Opinion
CIVIL ACTION NO. 01-10682-DPW.
July 23, 2003.
MEMORANDUM AND ORDER
In this case, Claimant Wayne Petrucci appeals from the decision of the Commissioner of the Social Security Administration ("SSA") denying his application for Social Security Disability Insurance ("SSDI") benefits. I conclude Petrucci fails to meet his burden of demonstrating the SSA decision was not based upon substantial evidence. Accordingly, I affirm that decision.
I. BACKGROUND
A. Medical History
Petrucci is a fifty-seven year old United States Army veteran who sustained shrapnel wounds to the right calf in 1966, while serving in Vietnam. On August 1, 1998, shortly before filing for SSDI benefits, he underwent a right knee arthroscopy and drainage. Id. In Petrucci's medical record, attending physician Dr. M. Bradley noted Petrucci's report of twenty year history of pain, swelling and stiffness of the right knee with decreased range of motion. Upon physical examination of Petrucci, the doctor observed no ligamentous laxity of the right knee and a full range of motion. In addition, Dr. Bradley found that after the procedure, Petrucci was independent with crutches and safe with flat surfaces and stairs. He was discharged on the night of operation in stable condition.
The medical record prior to 1998 covered only the period 1994-1997 and was inconsistent with Dr. Bradley's findings. Writing on January 13, 1995, Dr. Joseph McCarthy, an orthopedic surgeon reported that bilateral tibial osteotomies were performed on Petrucci on May 31, 1994 in an effort to treat advanced osteoarthritis of both knees, a function of the 1966 wound. McCarthy stated Petrucci had been totally disabled since the operations and would require total knee replacement at some point in the future.
On September 27, 1995, Dr. John C. Molby of the Department of Veterans Affairs reported that Petrucci suffered from advanced degenerative arthritis of both knees. Dr. Molby noted that Petrucci had a limited range of motion of both knees, was unable to stand for more than thirty minutes, and could not walk for more than fifty yards without stopping. He concluded that Petrucci had been totally disabled from any gainful employment since May of 1994 and will be disabled indefinitely.
In a Veterans Affairs Rating Decision dated May 19, 1997, Petrucci was granted individual unemployability from September 21, 1994, based on a permanent and total service-connected disability.
In addition to this medical evidence, Petrucci asserts that he has been totally disabled since 1966, suffering not only from physical infirmities, but also from mental impairments, ranging from post traumatic stress disorder to "confrontational paranoia and distrust."
B. Employment History
Petrucci's Social Security Earnings Record indicates that between 1968 and 1974, his yearly income ranged from $5,475 to $9,971. While working for Metro Enterprises, his earnings were around $8,600 in 1982, $4,300 in 1983, and $22,600 in 1984. As self-employed sole owner of Wayne's Painting and Remodling, Petrucci posted income of $14,100 in 1993 and $6,800 in 1994.
C. Procedural Posture
On August 26, 1998, Petrucci filed an application for SSDI benefits under Title II of the Social Security Act, alleging a period of disability commencing on September 21, 1994. On August 31, 1998, the SSA denied Petrucci's application on the basis that his insured status had expired in 1980, well before the purported onset of his disability. Petrucci timely appealed the SSA's decision, amending the application to include an onset date of 1966. On April 30, 1999, the SSA again denied the application on the grounds that Petrucci had engaged in substantial gainful activity ("SGA") after the alleged onset of his impairment, and was thus not considered disabled for purposes of the Social Security Act.
On June 30, 1999, Petrucci sought review of the SSA's decision by an Administrative Law Judge ("ALJ"). The ALJ affirmed the decision of the SSA, noting that "the claimant was not under a `disability' as defined in the Social Security Act at any time through the date of this decision." On August 28, 2000, Petrucci filed a request with the Appeals Council for review of the ALJ's holding. The Appeals Council formally denied the petition on March 15, 2001.
D. Claimant's Argument on Appeal
Petrucci brings this appeal pursuant to 42 U.S.C. § 405(g), asserting that the decision of the ALJ was not supported by "substantial evidence." In particular, he contends that (1) the ALJ failed to consider the claim that his reported income was not from SGA, and (2) the ALJ cannot conclude that he did not have severe impairment without a medical determination.
