F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

L E O P O L D O N

. L E ON ,

Plaintiff-Appellant
,

v

.

N A N C Y A. B E R

R Y H I L L , Acting Commissioner Social Security
,

Defendant-Appellee. N o. 15-15277

D.C. No. 2:14-cv-00093- DGC

ORDER AND AMENDED OPI NI ON

Appeal from the United States District Court for the District of Ariz o na David G. Campbell, District J udg e, Presiding

Submitted J a

nuary 12, 2017 * San F rancisco, California

F iled November 7, 2017 A mended J anuary

25, 2018

* T h e p an el un an im o u s ly

co n clu d es th is case is su itab le f o r d ecisio n

w ith o ut o ral arg u

m en t. S ee Fed . R. App . P . 3 4 (a)(2 ).L E ON V

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B efore: J . Clifford W allace and Milan D. Smith, J r., Circuit J udg es, and Ralph R. Erickson, * * District J udg e.

Order; Opinion by

J udg e W allace

SUMMARY * * *

Social Security

Amending th e opinion filed on November 7, 2017, the p a nel affirmed the d istrict court’s decision to r emand for further a dministrative proceeding s in a claimant’s action seeking T itle I I disability insurance b enefits under the Social Security Act; and clarified that remand to the administrative law judg e (“AL J ”) should be with an open record on the issue of w hether the claimant’s fatigue related to his capacity to undertake full time employ ment.

The “credit-as-true rule” permits, b ut does not require, a direct award of benefits on review but only where the A L J has not provided sufficient reasoning for rejecting testimony and there are no outstanding issues on wh i c h f urther proceeding s in the administrative court w ould be useful. Under these circumstances, if a c laimant’s t e s timony is credited as true, an a

ward of benefits may be ap p ropriate.

** T h e Ho n o rab le Ralp h R. Erick so n , Un ited States District J u dg e f or th e District o f

No rthDak o t a, sittin g b y

d esig n atio n

.

*** T h is su m m ary co n stitu

t es n o p art o f th e o p in io n o f th e co urt. It h as b eenp rep ared b y

co urt staf

f f o r th e co nv en i en ce o f

th e read er.L E ON V

. B E R R YH I L L 3

Treichl e r v. Comm’r o

f Soc. Sec. Admin.
, 775 F .3d 1090, 1101–02 (9th Cir. 2014).

The panel held that the district c o u r t erred in its app l i cation of the three-step credit-as-true rule, outlined in V a r ney v. Secretary o

f Health & H

uman Services
, 8 59 F .2d 1396, 1400–01 (9t h Cir. 1988), because contrary to the district court’s order, the Varney r ule did not require the court to remand for an immediate award of b enefits when the three Varney rule conditions were met.

The p anel h eld that the AL J in this case failed to consider evidence related to claimant’s claim of fatigue properly

. The panel further held that the rare c ircumstances that result in a d i r ect award of b enefits on review were not present in t h i s

case. The panel held that on remand the district c ourt should specify the scope o f its remand. The pan e l re m a n ded on an open record because there w as serious doubt as to whether claimant was in fact disabled g iven that t h e d istrict court upheld the AL J ’s other f inding s. In addit i on, the panel directed that on re m a n d because the AL J relied on Dr. McL ean’s op inion in discrediting claimant’s fatigue testimony and the record was not developed thoroug h l y on the issue of claimant’s fatigue, claimant should be allowed to

cross-ex amine the C o mmissioner’s medical consultants on the sole issue of his fatigu e.L E ON V

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COUNSEL

Eric G. Slepian, Phoenix , Ariz ona, for Plaintiff-Appellant.

Erin Hig hland and J ordan D. G oddard, Assistant Reg ional Counsel; Mathew W

. Pile, Acting Reg ional Chief Counsel, Seattle Reg ion X; Eliz abeth A. Strang e, F irst A s s i s t ant United States Attorney ; Office o f t he General Counsel, Social Security A dministration, Seattle, W as h i n g t o n ; for D efendantAppellee.

