; instead, it simply7

stated that “there is no evid ence to indicate that any of [Cristina’s] work activity was performed in a . . . special environment.” Appeals Council Decision (Sept. 21, 2000), J.A. 32. The Appeals Council held that because Cristina had performed substantial gainful activity since turning 22, she
therefore was not disabled unde r the Act and wa s ineligible for childhood disability benef its. Having so concluded, the Appeals Council had no occasion to reach the ALJ’s determination that Cristina’s impairment did not begin before
she turned 22. See 20 C.F.R. § 404.1520(a)(4) (specifying steps for determining whether claimant is “disabled”).

Under the Social Security Administration’s regulations, the Appeals Council decision re presented the agency’s final
decision on Cristina’s claim. See § 404.981 (“The Appeals
Council’s decision . . . is bindi ng unless you or another party
file an action in Federal district court . . . .”).

The Rossellos sought review of the Social Security
Administration’s decision in U.S. District Court under 42U.S.C. § 405(g). The Rossellos and the agency filed crossmotions for summary reversal a nd affirmance of the decision. The District Court ultimately affirmed the agency’s decision.
Rossello v. Barnhart , 473 F. Supp. 2d 72 (D.D.C. 2007). The
District Court found “substant ial evidence to support” the Appeals Council’s conclusion th at Cristina had engaged in substantial gainful activity, that the contrary evidence submitted by the Rossellos “was limited in nature,” and that “nothing indicated that Ms. Rossello’s earnings were subsidized or that her work conditions were particularly unique.” Id. at 75.

The Rossellos appealed to this Court. We have jurisdiction under 28 U.S.C. § 1291 ; we review the District Court’s judgment de novo and consider whether the Social8

Security Administration’s fi nal decision is “based on
substantial evidence in the reco rd and correctly applies the relevant legal standards.” Butler v. Barnhart , 353 F.3d 992, 999 (D.C. Cir. 2004); see also 42 U.S.C. § 405(g).

II

The Rossellos argue that the record does not contain substantial evidence to justify the Appeals Council’s conclusion that Cristina engaged in substantial gainful activity in 1986 and 1987. We agr ee with the Rossellos.

Substantial-evidence review is highly deferential to the agency fact-finder, requiring only “such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” Pierce v. Underwood , 487 U.S. 552, 565 (1988) (internal quotation marks omitted) . Reversal of an agency
decision under that standard is rare. But this is one of those
rare cases. Even under the defe rential, “substantial-evidence” standard of review, the App eals Council’s decision does not
pass muster.

The Appeals Council initially informed the Rossellos that it had obtained Cristina’s earnings record and was prepared to
rule that she had not been con tinuously disabled since turning 22 because her average monthly earnings in 1986 and 1987 were greater than $300, thereby triggering a presumption that she had engaged in substantial gainful activity. See 20 C.F.R. § 404.1574(b)(2)(i) & tbl.1 (monthly earnings above $300 “show that you engaged in substa ntial gainful ac tivity”). In response, the Rossellos submitted a letter and affidavits describing Cristina’s work ac tivity in 1986 and 1987. They submitted this evidence to demonstrate that Cristina’s average monthly earnings of $334.42 in 1986 and $587.04 in 1987

were “subsidized” and that he r unsubsidized earnings did not indicate substantial gainful activity.9

The Social Security Administration’s regulations provide that earnings are subsidized if the “true value” of the work, “when compared with the same or similar work done by unimpaired persons, is less than the actual amount of earnings.” § 404.1574(a)(2); see also id. (“For example, when a person with a serious impairment does simple tasks under close and continuous supervision, our determination of whether that person has done s ubstantial gainful activity will not be based only on the amou nt of the wages paid.”).
Several circumstances “indicate the strong possi bility of a subsidy,” including when “[m]ental impairment is involved,” when “the employee receives unusual help from others in doing the work,” or when ther e “appears to be a marked discrepancy between the amount of pay and the value of the services.” SSR 83-33, Titles II and XVI: Determining Whether Work is Substantial Gainful Activity–Employees, 1983 WL 31255, at *4 (Soc. S ec. Admin. Nov. 30, 1982).