II. DISCUSSION
A. Standard of Review
This court may enter a judgment "affirming, modifying, or reversing the decision of the Commissioner of Social Security, with or without remanding the cause for a rehearing." 28 U.S.C. § 405(g). Where the SSA has denied a claimant's application for SSDI benefits, its decision is binding, unless the court concludes the Commissioner committed legal or factual error in examining the claim. Manso-Pizarro v. Sec'y of Health and Human Servs., 76 F.3d 15, 16 (1st Cir. 1996).
Under 42 U.S.C. § 405(g), the Commissioner's findings of fact are controlling if supported by "substantial evidence." In explaining this standard, the Supreme Court has noted that substantial evidence is "`more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" Richardson v. Perales, 402 U.S. 389, 401 (1971) citing Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938). As a consequence, a court may not reverse or remand the Commissioner's decision where "the record could arguably justify a different result." Rawls v. Apfel, 998 F. Supp. 70, 72 (Mass. 1988). As noted in Rams v. Chater, 989 F. Supp. 309 (Mass. 1997), "[t]he role of the district court under 42 U.S.C. § 405(g) is to determine whether there is substantial evidence on the record to support the decision of the commissioner, and not to re-weigh the evidence or try the issues de novo." Id. at 313; see also Geoffroy v. Sec'y of Health and Human Servs., 663 F.2d 315, 319 (1st Cir. 1981) ("whatever label the parties or the court ascribe to the procedure used to review the Secretary's decision, statute and long established case law make clear that the court's function is a narrow one.")
B. Establishing Eligibility for SSDI Benefits
To obtain SSDI benefits under the Social Security Act, a Claimant must establish that he (1) has insured status, and (2) is disabled. 42 U.S.C. § 423(a)(1)(A), (D); see Rawls, 998 F. Supp. at 72-73. Under criterion (1), a claimant enjoys insured status where he has satisfied an earnings requirement, having "worked for a statutorily defined period of time before applying for benefits." Rawls, 998 F. Supp. at 73 citing 42 U.S.C. § 423(c)(1)(A), (B); see also 20 C.F.R. § 404.130 (analogous Social Security regulations, expounding upon 42 U.S.C. § 423(c)).
In general, a claimant's insured status is contingent upon a requisite ratio of `quarters of coverage' ("QCs") to total quarters. 20 C.F.R. § 404.130. A claimant is credited with QCs "based on the wages [he is] paid and the self-employment income [he] derive[s] during certain periods." 20 C.F.R. § 404.101(b).
It is uncontested that Petrucci maintained insured status through December 31, 1980. While Petrucci no longer satisfied the earnings requirement in 1998 when he filed his application with the SSA, he could nevertheless recover SSDI benefits if he qualified for a "period of disability." 42 U.S.C. § 416(i)(2)(A); 20 C.F.R. § 404.320; see Arnone v. Bowen, 882 F.2d 34, 38 (2nd Cir. 1989); Cruz Rivera v. Sec'y of Health and Human Servs., 818 F.2d 96, 97 (1st Cir. 1986). Specifically, Petrucci was eligible for benefits in 1998 if he had been disabled for "a continuous period," commencing before the expiration of his insured status on December 31, 1980, and ending no less than one year before he submitted his application to the SSA (August 26, 1997). 42 U.S.C. § 416(i)(2)(A); 20 C.F.R. § 404.320.
As a means of evaluating whether a claimant is under a disability pursuant to criterion (2) of the eligibility standard, the SSA has developed a five step sequential test. 20 C.F.R. § 404.1520. Goodermote v. Sec'y of Health and Human Servs., 690 F.2d 5, 6-7 (1st Cir. 1982); McDonald v. Sec'y of Health and Human Servs., 795 F.2d 1118, 1120 (1st Cir. 1986). It bears emphasizing that "all five steps are not applied to every applicant, as determination may be concluded at any step along the process." Freeman v. Barnhart, 274 F.3d 606, 608 (1st Cir. 2001).
