William Ludwig v. Michael Astrue , 681 F.3d 1047 ( 2012 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
WILLIAM M. LUDWIG,  No. 10-35946
Plaintiff-Appellant,
v.  D.C. No.
4:10-cv-00002-RRB
MICHAEL J. ASTRUE,
OPINION
Defendant-Appellee.

Appeal from the United States District Court
for the District of Alaska
Ralph R. Beistline, Chief District Judge, Presiding
Argued and Submitted
July 27, 2011—Anchorage, Alaska
Filed June 1, 2012
Before: Betty B. Fletcher, Andrew J. Kleinfeld, and
Consuelo M. Callahan, Circuit Judges.
Opinion by Judge Kleinfeld
6147
LUDWIG v. ASTRUE 6149
COUNSEL
Paul B. Eaglin, Eaglin Law Office, Fairbanks, Alaska, for the
appellant.
Jordan D. Goddard, Assistant Regional Counsel, Office of the
General Counsel, Social Security Administration, Seattle,
Washington, for the appellee.
OPINION
KLEINFELD, Senior Circuit Judge:
We address whether an administrative law judge’s handling
of an ex parte contact was error, and if so, whether it was
harmless.
6150 LUDWIG v. ASTRUE
I. Facts
Ludwig claimed social security disability,1 his claim was
denied, and his appeal to the district court was unsuccessful.
A. The Medical Evidence
Ludwig told the Social Security Administration in his May
2006 application that he could not work because of epilepsy,
bipolar disease, depression, insomnia, and social anxiety. He
had not worked since getting fired at his last job as a cook
earlier the same year. He had previously worked on a fishing
tender, and as a welder and a cook. In his initial interview,
Ludwig attributed his inability to work to his psychiatric
problems, not his physical condition. But at his hearing, he
claimed disabling arthritis in his knees, hips, and ankles, and
degenerative disease in his low back. He testified that he had
severe pain if he lifted as much as 15 pounds.
Ludwig had extensive medical records from correctional
facilities and community health facilities. He had complained
of knee problems for ten years, starting when he was in mili-
tary service. A year before his social security application, he
told a medical provider that he could “press 1,000 pounds,”
and exercised. His description of his symptoms, together with
X-rays and MRIs, led to a diagnosis of chronic pain in both
knees and possible tears in the meniscus of the left knee. In
2007, the Department of Veterans Affairs (VA) awarded Lud-
wig ten percent service-connected disability compensation on
account of his knee. Two months before Ludwig’s social
1
Disability under the Social Security Act is defined as the “inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continu-
ous period of not less than 12 months.” 42 U.S.C. § 423(d)(1)(A). A five-
step evaluation process is used to determine whether a claimant is dis-
abled. 20 C.F.R. § 404.1520; Parra v. Astrue, 481 F.3d 742, 746 (9th Cir.
2007).
LUDWIG v. ASTRUE 6151
security hearing, a VA examining physician described Lud-
wig’s knee problems as “minimal.” Around the same time, a
chiropractic report said that Ludwig was walking normally.
Ludwig also complained of back pain. On June 14, 2007,
Ludwig told a medical provider that he had been experiencing
low back pain since trying to pick up a dishwasher the previ-
ous month. Two weeks later, he reported to a different exam-
iner that he had endured chronic back pain since straining his
back eleven years earlier, but had suffered no recent injury.
He was diagnosed with lumbar strain and mild disc hernia-
tion. Ludwig said to one medical provider that Vicodin was
“the only thing that helped before” with the back pain, but
was instead prescribed methadone. The prescription was later
changed to morphine sulphate, after Ludwig complained of
side effects from the methadone. Physical therapy was pre-
scribed, but Ludwig did not complete the sessions.
Ludwig was diagnosed with bipolar disorder in 2002. Med-
ication successfully controlled it. Ludwig reported to his doc-
tor in early 2006, the same year he applied for social security
disability benefits, that, so long as he stayed away from alco-
hol, his medication kept him reasonably stable. After he got
fired from his job as a cook, he enrolled in a drug and alcohol
treatment program.
He also had a seizure disorder, controlled by medication.
An emergency department record shows that Ludwig was
admitted to the emergency room in March 2006, after having
had a “witnessed seizure while working at the local Denny’s
restaurant.” He testified at his social security hearing that this
was an anxiety attack, not a seizure. But he also testified to
far more frequent and recent seizures than what he had told
his medical providers.
