MEMORANDUM OPINION AND ORDER

MARGARET A. NAGLE, Magistrate Judge.

Plaintiff filed a Complaint on May 16, 2013, seeking review of the denial of plaintiff's application for a period of disability, disability insurance benefits ("DIB"), and supplemental security income ("SSI"). On June 11, 2013, the parties consented, pursuant to 28 U.S.C. § 636(c), to proceed before the undersigned United States Magistrate Judge. The parties filed a Joint Stipulation on January 22, 2014, in which: plaintiff seeks an order reversing the Commissioner's decision and remanding this case for the payment of benefits or, alternatively, for further administrative proceedings; and the Commissioner requests that her decision be affirmed or, alternatively, remanded for further administrative proceedings. The Court has taken the parties' Joint Stipulation under submission without oral argument.

SUMMARY OF ADMINISTRATIVE PROCEEDINGS

Plaintiff filed an application for a period of disability and DIB on April 15, 2010, and SSI on April 30, 2010. (Administrative Record ("A.R.") 47.) Plaintiff claims to have been disabled since March 28, 2009, due to degenerative/bulging discs, high blood pressure/heart pacemaker/systematic lupus/spinal stenosis, sleep apnea, spinal meningitis, pneumonia, obesity/feet problems, sick sinus syndrome, migraines/anxiety, and past manic depression/bipolar. (A.R. 258.) Plaintiff has past relevant work ("PRW") experience as an administrative assistant, telephone solicitor (door service), and customer service representative (for the bank). (A.R. 62.)

After the Commissioner denied plaintiff's claim initially and upon reconsideration, plaintiff requested a hearing. (A.R. 47.) On December 6, 2011, plaintiff, who was represented by a non-attorney, appeared and testified at a hearing before Administrative Law Judge Helen E. Hesse (the "ALJ"). (Id.) Medical expert Joseph E. Jensen and vocational expert Susan L. Allison also testified at the hearing. (Id.) On February 8, 2012, the ALJ denied plaintiff's claim (A.R. 47-63), and the Appeals Council subsequently denied plaintiff's request for review of the ALJ's decision (A.R. 1-7). That decision is now at issue in this action.

SUMMARY OF ADMINISTRATIVE DECISION

In her February 8, 2012 decision, the ALJ found that plaintiff met the insured status requirements of the Social Security Act through December 31, 2014, and plaintiff has not engaged in substantial gainful activity since March 28, 2009, the alleged onset date of her disability. (A.R. 49.) The ALJ determined that plaintiff has the severe impairments of: "systemic lupus erythemotosis, degenerative disc disease of the lumbar and cervical spines with stenosis, and morbid obesity." (A.R. 50.) The ALJ also determined that plaintiff does not have any severe impairment related to her "hypertension, deep vein thrombosis, cellulitis, sleep apnea, spinal meningitis, history of migraine headaches, pneumonia, sick sinus syndrome (coronary syndrome) and hammer toes and plantar fasciitis." (A.R. 50-51.) The ALJ concluded that plaintiff does not have an impairment or combination of impairments that meets or medically equals one of the listed impairments in 20 C.F.R. Part 404, Subpart P, Appendix 1 (20 C.F.R. §§ 404.1520(d), 404.1525, 404.1526, 416.920(d), 416.925, and 416.926). (A.R. 53.)

After reviewing the record, the ALJ determined that plaintiff has the residual functional capacity ("RFC") to perform light work as defined in 20 C.F.R. §§ 404.1567(b) and 416.967(b) with the following limitations:

(A.R. 55.) In making this finding, the ALJ considered the subjective symptom testimony of plaintiff, which the ALJ found was not entirely credible, as well as the medical evidence and opinions of record. (A.R. 55-61.)

The ALJ found that plaintiff was able to perform her PRW as an "administrative assistant," "telephone solicitor (donor service), and "customer service representative (for the bank)," because "this work does not require the performance of work-related activities precluded by [plaintiff]'s [RFC]." (A.R. 62.) Accordingly, the ALJ concluded that plaintiff has not been under a disability, as defined in the Social Security Act, from March 28, 2009, the alleged onset date, through February 8, 2012, the date of the ALJ's decision. (A.R. 63.)

STANDARD OF REVIEW

Under 42 U.S.C. § 405(g), this Court reviews the Commissioner's decision to determine whether it is free from legal error and supported by substantial evidence in the record as a whole. Orn v. Astrue, 495 F.3d 625, 630 (9th Cir. 2007). Substantial evidence is "`such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" Id. (citation omitted). The "evidence must be more than a mere scintilla but not necessarily a preponderance." Connett v. Barnhart, 340 F.3d 871, 873 (9th Cir. 2003). "While inferences from the record can constitute substantial evidence, only those `reasonably drawn from the record' will suffice." Widmark v. Barnhart, 454 F.3d 1063, 1066 (9th Cir. 2006) (citation omitted).