First, the agency asks whether the claimant is working. 20 C.F.R. § 404.1520(b). If the claimant is employed and engaged in SGA, i.e. "work activity that involves doing physical or mental activity . . . for pay or profit," ( 20 C.F.R. § 404.1572(a) — (b)), he is automatically deemed not disabled, "regardless of [his] medical condition . . . age, education, and work experience." 20 C.F.R. § 404.1520(b); see Goodermote, 690 F.2d at 6; Torres v. Barnhart, 249 F. Supp.2d 83, 91 (Mass. 2003).
Second, the SSA inquires as to whether the claimant has a severe impairment that "significantly limits [his] physical or mental ability to do basic work activities." 20 C.F.R. § 404.1520(c). If the claimant does not have such an infirmity, he is considered not disabled. Id.; see McDonald, 795 F.2d at 1120.
Third, the agency evaluates whether the claimant's impairment is equivalent to an infirmity on a list contained in the regulations' Appendix 1. 20 C.F.R. § 404.1520(d). If there is a correlation, the claimant is considered disabled. Id; see McDonald, 795 F.2d at 1120.
Fourth, the SSA examines whether the claimant's impairment prevents him from engaging in the kind of work he has done in the past. 20 C.F.R. § 404.1520(e). If no, he is not under a disability. Id.; see McDonald, 795 F.2d at 1120.
Fifth, the SSA assesses whether the claimant's infirmity prevents his from performing all other forms of work. 20 C.F.R. § 404.1520(f). If so, claimant is under a disability. Id. If not, he is not disabled. Id.; see McDonald, 795 F.2d at 1120.
Under the first four tests, the burden of proof and persuasion is on the claimant. Freeman, 274 F.3d at 608; Makuch v. Halter, 170 F. Supp.2d 117, 123 (Mass. 2001). By contrast, under the fifth inquiry, the burden is shifted to the SSA to establish that the claimant is capable of performing other jobs in the economy. Id.
C. Application of the Prescribed Sequential Analysis
1. Step One
Examining Petrucci's application at the first step of the disability inquiry, the ALJ found that Petrucci had engaged in SGA after the alleged onset of his infirmity and during the period from 1981 through 1997, the interval for which he had the burden of proving a continuous "period of disability." Consequently, the ALJ held that Petrucci was not disabled and could not recover SSDI benefits. 20 C.F.R. § 404.1520(b);Goodermote, 690 F.2d at 6. In appealing from this decision, Petrucci argues that the ALJ committed reversible error in failing to consider his contention that the reported income was not a function of SGA.
Upon review of the record, I conclude that the ALJ's finding at the first step is supported by substantial evidence. Under the regulations promulgated by the SSA, the touchstone of SGA analysis is a claimant's income. Where the claimant is an employee,
our primary consideration will be the earnings you derive from the work activity. We will use your earnings to determine whether you have done substantial gainful activity unless we have information from you, your employer, or others that shows that we should not count all of your earnings.20 C.F.R. § 404.1574(a)(1). Where the claimant is self-employed, income is similarly the focal point of the SGA inquiry: a claimant's work constitutes SGA where he "render[s] services that are significant to the operation of the business and receive[s] a substantial income from the business." 20 C.F.R. § 404.1575(a)(1).
While the ALJ did not explicitly address whether Petrucci had rendered services significant to the operation of Wayne's Painting and Remodeling, Petrucci does not contest the issue on appeal. Pursuant to SSA regulations, in most cases, a self-employed claimant who is the sole operator of his business will be found to have rendered "significant services." Indeed, under 20 C.F.R. § 404.1575(b)(1), "if you are not a farm landlord and you operate a business entirely by yourself, any services that you render are significant to the business." (Emphasis added). See Mooney v. Shalala, 889 F. Supp. 27, 33 (N.H. 1994), citing Corrao v. Shalala, 20 F.3d 943, 948 (9th Cir. 1994) ("`If one has a sole proprietorship, all services rendered are significant to the business'"). It is worth noting that Claimant indicated on his SSA Work Activity Report Form that he was the sole owner of a painting and remodeling company. Under the section of the form affording an applicant the opportunity to discuss his role in the business "in terms of management decisions, responsibilities, hours, production and services" before the onset of the alleged disability, Claimant wrote that he had "talked to customers, painted, carpentry." It follows that there is substantial evidence that Petrucci performed services significant to his business, in accordance with the SSA regulation for the self-employed. See, e.g. Longo v. Chater, 1997 WL 148239, at *3 (S.D.N.Y. 1997) (because claimant was "an individual contractor, he was the sole operator of his business. Therefore, he rendered significant services.").
