803 F.2d 917 (7th Cir. 1986), 85-1700, Bauzo v. Bowen

Docket Nº:85-1700.
Citation:803 F.2d 917
Party Name:Elisa BAUZO, Plaintiff-Appellant, v. Otis R. BOWEN, Secretary of the United States Department of Health and Human Services, Defendant-Appellee.
Case Date:October 17, 1986
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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803 F.2d 917 (7th Cir. 1986)

Elisa BAUZO, Plaintiff-Appellant,


Otis R. BOWEN, Secretary of the United States Department of

Health and Human Services, Defendant-Appellee.

No. 85-1700.

United States Court of Appeals, Seventh Circuit

October 17, 1986

Argued Jan. 28, 1986.

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Agustin G. Garcia, Quinones & Garcia, Chicago, Ill., for plaintiff-appellant.

Mimi H. Leahy, Dept. of Health & Human Services, Anton R. Valukas, U.S. Atty., Chicago, Ill., for defendant-appellee.

Before CUDAHY, COFFEY, and FLAUM, Circuit Judges. [*]

FLAUM, Circuit Judge.

This is an appeal from an order of the district court affirming the decision of the Secretary of Health and Human Services (Secretary) to deny plaintiff's application for social security disability benefits. The major issue we will address concerns the proper scope of judicial review in social security cases where the Appeals Council has reversed, pursuant to 20 C.F.R. Sec. 404.970(a), an Administrative Law Judge's (ALJ) grant of disability benefits. We hold that our review in such cases is limited to determining whether the Appeals Council's decision is supported by substantial evidence on the record as a whole. Because the Appeals Council's decision in this case was not supported by substantial evidence, we reverse and remand to the district court with instructions to remand to the Secretary for further agency proceedings.


Appellant, Elisa Bauzo, was born in 1935 and completed her eighth grade education in Puerto Rico. She does not read or write English and has a limited understanding of oral English. On January 7, 1983, Bauzo filed concurrent applications for disability insurance benefits and supplemental security income alleging that she became unable to work on July 9, 1979 due to both a dislocated disc and a hernia. She complained of back, chest and leg pains, and nervousness. Following initial denial and denial upon reconsideration, an ALJ conducted a hearing during which Bauzo was represented by counsel.

At the hearing, Bauzo testified through her interpreter that she could walk only three blocks and climb the flight of stairs to her second-story apartment. She alleged that she was unable to sit for more than one-half hour, bend at the waist or lift

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objects because of back pain. Her typical day consists of caring for both herself and her eleven-year-old stepson, which includes cooking and doing the dishes. She is able to grocery shop once a week with assistance. Her hobbies are arranging flowers, working on macrame and watching television. She does not drive, do her own laundry or use public transportation without assistance.

Until 1974 Bauzo worked as an industrial sewing machine operator for five different companies in Puerto Rico. From 1974 to 1979, she was a punch press operator in a company that manufactures equipment for pin ball machines. Her back problems began in 1979 when she strained her back at work while pushing a cart containing a heavy load of materials. Because of her difficulty in walking, her vision problems, her inability to bend and sit, and her nervousness, Bauzo believes that she would be unable to return to her past work.

After listening to Bauzo's testimony and reviewing the medical exhibits, the ALJ issued a written decision granting benefits to Bauzo. The ALJ found that Bauzo was suffering from severe lumbar disc disease and angina and that she was unable to perform her past relevant work as a punch press operator and sewing machine operator due to her inability to either sit for more than one-half hour or lift more than ten pounds. The ALJ then applied Rule 201.17 of the "Grid", 20 C.F.R. Part 404, Subpart P, Appendix 2, Sedentary Tables, which directed a finding of disability. On its own motion, however, the Appeals Council reversed and held that the ALJ's decision was not supported by substantial evidence. 20 C.F.R. Sec. 404.970(a)(3). Specifically, the Appeals Council determined that Bauzo's allegations of severe and disabling pain were not credible in view of the medical evidence, that Bauzo retained the functional capacity to perform work-related functions except for work involving constant standing or walking or lifting over twenty pounds, and that Bauzo's impairments did not prevent the performance of her past relevant work. The Appeals Council found, therefore, at the fourth step of the regulatory test for disability 1, that Bauzo was not disabled.

Bauzo then sought review of the Appeals Council's decision in the district court, which determined that the Appeals Council's decision was supported by substantial evidence. Accordingly, the district court granted summary judgment for the Secretary.


