                            In the

United States Court of Appeals
               For the Seventh Circuit

No. 11-3589

A NGELA M. F ARRELL,
                                             Plaintiff-Appellant,
                               v.

M ICHAEL J. A STRUE, Commissioner of Social Security,

                                            Defendant-Appellee.


             Appeal from the United States District Court
       for the Northern District of Indiana, Hammond Division.
   No. 2:10-cv-00226-APR—Andrew P. Rodovich, Magistrate Judge.



      A RGUED M AY 25, 2012—D ECIDED A UGUST 28, 2012




 Before P OSNER, F LAUM, and W OOD , Circuit Judges.
  W OOD , Circuit Judge. Angela Farrell suffers from
anxiety, depression, suicidal tendencies, insomnia,
vertigo, migraine headaches, fibromyalgia, carpal tunnel
syndrome, and plantar fasciitis. Citing this array of im-
pairments, she applied for disability insurance benefits;
as of the date of her application, she was almost 34 years
old. Her initial application was denied, but the Social
Security Administration Appeals Council remanded
2                                               No. 11-3589

her case for reconsideration. On remand, the Administra-
tive Law Judge (ALJ) once again ruled against her, in
part because of her failure to establish definitively that
she suffered from fibromyalgia. The Appeals Council
summarily affirmed this decision, despite new evidence
before it that confirmed the fibromyalgia. The district
court in turn affirmed that ruling, and Farrell now ap-
peals. We reverse. The Social Security Administration’s
own regulations require the Appeals Council to
consider “new and material evidence,” but it did not do
so in this case. In addition, several other aspects of the
ALJ’s decision independently require correction. Because
these warrant reversal in and of themselves (that is,
without regard to the error committed by the Appeals
Council), we follow the procedure that normally
applies when the Appeals Council denies review and
remand to the ALJ.


                             I
  Farrell is married and has two children. She is 4’11” tall
and, at the time of the hearing, she weighed 211 pounds;
this represents a body mass index of 42.6, well into the
range of obesity (which is 30 or greater). See NIH,
National Heart Lung and Blood Institute, http://www.
nhlbisupport.com/bmi/bminojs.htm. She completed be-
tween two and three years of college and has worked in
a variety of jobs, including as a tax analyst, an accounting
clerk, and a waitress.
   Her primary physician is Dr. Sara Beyer, who has
been treating her since at least 2002. According to
No. 11-3589                                            3

Dr. Beyer’s reports, Farrell has suffered from progres-
sively worsening physical and mental conditions. In
2003, Dr. Beyer treated her for panic attacks. Dr. Beyer
reported that Farrell’s medications were ineffective in
quelling these attacks, and she noted that Farrell was
suffering from severe pain throughout her body,
increased anxiety, and suicidal thoughts. Following
surgery in April 2003, Farrell returned to work, but she
quickly became fatigued and anxious. In response,
Dr. Beyer specifically instructed her to avoid stressful
situations—advice that in Farrell’s case covered a lot of
ground. Practically, in order to comply she would
have needed to avoid any contact with the outside
world, given her photo- and phonophobias. In July
of that year, Farrell underwent a psychiatric assess-
ment in which she received a Global Assessment of
Functioning (GAF) score of 51—a score that is right on
the border between “severe” and “moderate” symptoms.
(A GAF score of 41-50 indicates serious symptoms; a
score of 51-60 indicates moderate symptoms; and a score
in the range of 61-70 indicates mild symptoms. Am.
Psychiatric Ass’n, D IAGNOSIS AND S TATISTICAL M ANUAL
OF M ENTAL D ISORDERS 32-34 (4th ed. 2000).) As the
year progressed, so did Farrell’s symptoms. Her joint and
back pain became worse, and her mental symptoms
began to include paranoia, occasional hallucinations,
nightmares, and more serious thoughts of suicide (in-
cluding a specific plan to overdose on drugs).
  In June 2004, Farrell’s GAF score plummeted to 30,
well below the “serious” point. With new treatment for
her migraines and carpal tunnel syndrome, as well as
4                                               No. 11-3589