Although this Court cannot substitute its discretion for that of the Commissioner, the Court nonetheless must review the record as a whole, "weighing both the evidence that supports and the evidence that detracts from the [Commissioner's] conclusion." Desrosiers v. Sec'y of Health and Hum. Servs., 846 F.2d 573, 576 (9th Cir. 1988); see also Jones v. Heckler, 760 F.2d 993, 995 (9th Cir. 1985). "The ALJ is responsible for determining credibility, resolving conflicts in medical testimony, and for resolving ambiguities." Andrews v. Shalala, 53 F.3d 1035, 1039 (9th Cir. 1995).

The Court will uphold the Commissioner's decision when the evidence is susceptible to more than one rational interpretation. Burch v. Barnhart, 400 F.3d 676, 679 (9th Cir. 2005). However, the Court may review only the reasons stated by the ALJ in his decision "and may not affirm the ALJ on a ground upon which he did not rely." Orn, 495 F.3d at 630; see also Connett, 340 F.3d at 874. The Court will not reverse the Commissioner's decision if it is based on harmless error, which exists only when it is "clear from the record that an ALJ's error was `inconsequential to the ultimate nondisability determination.'" Robbins v. Soc. Sec. Admin., 466 F.3d 880, 885 (9th Cir. 2006) (quoting Stout v. Comm'r, 454 F.3d 1050, 1055 (9th Cir. 2006)); see also Burch, 400 F.3d at 679.

DISCUSSION

Plaintiff claims that the ALJ improperly failed to: (1) find her impairments of myofascial pain syndrome and history of migraine headaches severe at step two; (2) consider the opinions of treating physicians Dr. Khurana and Dr. Stoney; and (3) consider her subjective complaints, as well as the lay witness statements of her sister, Elisabeth Beech. (Joint Stipulation ("Joint Stip.") at 8.)

I. On Remand, The ALJ Must Reconsider Her Step Two Analysis With Respect To One Of Plaintiff's Allegedly Severe Impairments.

Plaintiff argues that the ALJ improperly failed to find her myofascial pain syndrome and history of migraine headaches to be severe impairments at step two. (Joint Stip. at 8-11.) The Court finds that the ALJ erred in finding that plaintiff's myofascial pain syndrome was not a severe impairment.

At step two of the sequential evaluation process, the ALJ is tasked with identifying a claimant's "severe" impairments. 20 C.F.R. §§ 404.1520(a)(4)(ii), 404.1520(c), 416. 920(a)(4)(ii), 416.920(c). A severe impairment is one that "significantly limits [a claimant's] physical or mental ability to do basic work activities."1 20 C.F.R. §§ 404.1520(c), 416.920(c). Despite use of the term "severe," most circuits, including the Ninth Circuit, have held that "the step-two inquiry is a de minimis screening device to dispose of groundless claims." Smolen v. Chater, 80 F.3d 1273, 1290 (9th Cir. 1996). Accordingly, "[a]n impairment or combination of impairments may be found `not severe only if the evidence establishes a slight abnormality that has no more than a minimal effect on [a claimant's] ability to work.'" Webb v. Barnhart, 433 F.3d 683, 686-87 (9th Cir. 2005) (citation omitted; emphasis in original).

A. Myofascial Pain Syndrome

As noted above, the ALJ found that plaintiff's systemic lupus erythemotosis, degenerative disc disease of the lumbar and cervical spines with stenosis, and morbid obesity constituted "severe" impairments at step two. (A.R. 50.) However, the ALJ did not find plaintiff's impairment of myofascial pain syndrome to be "severe." (A.R. 50-51.)

The medical records confirm that plaintiff suffered from myofascial pain syndrome. (A.R. 390, 978, 981.) Significantly, on October 23, 2011, treating rheumatologist Dr. Krishan S. Khurana diagnosed plaintiff with myofascial pain syndrome and determined that the condition would contribute to her inability to work full-time, even in a sedentary position. (A.R. 978.) This evidence, of which the ALJ was aware (A.R. 60), strongly suggests that plaintiff's myofascial pain syndrome would have more than a minimal effect on her ability to function in the workplace. The ALJ's failure to give specific and legitimate reasons for rejecting Dr. Khurana's opinion regarding the functional limitations stemming from plaintiff's myofascial pain syndrome or to find that medical condition to be severe at step two of the sequential evaluation process constitutes error.