Ludwig’s social security application was denied in July
2006. The Social Security Administration’s medical consul-
tant, after reviewing Ludwig’s records, concluded that Lud-
6152 LUDWIG v. ASTRUE
wig’s mental impairments caused mild restrictions and
difficulties. He opined that Ludwig could lift or carry 25
pounds frequently, 50 pounds occasionally, stand or walk for
about 6 hours in an 8-hour workday, and sit for the same
amount of time. After the initial denial, Ludwig requested a
hearing.
At his hearing, Ludwig testified that he could not lift more
than 15 pounds without severe pain, and that it was very pain-
ful to sit for more than half an hour. But he also testified that
he carried his own firewood into his cabin for heat. He testi-
fied that his bipolar disorder made it difficult for him to con-
trol his anger, and that he became anxious in crowds of more
than ten people. He said he had been fired from his job at
Denny’s because he could not get along with his coworkers.
Ludwig claimed that he suffered three or four grand mal sei-
zures a year, the last one about a month before the hearing.
He testified that his petit mal seizures occurred too frequently
for him to count. But medical records from 2007 show that he
claimed there were three to five year periods where he had no
seizures.
B. Ex Parte Communication
Right after the hearing, and before the ALJ had issued his
decision, an FBI agent told the ALJ that Ludwig was appar-
ently faking his physical disability. The ALJ immediately sent
a letter to Ludwig’s lawyer, disclosing the ex parte contact.
The ALJ suggested that counsel could contact the FBI agent
if he wished, though he did not represent that the agent had
agreed to talk to counsel:
Shortly after your client’s hearing . . . a special agent
with the F.B.I. [ ] informed me that, earlier, he had
observed Mr. Ludwig in the parking lot walking with
normal gait and station; and when he observed Mr.
Ludwig walking inside of the Federal Courthouse
(where our hearing was held) he was walking with
LUDWIG v. ASTRUE 6153
an exaggerated limp (which I also observed as he left
the hearing room).
Should you wish to inquire further, [the special
agent] can be reached at the F.B.I. office at:
101 12th Ave
#329
Fairbanks, AK, 99701
Counsel responded, objecting to any weight being given to
what the FBI agent had said.
Counsel asked that unless the ALJ gave assurance that no
weight would be given to the ex parte communication, he
receive a supplementary hearing at which counsel could
cross-examine the agent. Counsel intended to address
whether, among other things, the FBI agent really had
observed Ludwig as he thought, since around a dozen people
had been in and out of the several hearings that morning. He
questioned the accuracy of the FBI agent’s observations, since
Ludwig’s knee problem was well-documented in the medical
records. Counsel also expected to ask whether his client had
been under some sort of surveillance, making him recogniz-
able to the FBI agent.
C. The ALJ’s Decision
The ALJ found that although Ludwig had a “longstanding
seizure disorder,” it was “controlled when he takes medica-
tion as prescribed.” He noted conflicting evidence on Lud-
wig’s physical condition, including Ludwig’s claim that he
could press 1,000 pounds, the chiropractor’s observation that
Ludwig walked normally, and evidence of damage to Lud-
wig’s left knee.
The ALJ found that the seizure disorder and diseased tissue
in the left knee were “severe” for social security purposes. As
6154 LUDWIG v. ASTRUE
for Ludwig’s back pain, the ALJ found that Ludwig’s “contra-
dictory accounts” and minimal objective findings established
that Ludwig “was exaggerating symptoms.” He found that
Ludwig’s bipolar disorder was “well controlled” so long as
Ludwig took his medicine and abstained from alcohol, so it
caused only “mild” restriction of activities of daily living and
functioning.
The ALJ found that none of Ludwig’s impairments, sepa-
rately or together, met the criteria of a listed impairment,2 and
that Ludwig had the capacity to perform “medium” work.3
Most importantly, the ALJ found that Ludwig was not credi-
ble, and had exaggerated how intense, persistent, and limiting
his impairments were.
The decision notes that the FBI agent told the ALJ after the
hearing that the agent had seen Ludwig in the parking lot
“with a normal gait and station and subsequently observed the
claimant walking with an exaggerated limp once inside the
Federal Courthouse.” The ALJ wrote that he did “not assign
significant weight” to the agent’s statements because the FBI
agent was not familiar with Ludwig’s medical history and
observed Ludwig “only briefly.” The ALJ did not say, as Lud-
wig’s counsel had requested as an alternative to a supplemen-
tary hearing, that the ALJ had not assigned “any” weight to
what the FBI agent told him, just that whatever weight he
gave it was not “significant.”
The ALJ explained that the record contained “other evi-
dence showing [Ludwig had] exaggerated symptoms.” Lud-
wig’s testimony about his seizures was clearly exaggerated
“based on what he told health providers.” Ludwig had
claimed for compensation purposes in March 2008 that he
could walk “no more than a few yards,” but had reported a
month before to a medical provider that he had walked two
2
Citing 20 C.F.R. Pt. 404, Subpt. P, App. 1.
