                                                                           FILED
                            NOT FOR PUBLICATION                             DEC 27 2010

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S . CO U RT OF AP PE A LS




                            FOR THE NINTH CIRCUIT



IRIS R. DERVIN,                                  No. 08-56816

              Plaintiff - Appellant,             D.C. No. 2:06-cv-08217-RGK-
                                                 PJW
  v.

MICHAEL J. ASTRUE,                               MEMORANDUM *

              Defendant - Appellee.



                    Appeal from the United States District Court
                       for the Central District of California
                    R. Gary Klausner, District Judge, Presiding

                      Argued and Submitted February 1, 2010
                               Pasadena, California

Before: KLEINFELD, WARDLAW and CALLAHAN, Circuit Judges.

       Iris Dervin received Social Security benefit payments from 1995 to 2002. In

2002, her benefits were retroactively terminated as of June 2000. Her benefits

were terminated because she had engaged in periodic temporary employment

constituting 'substantial gainful activity' between 1998 and 2000.



        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      Upon termination of her benefits, the Social Security Administration

pursued reimbursement from Dervin of approximately ü28,000 in disability

overpayments. Dervin sought a waiver of the overpayment. She also brought a

new petition for disability benefits, claiming she is disabled by schizophrenia and

by µnee and bacµ pain. The ALJ denied Dervin's application for a waiver and

petition for benefits. The district court affirmed. We review its legal

determinations de novo and affirm the Commissioner's denial of benefits only

when it is supported by substantial evidence in the record. Rollins v. Massanari,

261 F.3d 853, 855 (9th Cir. 2001); Reddicµ v. Chater, 157 F.3d 715, 720 (9th Cir.

1998). We reverse.




      A. Disability Determination


      The ALJ's determination that Dervin's physical ailments were not disabling

was supported by substantial evidence in the record. There was no medical

evidence to support a finding of disability based on Dervin's joint and bacµ pain.




      The ALJ's determination that Dervin was not mentally impaired lacµs

substantial evidence in the record. First, ALJ failed to account for two previous



                                          2
determinations by the Social Security Administration that Dervin suffered from

schizophrenia and was therefore disabled. The ALJ's finding that Dervin suffered

from no mental limitation is patently incompatible with these previous findings and

diagnoses, which are not addressed in the ALJ's discussion. Schizophrenia is not

curable, and the record indicates that Dervin was not controlling her illness with

psychiatric medication. The ALJ found that Dervin lacµed 'a treatment history

with clinical and diagnostic findings.' This finding is not supported by the record,

which shows that Dervin was hospitalized for mental illness in 1994, and that for a

period thereafter she was diagnosed with and received ongoing outpatient

treatment for schizoaffective disorder.




      The ALJ rejected the opinion of Dr. Walµer, a psychiatrist that Dervin had

seen at Kaiser Permanente. Dr. Walµer opined in 2001 and again in 2004 that

Dervin was mentally disabled. Although Dr. Walµer's 2001 letter does not

confirm a specific diagnosis, Dr. Walµer's 2004 letters reference Dervin's

psychiatric records at Kaiser Permanente, which he notes 'reflects a long history of

serious mental illness and diagnosis Schizoaffective Disorder.' Dr. Walµer agreed

with that psychiatric diagnosis, and gave the names of her previous psychiatrists at

Kaiser Permanente. It appears that the ALJ did not seeµ supplemental material


                                          3
from the psychiatrists mentioned in Dr. Walµer's letters, in spite of the ALJ's duty

to fully and fairly develop the record in a social security case and to assure that the

claimant's interests are considered. Tonapetyan v. Halter, 242 F.3d 1144, 1150

(9th Cir. 2001). The duty to develop the record is heightened in cases where the

claimant is mentally impaired. See Delorme v. Sullivan, 924 F.2d 841, 849 (9th

Cir. 1991). In cases of chronic mental impairment such as this one, the ALJ is

required to gather all records of past treatment. Id. at 848 & n.17.




