procedure for adjudicating social security disability claims departs from the adversary model to
the extent of requiring the administrative law judge to summon a medical expert if that is
necessary to provide an informed basis for determining whether the claimant is
disabled.”)(citations omitted).

B. Failure to Analyze Diagnosis of Oppositional Defiant Disorder

Phillips also argues that the ALJ failed to analyze the CCCC psychiatrist’s diagnosis of
ODD. According to Phillips, a diagnosis of ODD requires the frequent occurrence of at least
four of the following behaviors: (i) losing temper, (ii) arguing with adults, (iii) actively defying
or refusing to comply with the requests or rules of adults, (iv) deliberately doing things that will
annoy other people, (v) blaming others for his or her own mistakes or misbehavior, (vi) being
touchy or easily annoyed by others, (vii) being angry and resentful, or (viii) being spiteful or
vindictive. (Pl Mot,, p. 11 (citing Diagnostic and Statistical Manual of Mental Disorders, p. 91
(4" ed. 1994).) The behavior associated with ODD must lead to significant impairment in social,
academic or occupational functioning. (/d.) (emphasis added).

Beyond an acknowledgement of Phillips’ ODD diagnosis, the ALJ provided the court
with no window on his analysis of the uncontroverted medical evidence. Perhaps the ALJ
accepted the evidence, but found that the significant impairment the diagnosis requires involved
Phillips’ academic impairments, and not an occupational or social limitation. Under this
hypothetical, the diagnosis would merely be redundant of the ALJ’s finding of a “marked”
impairment in the cognitive and communicative area. Perhaps, on the other hand, the ALJ
rejected the diagnosis. The point is that this Court does not know, and will not prognosticate on

the ALJ’s evaluation of relevant and uncontradicted medical testimony. “An ALJ may not select

19



the Court will reverse the Commissioner’s findings only if they are not supported by substantial
evidence or if the Commissioner applied an erroneous legal standard. Id. (citing Rohan v.
Chater, 98 F.3d 966, 970 (7th Cir. 1996)). Substantial evidence means “such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion.” Richardson v. Perales,
402 U.S. 389, 401, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971). This Court reviews the entire
administrative record, but does not reweigh the evidence, resolve conflicts, decide questions of
credibility, or substitute its own judgment for that of the Commissioner. Clifford, 227 F.3d at
869. At the same time, the Court will not “simply rubber stamp the Commissioner’s decision
without a critical review of the evidence.” Jd. Ultimately, the issue before the Court, “is not
whether [the applicant] is disabled, but rather, whether the ALJ’s findings were supported by
substantial evidence.” Diaz v. Chater, 55 F.3d 300, 306 (7th Cir. 1995).
HI. Discussion

Phillips raises three arguments before the Court. First, Phillips challenges the ALJ’s
assessment of both Phillips’ social functioning and his concentration, persistence and pace under
the “broad areas of development or functioning” method of evaluating functional equivalence.
Specifically, Phillips argues that the ALJ erroneously failed to assess Phillips’ ability to function
independently of his structured special education environment. Second, Phillips argues that the
ALJ committed an error of law by failing to analyze uncontradicted medical evidence. Finally,
Phillips claims that the Appeals Council erred in refusing to find that the 2001 IEP evidence
submitted to it constituted “new and material” evidence requiring a remand to the ALJ for further
consideration; alternatively, Phillips argues that this Court should find the evidence submitted to

the Appeals Council “new and material” and remand. The Court addresses Phillips’ arguments

13



Security Administration pursuant to sentence four of 42 U.S.C. § 405(g) for further proceedings
consistent with this opinion. The Court also recommends that the Administration transfer the

case to a different ALJ on remand. See Sarchet v. Chater, 78 F.3d 305, 309 (7th Cir. 1996).

DATE: March 28, 2003 BPbneleW Ve

Blanche M. Manning
United States District Court Judge

23



and his math skills were approaching the second grade level. The report recommended leamming
disabled classes for 400, out of a total of 1500, minutes per week. The report indicated that prior
intelligence testing had demonstrated that Phillips was functioning in the low average
intelligence range. The report noted that Phillips “got along” with his sibling, had a “fair
relationship” with his classmates, and “played well with others.”

On October 19, 1995, Phillips’ fourth grade teacher, Ms. Audrey Ware, completed a
School Activities Questionnaire (“SAR”) with respect to Phillips. Ware noted that Phillips did
not have any significant problems relating to his classmates or with his concentration on
academic tasks. Ware reported that Phillips received one-on-one attention in some areas and that
he received special help in reading.

