ORDER REVERSING DECISION OF COMMISSIONER AND REMANDING FOR FURTHER ADMINISTRATIVE PROCEEDINGS

ROBERT N. BLOCK, Magistrate Judge.

The Court now rules as follows with respect to the two disputed issues listed in the Joint Stipulation.1

A. Whether the ALJ's granting of little or no weight to the mental function opinions of treating internist Al-Aziz, examining psychologist Campbell, examining psychologist Berg, and non-examining psychiatrist Hurwitz is supported by legally sufficient rationales

Disputed Issue One is directed to the ALJ's consideration of the opinions of four physicians of record in arriving at his finding at step two of the Commissioner's sequential evaluation process that plaintiff did not suffer from a "severe" mental impairment.

A psychiatric impairment may be found "not severe" at step two of the Commissioner's sequential evaluation process only where the impairment "has no more than a minimal effect" on the claimant's mental ability to perform basic work activities. If a finding of non-severity is not "clearly established by medical evidence," adjudication must continue through the sequential evaluation process. See Social Security Ruling2 ("SSR") 85-28; SSR 96-3p; see also Yuckert v. Bowen, 841 F.2d 303, 306-07 (9th Cir. 1988); McDonald v. Secretary of Health & Human Svcs., 795 F.2d 1118, 1124-25 (1st Cir. 1986).

Here, four physicians of record opined that plaintiff's mental impairments had more than a minimal effect on plaintiff's mental ability to perform basic work activities:

The Court concurs with plaintiff that the ALJ provided reasons for discounting or rejecting all of these opinions that were not legally sufficient. For example, one of the ALJ's stated reasons for giving little weight to Dr. Alaziz's opinion was that Dr. Alaziz was not a specialist in mental health issues. (See AR 19.) This reason was not a legally sufficient reason for discounting Dr. Alaziz's opinion. See Lester v. Chater, 81 F.3d 821, 833 (9th Cir. 1996) (rejecting argument that treating physician's opinion as to the claimant's mental functioning could be rejected because the treating physician was not a mental health specialist); Sprague v. Bowen, 812 F.2d 1226, 1232 (9th Cir. 1987).

Similarly, one of the ALJ's stated reasons for giving little weight to Dr. Berg's opinion was that Dr. Berg conducted the examination of plaintiff "through an attorney referral in an effort to generate evidence for the hearing," and "he was presumably paid for the report." (See AR 18.) This was not a legally sufficient reason in itself for discounting Dr. Berg's opinion. See Reddick v. Chater, 157 F.3d 715, 726 (9th Cir. 1998) ("[I]n the absence of other evidence to undermine the credibility of a medical report, the purpose for which the report was obtained does not provide a legitimate basis for rejecting it."); Lester, 81 F.3d at 832; see also Batson v. Comm'r of Soc. Sec. Admin., 359 F.3d 1190, 1196 n.5 (9th Cir. 2004) (rejecting claimant's contention that physician was biased because he was hired by workers' compensation insurance company). Another of the ALJ's stated reasons for giving little weight to Dr. Berg's opinion was that the opinion was inconsistent with the medical record, which revealed inconsistent mental health treatment. (See AR 19.) However, there was evidence in the record (which the ALJ seemingly ignored) that the inconsistent mental health treatment was due to plaintiff's inability to afford the cost of treatment. (See AR 342, 344-45, 458-59.) The Court therefore finds that this stated reason also was not a legally sufficient reason for discounting Dr. Berg's opinion. See Regennitter v. Comm'r of Social Sec. Admin., 166 F.3d 1294, 1299-1300 (9th Cir. 1999). Another of the ALJ's stated reasons for discounting Dr. Berg's opinion was that it was contradicted by plaintiff's own testimony about his daily activities. Specifically, the ALJ cited plaintiff's testimony that his daily activities included taking his children to and from school each day, preparing meals, and shopping several times a week. (See AR 19, 63-66, 232-35.) However, like plaintiff, the Court fails to see the inconsistency between those daily activities and the mental limitations to which Dr. Berg opined.