Last year, in Scott v. Heckler, 768 F.2d 172, 178 (7th Cir.1985), we held that 20 C.F.R. Sec. 404.970(a) limits the authority of the Appeals Council to initiate own motion review of an ALJ's decision. Section 404.970(a) provides:

(a) The Appeals Council will review a case if--

(1) There appears to be an abuse of discretion by the administrative law judge;

(2) There is an error of law;

(3) The action, findings or conclusions of the administrative law judge are not supported by substantial evidence; or

(4) There is a broad policy or procedural issue that may affect the general public interest. 20 C.F.R. Sec. 404.970(a).

In Scott, we interpreted Sec. 404.970(a) to limit the Appeals Council's discretion in rejecting an ALJ's decision. Scott, 768 F.2d at 178. According to Scott, a reviewing court has "an obligation to determine whether

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the own motion review conducted by the Appeals Council was in fact justified under the standard by which the Council justified it in theory." Id. Under Scott, a reviewing court first examines the ALJ's decision to determine whether the Council properly exercised its authority to review. If the Council failed to properly exercise its authority to review, then the ALJ's decision, not the Appeals Council's, constitutes the Secretary's final decision for purposes of judicial review under 42 U.S.C. Sec. 405(g). Id. at 179. We since have reconsidered our decision in Scott and now hold that Sec. 404.970(a) does not limit the Appeals Council's discretion to initiate review of an ALJ's decision. We find convincing the rationale of the Circuits which have held that judicial review should be limited to determining whether the Appeals Council's decision is supported by substantial evidence on the record as a whole. See Lopez-Cardona v. Secretary of Health and Human Services, 747 F.2d 1081 (1st Cir.1984) (per curiam); Parris v. Heckler, 733 F.2d 324 (4th Cir.1984); Kellough v. Heckler, 785 F.2d 1147 (4th Cir.1986); Deters v. Secretary of Health, Education and Welfare, 789 F.2d 1181 (5th Cir.1986); Mullen v. Bowen, 800 F.2d 535 (6th Cir.1986) (en banc); Baker v. Heckler, 730 F.2d 1147 (8th Cir.1984); Taylor v. Heckler, 765 F.2d 872 (9th Cir.1985); Razey v. Heckler, 785 F.2d 1426 (9th Cir.1986); Howard v. Heckler, 782 F.2d 1484 (9th Cir.1986); Parker v. Bowen, 788 F.2d 1512 (11th Cir.1986) (en banc). Thus we overrule Scott and focus our review upon the Appeals Council's decision rather than the ALJ's. Even if the ALJ's decision is supported by substantial evidence, the Appeals Council will not violate its own regulations by initiating review on its own motion.

Today's holding is consistent with the statutory scheme for the administration of social security benefits. 42 U.S.C. Sec. 405(b) authorizes the Secretary "on his own motion, to hold such hearings and to conduct such investigations and other proceedings as he may deem necessary or proper for the administration of [federal old-age, survivors, and disability insurance benefits programs]." Under 42 U.S.C. Sec. 405(g) federal courts may review the Secretary's "final decision" and the findings of the Secretary are conclusive if supported by substantial evidence. The Secretary has chosen the Appeals Council, not the ALJ, to make these final decisions. See 20 C.F.R. Secs. 404.900, 404.981, 416.1400, 416.1481. Since federal courts may review only the Secretary's final decisions and because the Secretary has delegated its authority to make final decisions to the Appeals Council, reviewing courts must therefore defer to the Appeals Council's decision. Parris, 733 F.2d at 326; Kellough, 785 F.2d at 1151; Deters, 789 F.2d at 1185; Parker, 788 F.2d at 1516-17.

Limitation of judicial review to the Appeals Council's decision more properly reflects the great deference which should be given to an agency's interpretation of its own regulations. See Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-45, 104 S.Ct. 2778, 2781-83, 81 L.Ed.2d 694 (1984). It is also compatible with our recent decision in DeLong v. Heckler, 771 F.2d 266 (7th Cir.1985), in which we interpreted a companion regulation, 20 C.F.R. Sec. 404.969. Section 404.969 provides:

Appeals Council initiates review.

Anytime within 60 days after the date of a hearing decision or dismissal, the Appeals Council itself may decide to review the action that was taken. If the Appeals Council does review the hearing decision or dismissal, notice of the action will be mailed to all parties at their last known address. 20 C.F.R. Sec. 404.969.

In DeLong, we read Sec. 404.969 as affording the Appeals Council the authority to review an ALJ's grant of benefits on its own motion. Id. at 268. We agree with the Fifth Circuit that Sec. 404.969 authorizes the Appeals Council to review any ALJ decision under its own motion review authority. Deters, 789 F.2d at 1184, citing DeLong, 771 F.2d at 267-68. Section 404.970(a) merely indicates the kinds of decisions the Appeals Council will review. Read together Secs. 404.969 and 404.970(a) indicate that the limited purpose of Sec. 404.970(a) is to

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advise claimants of those kinds of...

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