An IEP report from February 1996 indicated that Phillips’ reading skills were at the first
grade level, and his spelling and math skills were close to the second grade level. Phillips’
reported deficiency areas included: cognitive skills, auditory processing, long-term memory,
visual motor skills and fine motor skills. With the articulated goals of improving Phillips’
reading and math skills, the report recommended that Phillips’ placement in learning disabled
classes increase from 400 to 600 hours per week, then to 900, then to 1300 minutes per week the
following academic year, Therefore, per the IEP’s recommendation, beginning in September
1996, when Phillips was to start the fifth grade, he would be placed in a self-contained special
education classroom for 1300 minutes per week. The remaining 200 minutes per week were
allocated for other non-core curriculum such as art, gym, music and library, as well as lunch and
recess.

Phillips’ fourth-grade report card again reported primarily D’s and F’s in the core subjects



and discuss only that evidence that favors his ultimate conclusion, but must articulate, at some
minimum level, his analysis of the evidence to allow the . . . court to trace the path of his
reasoning.” Diaz, 55 F.3d at 307. This requirement is highlighted where, as here, the record is
devoid of any contradictory diagnosis. Scivally v. Sullivan, 966 F.2d 1070, 1076 n.5 (7th Cir.
1992) (citation omitted); Herron v. Shalala, 19 F.3d 329, 333 (7th Cir. 1994) (ALJ may not,
without adequate explanation, discount an ucontradicted, dispositive medical opinion). Although
either an acceptance or rejection of the evidence might be consistent with the ALJ’s conclusions
regarding Phillips’ disabilities, his failure to articulate specific reasons for accepting or rejecting
the evidence leaves the Court with no opportunity for meaningful review. Accordingly, on
remand, the ALJ shall make express his or her evaluation of the significance of the ODD
diagnosis on Phillips’ disability determination.

Cc. The Appeals Committee’s Refusal to Consider Additional Evidence

As part of Phillips’ request for review of the ALJ’s decision, he sent to the Appeals
Council his IEP that was prepared on May 21, 2001. At the time, Phillips was in the ninth grade.
The IEP reported that his reading and math skills were at the fourth grade level. The report noted
that Phillips “has a problem managing his angry feelings and he has a court hearing on 5/23/01
due to an altercation that he had with a 16-year old boy.” In addition, the IEP reported that
Phillips had failed all of his classes, is disruptive in class, and has short term memory problems.
Phillips was found to have the following problem areas: has difficulty following directions,
processes information slowly, has a short auditory attention span, is easily distracted, has
difficulty following multiple verbal requests, is frequently distracted by extraneous noises, is

disorganized and often misplaces things.

20



may .. . remand the case to the Commissioner of Social

Security for further action . . . and it may at any time order

additional evidence to be taken before the Commissioner of

of Social Security, but only upon a showing that there is new

evidence which is material and that there is good cause for

the failure to incorporate such evidence into the record in a

prior proceeding.
42 U.S.C. § 405(g). Similar to the Appeals Council’s review of materiality, under “sentence six”
remand, evidence is material only if it “relate[s] to the claimant’s condition during the relevant
time period encompassed by the disability application under review.” Johnson v. Apfel, 191 F.3d
770, 776 (7th Cir. 1999). Here, too, the materiality requirement defeats Phillips’ request for
remand. Phillips’ new IEP, prepared over two years after the ALJ’s decision does not relate back
to Phillips’ condition at the time of the ALJ’s decision. Although the report provides evidence
that Phillips’ problems have not abated, and perhaps have worsened, the Seventh Circuit
tepeatedly has held that evidence of an aggravated or deteriorating condition after the date of the
ALJ’s decision is not material for purposes of § 405(g) review. Godsey v. Bowen, 832 F.2d 443,
445 (7 Cir. 1987); Kapusta v. Sullivan, 900 F.2d 94, 97 (7th Cir. 1989) (denying request for
temand when “the reports postdating the hearing speak only to [the claimant’s] current condition,
not to his condition at the time his application was under consideration by the Social Security
Administration”). As the Seventh Circuit noted in both Godsey and Kapusta, the materiality
requirement does not stand in the way of a fresh application for benefits premised on newly-
developed impairments. See id.

TV. Conclusion

For the foregoing reasons, plaintiffs’ motion for reversal [16-1] is granted, in part, and

defendant’s motion for affirmance [17-1] is denied. The Court remands this case to the Social

22



and not upon the reviewing court (Stuckey v. Sullivan, 912 F.2d 178, 181 (7th Cir. 1990)), and a
finding may be supported by substantial evidence even if the reviewing court might have reached
a different conclusion. Delgado v. Bowen, 782 F.2d 79 (7th Cir. 1986). Accordingly, Phillips’
substantial evidence challenge here must fail, because the ALJ’s finding with respect to Phillips’
social functioning was supported by “such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion.” Richardson, 402 U.S. at 401.

