S. W. v. Carolyn W. Colvin, 2:13-cv-02881

Background

Plaintiff Wanda Williams, as guardian for minor S.W., applied for SSI on September 28, 2009, alleging ADHD and bipolar disorder; the ALJ denied benefits on August 22, 2011, and the Appeals Council denied review.
Administrative hearing included testimony from plaintiff, S.W., and a medical expert; the ALJ found S.W. had a severe impairment of hyperactivity but was not disabled.
At step three the ALJ found S.W. did not meet or functionally equal a Listing, assessing "less than marked" limits in acquiring/using information and attending/completing tasks, and no limitation in other domains.
The record contains standardized academic test scores (CAT, California Standards Test) showing very low performance (e.g., far below basic / low percentiles) and third‑party statements from the grandmother and a tutor describing significant functional difficulties.
The district court found the ALJ erred by (1) failing to consider or explain rejection of standardized test results at step three and (2) failing to give germane, specific reasons to discount lay‑witness (grandmother) testimony, and remanded for further proceedings crediting the grandmother’s statements.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the ALJ properly evaluated functional equivalence at step three using the six domains	ALJ ignored available standardized test scores and thus failed to support the "less than marked" findings; scores show marked limitations in multiple domains	ALJ’s functional findings are supported by the record and reliance on the ME was proper	Court: ALJ erred — must address standardized test results, explain if not relied upon, and obtain expert help interpreting scores if needed; remand required
Whether the ALJ properly considered lay‑witness (grandmother) testimony	Grandmother’s statements describe daily limitations and should have been credited or given germane reasons for discounting	Defendant contends inconsistencies in third‑party statements justify discounting	Court: ALJ’s generic rejection was inadequate; lay testimony must be credited as true and ALJ must consider it on remand
Whether ALJ properly determined severity of alleged impairments (ADHD, mood disorder, specific learning disability) at step two	ALJ failed to explicitly assess/separate these impairments as severe or nonsevere	Implicit determination adequate under ALJ discretion	Court: ALJ must reevaluate medical evidence and explicitly state reasons for finding each impairment severe or nonsevere on remand
Whether immediate award of benefits is appropriate	Plaintiff urges reversal and award given improperly rejected evidence	Defendant favors remand for further development	Court: Outstanding issues require further development; remand for proceedings, not immediate benefits

Key Cases Cited

Moncada v. Chater, 60 F.3d 521 (9th Cir.) (standard for substantial evidence review)
Drouin v. Sullivan, 966 F.2d 1255 (9th Cir.) (whole‑record review and substantial evidence standard)
Reddick v. Chater, 157 F.3d 715 (9th Cir.) (ALJ must account for the context of materials and not ignore evidence suggesting opposite result)
Smolen v. Chater, 80 F.3d 1273 (9th Cir.) (requirements for evaluating credibility and medical evidence)
Stout v. Comm’r of Soc. Sec. Admin., 454 F.3d 1050 (9th Cir.) (value of lay witness testimony and requirement to give germane reasons to discredit)
Schneider v. Barnhart, 223 F.3d 968 (9th Cir.) (when improperly rejected lay evidence would require a finding of disability, it may be credited)