ORDER

The Opinion filed on November 7
, 2 0 1 7 is amended a s follows:

At pag e 12, line 1 8 throug h pag e 13, line 2, delete <According ly
, on remand L eon shall be permitted to crossex amine the Commissioner’s medical consultants, but only to the ex tent such cross-ex amination concerns the issue o f L eon’s f atig ue.> and r eplace with <B ecause the A L J relied on Dr. McL ean’s opinion in discrediting L e on’s fatigue testimony and the record has not been developed thoroug hly

on the issue of L eon’s fatigu e, L eon shall be a llowed to crossex amine the Commissioner’s medical consultants o n the sole issue of his fatigue.>
The petition for panel rehearing is denied.L E ON V

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OP INION

W A L L ACE, Circuit J udg e :

The credit-as-true analy sis has e v olved in our circuit over time, thus providing a challeng e f or application by the district court. The r

ule itself permits, but does not re q u i r e , a direct award of benefits on review but o n ly where the administrative law judg e (AL J ) has not prov i d e d sufficient reasoning for rejecting testimony and there are no outstanding i ssues on which f urther proceeding s 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. 2 014). Once the claimant’s testimony o n the severity of his sy mptoms is credited as true,

see Varney v

. S

ecretary of Health & Human Services.
, 859 F .2d 1396, 1400–01 (9th Cir. 1 988), then the court should “determine whether the record, take n a s a whole, leaves ‘not the slig htest un certainty as to the outcome of [ the] proceeding

. ’” Treichler
, 775 F .3d at 1 1 0 1, quoting NLRB v

. W yman-Gordo n Co

. , 3 94 U.S. 759, 766 n

. 6 ( 1969). An automatic award of benefits i n a disability benefits c ase is a

rare and p r o p hy lactic ex ception to the well-established ordinary remand rule. Id. at 1100. H ere, the petitioner argues that w e should reverse the district court’s remand a nd direct the dis t r ict court to award b enefits. W e affirm the district court but clarify the remand order.

I

.

P e t itioner L eon has a six th-g rade education and is a f o r m e r landscaper a

nd foreman. The AL J f ound he h ad developed severe impairments including deg enerative j o intL E ON V

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disease of the k

nees, deg enerative disc disease of the lumbar spine, diabetes with nephropathy
, and hy pert ension. L e on testified that he also suffered from other impairments that the AL J ultimately concluded w ere not supported by med ical evidence, including renal f a i lure, poor vision, o bstructive sleep apnea, fibromy alg ia, rheumatoid a rthritis, dep r e ssion, and anx iety

. W hile he is n ot capable of performing past work, the AL J found that L eon has the residual functional capacity to perform lig ht work as defined in 20 C.F .R. § 404.1567(b), with some phy sical limitations. At issue in this ap p e al is L eon’s alleg ed fatigue due to a combination of i m p airments and medications, and wh e t h er t he ex tent of the fatigue is so

ex treme that it would prevent h im f rom undertaking full time employ ment in a job identified by a vocational ex pert before the ag ency

.

I I

.

L eon filed a Title I I application for d isability insurance benefits on September 27, 2 0 10. This f o llowed prior applications in 2009 that were denied o n F ebruary 5, 2010, and the period of disability n ow at i s s u e beg an on F ebruary 6, 2010. W e do not review the appli c a t i o n s denied prior to that date. After initial denial and reconsi d e r a t ion, L e on appeared and testified at a hearing on J une 11, 2012, and the AL J issued its decision shortly thereafter, finding L eon was not disabled under sections 216(i) and 223(d) of the Social Security Act.

L eon appeals from the district court’s order r emanding for further proceeding s the final decision o f the Commissioner o f Social Security

. A lthoug h the district cou r t remanded to the ag ency for further p roceeding s, L eon may appeal from t h at order because the relief requested, a d irect award of benefits,L E ON V

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was not g r a

nted. See F

o rney v. Apfel
, 524 U.S. 266, 271 (1998). W e have jurisdiction under 28 U.S.C. § 1291, and we review the decision to remand for further proceeding s for abuse of discretion. Treichl er , 7 7 5 F .3d at 1100. All other issues are reviewed de n ovo. Garrison v. Colvin
, 759 F .3d 995, 1010 (9th Cir. 2014).

I I I

.