2. Evidence Regarding Concentration, Persistence and Pace

The ALJ found a “less than marked” limitation in the area of Phillips’ concentration,
persistence, and pace. The regulations define the area of concentration, persistence and pace as
the child’s “ability or inability to attend to, and sustain concentration on, an activity or task, such
as playing, reading, or practicing a sport, and the ability to perform the activity or complete the
task at a reasonable pace.” 20 C.F.R. § 416.926a(c)(4)(vi) The ALJ’s conclusion regarding
Phillips’ concentration, persistence and pace rested on two factual findings: (i) that Phillips was
“making progress in his school subjects” and, (ii) that his difficulties in concentrating at school
did not carry over into the “other activities of daily living.” Each of these findings is
fundamentally flawed. On the first count, nothing in the administrative record supports the
ALJ's finding that Phillips’ academic performance had improved. If anything, at the time of the
ALJ’s review, during Phillips’ sixth grade, his “progress” was in the wrong direction. The record
indicates that the majority of Phillips’ grades from his third, fourth and sixth grade report cards
were D’s and F’s. Over the same time frame, the percentage of Phillips’ curriculum constituting
special education instruction increased. The CCCC counselor, after speaking with Phillips’ sixth

grade teacher, concluded that Phillips “will probably drop out of he doesn’t start to change now.”

17



short auditory attention span, is easily distracted, loses focus/concentration often, has difficulty
following multiple verbal requests, is frequently distracted by extraneous noises and is
disorganized and often misplaces things. Specialized instruction was recommended for English,
math and science. Further attention to Phillips’ attendance record was recommended, as Phillips
often was truant.

D. The Standard for Childhood Disability Under the Act

In August 1996, after Phillips’ initial application for benefits but prior to the ALJ’s
decision, the eligibility standard for a child’s disability benefits was amended by the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996, Pub.L. No. 104-193, 1996
U.S.C.C.A.N. (110 Stat.) 2105. In February 1997, the Commissioner published “interim rules”
governing application of the 1996 regulation. See 62 Fed. Reg. 6408. On September 11, 2000,
the Commissioner published the revised final rules for determining disability for children under
eighteen, which became effective on January 2, 2001. See 65 Fed. Reg. 54,747. Phillips’
hearing before the ALJ was conducted on February 23, 1998 and the ALJ’s decision was
rendered on January 29, 1999. The ALJ thus applied the then-current interim rules to his
assessment of Phillips’ claim.

Although it is not obvious that this Court’s review of the ALJ’s decision will too be
governed by the interim rules, given that the final rules are now in effect, the Court finds the final
tules themselves authoritative on this point: “[w]ith respect to claims in which we have made a
final decision, and that are pending judicial review in Federal court, we expect that the court’s
review of the Commissioner’s final decision would be made in accordance with the rules in

effect at the time of the final decision.” 65 Fed. Reg. 54,747. Accordingly, the Court gives



evaluated Phillips’ records and opined that his impairments did not meet, medically equal, or
functionally equal a listed impairment. (See Section LD., infra.) Dr. Hudspeth opined that
Phillips had a learning disability and was moderately impaired in his cognitive development.
Finally, Dr. Hudspeth found no impairment in Phillips’ communicative development, motor
development or personal/behavioral development.

On January 23, 1996, a second Social Security physician, Dr. Donald McLean, reviewed
Phillips’ records and also concluded that his impairments did not meet, medically equal, or
functionally equal a listed impairment. (See id.) Dr. McLean, like Dr. Hudspeth, opined that
Phillips had a moderate impairment in cognitive development, and a less than moderate
impairment in social development, and concentration, persistence, and pace. Dr. McLean found
no impairment in Phillips’ communicative development, motor development, or
personal/behavioral development.

On February 6, 1998, when Phillips was in the sixth grade, his school referred him to the
Community Counseling Centers of Chicago (“CCCC”) for evaluation. Phillips was evaluated at
the CCCC from February through the beginning of April. The assessment included an evaluation
of Phillips by a psychiatrist, clinical interviews of both of Phillips’ parents and Phillips’ sixth
grade teacher, as well as an observation of Phillips in his school classroom environment. At the
time of this referral, Marshall had reported that Phillips was having behavioral problems both at
home and at school. She reported that Phillips had mood swings and often became aggressive
with his siblings. The counselor initially examining Phillips reported that he had a flat effect and
that his attitude was guarded. Phillips’ thought processes were tangential and his cognitive

functioning was severely impaired. His judgment and insight were minimally impaired, and he


and indicated that improvement was needed in the following areas: completing assignments,
participating in class activities, doing homework, and putting forth effort.

On January 7, 1998, Phillips’ sixth-grade teacher, Joanne Abelman, completed another
SAR for Phillips. She reported that Phillips was in a self-contained learning disability
curriculum. Abelman reported that Phillips was functioning at the third grade level in reading
and at the fourth grade level in math. She indicated that Phillips had a short attention span and
rushed through his work. She graded Phillips’ ability to work independently as “very poor.” She
noted that Phillips did not respond well to change or to constructive criticism. Finally, with
respect to Phillips’ behavior, Abelman reported that he had minor behavioral problems when
interacting with peers, but generally was respectful of authority.