I note that under SSA regulations regarding the self-employed, a claimant's earnings are not dispositive in the sense that the SSA may find that an applicant who has not derived a substantial income from his business has nevertheless engaged in SGA. In addition to an income-based evaluation guide, the SSA has promulgated two other tests as a means of determining whether a claimant has engaged in SGA. First, if a claimant's work activity "in terms of factors such a hours, skills, energy output, efficiency, duties, and responsibilities, is comparable to that of unimpaired individuals in [his] community who are in the same or similar businesses as their means of livelihood," his employment constitutes SGA. 20 C.F.R. § 404.1575(a)(2). Second, if a claimant's work activity "although not comparable to that of unimpaired individuals, is clearly worth the amount shown in § 404.1574(b)(2) when considered in terms of its value to the business, or when compared to the salary that an owner would pay to an employee to do the work [he] is doing," he will be found to have engaged in SGA. 20 C.F.R. § 404.1575(a)(3). See Rams, 989 F. Supp. at 316;Karouz v. Sullivan, 1992 WL 220760, at *2-3 (R.I. 1992).
Affording guidelines for income-based SGA analysis, the SSA has delineated explicit earnings thresholds that, if exceeded, create the presumption that a claimant has performed SGA. 20 C.F.R. § 404.1574(b). Between 1980 and 1989, the amount was $300 per month ($3,600 per year). Id. After 1990, the amount was $500 per month ($6,000 per year). Id.
The monthly earnings are calculated as averages based on yearly income. 20 C.F.R. § 404.1574(b).
Petrucci's earnings were well above the proscribed threshold for several of the years during the relevant time period. While working as an employee of Metro Enterprises, he earned $8,628.08 in 1982, $4,394.43 in 1983 and $22,668.79 in 1984. As a self-employed painter and remodeler, he earned $14,111 in 1993 and $6,806 in 1994. Thus, Petrucci's income creates the presumption that he indeed engaged in SGA during his alleged period of disability.
Petrucci correctly notes that this presumption of SGA based on significant earnings is not absolute. Indeed, as the United States District Court for the District of New Hampshire emphasized in Mooney v. Shalala,
in developing fair and full record, a claimant is entitled to offer evidence to rebut this presumption. `In considering whether the presumption is rebutted, the factors to be considered include the responsibilities and skills required to perform the work, the amount of time the individual spends working, the quality of the individuals' work, special working conditions, and for individuals who are self employed, the value of their work to the business.'"Mooney, 889 F. Supp. at 33 citing Corrao, 20 F.3d at 948;see, e.g. Boyes v. Sec'y of Health and Human Servs., 46 F.3d 510 (6th Cir. 1994) (mentally impaired claimant had not engaged in SGA where adult services director at claimant's workshop revealed that claimant's productivity was one-half that of a typical non-impaired person, and additional evidence indicated that claimant "relied on special transportation to get to and from work and . . . completed his work duties through constant on-site supervision."); Thompson v. Sullivan, 928 F.2d 276 (8th Cir. 1991) (though claimant's earnings were above the prescribed threshold, the presumption of SGA was successfully rebutted by evidence demonstrating that the income was a function of charitable donation.) It is important to emphasize that because the burden is on the claimant to establish that he did not engage in SGA for purposes of step one in the five step inquiry, the claimant bears the burden of rebutting the presumption of SGA based on income. See Dinkel v. Sec'y of Health and Human Servs., 910 F.2d 315, 318 (6th Cir. 1980) (holding for defendant where claimant "failed to carry the burden of proving that her employment was a sheltered workshop subsidized by the government for the employment of deaf persons, rather than SGA."); see also Mooney, 889 F. Supp. at 33; Downie v. Heckler, 628 F. Supp. 963, 965 (Mass. 1986). Petrucci has not done so here.
In an effort to challenge the presumption of SGA arising out of his earnings, Petrucci argues that the work he performed after the purported onset of his disability in 1968 was not SGA but "made-work by family, friends and relatives." Indeed, he bases this appeal on the grounds that the ALJ failed to consider "the facts pertaining to the special conditions of his employment."
