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Evans v. Berryhill

United States District Court, D. Oregon

July 31, 2017

NANCY A. BERRYHILL, Acting Commissioner of Social Security, Defendant.


          STACIE F. BECKERMAN United States Magistrate Judge

         David Evans (“Evans”) brings this appeal challenging the Commissioner of the Social Security Administration's (“Commissioner”) denial of his application for expedited reinstatement of his disability insurance benefits. The Court has jurisdiction over this matter pursuant to 42 U.S.C. § 405(g). For the reasons that follow, the Court remands this case for further administrative proceedings because the Commissioner's decision is based on a legal error.


         In 1979, Evans was awarded child disability benefits because he met the statutory criteria for blindness. (Tr. 22.) In September 1992, the Social Security Administration (“SSA”) determined that Evans continued to meet the criteria for blindness, and therefore approved Evans' application for reinstatement of his disability insurance benefits under Title II of the Social Security Act. (Tr. 160.)

         In 1996, Evans earned a juris doctorate from the University of Oregon School of Law. (Tr. 221.) In 2004, Evans earned roughly $43, 000 while working as an attorney at the law firm of Vincent, Victor, and Evans. (Tr. 162, 221-22.) During 2004, Evans claims that he reduced his hours and took a reduction in pay “due to increasing health problems, ” that he informed a representative of the SSA about his deteriorating health and impaired ability to work, and that the SSA representative told him “to continue with [his] benefits until the end of the year in case [he] could not continue working.” (Tr. 222.) Evans stopped practicing law at the end of the year. (Tr. 222.)

         In October 2013, Evans opened a medical marijuana dispensary in Eugene, Oregon, called “Emerald City Medicinal” or “E.C. Meds.” (Tr. 200, 222.) Evans served as the sole shareholder of the business and claims to have worked on a part-time basis for no pay. (Tr. 200, 222.) He employed an office manager and “bud tender, ” paid independent contractors for business recommendations, and accepted volunteer work. (Tr. 117.) Evans oversaw the business operation and had the final say on personnel decisions and vendor selection. (Tr. 117-18.)

         Also in October 2013, the SSA determined that Evans' eligibility for disability benefits “ceased effective October 1, 2004, which was the first month in which [Evans] performed substantial gainful activity . . . after the completion of his trial work period.”[1] (Tr. 8.)

         In February 2014, Evans applied for reinstatement of his disability benefits and informed the SSA that he was no longer engaged in substantial gainful activity. (Tr. 8, 257.) In August 2014, the SSA issued a letter explaining why Evans was not entitled to reinstatement of his disability benefits. (Tr. 144-47.) The letter provided, in relevant part:

One of the basic factors for disability is that your health problems must keep you from performing any kind of substantial gainful activity. You told us you own and operate Emerald City Medicinal . . . . While you report no financial gain from your business, if you were performing the same function for an employer, you would receive a paycheck or salary for your work. Thus, we must determine what your worth of work is. We evaluate all relevant factors of your work activity, such as hours, skills, output, efficiency, duties and responsibilities in determining your work worth.
In your business, you report overseeing the overall operation of the business, and the burden of any issues falls to you. You report work activities in this business to include hiring, firing, choosing the vendors (growers), counseling [customers], and making financial decisions. Your position and duties indicate you are making the management decisions for your business, as well as performing other duties.
State of Oregon occupational guides for Lane County indicate the average hourly pay for a General and Operations Manager is $41.58, with an average annual salary of $86, 494. You also told us you worked 30 hours per week at the time you filed the [February 2014] application for expedited reinstatement. During a phone call on August 7, 2014, you told us you worked 20 to 25 hours per week. You reported that your conditions cause you difficulty in getting to the office sometimes, but noted that it is sometime[s] easier for you to work at home as you have specialized computer equipment at home. It is reasonable that based on your management responsibilities and other duties, your work hours are closer [to] 30 hours per week. We calculate your work worth based on $41.58 per hour at 30 hours per week. This equals $5, 405.40 per month. Income related work expenses we deducted from the work value included $100 per month for your guide dog. The resulting countable income is $5, 305.40. Substantial gainful activity for blind individuals in 2014 is $1, 800 gross per month . . . .