W h en the A L J denies benefits and the c ourt finds err o r, the court ordinarily must r emand to the ag ency f o r f u r ther proceeding s before directing an award of benefits. Treichler
, 775 F .3d at 1099. W here an AL J improperly rejec t s a claimant’s pain testimony as incr e d i ble without providing leg ally sufficient reasons, the reviewing court may g r ant a direct award of benefits when c e rta i n conditions are met. Varney
, 859 F .2d at 1400–01. The three-part analy sis for such conditions is known as the “credit-as-true” rule. Garrison
, 759 F .3d at 1019. F irst, we ask whether the “AL J failed to provide leg ally sufficient reasons for rejecting evidence, whether claimant testimony or medical opinion.” I d

. at 1020. Nex t, we determine “‘whether there ar e ‘ o utstanding issues that must be r esolved before a disability determination can be made,’

. . . and w hether fu rt h e r a dministrative proceeding s would be useful.” Treichler
, 7 75 F .3d at 1 101, quoting Moisa

v. B arnhart
, 367 F .3d 882, 887 ( 9 t h C i r

. 2004). W hen these first two conditions are satisfied, w e then credi t t he di s c r e dited testimony as true f or the purpose of d etermining whether, on the r ecord taken as a whole, there is no doubt a s to disability

. I

d.

The application o f the Varney rule f or a direct award o f benefits was intended as a r are and prophylactic ex ception to the ordinary remand rule when there is no question th a t aL E ON V

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finding of disability w ould be required if claimant ’s testimo n y were accepted as true. Id

. As emphasiz ed in Treichl e r , t h e three-step Varney rule may r esult in a direct award of benefits only if the first two conditions are satisfied and further administrativ e proceeding s w ould not be useful. Even if we reach the thir d step a n d credit the claimant’s testimony as true, it is w ithin the court’s discret i o n e i t her to make a d i rect award of b enefits or to remand for f urther proceeding s. Id

. I n these circumstances, the A L J ’s failure to provide sufficient reasoning despite a f ully d eveloped record, without any conflicts, g aps, or amb i g uities, does not automatically result i n a determination that the c laimant is
t h e refore credible and should be awarded benefits immediate l y

. B efore Treichler
, o ur court prescribed “flex ibility ” even w hen a claimant would be otherwise entitled to benefits under the cred i t-as-true analy sis in Varney , when the record as a whole creates serious doubt a s to disability

. Garrison
, 759 F .3d at 1021. An award under this rule is a rare ex ception, and the rule was inte n d e d to deter AL J s from providing boilerplate r ejections without analy sis. “W h e re

. . . a

n A L J makes a leg a l err or, but the record is uncertain and ambig uous, the proper appro a c h i s to remand the case to the ag ency .” Treichler , 775 F .3d at 1105.

Treichler
, which was not available to the district judg e a s it w as published only day s after the district court’s order,

ex amined the ex tent of that “ fl ex i b ility ,” emphasiz ing the court’s discretion is a departu r e from the o rdinary remand rule. See id. at 1101. Contrary to the d istrict court’s order, the Varney rule does not require the c ourt to remand for an immediate award o f bene f i t s when the three Varney rule conditions h ave been satisfied. F urther co n s ideration of the record is needed to proceed to a d isability determin a t i o n without serious doubt.L E ON V

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I V.

The AL J in this case failed to consider evidence related to L eon’s claim of fatigue properly

. An AL J must make t w o finding s before making a c r edibility d etermination. “F irst, the AL J must determine whether the claimant has p r esented objective medical evidence of an underlying impairment.” Id.
at 1102, quoting Lingenfelter v. A strue , 504 F .3d 1028, 1036 (9th Cir. 2007). Then, if such evidence is introduced and “the AL J h a s not determined that the claimant is maling ering
, the AL J must provide ‘ specific, clear and c onvincing reasons for’ rejecting the claimant’s testimony reg arding the severity o f the claimant’s sy

mpto m s

. ” Id.
, quoting Smolen v

. Chater
, 80 F .3d 1273, 1281 (9th Cir. 1996). While the AL J found that L eon had “ not described sig nificant fatigue to his doc t o r s ” and only one doctor had obs e r v ed sleepiness, the record indicates that two nurse practitioners also obse r v ed L eon’s sy mptoms of fatigue. At the time L eon’s claim was filed, the opinions of nurse practitioners as treating sou r ces were not g iven the same weig ht a s phy sicians’ opinions. P r i o r to March 27, 2017, nurse practitioners were not included in the Social Securit y A dministration’s definition of medical
sources, but the AL J was requi r ed
, a t the least, to provide g ermane r easons for rejecti ng testimony that corroborates a claimant’s pain testimony