The ALJ rejected Dr. Campbell's opinion that plaintiff had marked limitations in social functioning and moderate limitations handling stress and changes in work activities for two stated reasons. (See AR 19.) First, the ALJ characterized the foregoing opinion as inconsistent with the results of plaintiff's mental status examination, as plaintiff's psychomotor activity, speech, thought process, cognition, attention and concentration were normal. (See AR 19, 348.) However, the results of Dr. Campbell's mental status examination to which the ALJ referred had nothing to do with the marked and moderate limitations to which Dr. Campbell opined. As reflected in his report, Dr. Campbell observed that plaintiff was anxious, rude, hostile, somewhat physically intimidating, evasive, belligerent and uncooperative. (See AR 347-50.) Dr. Campbell also reported that plaintiff's affect was angry and somewhat labile and his insight and judgment were "poor." (See AR 348.) The marked and moderate limitations to which Dr. Campbell opined were not inconsistent with those observations/findings. The ALJ's other stated reason for rejecting the marked and moderate limitations to which Dr. Campbell opined was that plaintiff gave poor effort during the examination, refused to discuss his daily routine, and would not comply with psychiatric testing. (See AR 19.) The Court notes, however, that plaintiff told Dr. Campbell that he got along poorly with people, and plaintiff's generally hostile and belligerent behavior is well documented. (See AR 348-50.) Dr. Campbell stated that she did not know whether plaintiff's behavior had been volitional, implying that it could have been medically dictated behavior. (See AR 350.) Although Dr. Campbell acknowledged that only limited information was available, Dr. Campbell did render her opinion regarding plaintiff's marked and moderate limitations based on her findings and plaintiff's presentation at the examination. (See AR 349-50.) The Court therefore finds that plaintiff's supposed lack of cooperation also was not a legally sufficient reason for rejecting Dr. Campbell's opinion regarding plaintiff's marked and moderate limitations.

The ALJ stated that he was according little weight to the opinion of the state agency physician, Dr. Hurwitz, because the medical record did not support the assessed limitations and the record contained minimal mental health treatment. (See AR 19.) However, those reasons do not withstand scrutiny because (a) Dr. Hurwitz's opinion was supported by the opinions of plaintiff's treating physician and the two examining physicians, and (b) the record reflects that plaintiff was receiving regular mental health treatment from his treating physician, in the form of prescribed medications. (See AR 290-91, 342, 344, 345, 379-80, 416.) Moreover, the lack of evidence of psychiatric hospitalization or comparably serious treatment is not dispositive because step two is only "a de minimis screening device to dispose of groundless claims." See also French v. Astrue, 2010 WL 2803965, at *6 (C.D. Cal. July 15, 2010) ("A claimant may suffer from a mental impairment without having been hospitalized for that limitation. Thus, it appears that the ALJ applied more than a de minimis test and his conclusion at step two that Plaintiff does not suffer from a severe mental impairment was error."); Alsyouf v. Astrue, 2010 WL 5624668, at *3 (C.D. Cal. Jan. 21, 2010) (same). Further, as discussed above, there was evidence in the record (which the ALJ seemingly ignored) that plaintiff's failure to obtain additional mental health treatment was due to plaintiff's inability to afford the cost of such treatment.

The Court therefore finds that the medical evidence here did not "clearly establish" a finding of non-severity. See Webb v. Barnhart, 433 F.3d 683, 688 (9th Cir. 2005) (ALJ's determination that claimant exaggerated severity of his symptoms did not "doom" the claim at step two where treating doctors did not dismiss claimant's complaints as altogether unfounded and where there was objective medical evidence of severe impairment); Edlund v. Massanari, 253 F.3d 1152, 1159 (9th Cir. 2001) (ALJ's non-severity finding was not supported by substantial evidence where examining psychologist rendered uncontroverted opinion that claimant had severe depression); Holzberg v. Astrue, 679 F.Supp.2d 1249, 1261 (W.D. Wash. 2010) (ALJ erred in finding depression not severe where evidence indicated moderate limitations in several mental functional areas).

B. Whether the ALJ made a proper adverse credibility determination

Disputed Issue Two is directed to the ALJ's adverse credibility determination with respect to plaintiff's subjective symptom testimony. (See Jt Stip at 28-36.)

An ALJ's assessment of pain severity and claimant credibility is entitled to "great weight." Weetman v. Sullivan, 877 F.2d 20, 22 (9th Cir. 1989); Nyman v. Heckler, 779 F.2d 528, 531 (9th Cir. 1986). Under the "Cotton test," where the claimant has produced objective medical evidence of an impairment which could reasonably be expected to produce some degree of pain and/or other symptoms, and the record is devoid of any affirmative evidence of malingering, the ALJ may reject the claimant's testimony regarding the severity of the claimant's pain and/or other symptoms only if the ALJ makes specific findings stating clear and convincing reasons for doing so. See Cotton v. Bowen, 799 F.2d 1403, 1407 (9th Cir. 1986); see also Smolen v. Chater, 80 F.3d 1273, 1281 (9th Cir. 1996); Dodrill v. Shalala, 12 F.3d 915, 918 (9th Cir. 1993); Bunnell v. Sullivan, 947 F.2d 341, 343 (9th Cir. 1991) (en banc).