Moreover, the ALJ's error cannot be deemed harmless. In general, an ALJ's failure to discuss a claimant's impairment at step two may be deemed harmless only when the ALJ's error did not prejudice a claimant at later steps in the sequential evaluation process. In Burch, for example, the Ninth Circuit assumed, without deciding, that it was legal error for the ALJ not to discuss plaintiff's obesity in his step two analysis. 400 F.3d at 682. The Ninth Circuit concluded, however, that the assumed error was harmless, because it would not have impacted the ALJ's analysis at either step four or five of the evaluation process. Specifically, the Ninth Circuit found that, for purposes of step four, plaintiff failed to proffer any evidence of functional limitations due to her obesity that would have impacted the ALJ's analysis. Id. at 683. Further, at step five, the Ninth Circuit found that no prejudice occurred, because the ALJ "adequately considered [plaintiff's] obesity in his RFC determination," i.e., there was no "functional limitations as a result of [plaintiff's] obesity that the ALJ failed to consider." Id. at 684; see also Lewis v. Astrue, 498 F.3d 909, 911 (9th Cir. 2007) (finding that any error the ALJ committed in failing to list plaintiff's bursitis at step two was harmless, because the ALJ "extensively discussed" plaintiff's bursitis and "considered any limitations posed by the bursitis at [s]tep [four]").

In this case, unlike in Burch and Lewis, the Court cannot conclude that the ALJ's failure to consider plaintiff's myofascial pain syndrome and her resulting limitations is harmless error. As discussed in detail below, the ALJ failed to give the requisite specific and legitimate reasons for rejecting Dr. Khurana's opinion regarding the various work limitations stemming from plaintiff's impairments, and because Dr. Khurana opined that plaintiff's myofascial pain syndrome would preclude her from working full-time even in a sedentary position, that opinion, if credited, would have impacted the ALJ's analysis at steps four and five of the evaluation. Accordingly, the Court cannot find the ALJ's error to be harmless. See Stout, 454 F.3d at 1055 (finding an error to be harmless when it "was nonprejudicial to the claimant or irrelevant to the ALJ's ultimate disability conclusion"). On remand, the ALJ must revisit her severity determination with respect to plaintiff's myofascial pain syndrome.

B. History of Migraine Headaches

Plaintiff also alleges disability, in part, due to her history of migraine headaches. (A.R. 258.) The medical records do confirm that plaintiff has suffered from a history of migraine headaches. (A.R. 373, 377, 386, 389, 428, 608, 649, 651.) In fact, the ALJ acknowledged that plaintiff had a medical impairment of a history of migraine headaches, but found it to be non-severe. (A.R. 50.)

On July 20, 2010, consultative examiner Dr. Rocely Ella-Tamayo conducted a complete internal medicine evaluation of plaintiff. (A.R. 603-09.) Based on plaintiff's history, a physical, musculoskeletal and neurological examination of plaintiff, and diagnostic impressions, Dr. Ella-Tamayo diagnosed plaintiff with, inter alia, a history of migraine headaches. (Id.) Dr. Ella-Tamayo then opined that plaintiff: would be restricted to pushing, pulling, lifting and carrying 20 pounds occasionally and 10 pounds frequently; could stand and walk two to four hours in an eight-hour workday with normal breaks, but would need an assistive device for prolonged ambulation; could kneel occasionally, but would be unable to squat; and would have no sitting restrictions. (A.R. 608.) Because it can be inferred that Dr. Ella-Tamayo assessed these functional limitations, due, in part, to plaintiff's migraine headaches, Dr. Ella-Tamayo's opinion suggests that plaintiff's migraine headaches would have more than a de minimus impact on her ability to perform basic work activities. Thus, it was error for the ALJ to classify plaintiff's history of migraine headaches as non-severe. The Court finds the error to be harmless, however.

As noted above, where an ALJ fails to find an asserted impairment severe at step two, but nonetheless accounts for that impairment at step four in the RFC analysis, any alleged error in failing to find the disorder "severe" at step two is harmless. See Lewis, 498 F.3d at 911. Here, the ALJ gave "great weight" to Dr. Ella-Tamayo's opinion in determining plaintiff's RFC. (A.R. 59.) Thus, any error in failing to include plaintiff's migraine headaches as a severe impairment at step two was harmless error.

However, as this case is being remanded to reconsider several issues discussed herein, the ALJ should reassess plaintiff's history of migraine headaches as severe at step two or provide appropriate reasons for failing to do so.

II. The ALJ Failed To Give Specific And Legitimate Reasons For Rejecting The Opinions Of Dr. Khurana and Dr. Stoney.

Plaintiff contends that the ALJ failed to provide specific and legitimate reasons for rejecting the opinions of treating physicians Dr. Khurana and Dr. Stoney. (Joint Stip. at 20.) The Court agrees.

