OPINION AND ORDER
MICHAEL J. McSHANE, District Judge.
Plaintiff filed this petition (#24) for attorney fees in the amount of $10, 949.73 and expenses in the amount of $655.14 under the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412(d). Defendant, in response (#27), moves this Court to deny the petition, arguing that the Commissioner was substantially justified in denying plaintiff disability insurance benefits (DIB) and social security insurance (SSI) benefits under the Social Security Act, 42 U.S.C. § 401-434. For the reasons set forth below, plaintiff's petition (#24) is GRANTED.
PROCEDURAL AND FACTUAL BACKGROUND
Plaintiff applied for DIB and SSI benefits on December 27, 2006, alleging a date of disability onset of February 5, 2004. Tr. 13 & 25. These claims were denied. Pl.'s Br. 2, ECF No. 13. Plaintiff timely requested a hearing before an administrative law judge (ALJ), and appeared before the Honorable Joel T. Elliott on April 16, 2009. Tr. 13. ALJ Elliott denied plaintiff's claim by written decision dated June 18, 2009. Tr. 13-21. Plaintiff's subsequent review from the Appeals Council was denied, thus rendering the ALJ's decision final. Tr. 1-3. On September 30, 2011, the Honorable Michael R. Hogan affirmed the Commissioner's denial and dismissed plaintiff's action. Order, ECF No. 19. On July 8, 2013, the Ninth Circuit reversed and remanded for further proceedings. USCA Memorandum/Opinion for the 9th Circuit, ECF No. 23. Plaintiff now seeks attorney fees and expenses.
Plaintiff, born on December 27, 1959, has a "marginal 9th grade education" and is able to communicate in English. Tr. 20. Plaintiff was forty-five at the time of alleged disability onset. Id. Plaintiff alleges disability beginning February 5, 2004, tr. 13, due to residual degenerative joint disease of the right ankle, depressive disorder, learning disorders, and degenerative disc disease of the spine, Pl.'s Br. 2, ECF No. 13.
STANDARD OF REVIEW
Under the EAJA, this Court "shall award to a prevailing party other than the United States fees and other expenses... incurred by that party in any civil action... unless [this Court] finds that the position of the United States was substantially justified or that special circumstances make an award unjust." 28 U.S.C. § 2412(d)(1)(A); Meier v. Colvin, 727 F.3d 867, 870 (9th Cir. 2013). "It is the government's burden to show that its position was substantially justified." Meier, 727 F.3d at 870 (citing Gutierrez v. Barnhart, 274 F.3d 1255, 1258 (9th Cir. 2001)). Substantial justification means "justified in substance or in the main-that is, justified to a degree that could satisfy a reasonable person." Pierce v. Underwood, 487 U.S. 552, 565 (1988). "Put differently, the government's position must have a reasonable basis both in law and fact.'" Meier, 727 F.3d at 870 (quoting Underwood, 487 U.S. at 565).
The EAJA establishes a two-part test for determining whether an award of attorney fees is appropriate. First, this Court must ascertain whether plaintiff is a prevailing party. See, e.g., Flores v. Shalala, 49 F.3d 562, 567 (9th Cir. 1995). Second, this Court must determine whether the government was substantially justified in its position in the underlying agency action and litigation. Meier, at 870. Because neither party contests that plaintiff is a prevailing party, plaintiff's entitlement to attorney fees and expenses hinges on whether the Commissioner was substantially justified in (1) its position in the underlying agency conduct and (2) in its litigation position.
I. Underlying Agency Conduct
The parties dispute whether the ALJ's decision was substantially justified. In its memorandum disposition, the Ninth Circuit held that ALJ Elliott's hypothetical question to the vocational expert (VE) failed to incorporate his "findings regarding Nelson's depressive disorder, " and therefore, the VE's "conclusion was compromised." USCA Memorandum/Opinion for the 9th Circuit 2, ECF No. 23-1. As a result, the Ninth Circuit remanded for further proceedings. Id. at 3. Upon remand, the Ninth Circuit instructed the ALJ to "consider Exhibit 14F" and to consider "new evidence Nelson submitted to the Appeals Council." Id.
In response to plaintiff's request for attorney fees, the government argues that ALJ Elliott "thoroughly examined Plaintiff's psychological records and reasonably found that Plaintiff's subjective complaints were inconsistent with the ALJ's residual functional capacity findings." In particular, the government contends that this thorough examination substantiates the ALJ's position. The government's argument is unpersuasive.
"In this case, the ALJ determined at step two that [plaintiff's] mental impairments caused a moderate limitation in maintaining concentration, persistence, and pace." Winschel v. Commissioner of Social Sec., 631 F.3d 1176, 1181 (9th Cir. 2011); see also tr. 17. Despite this determination, "the ALJ did not indicate that medical evidence suggested [plaintiff's] ability to work was unaffected by this limitation, nor did he otherwise implicitly account for the limitation in the hypothetical. Consequently, the ALJ should have explicitly included the limitation in his hypothetical question to the [VE]." Winschel, 631 F.3d at 1181. Because of ALJ Elliott's omission, the "[VE's] testimony is not substantial evidence' and cannot support the ALJ's conclusion that [plaintiff] could perform significant numbers of jobs in the national economy." Id.
In this Circuit, a "holding that the agency's decision... was unsupported by substantial evidence is... a strong indication that the position of the United States'... was not substantially justified." Meier, 727 F.3d at 874 (quoting Thangaraja v. Gonzales, 428 F.3d 870, 874 (9th Cir. 2005)). Further, "it will be only a decidedly unusual case in which there is substantial justification under the EAJA even though the agency's decision was reversed as lacking in reasonable, substantial and probative evidence in the record." Thangaraja, 428 F.3d at 874 (quoting Al-Harbi v. I.N.S., 284 F.3d 1080, 1085 (9th Cir. 2002)) (internal quotation marks omitted). Unlike in those few "decidedly unusual cases, " the ...