Charles FROST, Plaintiff-Appellant, v. Jo Anne BARNHART, Commissioner of Social Security, Defendant-Appellee, 314 F.3d 359

OPINION GOULD, Circuit Judge: Charles Frost (“Frost”) applied for supplemental security income benefits pursuant to Title XVI of the Social Security Act (the “Act”). An administrative law judge (“ALJ”) concluded that Frost was disabled between May 16, 1997 and October 31, 1997 but was not disabled thereafter and could perform simple, unskilled work tasks. 1. Using the Medical-Vocational Guidelines, 20 C.F.R. pt. 404, subpt.

P, app. 2, the ALJ determined that simple, unskilled work suitable for Frost is widely available in the national economy and that, accordingly, Frost’s disability does not entitle him to benefits under the Act after October 31, 1997. Frost argues that the decision of the Commissioner to deny him benefits for the period after October 31, 1997 was not supported by substantial evidence, as is required for affirmance. See Pagter v. Massanari, 250 F.3d 1255, 1258 (9th Cir.2001). Frost sought to be classified as disabled on the ground that he is impaired by paranoid schizophrenia and obsessive-compulsive disorder.

Frost’s psychiatrist, Dr. Richard Price (“Price”), diagnosed him with both disorders in July 1996, but, according to Price’s notes, Frost’s condition had improved during the year and a half preceding his December 19, 1997 hearing. A course of medication had virtually eliminated his paranoid schizophrenic symptoms and had modified his obsessive-compulsive behavior, although some symptoms remained. Frost challenges this conclusion by pointing first to two statements made by Price.

On December 2, 1997, Price in his medical file noted that Frost continued to worry obsessively that his niece might be killed in an automobile accident while sleepwalking.

On December 16, 1997, Price noted that Frost remained “quite symptomatic with his obsessive-compulsive disorder” and added, “I believe that it would be fair to give [Frost] a chance to succeed in the workplace but I would not be surprised if his condition interfered with his ability to be a fully productive employee.” These statements do not indicate that Frost is disabled; instead, the latter statement suggests that Frost should be given a chance to work.

Frost also points to a statement by other therapists who evaluated him in July 1999, whose medical file stated that “it would help [Frost’s] self-esteem if he obtained a part-time job[;] however, judging from his history, it is questionable whether he could maintain it.” Although skeptical, this statement also does not specify that Frost is too disabled to attempt simple work. 2. Frost also argues that the district court did not properly consider the testimony that he and his sister provided at the hearing before the ALJ.

Frost and his sister testified that he obsesses over his niece’s sleepwalking; that he worries about the safety of both of his nieces every night when he goes to bed; that he must ask the same question repeatedly because of his poor memory; and that he does not drive by himself because he gets lost easily. But there is no reason to assume that these symptoms would interfere with his ability to do the kind of simple work that the ALJ suggested. 3. Frost also testified that he sleeps from 2 a.m. to 2 p.m. every day, because his medication makes him drowsy.

However, Frost stated on July 22, 1997— five months before the hearing — that he was sleeping eight hours nightly. The record suggests that his sleep patterns may have changed because his doctors modified his medications. But as the ALJ said, there was no showing Frost had to stay up late and sleep late, and these purported symptoms do not negate the conclusion that there was substantial evidence for the Commissioner’s decision on Frost’s ability to do simple work. 4.

Although Frost argues that the ALJ improperly rejected his testimony as not credible, it rather appears that the ALJ accepted Frost’s testimony as credible but found that it was not sufficient to demonstrate that he is disabled. However, if the ALJ finds on remand that Frost’s testimony concerning his impairments is incredible or unreliable, the ALJ must make a credibility determination with findings sufficiently specific to permit the court to conclude that the ALJ did not arbitrarily discredit Frost’s testimony. Thomas v. Barnhart, 278 F.3d 947, 958 (9th Cir.2001). 5.

Frost correctly notes that while the ALJ evaluated his obsessive-compulsive, disorder under

section 12.06 of the Listing of Impairments in 20 C.F.R. pt. 404, subpt. P, app. 1 (“the Listings”), she did not evaluate his paranoid schizophrenic disorder under

section 12.03 of the Listings, which covers “Schizophrenic, Paranoid, and Other Psychotic Disorders.” We conclude this omission warrants a remand. When Frost applied for SSI in 1997,

section 12.03 provided as follows: The required level of severity for these disorders is met when the requirements in both A and B are satisfied, or when the requirements in C are satisfied. A.Medically documented persistence, either continuous or intermittent, of one or more of the following: 1. Delusions or hallucinations; or 2. Catatonic or other grossly disorganized behavior; or 3. Incoherence, loosening of associations, illogical thinking, or poverty of content of speech if associated with one of the following: A. Blunt affect; or B. Flat affect; or C. Inappropriate affect; or 4.

Emotional withdrawal and/or isolation. AND B. Resulting in at least two of the following: 1. Marked restriction on activities of daily living; or 2. Marked difficulties in maintaining social functioning; or 3. Deficiencies of concentration, persistence or pace resulting in frequent failure to complete tasks in a timely fashion (in work settings or elsewhere); or 4. Repeated episodes of deterioration or decompensation in work or work-like settings which cause the individual to withdraw from that situation or to experience exacerbation of signs or symptoms (which may include deterioration of adaptive behaviors).