(Tr. 144-45.) In March 2015, Evans executed an agreement to sell eighty percent of his interest in E.C. Meds. (Tr. 200.)

         On July 20, 2015, Evans appeared and testified at a hearing before an Administrative Law Judge (“ALJ”). (Tr. 236-53.) During the hearing, the ALJ explained that he was concerned only with whether it was appropriate to reinstate Evans' disability benefits; that Evans' benefits appeared to have been terminated based, in part, on his ownership interest in, and work on behalf of, E.C. Meds; and that the recent sale of E.C. Meds was “probably going to be sufficient” to find Evans eligible for reinstatement. (Tr. 239-42.) In response, Evans provided the ALJ with a copy of the sales agreement he executed in March 2015, and the ALJ made it part of the record. (Tr. 239-40.) Evans also explained that he worked on a part-time basis for no pay at E.C. Meds, and agreed to have his co-workers submit statements clarifying the nature of their roles. (Tr. 242, 251.)

         On July 26, 2015, Sunshine Dulaney (“Dulaney”), the office manager at E.C. Meds, and Laura Gibson (“Gibson”), a volunteer, submitted letters in support of Evans' application for reinstatement. (Tr. 217-19.) In her letter, Dulaney explained that she has experience caring for individuals with disabilities, agreed to assist Evans with “functions that were beyond his physical abilities, ” and was “responsible for all day-to-day operations, functions, and decisions” as the office manager. (Tr. 218.) Specifically, Dulaney stated that she handled cash transactions, balanced the till, obtained “change as needed from the bank, ” negotiated “consignment agreements with medicinal growers, ” completed “all necessary paperwork for compliance with the Oregon Health Authority regulations and Oregon Medical Marijuana Programs laws, ” assisted customers, served as the receptionist, ran errands, established “office procedures, ” and handled “inventory” and “loss control.” (Tr. 218-19.) Dulaney also confirmed that Evans worked “one to three days per week.” (Tr. 218.)

         Gibson explained that she had worked for eighteen months as a volunteer and spent “the bulk” of her volunteer work serving as a bookkeeper, but also tracked the daily activity in the dispensary to “ensure compliance with state laws and Oregon Health Authority regulations, ” tracked the “activity of individual grower[s] . . . [and] the amounts owed to them for their cosigned products, ” maintained a patient database, created a monthly newsletter, loaned money to the dispensary, and procured furniture and supplies for the office. (Tr. 217.) Gibson estimated that she performed approximately forty-two to forty-nine hours of computer work per week, which was “was not something [Evans] could do.” (Tr. 217.) She added that Evans often times left work early due to migraines, and at times “spent the majority of the day on the floor in the back office in the dark because he could not leave [the officer manager] working . . . alone.” (Tr. 217.)

         On August 21, 2015, the ALJ issued two decisions: (1) a decision addressing the SSA's decision that Evans was no longer disabled as of October 1, 2004 (hereinafter, “the disability cessation decision”) (Tr. 20-23, 23A); and (2) a decision addressing Evans' application for reinstatement of his disability benefits (hereinafter, “the reinstatement decision”). (Tr. 257-59.)

         In the disability cessation decision, the ALJ applied the eight-step sequential evaluation process used for determining whether a claimant continues to be disabled. See20 C.F.R. § 404.1594(f)(1)-(8). Under the first step of that process, the ALJ will find “disability to have ended” if the claimant has engaged in substantial gainful activity and “any applicable trial work period has been completed.” 20 C.F.R. § 404.1594(f)(1). The ALJ determined that Evans' trial work period had been completed, and that his disability ended on October 1, 2004, “the first month after the completion of the trial work period in which [Evans] engaged in substantial gainful activity.” (Tr. 22-23.) As support for the latter finding, the ALJ observed that Evans' earnings records cited self-employment income of $42, 490 in 2004, which was ...

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