However, in bringing his case before the ALJ, Petrucci offered little evidence to support the proposition that the income he accrued while working for Metro Enterprises between 1982 and 1984, and while self-employed between 1993 and 1994 was a function of "made work," a so-called "dignity check" not commensurate with "any reasonable measurable scale" of pay. With respect to his self-employment income, Petrucci highlighted his 1993 and 1994 tax returns as evidence that his former business, Wayne Repairs and Painting Services, was merely "an entity that was created for the purpose of maintaining a rental property owned by the couple." However, there is nothing in his returns that would support the contention that the business was a sham or that the reported self-employment income did not reflect the true value of the work performed. Further, even assumingarguendo that Petrucci's business was as he now describes, and in turn that his self-employment earnings were to some degree a function of make-work, he has proffered no evidence to substantiate the assertion that the income he derived from his employment at Metro Enterprises was not commensurate with the value of his performance.
Contrary to what Petrucci seems to imply, it is not the statutory burden of the ALJ to investigate an applicant's blanket claims so as to prove that earnings above the explicit threshold are a true reflection of SGA. See Johnson v. Bowen, 668 F. Supp. 1016, 1021 n. 8 (Mass. 1988) (affirming ALJ's denial of benefits where claimant preferred no evidence to rebut presumption of SGA, and noting that while it might have been "preferable" for the ALJ to have requested additional evidence from claimant where the record was thin, the ALJ was nonetheless justified "in determining that the presumption that [claimant] had performed SGA had not been successfully rebutted."); see also Downie, 628 F. Supp. at 965-66; Dinkel, 910 F.2d at 319. Thus, Petrucci's argument that the ALJ committed reversible error by not rescheduling a hearing (after Petrucci had voluntarily waived his right to personal appearance before an ALJ) and conducting "an investigation of the nature of the reported earnings, as the claimant was willing to appear and testify if necessary to develop the record," is not compelling.
In Nazzaro v. Callahan, the case Petrucci cites for the proposition that the ALJ has the duty to develop facts relating to the special circumstances surrounding a claimant's employment, the applicant proffered concrete evidence to rebut the presumption of SGA based on earnings. Nazzaro, 978 F. Supp. 452, 455 (W.D.N.Y. 1997). Specifically, the claimant presented letters from his case manager and the Vocational Services Program Director at the Western New York Association for the Learning Disabled substantiating the claim that he needed the continued help of a `job coach' to maintain employment. Id. Nazzaro is readily distinguishable from the instant case where Petrucci submitted no evidence to support his contention, affording the ALJ no basis on which to premise further development.
Given the records of Petrucci's substantial earnings and his failure to offer evidence to rebut the presumption of SGA, the ALJ's finding, at the first step of the five part disability inquiry, that Petrucci was not disabled is supported by "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Richardson, 402 U.S. at 401 citing Consolidated, 305 U.S. at 229. Consequently, I will deny Petrucci's motion to reverse or remand the ALJ's decision on the purported grounds that the ALJ failed to consider Claimant's contention that his reported income was not a function of SGA.
2. Step Two
Although the ALJ's determination that Petrucci had engaged in SGA pursuant to step one of the disability analysis is dispositive because a claimant who performs SGA is automatically considered not disabled and ineligible for benefits, 20 C.F.R. § 404.1520 (see Freeman, 274 F.3d at 608), I note the ALJ went on to step two in Petrucci's case, observing that "there is no medical evidence in the claimant's file which establishes that the claimant had any severe, medically determinable impairment prior to the date last insured, December 31, 1980."
Because I have affirmed the ALJ's decision on the grounds that there was substantial evidence to support its finding under step one of the disability inquiry, I decline to assess whether the ALJ erred under step two. As the court in Rams held, "[i]f the ALJ's finding required at any of these five steps is determinative as a matter of law and is supported by substantial evidence, this court must affirm her decision." Rams, 989 F. Supp. 309 at 315; see also Freeman, 274 F.3d at 608.
III. CONCLUSION
For the reasons set forth more fully above, I hereby DENY Petrucci's motion to reverse or remand and AFFIRM the decision of the SSA denying Petrucci's request for SSDI benefits.