3
Citing 20 C.F.R. §§ 404.1567(c), 416.967(c).
LUDWIG v. ASTRUE 6155
miles in sub-zero temperatures and suffered frostbite. (Lud-
wig lives in Fairbanks, Alaska.) Ludwig’s back and knee
claims were inconsistent with his claim to health care provid-
ers that he could press 1,000 pounds. He had exaggerated var-
ious parts of his medical history to various providers.
Likewise, Ludwig contradicted himself in different contexts
about his claimed difficulty with social interactions. His state-
ments that he walked for exercise, cut wood for heat, and
stood for nine hours a day as a cook, contradicted his claimed
physical limitations. The ALJ found that Ludwig could still
work as a cook, as he had before he was fired for not getting
along, and was not disabled under the Social Security Act.
The district court affirmed.
II. Analysis
A. Standard of Review
We review the district court’s decision de novo “to ensure
that the [ALJ’s] decision was supported by substantial evi-
dence and a correct application of the law.”4 Substantial evi-
dence means “such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion,” and
“[e]ven when the evidence is susceptible to more than one
rational interpretation, we must uphold the ALJ’s findings if
they are supported by inferences reasonably drawn from the
record.”5
B. The Ex Parte Contact
The ex parte contact in this case is troubling. Judges are
supposed to get their evidence from the testimony and exhib-
4
Valentine v. Comm’r Soc. Sec. Admin., 574 F.3d 685, 690 (9th Cir.
2009) (citation omitted).
5
Molina v. Astrue, 674 F.3d 1104, 1110-11 (9th Cir. 2012) (citations
omitted).
6156 LUDWIG v. ASTRUE
its, not private chats.6 The judge should have refused to hear
the ex parte communication. Ordinarily, if someone says to a
judge, “Judge, you know that case you heard this morning?”,
a judge responds, “Don’t tell me anything about it. I can’t lis-
ten to evidence out of court.”
The FBI agent’s statements went to the heart of the case.
Part of Ludwig’s disability claim was his knee problem that
he said made it hard to walk. He limped in the courtroom. The
FBI agent told the ALJ that he saw Ludwig walking in the
parking lot without limping. That is to say, the FBI agent told
the ALJ privately that Ludwig was faking.
An FBI agent, by virtue of his employment, is likely to
have more credibility with a trier of fact than a felon like Lud-
wig, with conflicting medical records and a history of sub-
stance abuse. To impeach the FBI agent, Ludwig’s lawyer
wanted to ask the agent in a supplementary hearing, “How do
you know the person you saw in the parking lot was Lud-
wig?” That is a good question, and counsel doubtless had rea-
sons for wanting to ask the FBI agent in front of the ALJ. The
FBI agent was under no obligation to talk to Ludwig’s attor-
ney, and might have refused to answer his questions without
a scheduled hearing. Even if the FBI agent did respond to
counsel’s inquiries, he would have plenty of time to improve
how his answers sounded if he got a private rehearsal with
claimant’s counsel. Without a hearing, the ALJ would not be
able to see the agent’s demeanor when answering questions.
[1] Ludwig’s lawyer asked for either an assurance that the
ALJ would give no weight to the ex parte communication, or
6
See 42 U.S.C. § 405(b)(1) (providing that if a hearing is held, the Com-
missioner of Social Security “shall, on the basis of evidence adduced at
the hearing, affirm, modify, or reverse the Commissioner’s findings of
fact and [initial disability] decision”) (emphasis added); 20 C.F.R.
§ 404.953(a) (providing that the “administrative law judge must base [its]
decision on the preponderance of the evidence offered at the hearing or
otherwise included in the record”) (emphasis added).
