                            UNPUBLISHED ORDER
                         Not to be cited per Circuit Rule 53




           United States Court of Appeals
                              For the Seventh Circuit
                              Chicago, Illinois 60604

                              Submitted May 9, 2005*
                               Decided May 10, 2005

                                       Before

                   Hon. RICHARD A. POSNER, Circuit Judge

                   Hon. MICHAEL S. KANNE, Circuit Judge

                   Hon. ILANA DIAMOND ROVNER, Circuit Judge

No. 05-1047

JAMES YOUNG,                                    Appeal from the United States
    Plaintiff-Appellant,                        District Court for the Western
                                                District of Wisconsin
      v.
                                                No. 02-C-257-C
JO ANNE B. BARNHART,
Commissioner of Social Security,                Barbara B. Crabb,
     Defendant-Appellee.                        Chief Judge.


                                     ORDER

   After prevailing in his appeal from the denial of Social Security disability
benefits, James Young petitioned the district court for an award of attorneys’ fees
and costs pursuant to the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412.
The district court denied his petition and Young again appeals. We reverse.

   Young applied for disability benefits in 1998, claiming that he was
unemployable because of a variety of cognitive, memory, social, and personality
problems caused by a brain injury he suffered in a motorcycle accident eleven years


      *
       After an examination of the briefs and the record, we have concluded that oral
argument is unnecessary. Thus, the appeal is submitted on the briefs and the record.
See Fed. R. App. P. 34(a)(2).
No. 05-1047                                                                      Page 2

earlier. An administrative law judge denied Young’s application, the Social
Security Appeals Council denied review, and the district court upheld the decision.
But we reversed because the ALJ failed to consider Young’s personality disorders
when determining his residual functional capacity (RFC) and formulating
hypothetical questions to the vocational expert. Young v. Barnhart, 362 F.3d 995
(7th Cir. 2004).

   Young then petitioned the district court for an award of costs and attorneys’ fees
pursuant to the EAJA, but the court denied his petition because it found the
Commissioner’s opposition to Young’s application to be “substantially justified.”
The day after Young’s petition was denied, we decided Golembiewski v. Barnhart,
382 F.3d 721, 724 (7th Cir. 2004), in which we held that the Commissioner’s
opposition to an application for disability benefits was not substantially justified
because the ALJ had violated our precedent and the Commissioner’s own
regulations by failing to discuss the applicant’s credibility and ignoring significant
medical evidence. We also said that the “strong language” in our earlier opinion
was evidence that the Commissioner’s position lacked substantial justification. Id.
Young asserted that his case was analogous to Golembiewski and moved to alter or
amend the district court’s judgment. See Fed. R. Civ. P. 59(e). The court denied his
motion, and Young appeals.

    The EAJA provides that a successful litigant against the federal government is
entitled to recover his attorneys’ fees1 provided that: (1) he was a “prevailing party”;
(2) the government’s position was not “substantially justified”; (3) there exist no
special circumstances that would make an award unjust; and (4) he filed a timely
application with the district court. 28 U.S.C. § 2412(d)(1)(A); Kreicioch v. United
States, 316 F.3d 684, 687 (7th Cir. 2003). The Commissioner does not dispute that
Young meets all of the prongs except the second, and continues to assert that an
award is unwarranted because her position was substantially justified.

    EAJA fees may be awarded if either the Commissioner’s pre-litigation conduct or
her litigation position lacked substantial justification. Golembiewski, 382 F.3d at
724. The ALJ’s decision constitutes part of the Commissioner’s pre-litigation
conduct. Id. In order for the Commissioner’s position to be substantially justified,
it must have reasonable factual and legal bases, and there must exist a reasonable
connection between the facts and her legal theory. See Pierce v. Underwood, 487
U.S. 552, 565 (1988); Golembiewski, 382 F.3d at 724; United States v. Hallmark
Constr. Co., 200 F.3d 1076, 1080 (7th Cir. 2000). The Commissioner bears the

      1
       Young also petitioned for costs in the amount of $22.00. Under the EAJA, costs
“may be awarded to the prevailing party in any civil action” against the federal
government. 28 U.S.C. § 2412(a)(1). But neither Young nor the Commissioner
addresses this part of the petition in their briefs, and each focuses entirely on Young’s
request for more than $20,000 in attorneys’ fees. 28 U.S.C. § 2412(b). We thus
disregard the issue of costs.
No. 05-1047                                                                    Page 3

burden of proving that her position was substantially justified. Golembiewski, 382
F.3d at 724. The district court here held that the Commissioner met her burden
and we review that decision for an abuse of discretion. Id. at 723.