stronger medication for her depression and anxiety, her
GAF score improved to 50 by September of that year, but
her symptoms were still significant. She reported
suffering from extreme stress in social situations, an
inability to concentrate, and continuing back and joint
pain.
  In April 2005, Farrell complained of a constant sense
of worriment and problems concentrating, as well as
several new physical ailments, including an irregular
heartbeat. After an examination, Dr. Beyer recorded that
Farrell suffered from anxiety, insomnia, depression,
joint pain, and anemia. She also alluded to the possibility
of fibromyalgia—a diagnosis that both Dr. Beyer and
other treating specialists had considered in the past.
   Shortly thereafter, in May 2005, Farrell applied for
disability insurance benefits from the Social Security
Administration, alleging an onset date in Novem-
ber 2003. Her application noted her history of “de-
pression, anxiety, phobias, migraines, su[icid]al tendencies,
vertigo, fibromyalgia, carpal tunnel [syndrome],
insomnia, [and] plantar fasciitis,”and claimed that she
is unable to work as a result of these ailments.
   As part of the process of evaluating her application,
Farrell’s file was reviewed by several physicians
engaged by the state. In general, they had a more optimis-
tic assessment of her capabilities than her treating physi-
cians had reached. Dr. Perkins, for example, suggested
that Farrell suffered from only “moderate difficulties”
and suggested that she could hold jobs requiring
simple and routine tasks. After reviewing Farrell’s
No. 11-3589                                             5

medical records, Dr. Pyle determined that she was able
to lift and carry between 25 and 50 pounds, and work for
6 hours in an 8 hour workday. Dr. Mann thought
that Farrell had only “mild restrictions in daily activi-
ties” and found her capable of jobs involving only
simple tasks. Dr. Boyce, who testified before the ALJ,
stated that there was no evidence in Farrell’s records
of inflammation that would give rise to arthritic pain.
He further testified that there was no evidence of a con-
firmed diagnosis of fibromyalgia.
  After weighing Dr. Beyer’s conclusions against the
opinions offered by the state’s reviewing physicians, the
ALJ ruled against Farrell. He found the testimony of the
reviewing physicians to be more consistent with the
medical record, and he credited Dr. Boyce’s view
regarding fibromyalgia (i.e., that she suffered from only
“minimal functional limitations resulting from [her] . . .
fibromyalgia-type illness”) while chiding Dr. Beyer for
lacking a clinical basis for her evaluation of Farrell’s
functional capacity. Farrell sought review at the Appeals
Council. She included new evidence with her sub-
mission, but the Appeals Council nevertheless sum-
marily denied her petition. The district court affirmed,
and this appeal now follows.


                            II
  On appeal, Farrell presents a variety of challenges to
the Social Security Administration’s decision to deny her
application for disability benefits. We review the ALJ’s
decision “to deny benefits to determine whether it was
6                                                No. 11-3589

supported by substantial evidence or is the result of an
error of law.” Rice v. Barnhart, 384 F.3d 363, 369 (7th Cir.
2004).


                              A
   Farrell’s first argument is that the district court and the
Appeals Council erred by refusing to consider her new
evidence confirming a diagnosis of fibromyalgia. As
we noted above, the ALJ found “no evidence that this
diagnosis ha[d] been confirmed” and accordingly ruled
that Farrell’s claimed impairments were “nonsevere.”
In response to this adverse ruling, Farrell received con-
firmation of the diagnosis that had been suggested
several times in her medical reports: tests conducted by
Dr. Ryan Loyd showed that all 18 fibromyalgia points
were tender, and although only 11 positive results are
required for a confirmed diagnosis, Farrell tested posi-
tive in 16, including several on her neck, shoulders,
knees, elbows, and chest. (The NIH’s website explains
that “[t]o be diagnosed with fibromyalgia, you must
have had at least 3 months of widespread pain, and
pain and tenderness in at least 11 of 18 areas,” including
arms (elbows), buttocks, chest, knees, lower back, neck,
rib cage, shoulders, and thighs. See http://www.ncbi.nlm.
nih.gov/pubmedhealth/PMH0001463/.)
  In light of Dr. Loyd’s firm diagnosis, Farrell sought
review of the ALJ’s decision at the Appeals Council and
included this new evidence with her application. The
Appeals Council summarily denied the application. In
affirming that ruling, the district court specifically
No. 11-3589                                                7