Plaintiff testified at the hearing that he resigned from his position as a special education teacher in October 2007, after he was injured in a school riot and had his life threatened. (See AR 55-57.) Plaintiff claimed that he cannot work because he cannot handle being around people. (See AR 56-57.) Plaintiff reported that he has problems with concentration, memory, and completing tasks. (See AR 61, 237.) Plaintiff also claimed that he suffers from knee and tail bone injuries. (AR 58.) Plaintiff stated that in August 2012, he fractured his tail bone when his knee impairment caused him to fall down a flight a stairs. (See AR 58, 62.) Plaintiff testified that he needs to use a cane, is limited to walking 50 yards, and lies down most of the day. (See AR 58, 62-63.) According to plaintiff, his physician recommended knee surgery, but indicated that plaintiff would first need to lose about 60 pounds. (See AR 58.) Plaintiff testified that he has custody of his two children, ages six and eleven, and takes them to and from school each day. (See AR 64-65.)

The ALJ found that although plaintiff's medically determinable impairments could reasonably be expected to cause the alleged symptoms, plaintiff's statements concerning the intensity, persistence, and limiting effects of these symptoms were not credible to the extent they were inconsistent with the ALJ's residual functional capacity assessment.4 (See AR 22.) In support of this adverse credibility determination, the ALJ proffered three reasons. (See AR 21-22.)

First, the ALJ cited plaintiff's daily activities, which included preparing simple meals, performing grooming activities, shopping, and driving. (AR 22.) An ALJ may rely on a claimant's daily activities to support an adverse credibility determination when those activities: (1) "contradict [the claimant's] other testimony"; or (2) "meet the threshold for transferable work skills." Orn v. Astrue, 495 F.3d 625, 639 (9th Cir. 2007). However, "[t]he ALJ must make `specific findings relating to [the daily] activities' and their transferability to conclude that a claimant's daily activities warrant an adverse credibility determination." Id. (quoting Burch v. Barnhart, 400 F.3d 676, 681 (9th Cir. 2005)). Here, the ALJ found that some of the physical and mental abilities and social interactions required in order to perform plaintiff's daily activities were the same as those necessary for obtaining and maintaining employment. (See AR 22.) However, the ALJ made no specific findings about the transferability of plaintiff's daily activities to the work setting, and the record does not evidence that plaintiff spent a substantial part of his day engaged in activities that resembled those necessary for employment. (See AR 22); see Fair v. Bowen, 885 F.2d 597, 603 (9th Cir. 1989) (holding that daily activities may be grounds for an adverse credibility finding "if a claimant is able to spend a substantial part of his day engaged in pursuits involving the performance of physical functions that are transferable to a work setting."). The ALJ further found that plaintiff's daily activities were inconsistent with the presence of an incapacitating or debilitating condition, and his ability to participate in such activities undermined his credibility. (See AR 22.) However, the ALJ did not elaborate on which specific activities conflicted with which part of plaintiff's testimony. See Burrell v. Colvin, 775 F.3d 1133, 1138 (9th Cir. 2014). Merely referencing plaintiff's cooking, grooming, shopping, and driving activities was insufficient to establish a conflict with plaintiff's testimony. See Orn, 495 F.3d at 639; Lester, 81 F.3d at 834 ("General findings are insufficient; rather, the ALJ must identify what testimony is not credible and what evidence undermines the claimant's complaints."). Accordingly, the Court finds that the ALJ improperly relied on plaintiff's daily activities in support of his adverse credibility determination.5