Phillips had another IEP assessment during the sixth grade, on January 27, 1997. The
IEP report indicated that Phillips’ deficient areas included: cognitive skills, auditory processing,
long term memory, visual motor skills, fine motor skills and his relationship with his peers.
Phillips’ individualized program called for positive reinforcement, encouragement and praise,
small groups, repeat directions and shorter tasks.

Phillips’ report card for the sixth grade, or the 1997-1998 academic year, reported D’s
and F’s in the core subjects of reading, writing, spelling and math. The report card indicated that
improvement was needed in the following areas: listening, following directions, completing
classroom work and completing homework.

3. Medical Evidence

a. Mental Impairments

In November 1995, Dr. D.G. Hudspeth, a Social Security Administration psychiatrist,


In support of the ALJ’s second conclusion — that Phillips’ concentration problem did not
manifest itself outside of school — the ALJ observed that Phillips “testified that he watches
television during his free time [and] . . . [h]e also can concentrate well enough to play
basketball.” Phillips argues that the ALJ’s findings here did not take into account Marshall’s
testimony that when Phillips watched television, he often had trouble following the program, and
ignored Phillips’ testimony that when he played basketball, he could only play for “a little bit”
before his leg and head began to hurt.

Even if the ALJ discounted Marshall’s testimony here as lacking credibility, he did not
question Phillips’ credibility regarding his problems playing basketball. And, even if the ALJ
discredited Phillips’ testimony as well, the Court, on a more fundamental level, finds Phillips’
ability to stare at a TV screen or launch a round ball into a netted rim a slender reed upon which
to rest the ALJ’s conclusions regarding Phillips’ limitations in the area of concentration,
persistence, and pace.

Thus, with respect to the ALJ’s findings regarding Phillips’ functional limitations in the
concentration, persistence and pace domain, the Court finds that the ALJ’s decision cannot
withstand substantial evidence review. The ALJ “failed to build an accurate and logical bridge
from the evidence to [his] conclusion.” Dixon, 270 F.3d at 1176. Thus, the Court remands to the
Commissioner to make further findings regarding Phillips’ concentration, persistence and pace.
In making this evaluation, the Commissioner must consider Phillips’ functional limitations
outside the structured setting of his classroom. If the ALJ believes that he lacks sufficient
evidence on this front, he must adequately develop the record, and, if need be, obtain expert

opinions. Clifford, 227 F.3d at 873; Green v. Apfel, 204 F.3d 780 (7th Cir. 2000)(““[T]he

18


on him.

When speaking with a psychiatrist at the CCCC in August 1998, Phillips stated that be
was sad and felt like crying for no reason. His statement was confirmed by the psychiatrist’s own
observation that Phillips appeared sad and isolated.

b. Physical Impairments

In September 1997, Phillips was evaluated by Dr. Thomas Bahk for mild headaches. A
subsequent CT scan of Phillips’ head was negative. On February 16, 1998, Phillips underwent
an MRI scan of his brain. Results showed extensive sinusitis, but no post-traumatic changes.
Two days later, Dr. Bahk completed a questionnaire regarding Phillips’ physical impairments.
Dr. Bahk reported that Phillips had mild headaches secondary to maxillary sinusitis. Dr. Babk
summarized Phillips’ prognosis as fair.

Cc. Evidence Submitted to the Appeals Council Subsequent to the Hearing

An IEP prepared on May 21, 2001, when Phillips was in the ninth grade, indicated that
Phillips had a learning disability, and that his general intellectual level was in the very slow to
slower than average range. Phillips’ reading and math skills were at the fourth grade level.
Phillips indicated that he had difficulty managing his angry feelings and that he had an upcoming
court hearing concerning an altercation he had with another teenager. It was recommended that
Phillips obtain outside counseling to learn appropriate ways to manage his “sad and angry
feelings.”

The report noted that Phillips had “failed all of his classes,” “is disruptive in class” and
“has short term memory problems.” The report concluded that Phillips had the following

learning deficiencies: has difficulty following directions, processes information slowly, has a


‘Minute @rder Form (06/97)

United States District Court, Northern District of Hlinois

Nameof Asigned Judge | Blanche M, Manning Stag Judge Other

CASE NUMBER 01 C 6962 DATE March 28, 2003
CASE Marshall v. Barnhart
TITLE

motion: Un the {allowing box 0 indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the

DOCKET ENTRY:

03) a Filed motion of [ use listing in “Motion” box above.}

(2) Q Brief in support of motion due ____.

(3) Oo Answer brief to motion due. + Reply to answer brief due___.

