                                                                            FILED
                            NOT FOR PUBLICATION                              JAN 07 2010

                                                                        MOLLY C. DWYER, CLERK
                     UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



PEARLA STILLWATER,                                No. 08-35976

             Plaintiff - Appellant,               D.C. No. 6:07-cv-00941-AA

  v.
                                                  MEMORANDUM *
COMMISSIONER OF SOCIAL
SECURITY ADMINISTRATION,

             Defendant - Appellee.



                    Appeal from the United States District Court
                             for the District of Oregon
                      Ann L. Aiken, District Judge, Presiding

                     Argued and Submitted December 10, 2009
                                Portland, Oregon

Before: FARRIS, D.W. NELSON and BERZON, Circuit Judges.

       Pearla Stillwater appeals the determination by an Administrative Law Judge

that she is not disabled and does not qualify for SSI benefits. Stillwater alleges

disability since May 1, 1995. She argues that the ALJ erred in rejecting (1) her

testimony, (2) the opinion of Dr. Greenburg, (3) the opinions of two agency


        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
medical experts, and (4) lay witness testimony; and in finding that Stillwater has

no severe mental impairment. She also assigns error to the posing of an

incomplete hypothetical to the vocational expert.

      At step one of the five-step test for determining whether a claimant is

disabled, the ALJ found that Stillwater had not engaged in “substantial gainful

activity” during the period of alleged disability. At steps two and three, the ALJ

found that Stillwater has medically determinable impairments of vestibular

dysfunction, diabetes, back pain, and obesity, but that Stillwater’s impairments did

not meet or equal the requirements of a listed impairment. At step four, the ALJ

found that Stillwater retained the ability to perform a limited range of light work.

The ALJ also found that Stillwater was limited in her ability to climb, stoop, kneel,

crouch, and crawl. Based on this RFC assessment and the testimony of a

vocational expert, the ALJ found that Stillwater could perform her past relevant

work as a cashier.

      We may set aside the Commissioner’s denial of disability insurance benefits

when the ALJ’s findings are based on legal error or are not supported by

substantial evidence in the record as a whole. Matney v. Sullivan, 981 F.2d 1016,

1019 (9th Cir. 1992).




                                           2
      Stillwater argues that the ALJ improperly rejected her subjective symptom

testimony. Given that Stillwater produced objective medical evidence of an

underlying impairment that could reasonably be expected to produce the alleged

symptoms, the ALJ could reject Stillwater’s testimony about the severity of her

symptoms only after offering specific, clear and convincing reasons for doing so.

See Dodrill v. Shalala, 12 F.3d 915, 918 (9th Cir. 1993).

      The ALJ stated that he rejected this testimony because: (1) the medical

evidence does not support the severity of Stillwater’s self-described symptoms; (2)

Stillwater’s work and school history demonstrates her ability to complete tasks; (3)

Stillwater’s daily activities contradict her testimony; and (4) Stillwater’s behavior

demonstrates inconsistencies.

      None of these reasons are sufficient. Dr. Greenburg’s report and numerous

lay witnesses corroborate Stillwater’s testimony, which has been consistent over

time. Stillwater’s past work and school history was long ago and her medical

conditions could easily have changed. Stillwater’s daily activities are very limited,

do not appear to meet the threshold for transferable work skills, do not appear to

show an ability to engage in sustained work-related activity, and do not contradict

her testimony. The record also lacks substantial evidence for the ALJ’s conclusion




                                           3
that Stillwater was noncompliant with treatment, or that she provided conflicting

information regarding past work.

      Stillwater argues that the ALJ improperly rejected Dr. Greenburg’s

testimony regarding her medical condition and physical limitations. Dr.

Greenburg, a specialist in endocrinology, was Stillwater’s treating physician and

treated her for diabetes from 2001 to 2005.

      The ALJ rejected Dr. Greenburg’s entire medical opinion because he found

the doctor not qualified to assess the effects of Stillwater’s back pain, and also on

the theory that the opinion was not based on objective medical evidence because

Stillwater is noncompliant with her diabetes treatment and a compliant diabetic

would not have such problems.

       Although the ALJ could reasonably discredit Dr. Greenburg with regard to

matters other than Stillwater’s diabetes, Dr. Greenburg was her diabetes doctor,

and his extensive opinion on that medical issue, documented in Diabetes Mellitus

Residual Functional Capacity Questionnaire, should not have been discredited

because of his lack of expertise with regard to back injuries. The ALJ gave no

adequate reason for rejecting Dr. Greenburg’s Diabetes Mellitus Residual

Functional Capacity Questionnaire.




                                           4
      Stillwater challenges the ALJ’s rejection of Dr. Haynes’s and Dr. DeBolt’s

opinion that Stillwater could only perform sedentary work. The ALJ gave that

opinion “very little weight” based on the ALJ’s prior rejections of Stillwater’s

testimony and Dr. Greenburg’s opinion. Those rejections were improper. Dr.

Haynes’s and Dr. DeBolt’s opinion must be reconsidered.

      Stillwater argues that the ALJ improperly rejected the statements and

testimony of several lay witnesses. Six lay witnesses completed statements

describing Stillwater’s limitations, and three of them testified at a hearing before

ALJ Schloss. ALJ Jones gave the lay witness testimony and statements “no

weight” in determining the severity of Stillwater’s impairments.

      The ALJ’s rejection of the lay witness testimony was legal error. First, the

ALJ’s assertion that lay witness testimony of daily activities “generally provide[s]

little assistance” is incorrect as a matter of statutory and case law. See 20 C.F.R. §

404.1513(d); Dodrill v. Shalala, 12 F.3d 915, 918-19 (9th Cir. 1993). More

specifically, the ALJ found the lay testimony credible, yet gave the testimony no

weight because the lay witnesses were not medical experts and their opinions were

“not supported by the entire evidence.” We have specifically rejected this

approach. Bruce v. Astrue, 557 F.3d 1113 (9th Cir. 2009).




                                           5
      Stillwater argues that the ALJ erred by finding that she does not suffer from

a severe mental impairment at step two in the sequential evaluation process. The

ALJ reviewed the medical records regarding Stillwater’s mental state and

concluded that the records were devoid of any diagnoses of mental disorders and

did not reveal any mental health treatment. Stillwater does not contradict those

findings. The ALJ’s determination was supported by substantial evidence.

      Stillwater argues that the ALJ’s hypothetical posed to the vocational expert

was deficient because it did not consider whether Stillwater had the stamina to

work on a sustained basis, considering her fatigue and need to rest. An ALJ has to

propose a hypothetical “based on medical assumptions supported by substantial

evidence in the record that reflects each of the claimant’s limitations.” Osenbrock

v. Apfel, 240 F.3d 1157, 1163 (9th Cir. 2001). The ALJ’s hypothetical was based

on his improper rejection of three doctors’ opinions, Stillwater’s testimony, and lay

witness statements. On remand, the ALJ should reconsider the hypothetical and

the ultimate RFC determination.

      REVERSED AND REMANDED.




                                          6