A. Legal Standard

An ALJ is obligated to take into account all medical opinions of record. 20 C.F.R. §§ 404.1527(c), 416.927(c). It is the responsibility of the ALJ to resolve conflicts in medical testimony and analyze evidence. Magallanes v. Bowen, 881 F.2d 747, 750 (9th Cir. 1989). In the hierarchy of physician opinions considered in assessing a social security claim, "[g]enerally, a treating physician's opinion carries more weight than an examining physician's, and an examining physician's opinion carries more weight than a reviewing physician's." Holohan v. Massanari, 246 F.3d 1195, 1202 (9th Cir. 2001).

The opinions of treating physicians are entitled to the greatest weight, because the treating physician is hired to cure and has a better opportunity to know and observe the claimant. Magallanes, 881 F.2d at 751. When a treating or examining physician's opinion is not contradicted by another physician, it may be rejected only for "clear and convincing" reasons. Lester v. Chater, 81 F.3d 821, 830 (9th Cir. 1995). When contradicted by another doctor, a treating or examining physician's opinion may only be rejected if the ALJ provides "specific and legitimate" reasons supported by substantial evidence in the record. Id.; see also Ryan v. Comm'r of Soc. Sec., 528 F.3d 1194, 1198 (9th Cir. 2008); Orn, 495 F.3d at 632.

B. Analysis

1. Dr. Khurana2

On October 23, 2011, Dr. Khurana completed a "Physical Capacities Evaluation." (A.R. 975-78.) In the evaluation, Dr. Khurana noted that, in an 8-hour workday, plaintiff: could occasionally lift/carry up to five pounds; occasionally climb, balance, stoop, kneel, crouch, crawl, and reach above her shoulder level; and would be severely limited in activities involving unprotected heights, being around moving machinery, exposure to marked changes in temperature and humidity, and driving automotive equipment, but only moderately limited with respect to exposure to dust, fumes, gases, and gasoline. (A.R. 978.) Plaintiff could sit/stand/walk one hour with alternate sitting and standing; could do simple grasping, but not pushing and pulling, and fine manipulation with no repetitive hand motion tasks; and could not use her feet for repetitive movements. (A.R. 975.) He noted that plaintiff is "exhausted all the time," "has myofascial pain syndrome," and "is on "prednisone which can cause muscle weakness." (A.R. 978.) Dr. Khurana concluded that plaintiff suffers from pain which would prevent her working full-time, even in a sedentary occupation. (A.R. 976.) Finally, Dr. Khurana opined that, due to plaintiff's pain and the side effects of her medication, she would be moderately limited in her attention and concentration that would preclude her from performing skilled work tasks. (A.R. 977.)

In her decision, the ALJ rejected the opinion of Dr. Khurana, as set forth in the Physical Capacities Evaluation, because: (1) he is not board certified; (2) he is not familiar with the Agency's disability guidelines; (3) his opinion is inconsistent with plaintiff's medical records; (4) his opinion is inconsistent with plaintiff's daily activities; and (5) his opinion that plaintiff is unable to work is a finding reserved for the Commissioner. (A.R. 60.)

The ALJ's first reason is not legitimate. The ALJ rejected Dr. Khurana's opinion, because he is not "board certified in orthopedic surgery, internal medicine, or rheumatology." (Id.) Although more weight is generally given to the opinion of a specialist about medical issues related to his or her area of specialty than to the opinion of a source who is not a specialist, this principle is not dispositive of whether the ALJ correctly assessed Dr. Khurana's opinion. The ALJ is indisputably obligated to take into account all medical opinions of record, and the absence of a board-certified specialty is not, in and of itself, a reason to reject a treating doctor's opinion. See Lester, 81 F.3d at 833 ("The treating physician's continuing relationship with the claimant makes him especially qualified to evaluate reports from examining doctors, to integrate the medical information they provide, and to form an overall conclusion as to functional capacities and limitations, as well as to prescribe or approve the overall course of treatment."). Thus, that Dr. Khurana was not board certified does not constitute a legitimate reason for rejecting the opinion of Dr. Khurana, a treating physician who noted on the top of his Physical Capacities Evaluation form that he specialized in rheumatology. (See A.R. 975-78.)

The ALJ's second reason in rejecting Dr. Khurana's opinion — to wit, that he is "not familiar with the Agency's disability guidelines" — is also not legitimate. (A.R. 60.) It is well established that "[w]hen a treating physician's opinion is contradicted . . ., the ALJ must assess its persuasiveness in light of specified factors, including the `length of the treatment relationship and the frequency of examination;' the `nature and extent of the treatment relationship;' and the treating opinion's consistency `with the record as a whole.'" Aranda v. Comm'r SSA, 405 Fed. Appx. 139, 141 (9th Cir. 2010) (quoting Orn, 495 F.3d at 631); see also Lester, 81 F.3d at 833. Thus, a demonstration of familiarity with Social Security disability guidelines by Dr. Khurana does not appear to be a pre-requisite to the ALJ's consideration of Dr. Khurana's opinion. Indeed, the regulations require that the ALJ consider the opinions of all physicians. See 20 C.F.R. §§ 404.1527(c), 416.927(c).