OR C. Medically documented history of one or more episodes of acute symptoms, signs and functional limitations which at the time met the requirements in A and B of this listing, although these symptoms or signs are currently attenuated by medication or psychosocial support, and one of the following: 1. Repeated episodes of deterioration or decompensation in situations which cause the individual to withdraw from that situation or to experience exacerbation of signs or symptoms (which may include deterioration of adaptive behaviors); or 2.

Documented current history of two or more years of inability to function outside of a highly supportive living situation. 20 C.F.R. pt. 404, subpt. P, app. 1, § 12.03 (1997).

Section 12.03, which the ALJ did not review, and

section 12.06, which the ALJ did review, have the same structure. In both, the requirements in A involve symptoms that are specific to the disorder under consideration — anxiety-related disorders in

section 12.06, and psychotic disorders such as paranoid schizophrenia in

section 12.03. In both, the requirements in B involve the effects of those symptoms. The requirements in B are identical in sections 12.03 and 12.06. The Magistrate Judge, in reviewing the ALJ’s decision, reasoned that although

section 12.03 had been ignored, it mattered not because the ALJ’s determination that

section 12.06B was not satisfied meant necessarily that 12.03B could not have been satisfied had it been considered. This reasoning is correct, so far as it goes. But the Magistrate Judge overlooked an important point, namely, that in both sections

part C provides an alternative means of demonstrating disability for those claimants who previously met the section’s standards and whose symptoms have been treated by medication but who still could not function alone in a work environment. Here, the ALJ found that Frost was disabled from May 16, 1996 to October 31, 1997 because he then met the requirements of sections 12.06A and B. She found that during that period he met the requirements in

section 12.06B3 and 12.06B4. The ALJ found that after October 31, 1997, Frost satisfied only the 'requirement in 12.06B4. Because a claimant must satisfy two of the B criteria, she found that he was no longer disabled. Since the ALJ did not evaluate Frost at all under

section 12.03, she did not discuss the requirements of

section 12.03A, nor did she consider the possible application of 12.03B or 12.03C. It is possible, however, that Frost satisfied the requirements of 12.03A and 12.03B during the period in which she held he was disabled under

section 12.06. If so, he satisfied the threshold requirements for consideration under 12.03C. Consequently, it is possible that he could have been classified as disabled on that basis even after October 31, 1997, if he was able to show that at some point he had met the requirements of 12.03A and B, and that currently he was subject to repeated episodes of deterioration or had a documented current history of two or more years of inability to function outside of a highly supportive living situation. For the above reasons, we conclude that Frost may have met the requirements of

section 12.03 under the regulations applicable at the time of his hearing, but the ALJ failed to address

section 12.03. The government argues that Frost has waived any argument concerning the applicability of

section 12.03C on the asserted ground that he did not raise it below. However, the record indicates quite clearly that in his opening brief in district court, Frost argued that his impairment met or equaled the requirements of

section 12.03. If he met its requirements, he was entitled to relief. Because this issue was properly raised below, and because the district court did not consider the applicability of

section 12.03C, we reverse and remand the case to the district court with instructions for it to remand to the Commissioner for further evaluation of Frost’s disability under

section 12.03, including 12.03C. Frost in his appellate brief asserts that if successful he intends to seek attorney’s fees under the Equal Access to Justice Act, 28 U.S.C. § 2412. The right to attorney’s fees depends on whether Frost is the prevailing party and whether the Commissioner’s position was “substantially justified.” 28 U.S.C. § 2412(d)(1). Under Shalala v. Schaefer, 509 U.S. 292, 113 S.Ct. 2625, 125 L.Ed.2d 239 (1993), Frost is the prevailing party because we have remanded his case for further administrative proceedings under “sentence four” of 42 U.S.C. § 405(g). See Flores v.

Shalala, 49 F.3d 562, 568 (9th Cir.1995). Whether or not the Commissioner’s position was “substantially justified,” however, should await the making of a timely motion for fees and briefing on that motion. In light of our disposition of the various issues, we conclude that each party shall bear its own costs on appeal. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED. This disposition is published pursuant to Ninth Circuit Rule 36—2(g), at the request of Judge Beezer. . In 2000,

section 12.03 was revised. See 65 Fed.Reg. 50,779-80 (Aug. 21, 2000) (codified at 20 C.F.R. pt. 404, subpt. P, app. 1, § 12.03). The current regulation still requires the claimant to satisfy both A and B, or C. Id. The changes to parts and A and B were not significant for our purposes. However, 12.03C was changed and it no longer includes a threshold requirement referencing parts A and B. Therefore, C now provides an alterna-five basis for classification that does not require the claimant to have satisfied the A and B requirements at any time. 12.03C now provides as follows: C.

Medically documented history of a chronic schizophrenic, paranoid, or other psychotic disorder of at least 2 years’ duration that has caused more than a minimal limitation of ability to do basic work activities, with symptoms or signs currently attenuated by medication or psychosocial support, and one of the following: 1. Repeated episodes of decompensation, each of extended duration; or 2. A residual disease process that has resulted in such marginal adjustment that even a minimal increase in mental demands or change in the environment would be predicted to cause the individual to decompensate; or 3.

Current history of 1 or more years’ inability to function outside a highly supportive living arrangement, with an indication of continued need for such an arrangement. 20 C.F.R. pt. 404, subpt. P, app. 1, § 12.03 (2002). . As the issue was not before us, we express no opinion as to whether, on remand, the ALJ must evaluate Frost’s disability under the new regulations or the regulations in place at the time of the December 1997 hearing. Under either version, Frost’s medical evidence entitles him to consideration of this listing.