      Instead, the ALJ relied on the opinion of Dr. Bagner, to whom Dervin was

referred by Social Services for a psychiatric evaluation. Dr. Bagner was not a

board-certified psychiatrist. He indicated that Dervin was his only source of

information for his evaluation. Evidently, he did not obtain or read her medical

records from Kaiser Permanente. Dr. Bagner was incorrect in his assessment of

Dervin as a 'reliable historian.' Dr. Bagner based his opinion in part on Dervin's

denials that she suffered from hallucinations or delusions, and that she had any

history of suicidal thoughts. The record shows, however, that she had paranoid

delusions regarding a conspiracy theory between her neighbors and her landlord, in

which they spied on her and made noises as they followed her around, and a

psychiatric history including hospitalization for suicidal ideation. (Dervin denies


                                           4
that she is delusional, stating that the problems she has with her conspiratorial

neighbors are real.) Additionally, Dr. Bagner's opinion was inconsistent with

reports in the record from other medical professionals who encountered Dervin in

the context of examining her physical ailments. An email to her referring

physician from Rit Tun in Orthopaedics noted that during Dervin's visit Dervin

exihibted 'inappropriate behavior, was offensive to myself and the staff, exhibited

paranoia, and heard voices over the intercom that were supposedly derogatory to

her.' Rit Tun noted that Dervin 'seem[ed] to be well-functioning' but was

'concerned that she may have schizophrenia' and recommended Dervin be

evaluated. Similarly, the notes from Dervin's chiropractor reveal that she was

asµed to leave the treatment facility and treatment was discontinued because of

Dervin's inappropriate behavior (apparently auditory hallucinations related to

Dervin hearing noises coming through the walls).




      The ALJ erred in rejecting Dr. Walµer's opinion in favor of Dr. Bagner's

opinion. The ALJ found that because Dervin had seen Dr. Walµer only twice, he

was not a 'treating physician' for purposes of the ALJ's disability determination.

We disagree. Kaiser Permanente is a medical group, in which patients may see

different doctors on different visits. Although Dr. Walµer did not prescribe


                                           5
psychiatric medication to Dervin, it appears that his opinion represents the long

history of Dervin's treatment at Kaiser Permanente for psychiatric illness. Thus,

the ALJ could not reject it in favor of Dr. Bagner's opinion without giving

'specific, legitimate reasons for doing so that are based on substantial evidence in

the record.' See Morgan v. Comm'r of Soc. Security Admin., 169 F.3d 595, 600

(9th Cir. 1999). The ALJ failed to account for the evidence in the record of

Dervin's mental illness, and did not give specific, legitimate reasons based on

substantial evidence for rejecting Dr. Walµer's opinion. The evidence in the record

as a whole unambiguously supports the conclusion that Dervin is mentally ill.

Accordingly, we reverse the ALJ's determination that Dervin was not mentally

impaired, and remand for further proceedings consistent with this disposition.




      B. Waiver of Overpayment




      Overpayments are amounts paid to the beneficiary in excess of the amount

due to that individual under the Social Security Act or payments resulting from the

failure to suspend, reduce, or terminate benefits. 20 C.F.R. y 404.501(a). The

Social Security Act provides that the Administration may seeµ recovery of the

amounts that were overpaid. 20 C.F.R. y 404.501(a). The individuals who


                                          6
received the overpayments are entitled to 'immediate notice' '[w]henever an

initial determination is made' that there has been an overpayment and that the

Administration seeµs 'adjustment or recovery of the overpayment[.]' 20 C.F.R.

404.502a.




      The Act and regulations also provide, however, that 'there shall be no

adjustment or recovery in any case where an overpayment under title II has been

made to an individual who is without fault if adjustment or recovery would either

defeat the purpose of title II of the Act, or be against equity and good conscience.'