Contrary to the conclusion of the Appeals Council that there was “no evidence” of a subsidy, the evidence indisputably establishes that Cristina’s work for her uncle in 1986 and 1987 – which accounts for 82 percent of her earnings during those years – was subsidized under the Social Security Administration’s re gulations. Cristina’s work involved simple tasks performe d under close supervision by her family. See Affidavit of Jorge Rossello (June 16, 2000), J.A. 158 (“she was not producti ve and performed only basic tasks,” such as “stuffing e nvelopes,” in “a sheltered
environment where she could be supervised all the time”). The evidence also shows that Cristina obtained the job through the kindness of her family and not based on merit.
See id. (“had she not been my niece, we would not have hired her because of [her] mental disability”); see also Letter from Joaquin Rossello to Social Secu rity Administration (July 18, 2000), J.A. 161 (Cristina’s work “provided her with a10

sheltered environment”). And Cristina’s uncle was “President,” “part owner,” a nd “closely involved in [the] management” of the employer that accounted for 61 percent of Cristina’s $334 monthly earni ngs in 1986 and 94 percent of her $587 monthly earnings in 1987. Affidavit of Jorge Rossello (June 16, 2000), J.A. 157.

The Appeals Council cited no evidence to undermine the only conclusion that the reco rd permits – namely, that Cristina’s earnings were subsidized.

If, as required by Social Security regulations, the Appeals Council had subtracted the amount of the subsidy from Cristina’s earnings in those ye ars, it presumably would have concluded that her average monthly earnings fell below the $300 threshold that triggers a presumption of substantial gainful activity. Indeed, becau se almost all of Cristina’s earnings appear to have been subsidized to some degree, the Appeals Council presumably wo uld have concluded that Cristina’s unsubsidized earnings fell below the $190 threshold and thus triggered a presumption that she did not engage in substantial gainful activity. See SSR 83-33, 1983 WL 31255,
at *2. 1

1 The remainder of Cristina’s earnings in 1986 came from her work at a hotel where her sister Marta was employed. The evidence suggests that Cristina’s ear nings there may also have been subsidized. Marta obtained the jo b for Cristina; Cristina’s sole, “very simple” duty was to distribute pool towels to hotel guests; and Marta “was able to directly and personally supervise” her sister. Affidavit of Marta Rossello (July 12, 2000), J.A. 155. The remainder of Cristina’s earnings in 1987 came from work for a temporary placement agency.11

We therefore agree with the Rossellos that the Social Security Administration’s de cision is not supported by
substantial evidence.

The remaining question is whether, as the Rossellos contend, we should reverse the decision outright and hold, based on the record before us, that Cristina is entitled to childhood disability benefits. Section 405 of Title 42 expressly provides that a district court may reverse the Social Security Administration’s decision rather than remand it for further proceedings. See § 405(g) (“The court shall have power to enter, upon the pleadin gs and transcript of the record, a judgment affirming, modifying, or reversing the
decision of the Commissioner of Social Security, with or without remanding the caus e for a rehearing.”).

But § 405(g) also provides that judicial review is limited
to the “ final decision of the Commissioner.” Id. (emphasis added). In this case, that “final decision” is the Appeals
Council decision. See 20 C.F.R. §§ 404.981, 404.955(a). And the Appeals Council rested the denial of benefits on a single ground: its conclusion that Cristina engaged in substantial gainful activity since turning 22. We have concluded the Appeals Council e rred, but that is not the end of the case. At a minimum, the Appeals Council still has to consider the Rossellos’ appeal from the ALJ’s conclusion that
there was insufficient evidence of Cristina’s mental impairment before age 22. See SL Communications, Inc. v.

FCC , 168 F.3d 1354, 1357 (D.C. Cir. 1999) (court has “no authority to consider” intermediate, ALJ finding that was not necessary to agency’s final decision); cf. SEC v. Chenery Corp. , 332 U.S. 194, 196 (1947) (“[A ] reviewing court . . . must judge the propriety of [agency] action solely by the grounds invoked by the agency.”); Vance v. Heckler , 757 F.2d 1324, 1325 (D.C. Cir. 1985) (rever sing and directing that12

Social Security benefits be aw arded where agency decision on
“sole issue in the case” was not supported by substantial evidence).

* * *

As a result of bureaucratic delays, the Rossellos’ case has dragged through the Social Secu rity Administ ration and the courts for more than 15 years. We reverse the District Court’s judgment and direct it to promptly remand the case to the Social Security Administration for the agency to expeditiously resolve the Rossellos’ claim for childhood disability benefits on behalf of Cristina.

So ordered.