Step-Three Mental-Listings Review: No Paragraph A Finding Required When Paragraph B and C Are Unmet; Holistic ALJ Reasoning and Harmless Listing Errors

Introduction

In Michael Pendergrass v. Commissioner Social Security, the Third Circuit reviewed the denial of Title II disability insurance benefits to Michael D. Pendergrass, a claimant with serious mental illness diagnosed as major depressive disorder and post-traumatic stress disorder. Pendergrass alleged disability beginning March 18, 2019, following psychiatric hospitalizations and intensive outpatient program participation.

After an Administrative Law Judge (ALJ) found Pendergrass not disabled under the Social Security Act, the Appeals Council denied review, the District of New Jersey affirmed, and Pendergrass appealed. The central appellate disputes concerned (i) step three (whether his impairments met or equaled the mental-disorders listings, including whether the ALJ adequately explained the analysis and considered combined impairments), and (ii) step five and the residual functional capacity (RFC), including whether the ALJ properly evaluated treating-source opinion evidence and whether the RFC/step-five findings were supported by substantial evidence.

The panel majority (Judge Chung) affirmed. Judge Krause dissented, warning that the ALJ’s analysis exemplified an overly common problem in mental-illness claims: relying on “snapshots” of improvement and insufficiently confronting contrary evidence, thereby undermining meaningful review.

Summary of the Opinion

Majority Holding

  • The ALJ’s step-three findings under Paragraph B and Paragraph C were supported by substantial evidence when the decision was read holistically.
  • The ALJ was not required to analyze Paragraph A once he found Paragraph B and Paragraph C were not satisfied, because Paragraph A alone cannot establish listing-level disability for these mental listings.
  • The ALJ’s mental RFC and step-five finding that Pendergrass could perform simple, low-contact unskilled work were supported by substantial evidence.
  • A typographical issue in the written RFC (“occasional interaction with co-workers and supervisors able to understand”) did not undermine the decision, particularly given consistent hearing hypotheticals.
  • The ALJ permissibly discounted the treating psychiatrist’s “check-the-box” marked-limitations assessment and explained why it conflicted with treatment notes and other evidence.
  • The ALJ’s mistaken identification of listings was deemed harmless error under 5 U.S.C. § 706.

Dissent (Judge Krause)

  • Substantial-evidence review is deferential but “not toothless,” and the ALJ failed to account for the waxing-and-waning nature of mental illness.
  • The ALJ “cherry-picked” benign or improving entries (e.g., “okay”) while overlooking contemporaneous notes showing minimal response and persistent functional interference.
  • The ALJ inadequately explained discounting the treating psychiatrist’s RFC, including failing to address supportability.
  • The ALJ overread activities of daily living (living alone/driving) and “some decent days” as proof of full-time work capacity.
  • The ALJ’s reliance on consultative reports was insufficiently tied to vocational capacity and was not reconciled with treating evidence.
  • Remand was warranted for meaningful review.

Analysis

Precedents Cited

1) The “Holistic Reading” Requirement and Adequate Explanation

  • Jones v. Barnhart, 364 F.3d 501 (3d Cir. 2004): The majority treated Jones as the anchor for two propositions: (i) appellate review asks holistically whether the ALJ considered appropriate factors, and (ii) the ALJ need not use particular language or format, so long as the explanation permits meaningful review.
  • Burnett v. Comm'r of Social Sec. Admin., 220 F.3d 112 (3d Cir. 2000): Used by the majority for the “meaningful review” requirement and the duty to indicate consideration of “significant probative evidence,” and by the dissent for the stricter proposition that the ALJ must “mention and explain” evidence that contradicts the outcome.
  • Berry v. Schweiker, 675 F.2d 464 (2d Cir. 1982): The majority cited Berry to support affirmance even where an ALJ’s listing discussion is imperfect, if other parts of the decision and clearly credible evidence permit understanding the basis of the determination.
  • Diaz v. Comm'r of Social. Sec., 577 F.3d 500 (3d Cir. 2009): Cited alongside Jones for the principle that no particular format is required.
  • Kohler v. Astrue, 546 F.3d 260 (2d Cir. 2008): The dissent invoked Kohler for the proposition that overlooking or mischaracterizing relevant evidence— particularly to the claimant’s disadvantage—constitutes reversible error.

2) Substantial Evidence and the Nature of Factfinding

  • Biestek v. Berryhill, 587 U.S. 97 (2019): The majority emphasized Biestek’s definition of substantial evidence (“such relevant evidence as a reasonable mind might accept”) and treated RFC and “jobs in the national economy” determinations as factual findings reviewed deferentially.

3) The Sequential Evaluation Framework

  • Sykes v. Apfel, 228 F.3d 259 (3d Cir. 2000): Cited by the majority to restate the five-step sequential evaluation and position step three (listings), step four (past relevant work), and step five (other work) within the administrative structure.