(4) oO Ruling/Hearing on__—_—sset for at

(5) a Status hearing[held/continued to] [set for/re-set for]on__——sset for at

(6) a Pretrial conferencefheld/continued to] [set for/re-set for)on___ssetfor__ ss at_— ts

(7) Oo Trial[set for/re-set for] on at

(8) o [Bench/Jury trial] [Hearing] held/continued toa

(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OOFRCP4(m) (General Rule21 CFRCP41(a)(1) O FRCP41(a)(2).

(10) MH [Other docket entry] For the reasons stated on the attached Memorandum and Order, plaintiffs’
motion for reversal [16-1] is granted, in part, and defendant’s motion for affirmance [17-1] is denied.
The Court remands this case to the Social Security Administration pursuant to sentence four of 42
U.S.C. § 405(g) for further proceedings consistent with this opinion. The Clerk is directed to enter a
Fed.R.Civ.P. 58 Judgment terminating this case.

qi) Oo [For further detail see order on the reverse side of the original minute order.]
No notices required, advised in open court.

No notices required.

J | Notices maited by judge’s staff.

Notified counsel by telephone. ly :
Docketing to mail notices, nda 13tyy 2g
Mail AO 450 form. snags! oa A
Copy to judge/magistrate judge. Hg Wd 82 ayn ey
a or 03-0314
intl Date/time received in
central Clerk's Office



is correspondingly limited. In determining whether a child’s limitation(s) is functionally
equivalent to a listed impairment, the Commissioner uses four methods. See 20 C.F.R.
416.926a(b). The ALJ considers all four methods before determining whether a child’s
impairment is functionally equivalent to a disability in the listings. There is no prescribed
sequence to these methods. See id. Under the first method, titled “limitation of specific
functions,” the ALJ will find that a child’s impairment is functionally equivalent in severity to a
disability in the listings if there is extreme limitation in one specific function, such as walking or
talking. See 20 C.F.R. § 416.926a(b)(1). The second method — “broad areas of development or
functioning” — is aimed at the effect of the child’s impairment(s) in broad areas of development
or functioning. See 20 C.F.R. § 416.926a(b)(2). This method requires evaluation in five
categories of functioning: (1) cognitive/communicative functioning, (2) motor functioning, (3)
social functioning, (4) personal functioning, and (5) concentration, persistence or pace. See 20
C.F.R. § 416.926a(c)(4). To establish functional equivalence, a child must suffer from a
medically determinable impairment that result(s) in “marked” limitations in two of these six
categories or an “extreme” limitation in one category. See 20 C.F.R. § 416.926a(b)(2). An
“extreme” limitation means that there is no meaningful functioning in a given area. See 20
C.F.R. § 416.926a(c)(3){ii)(C); a marked limitation is an impairment that is “more than
moderate” but “less than extreme,” and is present when the degree of limitation “seriously”
interferes with the child’s ability to function. See 20 C.F.R. § 416.926a(c)(3)(i)(C). The third
method, “episodic impairments,” evaluates chronic impairments that are characterized by
frequent illnesses or attacks or by exacerbations and remissions. See 20 C.F.R. § 416.926a(b)(1)

and (b)(2). Finally, the fourth method analyzes “limitations related to treatment or medication

11



Chevron-deference to the Social Security Administration’s interpretation of its own regulations
(see Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 739-42, 116 S.Ct. 1730 (1996);
Chevron, U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837, 842-45, 104
S.Ct. 2778 (1984)), and reviews the ALJ’s decision under the interim regulations, as those were
the regulations in effect at the time of the ALJ’s decision.

Under the interim regulations, a child shall be considered eligible for disability benefits if
he or she has “a medically determinable physical or mental impairment or impairments, which
results in marked and severe functional limitations, and which can be expected to result in death
or which has lasted for a continuous period of not less than twelve months.” See 65 Fed. Reg.
54,762. A determination whether a child is disabled requires a three-step sequential process. See
20 C.F.R. § 416.924(a). First, the ALJ must consider whether the child is engaging in substantial
gainful activity, i.e., working. See 20 C.F.R. § 416.924(b). If so engaged, the child will not be
awarded benefits. Jd. Second, the ALJ must evaluate whether the child has a medically
determinable “severe” impairment. See 20 C.F.R. § 416.924(c). A severe impairment is one that
is more than a slight abnormality. Jd. Third, if the ALJ finds that the impairment is severe, the
ALJ must consider whether the child’s impairment meets, medically equals, or functionally
equals the severity of one of the Commissioner’s listed (and therefore, per se disabling)
impairments. See 20 C.F.R. § 416.924, Only if the impairment is severe and meets or is
medically or functionally equal to a listed impairment will it constitute a disability within the
meaning of the Act. See 20 C.F.R. § 416.924(d).

