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Kneeland v. Berryhill

United States Court of Appeals, Fifth Circuit

March 8, 2017

OLIVIA A. KNEELAND, Plaintiff - Appellant

         Appeal from the United States District Court for the Western District of Louisiana

          Before HIGGINBOTHAM, ELROD, and HIGGINSON, Circuit Judges.

          PATRICK E. HIGGINBOTHAM, Circuit Judge:

         Appellant Olivia Kneeland applied for, and was denied, social security disability benefits. The district court affirmed. Because the Administrative Law Judge ("ALJ") legally erred by rejecting an examining physician's opinion without explanation in the decision, we VACATE the district court's decision and REMAND to the ALJ for new consideration of Kneeland's impairments that takes into account the examining physician's opinion.


         A. Relevant Medical History

         On April 12, 2006, Olivia Kneeland went to the emergency room following a car accident. Pregnant at the time, she suffered a fractured foot, lacerations on her arm and eye, and fractured ribs. Kneeland had foot surgery in May of 2006. A radiology report from June 2, 2006 notes a "comminuted fracture of the os calcis held in place orthopedic plate screws." Kneeland stated a brace was prescribed in October 2006. Progress notes from March 28, 2007 indicate right foot pain, and a radiology report found "internal plate and screw fixation of the lateral hind and midfoot . . . [and] underlying ankylosis with good alignment."

         On August 25, 2008, Dr. Dale Bernauer wrote a letter-at the center of this appeal-which states in part:

Examination shows her foot is very swollen. It is deformed looking. There is obvious crush injury to the calcaneus. She is tender to palpation. X-rays show that there is a plate on the calcaneus. The Bohler's angle is flattened. Subtalar joint is very arthritic. It is my opinion that she cannot work any job that entails standing for longer than 30 minutes or walking farther than 50 yards.

         In addition to her physical impairments, Kneeland suffers from cognitive and psychological impairments. She attended school until about the ninth grade, and does not have a GED. In August of 2008, Dr. Lawrence Dilks conducted a psychological evaluation, which indicated that Kneeland had, inter alia, bipolar disorder (mixed), pain disorder, mild mental retardation, and a current Global Assessment of Functioning score of 45-50. The evaluation also "indicated a verbal IQ of 73, a performance IQ of 70 and a full scale IQ of 69."

          On January 12, 2009, Dr. Joseph Tramontana, Ph.D., completed a "psychiatric review technique" and found that Kneeland met listing 12.05C.[1]He noted bipolar syndrome, and a valid IQ of 60 through 70 plus another impairment imposing an additional, significant limitation.

         On February 26, 2009, Kneeland underwent another psychological evaluation, this time by psychologist Dr. Jerry Whiteman. Notably, Dr. Whiteman found Kneeland had a verbal IQ of 77, a performance IQ of 74, and a full scale IQ of 74, which are slightly higher scores than what Dr. Dilks reported. Among other conclusions, Dr. Whiteman noted borderline but adequate cognitive abilities, complaints of chronic pain, a criminal history, and relying on others due to stamina and mobility limitations. A February 27, 2009 assessment indicates slight and moderate limitations in various categories, borderline intelligence, limited mobility, and foot pain.

         B. Procedural History

         On September 21, 2006, Kneeland filed a claim for supplemental social security income ("SSI") alleging disability beginning on April 12, 2006, based primarily on a broken bone in her foot and bipolar disorder.[2] Kneeland's claim was initially denied, and denied again on reconsideration. After a hearing was held, the ALJ issued an unfavorable decision. Kneeland appealed to the Social Security Administration's Appeals Council ("Appeals Council"), and submitted additional evidence including the IQ scores from Dr. Whiteman's evaluation.

         While that appeal was pending, Kneeland filed another SSI claim, as well as a claim for disability insurance benefits ("DIB"), [3] alleging "broken bone in foot, bi-polar, [and] migraines." This time, she was awarded benefits by the State Agency for meeting listing 12.05C, which at the time referred to mental retardation.[4] Despite the favorable outcomes, Kneeland's initial claim was still pending at the Appeals Council. And ultimately, in 2010, the Appeals Council granted Kneeland's request for review of her first denial, reopened her favorable decisions, consolidated the claims, and remanded for further proceedings. The Appeals Council found that the denial was "not supported by substantial evidence, " that "there is new and material evidence[, ] and [that] the decision [was] contrary to the weight of all the evidence now in the record." It further found "good cause" based on "new and material evidence" to reopen the favorable determinations.

