Sherman v. Social Security Administration, 1:16-cv-00310

Background

Plaintiff Gregory Paul Sherman applied for disability insurance and SSI in March 2012, alleging bipolar disorder; agency and ALJ denied benefits and Appeals Council denied review.
Sherman sued in federal court; he challenged the ALJ’s treatment and weighting of two medical opinions (treating physician Kevin Rexroad, M.D., and consultative examiner Paula Hughson, M.D.).
The district court agreed the ALJ failed to apply required legal standards and remanded for a rehearing, finding the ALJ improperly discounted those medical opinions without adequate explanation.
Sherman moved for attorney fees under the Equal Access to Justice Act (EAJA), asserting he was the prevailing party, met net-worth limits, and that the Commissioner’s position was not substantially justified.
The Commissioner defended the ALJ’s decision and argued her position was substantially justified, citing consistency with state agency psychologists and offering post hoc rationalizations.
The court found the Commissioner’s position was not substantially justified in the underlying agency action or subsequent litigation and awarded Sherman $6,628.75 in EAJA fees.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Sherman is entitled to EAJA fees as a prevailing party whose adversary was not substantially justified	Sherman prevailed on judicial review and the Commissioner’s position was not substantially justified	Commissioner contends her position was substantially justified because ALJ’s decision aligned with state agency psychologists and some reasons were reasonable	Granted: Court held Commissioner not substantially justified in agency action or litigation; EAJA fees awarded ($6,628.75)
Whether ALJ properly discounted treating physician Rexroad’s opinion	Rexroad’s opinion was improperly rejected based on lay speculation and without identifying inconsistencies or applying regulatory factors	Commissioner contends ALJ reasonably found inconsistencies and relied on record comparisons	Held: ALJ erred; reasons insufficient and post hoc rationalizations inadequate
Whether ALJ properly discounted consultative examiner Hughson’s opinion	Hughson’s opinion was wrongly discounted (no evidence she relied solely on claimant’s statements; consultative status not a ground to dismiss; ALJ misread GAF)	Commissioner argues ALJ reasonably found Hughson’s conclusions disproportionate to findings and noted GAF concerns	Held: ALJ erred on all three points; misreading of GAF and improper assumptions rendered discounting defective
Whether post hoc justifications by Commissioner can save the ALJ’s decision	Sherman argues post hoc rationalizations are impermissible and cannot justify the ALJ’s deficient reasons	Commissioner relies on additional record-based arguments in litigation to support ALJ’s decision	Held: Court rejected post hoc rationalizations; ALJ’s decision must stand on its stated reasons and was legally unreasonable

Key Cases Cited

Hackett v. Barnhart, 475 F.3d 1166 (10th Cir. 2007) (EAJA elements and substantial-justification standard)
Gilbert v. Shalala, 45 F.3d 1391 (10th Cir. 1995) (government bears burden to show substantial justification)
Pierce v. Underwood, 487 U.S. 552 (U.S. 1988) (definition of substantially justified)
Winfrey v. Chater, 92 F.3d 1017 (10th Cir. 1996) (ALJ may not substitute lay medical judgment for a physician’s)
Langley v. Barnhart, 373 F.3d 1116 (10th Cir. 2004) (ALJ must identify inconsistencies to allow meaningful review)
Watkins v. Barnhart, 350 F.3d 1297 (10th Cir. 2003) (need for specific weighing of evidence by ALJ)
Kemp v. Bowen, 816 F.2d 1469 (10th Cir. 1987) (ALJ cannot interpose own medical expertise over physician)
Haga v. Astrue, 482 F.3d 1205 (10th Cir. 2007) (courts may not accept post hoc rationalizations for ALJ decisions)
Robinson v. Barnhart, 366 F.3d 1078 (10th Cir. 2004) (ALJ’s decision must rest on reasons stated in the decision)