LUDWIG v. ASTRUE 6157
else a supplementary hearing to explore what force it should
have. He got neither. The ALJ said in his decision that he did
not give “significant” weight to the FBI agent’s information,
not that he disregarded it or gave it no weight. Congress has
commanded that the ALJ’s decision be “on the basis of evi-
dence adduced at the hearing,” not on the basis, even in part,
of private chats outside the hearing.7
[2] Ludwig cites Richardson v. Perales, but that case
addresses whether hearsay reports can constitute substantial
evidence, not ex parte communications.8 Ludwig also cites
Guenther v. Commissioner, which is binding circuit authority
and on point. We held, in the first of our two decisions in that
case, that “ ‘ex parte proceedings are anathema in our system
of justice,’ ” and “absent some ‘compelling justification,’ ex
parte communications will not be tolerated.”9 We held that
disclosure of the ex parte information after the trial was over
denied the other side “a meaningful opportunity to be heard.”10
We remanded for an evidentiary hearing to determine pre-
cisely what the contents of the ex parte communication were,
why it was made, why it was not served on opposing counsel,
and such other facts as might bear on acceptance and consid-
eration of the ex parte communication.11 When the case came
back to us, after the record had been supplemented with find-
ings and the contents of the ex parte communication, we held
that the ex parte communication prejudiced the appellants,
and denial of a supplementary hearing had denied them an
adequate opportunity for rebuttal.12
7
42 U.S.C. § 405(b)(1).
8
Richardson v. Perales, 402 U.S. 389, 402 (1971).
9
Guenther v. Comm’r, 889 F.2d 882, 884 (9th Cir. 1989) (quoting
United States v. Thompson, 827 F.2d 1254, 1258-59 (9th Cir. 1987)).
10
Id.
11
Id. at 885.
12
Guenther v. Comm’r, 939 F.2d 758, 761 (9th Cir. 1991).
6158 LUDWIG v. ASTRUE
We reversed in Guenther, requiring that the case be reas-
signed to a different judge who had not been exposed to the
ex parte communication.13 We admonished that “[w]e trust
that we will not again be confronted by an institutionalized
due process violation,” such as the ex parte communication in
that case, which went “both to the merits of the case and to
the [appellants’] character generally.”14 Yet today, we are.
This case differs from Guenther in that the ALJ here
promptly notified Ludwig’s attorney of the ex parte communi-
cation. Also, the error in Guenther was more egregious, in
that the ex parte communication was by a party to the pro-
ceeding. We are not persuaded that these distinctions make a
difference to the question of whether Ludwig was entitled to
an evidentiary hearing, though, since the judge in both Guen-
ther and this case received an ex parte communication going
to the heart of the case, and declined to say that he disre-
garded it.
By contrast, we affirmed a decision, despite ex parte com-
munication, in Alexander Shokai, Inc. v. Commissioner.15 In
Shokai, counsel was provided with notice of a hearing
addressing a third party motion to quash a subpoena, and
elected not to attend.16 No secret communication was made to
the judge, as in Guenther or this case. At the hearing in open
court, prior to trial, government counsel brought up matters
relating to the merits of the case and outside the scope of the
notice of hearing.17 The judge in Shokai expressly refused to
make any rulings on these matters until opposing counsel
could be heard.18 In Shokai, unlike this case, the error was
13
Id. at 762.
14
Id. at 761-62.
15
Alexander Shokai, Inc. v. Comm’r, 34 F.3d 1480 (9th Cir. 1994).
16
Id. at 1484.
17
Id.
18
Id.
LUDWIG v. ASTRUE 6159
before trial, and counsel had an adequate opportunity to deal
with it at trial, before the judge formed a conclusion.
[3] Allowing the FBI agent to speak to the judge outside
the presence of counsel, with no opportunity for counsel to
cross-examine the agent, and no assurance that the communi-
cation had no influence on the result, was error. “Notice and
[a meaningful] opportunity to be heard are the hallmarks of
procedural due process.”19 Though Ludwig was given notice
of the evidence against him, he was not given a meaningful
opportunity to be heard on it. The ALJ offered his own
impeachment that the FBI agent’s observation was brief and
that the agent was unfamiliar with Ludwig’s medical records.
But Ludwig’s lawyer might have done better. Where, as here,
the communication is ex parte, is not disregarded by the
judge, and may be subject to significant factual questions, we
cannot see what justification there could be for denying a
request for an evidentiary hearing. Receipt of the ex parte
communication, assignment of some weight to it, and denial
of a supplementary hearing to address it, was error.
C. Harmlessness
[4] Because the judge erred by considering the ex parte
evidence without allowing a supplementary hearing, we are
required to evaluate whether there was prejudice. We need not
decide whether, in these circumstances, a statement that the
judge disregarded the evidence would suffice to establish
absence of prejudice, because the ALJ made no such state-
ment. We do not suggest that private chats with witnesses are
purged of any taint by a rote recitation that they were given
“no” weight. But here we do not have even that assurance. No
“significant” weight, perhaps a more candid statement than
“no” weight, carries a negative pregnant, that the communica-
tion received some weight.
19
Guenther, 889 F.2d at 884.