Next, the ALJ rejected Dr. Khurana's opinion because it was characterized as inconsistent with plaintiff's activities of daily living, such as "doing chores, cooking meals, walking and driving." (A.R. 60.) Inconsistency between a treating physician's opinion and a claimant's daily activities may be a specific and legitimate reason for rejecting the opinion. See Bayliss v. Barnhart, 427 F.3d 1211, 1216 (9th Cir. 2005); Rollins v. Massanari, 261 F.3d 853, 856 (9th Cir. 2001). However, none of plaintiff's reported daily activities appears to exceed Dr. Khurana's opined limitations.

In a July 15, 2010 "Functional Report — Adult" form, plaintiff stated that she needs to sit down when she gets dressed and receives help to tie her shoes. (A.R. 288.) She only takes showers with the help of her daughter, and she is unable to blow dry her hair due to pain and fatigue. (Id.) Plaintiff experiences increased numbness in her legs when she is sitting on the toilet and needs to use her cane or counter to support herself when standing up from the toilet. (Id.) Plaintiff is able to prepare simple meals; however, it takes her an hour to do so, because she needs to sit down and take breaks while cooking. (A.R. 289.) Plaintiff relies on her daughter to complete the majority of the household chores, but plaintiff helps with light chores such as dusting, vacuuming, loading the dishes, and folding laundry, but she does so with difficulty. (A.R. 289-90.) Plaintiff is able to drive to her doctor appointments three times a week, but she prefers to have someone with her when she leaves the house and to have someone else drive her to her appointments. (A.R. 290.) Plaintiff does not do any grocery shopping. (Id.) Plaintiff is able to pay bills and count change, but she needs her daughter to double check her math when balancing her accounts and writing bill payments. (A.R. 291.) Plaintiff also stated that she uses a walker or cane to ambulate a majority of the time. (A.R. 292.) Accordingly, such activities do not appear to be inconsistent with Dr. Khurana's opinion, as a result, and it was improper for the ALJ to reject his opinion on this ground.

The ALJ's fourth reason for rejecting the opinion of Dr. Khurana is impermissibly conclusory and provides no specific reference to any inconsistencies between Dr. Khurana's opinion and plaintiff's treatment records. Rather, the ALJ merely states that Dr. Khurana's "opinion is inconsistent with [plaintiff's] medical records." (A.R. 60); see Regennitter v. Comm'r of SSA, 166 F.3d 1294, 1299 (9th Cir. 1999) (noting that "conclusory reasons will not justify an ALJ's rejection of a medical opinion"); McAllister v. Sullivan, 888 F.2d 599, 602 (9th Cir. 1989) ("[b]road and vague" reasons for rejecting the treating physician's opinion do not suffice); Embrey v. Bowen, 849 F.2d 418, 421-22 (9th Cir. 1988) ("To say that medical opinions are not supported by sufficient objective findings or are contrary to the preponderant conclusions mandated by the objective findings does not achieve the level of specificity our prior cases have required . . . . The ALJ must do more than offer his conclusions. He must set forth his own interpretation and explain why they, rather than the doctors', are correct."). Further, Dr. Khurana's opinion appears to be consistent with treating physician Dr. Stoney's opinion, which, as discussed below, the ALJ also failed to properly consider.

The ALJ's final reason for rejecting the opinion of Dr. Khurana is misguided. (A.R. 60.) While it is true that a treating physician's opinion on the matter of ultimate disability is not determinative or entitled to special weight, a treating physician's medical opinion must be considered. Boardman v. Astrue, 286 Fed. Appx. 397, 399 (9th Cir. 2008). A medical opinion "`reflect[s] judgments about the nature and severity of [a claimant's] impairment(s), including [a claimant's] symptoms, diagnosis and prognosis, what [a claimant] can still do despite impairment(s), and [a claimant's] physical or mental restrictions.'" Id. (citation omitted). Beyond finding that plaintiff was disabled and/or unable to work — a finding reserved for the ALJ — Dr. Khurana clearly expressed a medical opinion. He described plaintiff's symptoms and the restrictions on plaintiff's activity. (See A.R. 975-78.) Rather than affording proper weight to Dr. Khurana's opinion, the ALJ improperly chose to ignore it simply because Dr. Khurana also expressed an opinion regarding plaintiff's ultimate disability and residual functional capacity. While this may be a specific reason to reject a treating physician's medical opinion, it is not a legitimate one.