Because Phillips challenges only the “functional equivalence” analysis in the ALJ’s

decision (see Sec. IL, infra.), the Court’s delineation of the statutory and regulatory framework

10


demonstrated a short-term memory impairment. Phillips was diagnosed with Oppositional
Defiant Disorder (“ODD”), a non-specific learning disorder, and rule out Attention Deficit
Hyperactivity Disorder (“ADHD”). Psychiatric and psychological evaluations were
recommended.

On March 16, 1998, Phillips had his first CCCC counseling session. Marshall reported to
the counselor that Phillips argued and fought with his peers, would not do his chores, “talked
back” and experienced recurring headaches. The counselor indicated that Phillips should be
evaluated for ADHD. The counselor developed a treatment plan for Phillips that included
improving his academic performance, reducing his depressive symptoms, and decreasing his
aggressive behavior. The counselor noted that Phillips appeared to be receptive to help.

On March 25, 1998, Phillips underwent a psychiatric evaluation. Phillips’ complaints
(likely articulated by Marshall) included: behavioral problems at school, poor grades, being
quick-tempered and aggressive and chronic headaches. At the evaluation, the CCCC psychiatrist
reported Phillips to be alert, well-oriented and cooperative. His mood, however, was reported to
be depressed. Phillips was diagnosed with rule out dysthymic disorder, rule out learning
disorder, and rule out migraine headaches.

On March 31, 1998, Phillips’ CCCC counselor spoke with his sixth grade teacher. The
teacher indicated that Phillips rushed through his assignments and would not allow himself to be
taught. The teacher reported that Phillips “annoyed his peers and was immature.” Based on this
conversation, the counselor opined that Phillips needed a “reality check” concerning school, and
that “he will probably drop out if he doesn’t start to change now.” On April 7, 1998, after

visiting Phillips’ school, the counselor recommended that Phillips’ mother impose firmer limits



Where, as here, the Appeals Council has denied review and the ALJ decision is the final
decision, it is ordinarily improper for a court to consider new evidence not presented to the ALJ
because “the correctness of that decision depends on the evidence that was before the [ALJ].”
Eads y. Secretary of the Dept. of Health & Human Servs., 983 F.2d 815, 817 (7th Cir. 1993).
Nevertheless, pursuant to 42 U.S.C. § 405(g), a court may conduct a limited review of new
evidence when the claimant alleges that the Appeals Council’s denial of review rests on a
mistake of law. Eads, 983 F.2d at 817; see, e.g., Nelson v. Bowen, 855 F.2d 503, 506-08 (7th
Cir. 1988) (reversing because evidence submitted to the Appeals Council was not material to the
disability determination). In the absence of any such error, the Appeals Council’s decision
whether to review is discretionary and unreviewable. Perkins v. Chater, 107 F.3d 1290, 1294
(7th Cir. 1997).

The regulations require the Appeals Council to review new evidence if the evidence is
“new” and “material.” See 20 C.F.R. §§ 404.970(b), 416.1470(b). Evidence is material if it
“relates to the period on or before the date of the administrative law judge hearing decision.” 20
C.F.R. § 416.1470(b). Phillips’ May 2001 JEP, though new, is not material because it does not
bear on Phillips’ condition on or before the January 29, 1999 date of the ALJ’s decision.
Accordingly, because the Appeals Council did not commit an error of law in declining further
review of Phillips’ disability claim, this Court defers to the Council’s discretionary decision to
decline to do so.

D. Request for “Sentence Six” Remand

Alternatively, Phillips requests “sentence six” remand under 42 U.S.C. § 405(g). The

sixth sentence of the statute provides that a district court:

21



since 1994. She stated that Phillips often failed to do his homework and would do his chores
approximately half of the time. She said that Phillips spent the majority of his free time at home
watching television and aggravating his siblings. Phillips occasionally would play basketball
outside, however his play was limited because of recurring pain in his head and leg. She said
Phillips did have a few friends.

Marshall testified that Phillips was, at the time of the hearing, attending special education
classes full-time. Marshall stated that she had been contacted several times by Phillips’ teachers
regarding academic and behavioral problems, including disregarding instructions, a short
attention span, and failure to attend the school’s after-school tutoring program. Marshall also
testified that when Phillips watched television, he often had difficulty following the program.

Phillips testified that he received after-school tutoring in math and reading three days per
week. He said that his favorite subject was math. He stated that he “sometimes got along” with
his siblings. Phillips said that he often forgot to do both his homework and chores, Phillips
testified that he occasionally heard voices calling his name, and that he thought the voices were
real. He testified that he spent his free time either watching television or sleeping.

2. Academic Records

Phillips’ third-grade report card from the 1994-1995 academic year showed that he
received primarily D’s and F's in his core subjects. Phillips’ report card further indicated that he
needed improvement in the following areas: self-control, listening, following directions,
completing assignments, doing homework, and putting forth effort.