4) Weighing Medical Opinions, Including “Check-the-Box” Forms

  • Mason v. Shalala, 994 F.2d 1058 (3d Cir. 1993): The majority relied on Mason to diminish the evidentiary weight of a “check-the-box” form suggesting “marked” limitations, characterizing such forms as “weak evidence at best.”
  • Zirnsak v. Colvin, 777 F.3d 607 (3d Cir. 2014): Cited for the proposition that an ALJ may accept or reject medical evidence so long as the ALJ explains the rejection. The majority used Zirnsak to uphold discounting the treating psychiatrist’s limitation assessment as inconsistent with other evidence and treatment notes.
  • Brown v. Astrue, 649 F.3d 193 (3d Cir. 2011) and Jones v. Sullivan, 954 F.2d 125 (3d Cir. 1991): The dissent used these to contrast situations where consultative opinions were adequately tied to ability to work and where the ALJ’s reliance was well-explained.

5) Mental Illness: “Waxing and Waning,” Snapshots, and Cherry-Picking

  • Garrison v. Colvin, 759 F.3d 995 (9th Cir. 2014); Meuser v. Colvin, 838 F.3d 905 (7th Cir. 2016); Holohan v. Massanari, 246 F.3d 1195 (9th Cir. 2001): The dissent cited these cases to explain why intermittent improvement or a “snapshot” is not a reliable measure of workplace functionality for mental illness.
  • Ryan v. Comm'r of Soc. Sec., 528 F.3d 1194 (9th Cir. 2008): The dissent used Ryan to argue that treatment “improvement” does not necessarily undermine severity or functional limitation conclusions.
  • Adorno v. Shalala, 40 F.3d 43 (3d Cir. 1994): The dissent cited Adorno as an example of judicial response to selective reading of evidence.
  • Drumgold v. Comm'r of Soc. Sec., 144 F.4th 596 (4th Cir. 2025): The dissent cited Drumgold for the requirement of a sufficient rationale in crediting some evidence and discrediting other evidence, especially regarding the regulatory “supportability” and “consistency” factors.

6) Activities of Daily Living vs. Work Capacity

  • Smith v. Califano, 637 F.2d 968 (3d Cir. 1981): The dissent invoked Smith to caution that disability does not require “vegetat[ing] in a dark room”; limited daily activities do not equal employability.
  • Morales v. Apfel, 225 F.3d 310 (3d Cir. 2000): Cited by the dissent to stress that the workplace differs materially from home or a clinic, so activities of daily living may be a poor proxy for sustained work function.

7) Consultative Reports vs. Treating Source Evidence

  • Regennitter v. Comm'r Soc. Sec., 166 F.3d 1294 (9th Cir. 1999): The dissent cited Regennitter to argue that consultative reports describing “moderate” impairment but not assessing ability to work do not necessarily undermine a treating physician’s more severe functional assessment, particularly when temporally incomplete.

Legal Reasoning

1) Step Three: Paragraph B and C as the “Outcome Drivers”

The majority’s step-three analysis centered on the structure of the mental-disorders listings in 20 C.F.R. § 404, Subpt. P., App'x. 1 § 12.00: for the relevant listings, the claimant must satisfy Paragraph A plus either Paragraph B or Paragraph C. Because the ALJ found only “moderate” limitations across all four Paragraph B domains and found Paragraph C unsatisfied, the majority viewed Paragraph A as immaterial to the step-three result and held the ALJ was not required to analyze it.

Critically, the majority treated alleged explanatory gaps as curable by reading the decision “holistically” (relying on Jones v. Barnhart and Berry v. Schweiker), pointing to later narrative discussion as supplying the missing support for step-three conclusions—especially concerning treatment history, inconsistent participation, clinical findings, and self-reports.

2) Step Three: Combination of Impairments and “Meaningful Review”

Responding to the argument that the ALJ failed to consider impairments “in combination,” the majority emphasized that the ALJ explicitly noted functional difficulties and discussed the cumulative effect of both disorders within the Paragraph B domains. It further treated the later, detailed record discussion as sufficient to show consideration of probative evidence, meeting Burnett’s “meaningful review” threshold.

3) Harmless Error in Listing Identification

The majority held the ALJ’s mistaken identification of certain listings was harmless because the Paragraph A analysis was unnecessary given the dispositive failures under Paragraph B and Paragraph C. The court cited 5 U.S.C. § 706 to justify disregarding errors that do not affect the outcome.

4) RFC and Step Five: Typographical Ambiguity, Vocational Evidence, and Medical-Opinion Weighing

On the contested RFC phrase (“occasional interaction with co-workers and supervisors able to understand; … remember and carry out simple instructions”), the majority treated it as a typographical/comma error rather than a substantive incoherence, noting alignment with the hearing hypothetical to the vocational expert limiting the individual to “understanding, remembering, and carrying out simply instructions.”