Accordingly, for the aforementioned reasons, the ALJ failed to properly reject the opinion of Dr. Khurana.

2. Dr. Stoney3

On January 17, 2011, Dr. Stoney, completed a "Physical Capacities Evaluation." (A.R. 850-53.) In his evaluation, Dr. Stoney opined that plaintiff suffered from pain due to degenerative joint disease of the spine with facet syndrome, fibromyalgia, and systemic lupus. (A.R. 852.) He opined that in an entire 8-hour day, plaintiff could: sit/stand/walk less than one hour and would need to alternate between sitting and standing; could do simple grasping but not pushing and pulling, and fine manipulation; could do no repetitive movements of the feet; could occasionally lift/carry five pounds; could never climb, balance, stoop, kneel, crouch, crawl and reach above shoulder level; and would be restricted from activities involving unprotected heights, being around moving machinery, exposure to marked changes in temperature and humidity, and driving an automobile. (A.R. 850-51.) Dr. Stoney also noted that plaintiff's pain is disabling to the extent that it would prevent her from working full-time, even at a sedentary position. (A.R. 852.) Further, due to plaintiff's pain and side effects, Dr. Stoney opined that plaintiff would be severely limited in the attention and concentration required for even simple, unskilled work tasks. (A.R. 977.)

On March 14, 2011, Dr. Stoney completed another "Physical Capacities Evaluation" with the same responses set forth above. (A.R. 906-09.)

The ALJ gave Dr. Stoney's opinion "little weight" based on the same five grounds, verbatim, upon which she rejected the opinion of Dr. Khurana. (See A.R. 60-61.) Thus, for the same reasons that the Court determined that the ALJ failed to properly reject Dr. Khurana's opinion, the Court finds that the ALJ also erred in rejecting Dr. Stoney's opinion.4

Accordingly, on remand, the ALJ either must provide specific and legitimate reasons for rejecting the opinions of Drs. Khurana and Stoney or factor those opinions into her assessment of plaintiff's RFC.

III. The ALJ Failed To Properly Consider Plaintiff's Subjective Pain Testimony And The Lay Witness Statements of Plaintiff's Sister.

A. Plaintiff's Subjective Pain Testimony

Once a disability claimant produces objective medical evidence of an underlying impairment that is reasonably likely to be the source of claimant's subjective symptom(s), all subjective testimony as to the severity of the symptoms must be considered. Moisa v. Barnhart, 367 F.3d 885 (9th Cir. 2004); Bunnell v. Sullivan, 947 F.2d 341, 345 (9th Cir. 1991); see also 20 C.F.R. §§ 404.1529(a), 416.929(a) (explaining how pain and other symptoms are evaluated). "[U]nless an ALJ makes a finding of malingering based on affirmative evidence thereof, he or she may only find an applicant not credible by making specific findings as to credibility and stating clear and convincing reasons for each." Robbins, 466 F.3d at 883. The factors to be considered in weighing a claimant's credibility include: (1) the claimant's reputation for truthfulness; (2) inconsistencies either in the claimant's testimony or between the claimant's testimony and her conduct; (3) the claimant's daily activities; (4) the claimant's work record; and (5) testimony from physicians and third parties concerning the nature, severity, and effect of the symptoms of which the claimant complains. See Thomas v. Barnhart, 278 F.3d 947, 958-59 (9th Cir.2002); see also 20 C.F.R. §§ 404.1529(c), 416.929(c).

The ALJ found that "[a]fter careful consideration of the evidence . . . [plaintiff]'s medically determinable impairments could reasonably be expected to cause the alleged symptoms." (A.R. 56.) The ALJ cited no evidence of malingering by plaintiff. Nonetheless, the ALJ concluded that plaintiff's "statements concerning the intensity, persistence and limiting effects of these symptoms are not credible" to the extent they varied from the ALJ's own RFC assessment. (Id.) Accordingly, the ALJ's reasons for finding that plaintiff was not credible with respect to her subjective symptom and pain testimony must be "clear and convincing."

The ALJ rejected plaintiff's credibility, because: (1) her symptoms do not correlate with objective, medical findings; (2) she failed to demonstrate an increase in treatment or a worsening of her impairments; (3) she continued working for years despite her spinal impairments and being diagnosed with lupus; and (4) her daily activities are inconsistent with her alleged subjective symptoms. (A.R. 56, 61.)