. S ee Taylor v. Comm’r o

f Soc. Sec. Admin
, 659 F .3d 1228, 1234 (9th Cir. 2 0 11); see also 20 C.F

. R. § 404.1527 (evaluating opinion evidence for c laims filed before March 27, 2017).

L eon testified that his impairments and medications cause him sleep loss and ex treme f atig ue, and require him to take several naps p er day

. He a lso testified th a t h is medications require him to lie down for thirty to six ty minutes at a time

. F urthermore, h e testified that he frequently faints. L eo n’sL E ON V

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s tepdaug hter corroborated his fatigue testimony

. A g e rman e

ex p lanation is required to reject lay witness testimony
, such

as that o f L eon’s stepdaug hter, w h o s t a ted that he wakes in the nig ht with pain, and the A L J f a iled to provide any such

e x planation. Taylor
, 659 F .3d at 1234; see also Treic h l e r , 775 F .3 d a t 1098. Nor did the AL J provide clear a nd convincing reasons f

o r r ejecting L eon’s testimony about his fatig u e. Valentine v. Comm’r of Soc. Sec. Admin.
, 5 74 F .3d 685, 6 94 (9th Cir. 2009) ( if an A L J p rovided clear a nd convincing r e a s o ns for rejecting a claimant’s subjective complaints, and lay testimony was similar to such complaints, it follows that the AL J also g ave g ermane re asons for rejecting the lay witness testimony).

W ithout the benefit of Treichler
, the district court did not apply the cred i t-as-true standard properly here. The district court found that the AL J committed leg al e r r o r because she “did not g ive clear and convincing r e asons for rejecting Plaintiff’s testimony about his fatigue.” This satisfies the first part o f the a

naly sis. B ut Treichler provides a s e c o n d part o f the analy sis that asks “whether the r eco r d has been f ully developed, whether there are o utstanding issues that must be resolved b efore a determination of d i sability can b e made, and w hether f

u rther administrative proceeding s would be useful.” Treichle r , 775 F .3d at 1101 (citations a nd internal quotation marks omitted). A district court ca n n o t proceed directly to credit a claimant’s testimony as true and then look to the record to determine whether any issues are outstanding
, a s “this reverses the required order o f analy sis.” Doming u e z v. Colvin , 808 F .3d 403, 409 (9th Cir. 2015).

The second step of the credit-as-true analy sis r equires us t o determine whether the record has been develo p e d thoroug hly and is free o f c o n f licts, ambig uities, or g a

ps.L E ON V

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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 AL J for further proceeding s where there were “i nconsistencies, conflicts, and g a ps, in the record”). W h en there are outstanding iss u e s that must b e resolved before a determination can be made, or if further administrative proceeding s would be useful, a r emand i s necessary

. See Varney , 859 F .2d at 1399 (9th Cir. 1988).

L eon testified q

uite clearly that he sleeps poorly at nig ht due to sleep apnea, and that he believes his medications cause drow siness. He testified that he n eeds to take two to three naps d uring t h e d ay , lasting b etween 15 minutes and o ne hour. He also testified that he would be required to miss work sometimes due to pain. The record does n ot reflect that any o f hi s d o ctors observed fatigu e to this ex tent, althoug h he has been treated for sleep apnea and w a s prescribed use of a CPAP machine to a ssist with his sleep

. I n Brown-Hunter v

. Colvin
, 806 F .3d 4 87, 495–96 (9th Cir. 2 0 15), w e held that

a l t h o u gh t h e A L J c o m m i t t e d l e ga l e rr o r , f u r t h e r administrative proceeding s were useful becaus e questions

ex isted about the ex tent to which the cla i mant’s sy mptoms rendered her disabled—much as is the case here. Remand is also useful h ere because “the presentation of further evidence

. . . may well pr o v e enlig htening in lig ht of the passag e o f time
, ” reg arding whether L eon’s sy mptoms are or would be sig nificantly

reduced with proper use of the CPAP machine. Treichler
, 775 F

. 3 d at 1 101 (internal quotation marks omitted).