Regarding treating psychiatrist Dr. Lozovatsky’s opinion, the majority upheld the ALJ’s discounting of a marked-limitation assessment as (i) a “check-the-box” form entitled to little weight (Mason v. Shalala) and (ii) inconsistent with other providers and with Dr. Lozovatsky’s own treating notes describing the claimant as doing “ok” and reflecting “relatively benign mental status examinations.” The majority also emphasized that an ALJ is not required to reach the same conclusion as a treating source if the ALJ explains the rejection (Zirnsak v. Colvin).

5) Dissent’s Core Critique: The Nature of Mental Illness and the Need to Confront Contrary Evidence

The dissent’s throughline was that mental illness frequently “wax[es] and wane[s]” (Garrison v. Colvin), making it error to treat isolated “okay” days, grooming, or transient improvement as inconsistent with disabling limitations. Judge Krause argued the ALJ:

  • selectively cited therapy notes that supported moderate limitation while omitting adjacent statements reflecting minimal response and persistent interference;
  • failed to analyze the “supportability” of Dr. Lozovatsky’s RFC narrative, including the explanation embedded within the RFC form itself;
  • treated daily living activities and “some decent days” as indicative of full-time work capacity, contrary to Smith v. Califano and Morales v. Apfel;
  • relied on consultative reports without adequately explaining how they established vocational functionality, and without addressing timing gaps relative to the treating RFC.

Impact

Although designated “NOT PRECEDENTIAL,” the decision is practically significant as persuasive guidance in Third Circuit disability practice in several ways:

  • Step-three practice for mental listings: The majority endorses the view that where Paragraph B and C are dispositively unmet, an ALJ need not separately analyze Paragraph A, and listing mislabeling may be treated as harmless if it cannot change the outcome.
  • “Holistic” review and drafting strategy: The opinion reinforces that appellate courts may uphold step-three findings by relying on later RFC narrative discussion, reducing the likelihood of remand solely for imperfect step-three exposition—so long as the narrative elsewhere supplies traceable reasoning.
  • Treating-source forms: By reiterating Mason v. Shalala, the majority signals skepticism toward check-the-box limitations absent persuasive supporting explanation or consistency with longitudinal notes.
  • Countervailing pressure from the dissent: The dissent offers a roadmap for challenging denials in mental-illness cases—emphasizing waxing/waning symptoms, the danger of cherry-picking, and the need to address supportability/consistency under 20 C.F.R. § 404.1520c. Litigants may cite the dissent to argue for closer scrutiny of “snapshot” reasoning and for explicit reconciliation of conflicting mental-health evidence.

Complex Concepts Simplified

  • Substantial evidence: A deferential appellate standard asking whether a reasonable person could accept the cited evidence as adequate to support the ALJ’s conclusion (as described in Biestek v. Berryhill). It is not “beyond a reasonable doubt,” and courts do not reweigh evidence.
  • Five-step sequential evaluation: The SSA’s required order of decision-making (summarized in Sykes v. Apfel): current work activity; severity; listings; past work; other work.
  • Listings (Step 3): Medical criteria in Appendix 1 that, if met (or equaled), result in a presumption of disability without needing to assess jobs. For mental disorders, Paragraph A describes medical findings; Paragraph B describes functional limits; Paragraph C addresses “serious and persistent” disorders.
  • Paragraph B “moderate/marked/extreme”: “Moderate” means functioning is “fair” in a domain; “marked” and “extreme” are the highest impairment levels. Meeting Paragraph B generally requires one “extreme” or two “marked” limitations.
  • Paragraph C “serious and persistent”: Focuses on a long-term disorder history, reliance on ongoing treatment/support to control symptoms, and “marginal adjustment” (difficulty adapting to changes or demands).
  • RFC (Residual Functional Capacity): The most a claimant can still do despite limitations, used at steps four and five to decide if the claimant can work.
  • “Check-the-box” medical forms: Standardized forms where a provider checks severity boxes; courts often consider them weaker evidence unless supported by narrative explanation and consistent treatment notes (see Mason v. Shalala).
  • Harmless error: Not every ALJ mistake requires remand; if the error could not change the outcome, courts may affirm anyway (here, by citation to 5 U.S.C. § 706).

Conclusion

The majority affirmed the denial of benefits by applying deferential substantial-evidence review and emphasizing holistic reading of the ALJ’s decision: the step-three Paragraph B and C findings were supported by later narrative discussion; Paragraph A analysis was unnecessary once B and C failed; minor drafting/listing errors were harmless; and the ALJ adequately explained discounting the treating psychiatrist’s marked-limitation assessment, particularly given its “check-the-box” character and asserted inconsistencies.

The dissent framed the case as a cautionary example of how mental-illness claims can be mishandled—by treating episodic improvement as contradiction, overlooking contrary treatment-note context, and failing to provide a sufficiently reconciled rationale for discounting treating evidence and claimant testimony. Even as a nonprecedential opinion, the split illuminates the continuing doctrinal tension in disability adjudication: how to ensure “meaningful review” without turning substantial-evidence review into reweighing, especially where the record reflects the fluctuating course of mental illness.