FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LEOPOLDO N. LEON,

Plaintiff-Appellant,

v.

NANCY A. BERRYHILL, Acting

Commissioner Social Security,

Defendant-Appellee.

No. 15-15277

D.C. No.

2:14-cv-00093-

DGC

ORDER AND

AMENDED

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

Amended January 25, 2018

*

 The panel unanimously concludes this case is suitable for decision

without oral argument. See Fed. R. App. P. 34(a)(2).
2 LEON V. BERRYHILL

Before: J. Clifford Wallace and Milan D. Smith, Jr.,

Circuit Judges, and Ralph R. Erickson,** District Judge.

Order;

Opinion by Judge Wallace

SUMMARY***

Social Security

Amending the opinion filed on November 7, 2017, 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. 

** The Honorable Ralph R. Erickson, United States District Judge for

the District of North Dakota, sitting by designation.

*** 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

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.

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 because the ALJ relied on Dr.

McLean’s opinion in discrediting claimant’s fatigue

testimony and the record was not developed thoroughly on

the issue of claimant’s fatigue, claimant should be allowed to

cross-examine the Commissioner’s medical consultants on

the sole issue of his fatigue.
4 LEON V. BERRYHILL

COUNSEL

Eric G. Slepian, Phoenix, Arizona, for Plaintiff-Appellant.

Erin Highland and Jordan D. Goddard, Assistant Regional

Counsel; Mathew W. Pile, Acting Regional Chief Counsel,

Seattle Region X; Elizabeth A. Strange, First Assistant United

States Attorney; Office of the General Counsel, Social

SecurityAdministration, Seattle, Washington; for DefendantAppellee.

ORDER

The Opinion filed on November 7, 2017 is amended as

follows:

At page 12, line 18 through page 13, line 2, delete

<Accordingly, on remand Leon shall be permitted to crossexamine the Commissioner’s medical consultants, but onlyto

the extent such cross-examination concerns the issue of

Leon’s fatigue.> and replace with <Because the ALJrelied on

Dr. McLean’s opinion in discrediting Leon’s fatigue

testimony and the record has not been developed thoroughly

on the issue of Leon’s fatigue, Leon shall be allowed to crossexamine the Commissioner’s medical consultants on the sole

issue of his fatigue.>

The petition for panel rehearing is denied.
LEON V. BERRYHILL 5

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 onlywhere the administrative

law judge (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. 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
6 LEON V. BERRYHILL

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),

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,
LEON V. BERRYHILL 7

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).

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
8 LEON V. BERRYHILL

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

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.
LEON V. BERRYHILL 9

IV.

The ALJin 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

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 ALJfound 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
10 LEON V. BERRYHILL

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

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 laytestimonywas 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.
LEON V. BERRYHILL 11

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

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
12 LEON V. BERRYHILL

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.

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
LEON V. BERRYHILL 13

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

administrative proceedings are needed to make a disability

determination.

Unaided byTreichler, 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-astrue 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. Because the ALJ relied on Dr. McLean’s

opinion in discrediting Leon’s fatigue testimony and the

record has not been developed thoroughly on the issue of

Leon’s fatigue, Leon shall be allowed to cross-examine the
14 LEON V. BERRYHILL

Commissioner’s medical consultants on the sole issue of his

fatigue.

AFFIRMED in part with instructions.