The ALJ first rejected plaintiff's subjective symptom testimony based on her conclusion that the "objective medical evidence (x-rays, MRIs, CT scans, EMGs and lab reports) do not support [plaintiff's] allegations regarding the severity of her limitations because they are negative, inconclusive, or reflect no worsening of her conditions." (A.R. 58.) Assuming, arguendo, that the objective medical evidence does not corroborate the degree of plaintiff's allegedly disabling symptoms, this factor cannot form the "sole basis" for discounting plaintiff's subjective symptom testimony. Burch, 400 F.3d at 681; see Bunnell, 947 F.2d at 34 (noting that "[i]f an adjudicator could reject a claim of disability simply because a claimant fails to produce medical evidence supporting the severity of the pain, there would be no reason for an adjudicator to consider anything other than medical findings"). Accordingly, because the ALJ's first ground cannot, by itself, constitute a clear and convincing reason for discrediting plaintiff's testimony, the ALJ's credibility determination rises or falls with the ALJ's other ground for discrediting plaintiff.

The ALJ's second reason for rejecting plaintiff's credibility is neither clear nor convincing. The ALJ next rejected plaintiff's subjective complaints, because the "records do not reflect that her impairments are worsening or prevent her from performing basic work activities" and the "records, as discussed within, indicate improvement." (A.R. 56.) However, this conclusion about what plaintiff's records reflect fails to explain, with adequate specificity, how the evidence undermined plaintiff's statements about her physical symptoms. See Holohan, 246 F.3d at 1208 (ALJ's credibility finding that the "record in general indicates improvement" was not supported by substantial evidence because "general findings are an insufficient basis to support an adverse credibility determination"); see also Parra v. Astrue, 481 F.3d 742, 750 (9th Cir. 2007) ("The ALJ must provide `clear and convincing' reasons to reject a claimant's subjective testimony, by specifically identifying `what testimony is not credible and what evidence undermines the claimant's complaints.'" (quoting Lester, 81 F.3d at 834)); Fair v. Bowen, 885 F.2d 597, 602 (9th Cir. 1989) ("In order to disbelieve a claim of excess pain, an ALJ must make specific findings justifying that decision."). Moreover, the Court is unable to reconcile the ALJ's finding about plaintiff's improvement with the medical evidence she cites within her decision, particularly as the ALJ cites no evidence indicating that plaintiff's impairments were either improving or not worsening. (See A.R. 56-58.) Indeed, plaintiff testified at the hearing that for her pain, her dosage of morphine was recently increased, an indication that her pain was neither improving nor stable. (A.R. 111) Even assuming that there may have been some indication that plaintiff had medically improved, it does not mean that plaintiff's impairments no longer seriously affected her ability to function in a workplace. See Holohan, 246 F.3d at 1205 ("That a person . . . makes some improvement does not mean that the person's impairments no longer seriously affect her ability to function in a workplace."). Thus, this reason for rejecting plaintiff's credibility was neither clear nor convincing.

The ALJ's third reason — to wit, that plaintiff "continued working for years [after] treatment for her spinal impairments and after she was diagnosed with Lupus"— is unconvincing. (A.R. 61.) At the hearing, plaintiff testified that she was diagnosed with lupus in 2008. (A.R. 116.) It appears that plaintiff suffered from degenerative disc disease of the cervical and lumbar spine with stenosis as late as October 2008. (A.R. 100-01, 116.) Plaintiff testified that the last time she worked was in March of 2009, because that is "when [she] became disabled." (A.R. 110.) Thus, although plaintiff continued to work after she was diagnosed with lupus and treated for her spine impairments, the Court finds that a willingness to try to work is not clearly probative of a present ability to engage in such activity. Further, there is no evidence that plaintiff worked after her claimed disability date. Thus, this is not a clear and convincing reason to find plaintiff's subjective complaints incredible. See, e.g., Perkins v. Astrue, 535 F.Supp.2d 986, 993 (C.D. Cal. 2008) (adverse credibility determination supported by finding that claimant engaged in substantial gainful activity after alleged onset date) (emphasis added).