refused to consider Farrell’s new evidence, citing Rice
v. Barnhart, 384 F.3d at 366 n.2, in which we ruled that
it was “not appropriate for us to consider evidence
which was not before the ALJ, but which [plaintiff]
later submitted to the Appeals Council” because “the
Appeals Council eventually refused [plaintiff’s] request
to review the ALJ’s unfavorable decision.” The district
court was correct in its ruling. This is because 42 U.S.C.
§ 405(g) provides that a reviewing court may consider
additional evidence “only upon a showing that there is
new evidence which is material.” The evidence Farrell
wanted the court to consider was not “new” to the
district court because it had been already been sub-
mitted to, and rejected by, the Appeals Council. Evidence
that has been rejected by the Appeals Council cannot
be considered to reevaluate the ALJ’s factual findings.
  Nevertheless, whether the ALJ’s decision is supported
by substantial evidence is not the same question as
whether the Appeals Council properly rejected Farrell’s
appeal. The Social Security Administration regula-
tions require that body to evaluate “new and material
evidence” in determining whether a case qualifies for
review. 20 C.F.R. §§ 404.970(b), 416.1470. In Perkins v.
Chater, 107 F.3d 1290 (7th Cir. 1997), we held that “[o]ur
review of the question whether the [Appeals]
Council made an error of law in applying this regulation
is de novo. . . . In the absence of any such error,
however, the Council’s decision whether to review is
discretionary and unreviewable.” Id. at 1294. Here, the
Appeals Council’s decision says that it “considered . . . the
additional evidence . . . [and] found that this information
8                                               No. 11-3589

does not provide a basis for changing the Administra-
tive Law Judge’s decision.”
   We note that this text, which often appears in orders
of the Appeals Council rejecting plenary review, is not
as clear as it might be. On the one hand, it might
indicate that the Appeals Council found the proffered
new evidence to be immaterial, but on the other hand
it might indicate that the Council accepted the evidence
as material but found it insufficient to require a different
result. This ambiguity is reflected in several decisions
from reviewing courts. See, e.g., Brewes v. Commissioner
of Soc. Sec. Admin., 682 F.3d 1157, 1162-63 (9th Cir. 2012)
(avoiding the question by holding, in tension with this
court’s Rice decision, that the new evidence becomes
part of the administrative record for purposes of “re-
viewing the Commissioner’s final decision for substantial
evidence”); Meyer v. Astrue, 662 F.3d 700, 705-06 (4th Cir.
2011) (same); Krauser v. Astrue, 638 F.3d 1324, 1328 (10th
Cir. 2011) (discussing ambiguity and holding that where
the Appeals Council rejects new evidence as non-qualify-
ing and claimant challenges that ruling on judicial review,
that the “general rule of de novo review permits [the
court] to resolve the matter and remand if the Appeals
Council erroneously rejected the evidence.”). Krauser is
most consistent with our ruling in Rice. See also
Bergmann v. Apfel, 207 F.3d 1065, 1069-70 (8th Cir. 2000);
Aulston v. Astrue, 277 F. App’x 663, 664 (8th Cir. 2008).
We thus interpret the Appeals Council decision as
stating that it has rejected Farrell’s new evidence as non-
qualifying under the regulation and proceed along
the lines we indicated in Perkins to review that limited
question.
No. 11-3589                                                 9