20 C.F.R. y 404.506. An individual is at 'fault' for the overpayment for purposes

of a waiver request if the facts show that the overpayment resulted from

             (a) An incorrect statement made by the individual which

             he µnew or should have µnown to be incorrect; or

             (b) Failure to furnish information which he µnew or

             should have µnown to be material; or

             (c) With respect to the overpaid individual only,

             acceptance of a payment which he either µnew or could

             have been expected to µnow was incorrect.




                                          7
20 C.F.R. y 404.507. Additionally, the Social Security Administration considers

'all pertinent circumstances, including the individual's age and intelligence, and

any physical, mental, educational, or linguistic limitations ... the individual has.'

20 C.F.R. y 404.507.




      The ALJ found that Dervin was at fault because she failed to fully represent

her worµ activity to the Social Security Administration. The record shows that

Dervin made reports to the Social Security Administration regarding her worµ

activities, but a continuing benefits audits revealed that those reports were

incomplete. The ALJ failed to taµe into consideration all pertinent circumstances

when determining whether Dervin was at fault for the overpayment. The Social

Security Administration held a hearing in November 2001 and sent Dervin a

decision indicating that she was entitled to benefits. Thus, at least for the period

following that decision, Dervin reasonably relied on the Social Security

Administration's written determination of her eligibility in continuing to receive

payment of those benefits.




      Moreover, the ALJ failed to taµe into account Dervin's mental illness and

the prior determinations that Dervin was mentally ill in denying the waiver. It


                                           8
would be particularly unjust to require repayment if in fact Dervin's mental

condition is responsible for her current predicament. The law recognizes that the

mentally ill often act in ways that contradict their best interests. Cf. Higbee v.

Sullivan, 975 F.2d 558, 562 (9th Cir. 1992) ('The duty to provide an adequate

record is of extraordinary importance when a person once found eligible for S.S.I.

benefits may be in danger of losing them because he is too ill to act in his own best

interests.'). Multiple sources reflect Dervin's pre-occupation with her lacµ of

ability to worµ and her financial situation. Ann Bassett, Dervin's counselor,

diagnosed her with 'adjustment disorder' and 'acute stress disorder' tied to the

loss of her job in 1994. Bassett noted that Dervin 'suffers from extreme financial

stress' and that 'all her stress began in 1994, when she lost two jobs' and that she

'needs to worµ.' Dr. Walµer noted in his 2004 letter that Dervin 'says she used to

be a 'worµ horse' and finds the change to being disabled very frustrating' and

'feels worthless at times.' Dervin discussed with her social worµer her obsession

with finding the right job, and her worµ activity reports indicate (counter to her

interest) time spent looµing for worµ. Yet in her self-reporting, Dervin focuses on

physical ailments, denies her mental problems, and does not connect her inability

to hold any job with her mental illness (attributing her failures to being 'let go' or

a 'misplaced position'). Dervin's paranoia regarding her financial instability and


                                           9
resulting attempts to worµ may have inadvertently caused those fears to materialize

when the Social Security Administration simultaneously denied her the benefits

upon which she depends and informed her she owed them an insurmountable debt.




      We reverse the ALJ's determination that Dervin was at fault for the

overpayment, and remand to the ALJ to waive the claim for the overpayment.




REVERSED and REMANDED.




                                        10
                                                                              FILED
Dervin v. Astrue, No. 08-56816                                                DEC 27 2010

                                                                         MOLLY C. DWYER, CLERK
CALLAHAN, CIRCUIT JUDGE, dissenting:                                      U.S . CO U RT OF AP PE A LS




       I agree with the majority's conclusions that Petitioner Iris Dervin's physical

impairments are not disabling and that she is disabled due to a psychiatric

impairment, but I dissent from the remainder of the majority's decision. I would

affirm the Administrative Law Judge's determination that Dervin was not entitled

to a waiver of the overpayment of Social Security benefits payments because she

was 'at fault' for the overpayments. See 20 C.F.R.yy 404.506 & 404.507. In my

view, substantial evidence supported this decision. Because the majority would

reverse on this issue, I dissent.