         As a result, a new hearing was held on August 3, 2011. After brief testimony from Kneeland, the first of two reviewing medical experts, Dr. Alan J. Klein, Ph.D., testified. Dr. Klein opined that Kneeland did not meet Listing 12.05 because her IQ scores on the later of the two psychological examinations were above the 12.05C threshold. Dr. Klein further stated he did not see anything in the record that indicated treatment for bipolar disorder. The second reviewing medical expert, Dr. Frank L. Barnes, M.D., board-certified orthopedist, testified that, based on the record, he did not believe Kneeland met or equaled any listing of impairment. Of note, Dr. Barnes opined that Kneeland could "sit eight hours a day, [and] probably stand and walk a total of two hours a day, " among other limitations. Finally, the vocational expert, Beverly K. Majors, testified. The ALJ described a hypothetical to Majors that in relevant part provided:

[An individual] of the same work history [as Kneeland] and a ninth grade-eight-and-a-half grade educational background . . . could lift and carry 20 pounds occasionally and 10 frequently; sit eight hours out of an eight-hour workday; stand and/or walk two hours out of an eight-hour workday.

         The ALJ asked what occupations the above hypothetical person could perform, and after confirming the eight-and-a-half year education level, [5] the vocational expert testified that the individual could be an escort driver or assembly worker.[6]

         The ALJ denied Kneeland's claim on September 9, 2011, and the Appeals Council denied her request for review. Thereafter, Kneeland filed a complaint in federal district court. The magistrate judge issued a Report and Recommendation affirming the Commissioner's finding and dismissing with prejudice. Over Kneeland's objections, the district court adopted the Report and Recommendation. Kneeland now appeals.


         "We review de novo the district court's grant of summary judgment, applying the same standard that the district court applied."[7] Like the district court's review, our review is limited by 42 U.S.C. § 405(g).[8] "We review the Commissioner's denial of social security benefits 'only to ascertain whether (1) the final decision is supported by substantial evidence and (2) whether the Commissioner used the proper legal standards to evaluate the evidence.'"[9]

         Disability is defined as an "inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment" lasting at least twelve months.[10] To determine disability,

[t]he Commissioner uses a sequential, five-step approach . . . (1) whether the claimant is presently performing substantial gainful activity; (2) whether the claimant has a severe impairment; (3) whether the impairment meets or equals a listed impairment; (4) whether the impairment prevents the claimant from doing past relevant work; and (5) whether the impairment prevents the claimant from performing any other substantial gainful activity.[11]

         "The burden of proof is on the claimant at the first four steps. The burden of proof shifts to the Commissioner at the fifth step to establish the existence of other available substantial gainful employment that a claimant can perform. If the Commissioner identifies such employment, the burden shifts back to the claimant to prove that she could not perform the alternative work identified."[12]Before reaching step four, the Commissioner assesses the claimant's residual functional capacity ("RFC").[13] "The claimant's RFC assessment is a determination of the most the claimant can still do despite his [or her] physical and mental limitations and is based on all relevant evidence in the claimant's record."[14] The RFC is used in both step four and step five to determine whether the claimant is able to do her past work or other available work.[15]


         Kneeland appeals the ALJ's denial of her claim[16] for two central reasons: (1) the ALJ erred by applying improper legal standards, rendering the RFC assessment unsupported by substantial evidence; and (2) the ALJ's hypothetical to the vocational expert based on this RFC was therefore meaningless. We agree.


         As an initial matter, Kneeland challenges the Appeals Council's Order in 2010 to reopen and remand her favorable decisions. This challenge implicates our subject matter jurisdiction because we may only review final decisions, [17] and it is not clear the Appeals Council's 2010 Order is part of the final decision. Nevertheless, assuming without deciding that such an order is appealable as a final decision, Kneeland lost her right to judicial review of the 2010 Order for failing to immediately appeal from it.

         Kneeland argues that the Appeals Council's Order, which reopened the favorable decisions, consolidated the cases, and remanded for a new hearing, constitutes legal error because the Appeals Council failed to address Dr.

          Bernauer's letter, failed to evaluate Kneeland's "status post comminuted right ankle fracture, " and improperly terminated the sequential evaluation at step three. The Commissioner responds that the Appeals Council's Order reopening the claims was proper under the regulations because there was "good cause" based on new and material evidence presented. The Commissioner also notes that the ALJ's September 9, 2011 decision is the final administrative decision.

         The district court, accepting the magistrate's Report and Recommendation, found that 20 C.F.R. §§ 416.1487 and 416.1488 allowed the Appeals Council to reopen its decision because it did so within two years of the initial determination and there was "good cause" under § 416.1489 given the new and material evidence. The court rejected Kneeland's arguments concerning Dr. Bernauer's letter, reasoning that since the favorable determinations were based on meeting 12.05C, the Appeals Council logically focused on Kneeland's mental conditions in its decision to reopen.