   Young argues that the reasons given by the district court for denying his fee
application do not establish substantial justification for the Commissioner’s
position. The district court focused on evidence provided by three psychologists as
supporting “the conclusion that plaintiff’s temperament problems would not prevent
him from performing unskilled, routine, low stress, repetitive work that did not
involve significant contact with the public or coworkers.” But Young claims that
the district court simply disregarded the errors we identified in our opinion—the
ALJ’s failure to address the evidence concerning Young’s social and temperament
problems when formulating the RFC and the hypothetical questions to the
vocational expert—and instead reexamined the medical evidence and concluded
that Young’s application might have presented a close question had the ALJ
considered all the evidence in the record.

    We agree with Young that the district court erred when it reevaluated the
merits of his underlying application for disability benefits; instead the court should
have focused on the errors made by the ALJ and examined whether the
Commissioner’s position was substantially justified despite those errors. See
Hallmark Constr. Co., 200 F.3d at 1076 (district court must examine “actual merits
of the Government’s litigating position”) (quoting Pierce, 487 U.S. at 569). As we
discussed in our earlier opinion, the ALJ’s decision and the Commissioner’s defense
of it contain two significant legal errors, and the strong language we used in that
opinion is evidence that the Commissioner’s position was not substantially justified.
See Golembiewski, 382 F.3d at 724. First, as we observed, the ALJ did “not
sufficiently connect[ ] the dots between Young’s impairments, supported by
substantial evidence in the record, and the RFC finding.” Young, 362 F.3d at 1002.
The ALJ inexplicably disregarded all of the medical evidence concerning Young’s
difficulties with social interaction. As we noted, the ALJ’s determination of Young’s
RFC “says nothing of limiting contact with supervisors, despite the fact that there
was substantial evidence within the record that Young has difficultly accepting
instruction, responding appropriately to criticism, and interacting with others on
the job.” Id. Furthermore, the ALJ did not “explain how he reconciles Young’s two
conflicting limitations—the fact that Young will have difficulty accepting
instruction and criticism from others on the one hand and the fact that he has
difficulty making plans independently and setting realistic goals on his own on the
other hand.” Id. The RFC finding was fatally flawed because of these omissions by
the ALJ.

    The ALJ also failed to include in his hypothetical questions to the vocational
expert any information on Young’s difficulties with social interaction, even though
those difficulties were supported by medical evidence in the record. See Kasarsky
v. Barnhart, 335 F.3d 539, 544 (7th Cir. 2003) (per curiam) (hypothetical question
No. 05-1047                                                                    Page 4

must include all limitations supported by the record). The hypothetical questions
here, however, omitted significant documented limitations. “The hypothetical
questions presented by the ALJ, like the flawed RFC on which they were based,
made short shrift of Young’s social and temperamental impairments.” Young, 362
F.3d at 1004. We noted that in Young’s case the entire finding of disability “hinged
on the validity of the hypothetical question,” which we characterized as
“fundamentally flawed.” Id. at 1005. The hypothetical questions, like the flawed
RFC, “failed to account fully for the findings of almost all of the credited medical
experts that Young had significant impairments in social judgment.” Id. at 1004.
These two errors and the strong language we used when discussing them show that
the Commissioner’s position was not substantially justified.

    The district court gave two other reasons for denying Young’s application for
fees: that we ruled in favor of the Commissioner on a second issue in Young’s
appeal—whether the ALJ improperly discounted the findings of one of Young’s
doctors, id. at 1001—and that the district court had originally upheld the ALJ’s
decision before we reversed. But neither of these reasons addresses the flaws in the
ALJ’s decision. Cf. Lewis v. Barnhart, 281 F.3d 1081, 1086 (9th Cir. 2002) (inquiry
under EAJA focuses on issue on which case was ultimately remanded). The ALJ’s
errors did not result from consideration of a novel legal issue or one on which courts
have provided conflicting opinions. See Golembiewski, 382 F.3d at 724; Marcus v.
Shalala, 17 F.3d 1033, 1037 (7th Cir. 1994). Instead, the ALJ misapplied
established law when both the RFC assessment and the hypothetical questions
failed to acknowledge limitations fully documented in the record. The
Commissioner then compounded those errors by defending them in court. In light
of these shortcomings, the Commissioner cannot show that her position was
substantially justified.

   The district court abused its discretion in finding that the Commissioner’s
position was substantially justified. Accordingly, we REVERSE the order denying
Young’s application for fees. The Commissioner does not dispute that the fees
requested by Young are reasonable, so we REMAND with instructions to award the
amount requested.