Even if the record was fully developed and the improperly discredited evidence is credited as true, it i s n o t certain that th e AL J would be required to find L e on leg ally disabled under the third part of the c r e d i t-as-true standard. F o rL E ON V

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instanc e , a l thoug h a doctor and two nurse practitioners observed L eon’s fatigue, and L eon’s stepdaug hter confirmed that he sleeps during the day
, it is unclear whether L eon needs to sleep d uring working hours, or that h is fatigue would cause h i m to miss so much work that the AL J is certain to m a k e a disability finding

.
The rare circumstances that result in a di r e c t award o f benefits are not present in t h i s c ase. W e have previously awarded benefits without further administrative proceeding s only w hen the rec o r d clearly contradicted an AL J ’s conclusory finding s a

nd no substantial evidenc e w ithin the record supported the reasons provided by the AL J for denial

o f benefits. F or ex ample, in Trevizo v. Berryhill
, 871 F

. 3 d 664 (9th Cir. 2017), the AL J fa i l e d to provide clear a nd convincing reasons supporte d b y substantial evidence to disreg ard the treating phy sician’s o p i n ion. The phy sician treated the claimant ex tensively a nd ex a m i n e d her at least 16 times in f

our y ears. Id. at 677. The me dical opinion was supported by other doctors’ diag noses, and a v o c a t i o nal

ex p ert a ddressed the phy sical limitations outlined by the phy sician and testified that the claimant was unable to d o any full-time work. Id. at 6 83. T h e A L J rejected the claimant’s pain testimony because the pain was not as severe as a lleg ed, althoug h the c laimant’s testimony as to her own limitations

was not inconsistent with the medical opin i o ns a nd observations in the record. Id. at 679–80. The administrative record in Trevizo was e x tensive and without inconsistencies in the claimant’s primary phy sician’s m edical o pinions. F urthermore, the vocational ex pert in that case “specifically opined r eg arding the inability of an individual with T r eviz o’s phy sical and intellectual l i m i t ations as described by [ the phy sician] to sustain wor k

. ” I d

. at 683. The analy sis in Trevizo supports its holding that “ex c eptional facts” weig h edL E ON V

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strong ly in favor of a

n immediate pay

ment of benefits, a

n d that f urther development o f the administrative record would not be useful. Id. The circumst a n c es i n L eon’s case are not such, a nd we do not reach step three in crediting his p ain testimony a s t ru e for the purpose of a d isability determination, because at step two, it is clear that f urther administrative proceeding s a re needed to make a dis ab i l ity determination.

Unaided by Treichler
, the district court did n ot specify the scope of its remand. On remand, the district court should do

so. I f L eon’s testimony i s c r e d i t ed as true, the district court found there was insufficient testimony from t h e vocational

ex p ert to require a finding of disability

. Bu t because the district c ourt did not consider the second part of the credit-astrue standard properly
, we r emand o n an open record because there is serious doubt as to whether L eon is in fact disabled, g iven that the district court upheld the AL J ’s other finding s. See Brown-Hunter
, 8 0 6 F .3d at 495 (“W e may remand on an open record for further proceeding s when t h e r ecord as a whole creates serious doubt as to whether the claimant is, in fact, disabled . . . .”) (internal quotation marks omitted).

V.

W e AF F IRM t h e d istrict court’s d ecision to remand for further administrative proceeding s, but instruct the distri ct

co urt to remand to the AL J consistent with Treichler ’s requirements, w ith an open record on the issue o f L eon’s fatig u e related t o h is c apacity to undertake full time employ ment. B ecau s e the AL J relied on Dr. McL ean’s opinion in discrediting L e o n’s fatigue testimony and the record h as not been devel o p e d thoroug hly on the issue o f L eon’s fatig ue, L eon sha l l b e allowed to cross-ex amine theL E ON V

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Commissioner’s medical consultants o n the sole issue of his fatig u e.

AF F IRMED in part with instructions.