  We find the Appeals Council’s determination that
Farrell’s evidence was not “new and material” to be
erroneous. It is undisputed that Dr. Loyd’s diagnosis
was “new” to the administrative record at the time of
Farrell’s application to the Appeals Council. Its materiality
is also, in our view, beyond question: the ALJ’s decision
unequivocally rests in part on the determination
that “there is no evidence that [a fibromyalgia] diagnosis
has been confirmed.” Farrell’s new evidence fills in that
evidentiary gap by providing exactly that confirmation.
And this diagnosis, confirmed in December 2008,
“relates to the period on or before the date of the admin-
istrative law judge hearing decision” (November 2008)
as required by 20 C.F.R. § 404.970(b). It builds on the
allusions to possible fibromyalgia in Dr. Beyer’s
reports from 2005 and 2006. Dr. Loyd’s diagnosis was
“new and material” evidence that the Appeals Council
improperly failed to consider.
   The Commissioner contends that “[b]ecause the
Appeals Council did not make any finding with regard
to the materiality of the evidence Farrell submitted . . .
there is nothing in the Appeals Council’s denial of review
upon which Farrell can properly pin an assertion of legal
error.” This position is inconsistent with our decision
in Perkins and the other decisions we discussed above;
it would make the right recognized in the regulations
to submit new evidence to the Appeals Council mean-
ingless. We conclude that the Appeals Council com-
mitted legal error by ignoring Dr. Loyd’s opinion in its
decision to reject Farrell’s appeal. See Scivally v. Sullivan,
966 F.2d 1070, 1075 (7th Cir. 1992).
10                                             No. 11-3589

  This error was not harmless. The Commissioner
suggests now that the ALJ’s determination about the
severity of Farrell’s fibromyalgia is irrelevant, because
once an ALJ finds any severe impairment, her determina-
tion regarding the severity of the other impairments
is immaterial. This is true only insofar as the severity
finding relates to meeting the required threshold in
step two of the ALJ’s five-step analysis. 20 C.F.R.
§ 404.1520(a)(4)(ii) (requiring a “severe” impairment
to move on to step three); Castile v. Astrue, 617 F.3d 923,
926-27 (7th Cir. 2010) (“[T]he step two determination
of severity is merely a threshold requirement.” (quota-
tion marks omitted)). This is not the only place, however,
in which the severity of an applicant’s conditions is
properly part of the ALJ’s analysis. It also affects the
ALJ’s determination of residual functional capacity, for
example, and thus, no matter what happens at step two,
a correct assessment remains important. See Castile,
617 F.3d at 926-27; Arnett v. Astrue, 676 F.3d 586, 592
(7th Cir. 2012).


                            B
  Farrell also challenges a number of the ALJ’s factual
determinations. Many of them, such as the ALJ’s assess-
ment of Farrell’s credibility, are supported by sub-
stantial evidence. Nevertheless, as we explain in more
detail below, the ALJ failed to grapple properly with
the competing medical opinions.
  Farrell contends that the ALJ’s Residual Func-
tional Capacity (RFC) determination, see 20 C.F.R.
No. 11-3589                                              11

§ 404.1520(a)(4)(v), improperly discounted the medical
opinions of her treating physician, Dr. Beyer. See 20 C.F.R.
§ 404.1527(c)(1)-(c)(2) (“Generally, we give more weight
to opinions from your treating sources . . . .”). In
response, the Commissioner argues that it is required to
defer only if the treating physician’s opinion is “sup-
ported by objective clinical findings.” Henderson v. Apfel,
179 F.3d 507, 514 (7th Cir. 1999). Citing to only a handful
of pages in the record (and only one page from
Dr. Beyer’s notes), the Commissioner suggests that no
such clinical evidence exists. Dr. Beyer’s notes, however,
span many years and consume many pages. We do not
know what the ALJ thought about most of this material,
because he never seriously discussed it.
   Dr. Beyer suggested that Farrell was capable at most
of only occasionally lifting over 20 pounds and that
she could not sit or stand for more than 30 minutes at
a time. The lifting restriction is supported by the
June 2004 report, which indicates that Farrell has
“severe r[igh]t index pain—hard to bend finger.” The
August 2004 report similarly describes Farrell’s carpal
tunnel syndrome, which requires her to “wear her wrist
splints at all times.” Dr. Beyer also reported that
Farrell was limited by her chronic fatigue, and that her
inability to concentrate would affect her capacity to
listen. The ALJ faulted Dr. Beyer for “not referenc[ing]
clinical evidence to support [these] proposed restric-
tions.” But a careful examination of the record that
Dr. Beyer furnished shows exactly the kind of sup-
porting evidence the ALJ apparently wanted. As early
as May 2002, Dr. Beyer noted that Farrell suffered
12                                              No. 11-3589