6160 LUDWIG v. ASTRUE
[5] Shinseki v. Sanders establishes that administrative
adjudications are subject to the same harmless error rule as
generally applies to civil cases. Reversal on account of error
is not automatic, but requires a determination of prejudice.20
Determination of prejudice requires “case-specific application
of judgment, based upon examination of the record,” not
“mandatory presumptions and rigid rules.”21 The burden is on
the party claiming error to demonstrate not only the error, but
also that it affected his “substantial rights,” which is to say,
not merely his procedural rights.22 Among the case-specific
factors an appellate court must consider are “an estimation of
the likelihood that the result would have been different,”23 as
well as the impact of the error on the public perception of
such proceedings:
[T]he factors that inform a reviewing court’s
“harmless-error” determination are various, poten-
tially involving, among other case-specific factors,
an estimation of the likelihood that the result would
have been different, an awareness of what body
(jury, lower court, administrative agency) has the
authority to reach that result, a consideration of the
error’s likely effects on the perceived fairness, integ-
rity, or public reputation of judicial proceedings, and
a hesitancy to generalize too broadly about particular
kinds of errors when the specific factual circum-
20
Shinseki v. Sanders, 556 U.S. 396, 407 (2009). See Molina v. Astrue,
674 F.3d 1104, 1118 (9th Cir. 2012); McLeod v. Astrue, 640 F.3d 881, 888
(9th Cir. 2011).
21
Sanders, 556 U.S. at 407.
22
Id. at 407-409. The harmless error rule, as codified, requires us to
“give judgment after an examination of the record without regard to errors
or defects which do not affect the substantial rights of the parties.” 28
U.S.C. § 2111; Molina, 674 F.3d at 1118.
23
Sanders, 556 U.S. at 411.
LUDWIG v. ASTRUE 6161
stances in which the error arises may well make all
the difference.24
We addressed the issue of harmless error in social security
disability cases in McLeod v. Astrue, holding that Sanders
applies fully to them.25 We held that the claimant need not
necessarily show what other evidence might have been
obtained had there not been error, but does have to show at
least a “substantial likelihood of prejudice.”26 And as Sanders
required, we held that to evaluate error for harmlessness, “we
must exercise judgment in light of the circumstances of the
case,” as opposed to the sort of presuming and generalizing
that Sanders rejected.27
[6] Having done so, we conclude that there was no preju-
dice from the error. The contradictions between what Ludwig
said when he testified in his disability hearing, and what he
had said on other occasions, were dramatic. He had to have
spoken falsely for many years to medical personnel for him
to be speaking truthfully at his hearing. Considering the
record as a whole, and the ALJ’s explanation of his decision,
we are convinced that Ludwig has not demonstrated that the
decision would have been any different without the ex parte
communication.
How could the ALJ give some weight to the FBI agent’s
communication, but not a “significant” enough amount to
affect the outcome? Any judge with an adequate amount of
humility makes many decisions about which he has varying
degrees of confidence in his own judgment. Learning after a
firm conviction has been formed that one’s conviction is sup-
ported by additional evidence can affect the judge’s level of
confidence in his decision, without affecting the outcome of
24
Id. at 411-12.
25
McLeod v. Astrue, 640 F.3d 881, 887 (9th Cir. 2011).
26
Id. at 888.
27
Id.
6162 LUDWIG v. ASTRUE
the decision. The ALJ’s decision, and the record of Ludwig’s
contradictions, make it plain that the ALJ would have reached
the same conclusion—that Ludwig was fit to resume work
like his last job as a cook—had the FBI agent not spoken to
him about his observations of Ludwig.
[7] An ex parte contact can be quite egregious without
being prejudicial.28 In the absence of actual prejudice from the
error, we are required, under Sanders and McLeod, to con-
clude that the ex parte communication does not entitle Lud-
wig to a reversal.29
Ludwig makes two other arguments: that consideration of
the ex parte evidence denied his right to petition for redress
of grievances, and that it violated the ALJ’s duty to develop
the record.30 Both arguments appear to be rephrasings of the
ex parte evidence argument discussed above. They fail for the
same reasons.
AFFIRMED.
28
See, e.g., Sea Hawk Seafoods, Inc. v. Alyeska Pipeline Serv. Co., 206
F.3d 900, 908 (9th Cir. 2000) (holding that defendants were not prejudiced
by a bailiff’s inappropriate ex parte contact with juror).
29
“[W]here harmlessness is clear and not a ‘borderline question,’
remand for reconsideration is not appropriate.” McLeod, 640 F.3d at 888
(quoting Shinseki v. Sanders, 556 U.S. 396, 413 (2009)).
30
“An ALJ’s duty to develop the record further is triggered only when
there is ambiguous evidence or when the record is inadequate to allow for
proper evaluation of the evidence.” Mayes v. Massanari, 276 F.3d 453,
459-60 (9th Cir. 2001).