         Because Kneeland did not immediately appeal the Appeals Council's Order of which she now complains, she lost her right to judicial review. Closely connected to this procedural requirement is whether the 2010 Order is even appealable as a final decision in the first place. "The Social Security Act provides that courts may review the 'final decision' of the Commissioner."[18]"But the Act does not define 'final decision, ' instead leaving it to the [Social Security Administration] to give meaning to that term through regulations."[19]

         We first address whether the Appeals Council's 2010 Order was a final decision capable of federal court review. The proceedings alone suggest the Order was far from final. In 2010, the Appeals Council reopened the earlier favorable determinations.[20] It also vacated the unfavorable hearing decision, consolidated the claims, and remanded for further proceedings. After that remand, the process continued. There was another hearing, and the ALJ denied Kneeland's claim on September 9, 2011. Kneeland again appealed to the Appeals Council, which, this time, denied the request for review. "[C]ourts generally agree that when the Appeals Council denies a request for review, the ALJ's decision becomes the Commissioner's final decision."[21] Thus, after the Appeals Council denied the request for review, the ALJ's September 9, 2011 decision became the final decision.[22]

         The lingering question is whether the Appeals Council's interim 2010 Order is included as part of that final decision, and accordingly whether we have jurisdiction to review it. There is some authority to suggest that this Court has jurisdiction to review the propriety of an administrative decision to reopen a favorable decision, but only if a decision on the merits of disability is issued simultaneously. In Cieutat v. Bowen, this Court reviewed whether the Appeals Council had authority to reopen a favorable decision, whether it had good cause to do so in that case, and whether its unfavorable decision was supported by substantial evidence.[23] In Cieutat, the Appeals Council reopened a favorable decision after receiving new documents, [24] and then "issued a revised decision finding that [the claimant] was not disabled within the meaning of the Social Security Act."[25] The claimant appealed from this Appeals Council decision to federal district court.[26] The Cieutat Court explained: "the basis for judicial review is not the decision respecting reopening, but rather the admittedly reviewable decision denying benefits."[27] Somewhat relatedly, in Higginbotham v. Barnhart, this Court in "determin[ing] what constitutes the Social Security Commissioner's 'final decision, '"[28] held that "the Commissioner's final decision includes the Appeals Council's denial of a request for review."[29] It reasoned in part that "the regulations provide that the Commissioner's decision does not become final until after the Appeals Council makes its decision denying the claimant's request for review."[30] It also noted other courts' reasoning that a decision is not final "until the Appeals Council either denies review or issues its own ruling."[31] Indeed, other circuits to have considered the question have held that an Appeals Council's remand order is not a final decision.[32] And 20 C.F.R. § 404.984(b)(3) suggests the same:

If the Appeals Council assumes jurisdiction, it will make a new, independent decision based on the preponderance of the evidence in the entire record affirming, modifying, or reversing the decision of the administrative law judge, or it will remand the case to an administrative law judge for further proceedings, including a new decision. The new decision of the Appeals Council is the final decision of the Commissioner after remand.[33]

         In an unpublished case, this Court rejected a claimant's contention that an Appeal Council order remanding the case constituted a final decision.[34] It found, "[t]he phrase 'new decision of the Appeals Council' in the final sentence [of the above regulation] refers only to the council's first alternative of making . . . its own 'new, independent decision, ' not its second alternative of remanding for further consideration by the ALJ."[35] These cases suggest that a federal court may only review an Appeals Council decision to reopen if it comes attached to a favorable or unfavorable decision; a remand order alone is not final.

         But Cole ex rel. Cole v. Barnhart[36] throws a wrench into this understanding. In that case, the ALJ reopened and withdrew the claimant's favorable determination.[37] The Appeals Council found that "the ALJ properly 'reopen[ed] the award of benefits under the provisions of Social Security Ruling 82-52.'"[38] Thereafter, the ALJ-not the Appeals Council-issued a partially unfavorable decision.[39] Citing Cieutat, we found "jurisdiction to consider whether there is error in such a decision to reopen for good cause . . . when the reopening and withdrawal of the ALJ's [earlier] decision led to the ALJ's [later] partially unfavorable decision under review in the instant 42 U.S.C. § 405(g) action."[40] Cole thus appears to support this Court's jurisdiction to review a reopening even if it was unconnected to an immediate merits decision.

         Ultimately, we need not resolve the more difficult question of whether the Appeals Council's 2010 Order reopening and remanding a favorable determination can be appealed as a "final decision, " because even if it could be, Kneeland failed to properly appeal from it. 20 C.F.R. § 404.900 explains the administrative review process. Sections 404.900(a)(1) through (a)(4) describe the four administrative steps: an initial determination, reconsideration, a hearing before an ALJ, and Appeals Council review.[41] The regulation explains that "[w]hen you have completed the steps of the administrative review process listed in paragraphs (a)(1) through (a)(4) of this section, we will have made our final decision. If you ...

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