The opinion of the court was delivered by: John E. Mcdermott United States Magistrate Judge
MEMORANDUM OPINION AND ORDER
On September 19, 2008, Roy Gonzalez ("plaintiff") filed a complaint seeking review of the decision by the Commissioner of Social Security ("Commissioner") denying plaintiff's application for Supplemental Security Income ("SSI") benefits. Pursuant to 28 U.S.C. § 636(c), both parties filed consents to proceed before this Magistrate Judge. On June 8, 2009, the parties filed a Joint Stipulation ("JS"). The matter is now ready for decision.
After reviewing the pleadings, transcripts and administrative record ("AR"), the Court concludes that the decision of the Commissioner is reversed and remanded for further proceedings in accordance with law and with this Memorandum and Order.
Plaintiff is a 56 year old male who received SSI disability benefits from 1994 to 2000. (AR 437.) These benefits were terminated in 2000 when he was incarcerated. (AR 403-04.) Claimant was released from prison on August 9, 2005. (AR 84.) He filed an application for SSI disability benefits on August 12, 2005, alleging disability since 1997. (AR 312.) He has had no substantial gainful activity since 1997. (AR 12.)
Plaintiff appeared before U.S. Administrative Law Judge Joseph D. Schloss ("ALJ") on August 3, 2006. (AR 10.) An unfavorable decision issued on October 24, 2006. (AR 10-15). A timely Request for Review was filed with the Appeals Council on November 7, 2006. (AR 6). The Appeals Council declined to review the matter and civil action EDCV 07-381 JTL commenced in the United States District for the Central District of California, Eastern Division, on March 26, 2007.
On October 29, 2007, the parties filed a Stipulation to Voluntary Remand pursuant to sentence four of 42 U.S.C. § 405(g). (AR 327-28.) The District Court signed an order that same date remanding the action to the Commissioner for further proceedings. (AR 326.) Thereafter, the Appeals Council on December 8, 2007, directed the ALJ on remand to address plaintiff's mental condition and the opinions of medical sources, consider the possibility of a substance abuse problem, reevaluate plaintiff's credibility, and reevaluate plaintiff's residual functional capacity ("RFC"). (AR 332.)
The claimant appeared and testified at a de novo hearing on May 22, 2008, in San Bernardino, California. (AR 312.) A second unfavorable decision issued on July 7, 2008. (AR 312-20.) The ALJ determined that plaintiff's mental impairment was non-severe and that the plaintiff's history of polysubstance abuse was not an independent basis for disability. (AR 317, 320.) The ALJ therefore concluded that the claimant has not been under a disability since August 5, 2005, the date the application was filed. (AR 320.)
The Appeals Council declined to review the ALJ's decision. Plaintiff commenced this action on September 12, 2008.
As reflected in the Joint Stipulation, the disputed issues that plaintiff is raising as grounds for reversal and remand are as follows:
1. Whether the ALJ complied with the Appeals Council remand order to properly consider the plaintiff's medical condition and properly developed the record regarding plaintiff's' mental condition.
2. Whether the ALJ complied with the Appeals Council remand order to make proper credibility findings.
Under 42 U.S.C. Section 405(g), this Court reviews the ALJ's decision to determine whether the ALJ's findings are supported by substantial evidence and whether the proper legal standards were applied. DeLorme v. Sullivan, 924 F.2d 841, 846 (9th Cir. 1991). Substantial evidence means "more than a mere scintilla" but less than a preponderance. Richardson v. Perales, 402 U.S. 389, 401 (1971); Saelee v. Chater, 94 F.3d 520, 521-22 (9th Cir. 1996).
Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Richardson, 402 U.S. at 401 (internal quotations and citations omitted). This Court must review the record as a whole and consider adverse as well as supporting evidence. Robbins v. Soc. Sec. Admin., 466 F.3d 880, 882 (9th Cir. 2006). Where evidence is susceptible to more than one rational interpretation, the ALJ's decision must be upheld. Morgan v. Comm'r, 169 F.3d 595, 599 (9th Cir. 1999).
The Court concludes that the ALJ, in determining that plaintiff is not disabled, failed to develop the record fully and fairly, failed to address issues and evidence and failed to apply governing legal standards in evaluating the evidence.
A. The Sequential Evaluation
The Social Security Act defines disability 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 . . . can be expected to last for a continuous period of not less than 12 months." 42 U.S.C. §§ 423(d)(1)(A), 1382c(a)(3)(A). The Commissioner has established a five-step ...