Finally, it is not clear whether the ALJ relied on plaintiff's daily activities to undermine her credibility concerning her subjective complaints, but to the extent that she may have, the Court will address it. A claimant's ability to engage in some physical activities is not necessarily inconsistent with a finding of disability. See Gallant v. Heckler, 753 F.2d 1450, 1453 (9th Cir. 1984). Rather, an ability to take part in physical pursuits bears on a claimant's credibility only to the extent that the level of activity is in fact inconsistent with the alleged limitations. See Reddick v. Chater, 157 F.3d 715, 722 (9th Cir. 1998). It must be noted that the ALJ's description of plaintiff's daily activities is incomplete. The ALJ noted that plaintiff does "household chores (vacuuming, laundry), shops and cooks, pays bills and handles her own money, and drives for transportation." (A.R. 61.) The ALJ fails, however, to account for plaintiff's other statements regarding her daily activities. (See supra, Section II(B)(1); see also A.R. 287-94.) The ALJ thus erred by failing to take into account significant qualifications regarding plaintiff's activities. See Reddick, 157 F.3d at 722-23. Moreover, and critically, the ALJ fails to explain how plaintiff's ability to do some household chores, cooking, and driving a car translates into the ability to perform full-time work and renders plaintiff's testimony about her pain and symptoms unworthy of belief. See Vertigan v. Halter, 260 F.3d 1044, 1050 (9th Cir. 2001) (noting that the "mere fact that a plaintiff has carried on certain daily activities, such as grocery shopping, driving a car, or limited walking for exercise, does not in any way detract from her credibility as to her overall disability"); Smolen, 80 F.3d at 1283 n.7 ("The Social Security Act does not require that claimants be utterly incapacitated to be eligible for benefits, and many home activities may not be easily transferable to a work environment where it might be impossible to rest periodically or take medication."). Therefore, this reason does not constitute a clear and convincing reason for finding plaintiff to be not credible.

For the aforementioned reasons, the ALJ failed to give clear and convincing reasons for discrediting plaintiff's testimony. Thus, on remand, the ALJ must either credit plaintiff's subjective symptom testimony or provide clear and convincing reasons why plaintiff's testimony is not credible.

B. Lay Witness Statements of Elisabeth Beech

In evaluating the credibility of a claimant's assertions of functional limitations, the ALJ must consider lay witnesses' reported observations of the claimant. Stout, 454 F.3d at 1053. "[F]riends and family members in a position to observe a claimant's symptoms and daily activities are competent to testify as to [the claimant's] condition." Dodrill v. Shalala, 12 F.3d 915, 918-19 (9th Cir. 1993); 20 C.F.R. §§ 404. 1513(d), 416. 913(d) ("[W] e may also use evidence from other sources to show the severity of your impairment (s) . . . Other sources include, but are not limited to . . . spouses, parents and other caregivers, siblings, other relatives, friends, neighbors, and clergy."). "If an ALJ disregards the testimony of a lay witness, the ALJ must provide reasons `that are germane to each witness.'" Bruce v. Astrue, 557 F.3d 1113, 1115 (9th Cir.2009) (citation omitted). Additionally, "the reasons `germane to each witness' must be specific." Stout, 454 F.3d at 1054.

Here, the ALJ gave "little weight" to the opinion of plaintiff's sister, Elisabeth Beech, because: (1) her opinion contradicts plaintiff's activities of daily living, medical treatment history and work history; and (2) she is not familiar with the Agency's disability guidelines. (A.R. 61.)

Because the ALJ rejected Ms. Beech's testimony on the same grounds she rejected plaintiff's subjective pain testimony,5 the Court finds that the same reasoning applies with equal force in finding that the ALJ erred in properly considering Ms. Beech's statements.

On remand, the ALJ must provide germane reasons, if they exist, for rejecting Ms. Beech's statements regarding her observations of the nature and extent of plaintiff's alleged impairments and limitations, so that a reviewing court may know the basis for the ALJ's decision and have the ability to assess the propriety of that decision.

IV. Remand Is Required.

The decision whether to remand for further proceedings or order an immediate award of benefits is within the district court's discretion. Harman v. Apfel, 211 F.3d 1172, 1175-78 (9th Cir. 2000). Where no useful purpose would be served by further administrative proceedings, or where the record has been fully developed, it is appropriate to exercise this discretion to direct an immediate award of benefits. Id. at 1179 ("[T]he decision of whether to remand for further proceedings turns upon the likely utility of such proceedings."). However, where there are outstanding issues that must be resolved before a determination of disability can be made, and it is not clear from the record that the ALJ would be required to find the claimant disabled if all the evidence were properly evaluated, remand is appropriate. Id. at 1179-81.

Remand is the appropriate remedy to allow the ALJ the opportunity to remedy the above-mentioned deficiencies and errors. See, e.g., Benecke v. Barnhart, 379 F.3d 587, 593 (9th Cir. 2004) (remand for further proceedings is appropriate if enhancement of the record would be useful). On remand, the ALJ must correct the above-mentioned deficiencies and errors. After doing so, the ALJ may need to reassess plaintiff's RFC, in which case additional testimony from a vocational expert likely will be needed to determine what work, if any, plaintiff can perform.

CONCLUSION

Accordingly, for the reasons stated above, IT IS ORDERED that the decision of the Commissioner is REVERSED, and this case is REMANDED for further proceedings consistent with this Memorandum Opinion and Order.

IT IS FURTHER ORDERED that the Clerk of the Court shall serve copies of this Memorandum Opinion and Order and the Judgment on counsel for plaintiff and for defendant.

LET JUDGMENT BE ENTERED ACCORDINGLY.