An Individualized Education Program (“IEP”) report from June 1995, following Phillips’

completion of the third grade, indicated that Phillips’ reading skills were at the third grade level



in turn.

A. Environment for Evaluating Phillips’ Impairments

Under the second method of evaluating functional equivalence — “broad areas of
development or functioning” — the ALJ found that Phillips’ learning disability caused a “marked”
limitation in the cognitive and communicative functioning category, a “less than marked”
limitation in the concentration, persistence and pace domain, “no significant” limitation in the
social functioning area, and no limitation in either motor or personal functioning.

Phillips argues that the ALJ’s determinations regarding his limitations in the domains of
social functioning and in concentration, persistence and pace were based solely on evidence of
his behavior within the highly structured setting of his special education classrooms. Phillips
submits that this constituted an error of law because the regulations require that a determination
of whether a child’s impairment is functionally equivalent to a listed impairment requires an
assessment of how the child performs activities independent of the special education curriculum
environment. See 20 C.F.R. § 416.924a(b)(3)(i). The regulations provide:

A structured or supportive setting may minimize signs and
symptoms of [an applicant’s] impairment(s) and help to

improve [the applicant]’s functioning while the [applicant is] in

it, but [the] signs, symptoms, and functional limitations may
worsen outside this type of setting. Therefore, [the Commissioner]
will consider . . , the degree of limitation in functioning [the
applicant has} or would have outside the structured setting. Even if
[the applicant is] able to function adequately in the structured or
supportive setting, [the Commissioner] must consider how [the
applicant would] function in other settings and whether [the
applicant] would continue to function at an adequate level without

the structured or supportive setting.

20 C.F.R. § 416a(b)(5)(iv)(C) (emphasis added). This requirement, in this Court’s view, ensures

14



claimant’s alleged limitations were not fully credible, as they were not fully supported by the
medical evidence or relevant credibility factors.” The Court will not disturb an ALJ’s credibility
determination unless it appears “patently wrong.” Dixon v. Massanari, 270 F.3d 1171, 1177 (7th
Cir. 2001).

In contrast to Marshall’s testimony, the ALJ found persuasive Phillips’ teachers’
indications that he generally “got along” with his peers and his counselors’ statements that he
responded favorably to firm limits. The ALJ also noted that the record contained no
documentation from any of Phillips’ physicians or counselors regarding any problems with
hearing voices, The ALJ noted that Phillips had been diagnosed with ODD, but found
compelling that Phillips had not been conclusively diagnosed with any attention deficit disorder
nor any hyperactive disorder. The ALJ found that Phillips was not on any medications for any
behavioral or mood disorders, Ultimately, the ALJ concluded that Phillips was having some
success in controlling his behavior and “is dealing successfully with peer interactions.” The
Court also notes, though not expressly mentioned by the ALJ, that Marshall testified that Phillips
does have some friends, Dixon, 270 F.3d at 1176 (“[The ALJ] is not required to address every
piece of evidence or testimony. . .”) The Court finds that the ALJ, consistent with his regulatory
prescription, considered evidence of Phillips’ social behavior outside the confines of his
structured special education classroom environment, and that the ALJ’s conclusion regarding
Phillips’ social functioning was supported by substantial evidence.

The Court emphasizes that where conflicting evidence allows reasonable minds to differ,

the responsibility for determining whether a claimant is disabled falls upon the Commissioner,

16


On September 27, 1995, Eileen Marshall, on behalf of her minor son, McKinley Phillips,
applied for SSI alleging that Phillips suffered from multiple mental disabilities including
depression, a learning disability, and impaired social functioning. On November 20, 1995, the
Commissioner denied Phillips’ initial claim, and on January 30, 1996, denied Phillips’ request
for reconsideration. Phillips requested, and received, a hearing before an ALJ on February 23,
1998. Phillips was represented by counsel at the hearing. On January 29, 1999, the ALJ denied
Phillips’ request for SSI benefits, finding that Phillips was not “disabled” under the Act. On
February 12, 1999, Phillips filed a request for the Appeals Council to review the unfavorable
decision. On July 11, 2001 the Appeals Council declined Phillips’ request for review.
Accordingly, the ALJ’s decision is the Commissioner's final administrative decision. Having
exhausted his administrative remedies, Phillips now seeks judicial review of the Commissioner’s
final decision pursuant to 42 U.S.C. § 405(g).

B. The Administrative Hearing

Phillips was born on August 14, 1986. He was seven years old on his alleged onset date
of disability, nine years old on the date of Phillips’ initial filing of his application for SSI
benefits, and eleven years old on the date of the hearing. At the time of Phillips’ initial filing, he
was in the fourth grade at Hughes Elementary School in Chicago. Phillips has always resided
with, and been in the care of, his mother, Eileen Marshall. Phillips has never been gainfully
employed.