from “severe fatigue” and that it was “hard [for Farrell]
to get out of bed.” In September 2002, Farrell complained
of “being tired all the time” (emphasis in original).
In 2003, Dr. Beyer noted that Farrell bruises easily
(incidently, a point not dependent on Farrell’s self-re-
porting), and later that year diagnosed her with restless
leg syndrome (a neurological condition that is similarly
not dependent on subjective reports). Beginning in
2004, Dr. Beyer’s notes make increasing references to
joint pain and lower back pain.
  Notably, just before Farrell’s alleged onset of disability—
in October 2003—Dr. Beyer suggested that the “real
cause” for Farrell’s “severe fatigue” was her “stress [and]
depression.” Similarly, in September 2004, Dr. Beyer
suggested that Farrell’s “concentration problems” might
stem from her “depression [and] anxiety.” The ALJ’s
decision makes almost no mention of these mental
ailments—diseases which are best evaluated by those
physicians who have a long history of treating the ap-
plicant—despite the fact that Dr. Beyer’s medical
reports repeatedly suggest that these mental conditions
may be the root cause of some of her physical limitations.
  As we already have pointed out, Dr. Beyer’s reports
indicate that Farrell was suffering from anxiety and
depression as early as 2003. For example, her notes
from July 2003 state that Farrell was suffering from
“increased anxiety . . . l[eading] her to increased panic
attacks,” and the report from December flags increasing
anxiety. These ailments persisted. Dr. Beyer’s reports
from 2005 and 2006 continue to refer to Farrell’s anxiety,
No. 11-3589                                                13

stress, depression, along with new bouts of panic attacks
in June 2005. Farrell was hospitalized on more than one
occasion because of her suicidal tendencies, and she
admitted to cutting her wrist with a plastic knife to relieve
stress. Dr. Beyer noted that Farrell found it difficult to let
go of situations that were beyond her control. It was
only the thought of her own children that deterred her
from committing suicide. It is true that some reports,
such as those from August 2004, indicated improve-
ments in Farrell’s condition, but these successes were
only temporary. Farrell’s GAF score similarly vacillated,
but it only sporadically moved outside of the “severe”
zone. Farrell’s RFC should not have been measured
exclusively by her best days; when a patient like Farrell
is only unpredictably able to function in a normal
work environment, the resulting intermittent attendance
normally precludes the possibility of holding down a
steady job. Cf. EEOC v. Yellow Freight Sys., 253 F.3d 943,
949-52 (7th Cir. 2001) (en banc). Matters would be
different if the ALJ had confronted Dr. Beyer’s opinions
and had explained why he was rejecting them. But he
did not. Instead, he ignored the extensive medical
history in the record and emphasized contradictions with
the opinions of the government’s doctors. This was
error. See Gudgel v. Barnhart, 345 F.3d 467, 470 (7th
Cir. 2003).
  Farrell also challenges the hypothetical questions that
the ALJ posed to the testifying vocational experts,
alleging that they did not fully incorporate his findings
regarding her RFC. Because we have determined that
the ALJ’s RFC determination is based on an incomplete
14                                            No. 11-3589

assessment of the record and does not account for
Dr. Loyd’s diagnosis, we need not decide whether the
ALJ’s examination was appropriate. On remand, the
ALJ may need to re-examine these or other experts in
order to assess Farrell’s ability to work in light of the
fresh look at the case.
  The decision of the district court is R EVERSED, and the
case is R EMANDED to the agency for further proceedings
consistent with this opinion.




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