Second, the ALJ found that although plaintiff claimed that he spends the majority of his time lying down due to knee and tail bone pain, plaintiff's medical records revealed only infrequent and conservative treatment. (See AR 22.) The record supports this finding. While plaintiff has a torn meniscus in his left knee, Dr. Alaziz's records do not reflect treatment for that condition. (See AR 290-91, 342, 344-45, 379-81, 416-17, 419.) Although plaintiff claimed that knee surgery had been recommended, plaintiff was admittedly not a candidate for surgery, as he had failed to comply with his doctor's directive to lose approximately 60 pounds. (See AR 22, 37, 58, 419.) As for plaintiff's tail bone complaints, the record shows that plaintiff incurred a fractured coccyx in August 2012. (See AR 392-93.) That condition was treated with prescription pain medication. (See id.) There is no indication in the record that plaintiff received any other treatment for his tail bone pain. (See AR 392-93, 419-22). Accordingly, the Court finds that the ALJ properly relied on the infrequent and conservative nature of plaintiff's treatment in support of his adverse credibility determination. See Tommasetti v. Astrue, 533 F.3d 1035, 1039 (9th Cir. 2008) (ALJ may draw adverse inference against claimant's credibility from evidence of conservative treatment); Parra v. Astrue, 481 F.3d 742, 751 (9th Cir. 2007) (same); Warre v. Commissioner of Social Sec. Admin., 439 F.3d 1001, 1006 (9th Cir. 2006) ("Impairments that can be controlled effectively with medication are not disabling for the purpose of determining eligibility for SSI benefits.").

Third, the ALJ found that plaintiff offered inconsistent statements about the custody of his two children. (See AR 22.) Specifically, the ALJ noted that at the hearing in October 2012, plaintiff testified that his two children had lived with him for the past four years and that he had full custody of them. (See AR 22, 64.) However, just a month earlier, plaintiff told Dr. Berg that his two children lived with their grandparents. (See AR 22, 398.) The Court finds that the inconsistency in plaintiff's statements was a legally sufficient reason on which the ALJ also could properly rely in support of the adverse credibility determination. Tonapetyan v. Halter, 242 F.3d 1144, 1148 (9th Cir. 2001) (ALJ may use "ordinary techniques of credibility evaluation," such as considering the claimant's reputation for truthfulness and any inconsistent statements in her testimony); Smolen, 80 F.3d at 1284 (ALJ may consider "prior inconsistent statements concerning the symptoms, and other testimony by the claimant that appears less than candid"); Johnson v. Shalala, 60 F.3d 1428, 1432 (9th Cir. 1995) (ALJ may properly rely on inconsistencies in the claimant's testimony); Bunnell, 947 F.2d at 346 ("[T]he adjudicator may discredit the claimant's allegations based on inconsistencies in the testimony or on relevant character evidence.").

In conclusion, the Court finds that even if the ALJ erred in relying on one of the three stated reasons in support of his adverse credibility determination, the error was harmless because the ALJ's other stated reasons and ultimate credibility determination were supported by substantial evidence. See Carmickle v. Comm'r, Social Sec. Admin., 533 F.3d 1155, 1162-63 (9th Cir. 2008) (holding that ALJ's reliance on two invalid reasons in support of adverse credibility determination was harmless where remaining reasons were adequately supported by substantial evidence).

CONCLUSION AND ORDER

The law is well established that the decision whether to remand for further proceedings or simply to award benefits is within the discretion of the Court. See, e.g., Salvador v. Sullivan, 917 F.2d 13, 15 (9th Cir. 1990); McAllister, 888 F.2d at 603; Lewin v. Schweiker, 654 F.2d 631, 635 (9th Cir. 1981). Remand is warranted where additional administrative proceedings could remedy defects in the decision. See, e.g., Kail v. Heckler, 722 F.2d 1496, 1497 (9th Cir. 1984); Lewin, 654 F.2d at 635. Remand for the payment of benefits is appropriate where no useful purpose would be served by further administrative proceedings, Kornock v. Harris, 648 F.2d 525, 527 (9th Cir. 1980); where the record has been fully developed, Hoffman v. Heckler, 785 F.2d 1423, 1425 (9th Cir. 1986); or where remand would unnecessarily delay the receipt of benefits, Bilby v. Schweiker, 762 F.2d 716, 719 (9th Cir. 1985).

This is not an instance where no useful purpose would be served by further administrative proceedings, or where the record has been fully developed. The Court has found that, with respect to plaintiff's mental impairment, the ALJ erred at step two of the Commissioner's sequential evaluation process. Remand therefore is appropriate to allow the Commissioner to continue the sequential evaluation process starting at step three.6

Accordingly, pursuant to sentence four of 42 U.S.C. § 405(g), IT IS HEREBY ORDERED that Judgment be entered reversing the decision of the Commissioner of Social Security and remanding this matter for further administrative proceedings.