1. Marshall’s and Phillips’ Testimony

Both Marshall and Phillips testified at the hearing. Marshall testified that Phillips did not

“get along” with his siblings. She testified that Phillips had been taking Motrin for headaches



UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

EILEEN MARSHALL, on behalf of
McKINLEY PHILLIPS,

)
)
Pana, DOCKETED
v. } No. 01 C 6962 MAR 3 1 2003
JO ANNE B. BARNHART, }
Commissioner of the Social Security )
Administration, )
Defendant. }
MEMORANDUM AND ORDER

Plaintiff Eileen Marshall, on behalf of her minor son, McKinley Phillips, brings this
action pursuant to the Social Security Act, 42 U.S.C. §§ 1381 (‘the Act”), seeking judicial
review of a final agency decision of the Commissioner of Social Security (“the Commissioner”)
that denied Phillips’ application for Supplemental Security Income (“SSI”) under Title XVI of
the Act. Presently before the Court are the following motions: (i) Phillips’ motion to reverse the
Administrative Law Judge’s (“ALJ”) decision and to remand to the agency for further
proceedings, and (ii) the Commissioner’s motion to affirm the ALJ’s decision. For the following
reasons, Phillips’ motion to reverse and remand is granted, in part, and the Commissioner’s
motion to affirm is denied.

L Background’

A. Procedural History

' The facts in the Background section are taken from the Administrative Record which
includes a transcript of the proceedings before the ALJ and the evidence available to the ALJ at
the hearing.

aH



effects.” See 20 C.F.R. § 416.926a(b)(4). Phillips’ arguments are cabined to the ALJ’s analysis
under the second method of determining functional equivalence — “broad areas of development
or functioning.” (See Sec, IIL, infra.)

E. The ALJ’s and Appeal Council’s Decisions

Under the above framework, the ALJ first found that Phillips had not engaged in work
activity since he filed his application for benefits. On step two, the ALJ found that Phillips
suffered from a learning disorder that was a “severe” impairment in that it more than minimally
impacted his ability to function. On the third and final step, the ALJ, after addressing each
method of functional equivalence evaluation, found that Phillips’ impairment neither met, nor
medically or functionally equaled in severity any listed impairment. Phillips, therefore, was
found not to be disabled under the Act and therefore not entitled to disability benefits.

On appeal to the Appeals Council, Phillips submitted the above-mentioned 2001 IEP as
additional evidence, On July 11, 2001, the Appeals Council found that the evidence did not
provide a basis for reviewing the ALJ’s decision. As such, the ALJ’s decision became the final
decision of the Commissioner.

IL. Standard of Review

This Court’s review of the Commissioner’s decision is limited.? The Social Security Act,

42 U.S.C. § 405(g), requires the Commissioner’s findings (via the ALJ) to be sustained if

supported by substantial evidence. Clifford v. Apfel, 227 F.3d 863, 869 (7th Cir. 2000). Thus,

?Although the parties have styled their motions as motions for summary judgment
pursuant to Fed.R.Civ.P. 56, motions seeking judicial review of the Commissioner’s final
administrative decision under 42 U.S.C. § 405(g) are more properly treated as motions for an
order affirming or reversing the ALJ’s decision. See Valie v. Charter, 916 F.Supp. 821, 823 n. 2
(N.D. Il. 1996).

12



that a child’s special education placement, with its built-in safety nets, will not artificially inflate
an assessment of that child’s functional abilities. The Commissioner acknowledges the
regulatory requirement that children be evaluated outside the confines of highly structured
educational settings, but submits that the ALJ did consider Phillips’ functioning outside of his
special education curriculum.

1. Evidence Regarding Social Functioning

Evaluation of a child’s social functioning capabilities requires an assessment of that
child’s “ability or inability to form and maintain relationships with other individuals and with
groups.” 20 C.F.R. § 416.926a(c)(4)(iii). Although much of the evidence before the ALJ was
reports of Phillips’ behavior at school, the ALJ was presented with, and made express findings
based on, evidence of Phillips’ behavior outside of his special education classrooms. The ALJ
considered reports from Phillips’ CCCC counselor which indicated that Phillips was able to
control his behavior, would respond favorably to firm limits imposed by his mother, and was
having some success avoiding negative interactions with his peers — all outside of the classroom.
The ALJ expressly noted Phillips’ statement to his CCCC counselor that he had recently ignored,
opting not to engage, some boys who were harassing him.

Finally, the ALJ considered extensive testimony from Marshall regarding Phillips’
behavior problems at home. Specifically, the ALJ expressly evaluated Marshall’s testimony that
Phillips frequently fought with his siblings, often failed to do his homework or chores, and heard
voices. The ALJ, however, found Marshall’s depiction of Phillips as an extreme behavior
problem to be less than credible: “[tJhe claimant’s mother appears to have exaggerated her

testimony in order to present her son’s case for disability in the most favorable light,” and “[t]he

15