Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_06-cv-01435/USCOURTS-azd-3_06-cv-01435-0/pdf.json

Parties Involved:
Bernard Fulayter
Plaintiff
Sandra Fulayter
Plaintiff
Prudential Insurance Company of America
Defendant

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Sandra and Bernard Fulayter, 

Plaintiffs, 

vs.

Prudential Insurance Company of

America, 

Defendant. 

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No. CV06-1435-PCT- NVW

ORDER

Pending before the court is Plaintiffs’ Motion for Summary Judgment (Doc. # 20). 

I. Background

In this action, the plaintiffs challenge a termination of long-term disability benefits

under an employee insurance plan governed by the Employee Retirement Income Security

Act (“ERISA”). The following facts are undisputed. 

A. Fulayter’s Disability

Plaintiff Bernard Fulayter was involved in a tragic accident in Wisconsin on

December 28, 1997, when a sled occupied by himself and his grandson collided with a tree.

The impact instantly killed Fulayter’s grandson, broke Fulayter’s pelvis, and seriously

impaired the function of Fulayter’s right leg and foot by damaging nerves in his lumbosacral

plexus. Age 53 at the time, Fulayter spent the following month in intensive care and

rehabilitation. Two six-inch bolts were utilized to stabilize fractures on the right side of his

pelvis, and a metal plate was inserted across his tail bone for support. Fulayter was also

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required to wear a brace on his right foot. The injuries caused chronic pain in his pelvis,

right leg, and foot and made it difficult for him to walk or stand for prolonged periods.

Neurontin, Endocet, and ibuprofen were all prescribed for pain management.

Several years later, on January 15, 2003, Fulayter saw Victoria Yorke, M.D., for

evaluation after experiencing neck and shoulder pain apparently unrelated to his sledding

accident. Dr. Yorke noted that Fulayter had problems with severe degenerative arthritis,

depression, obesity, probable carpal tunnel syndrome, hypertension, hyperlipidemia, and

cervical strain. Imaging tests subsequently conducted at Dr. Yorke’s request by Gary

Herzog, D.O., revealed severe degenerative disc and bone disease in the upper portion of

Fulayter’s spine. A.R. at 199. 

Upon Dr. Yorke’s recommendation, Fulayter received electromyogram and nerve

conduction studies on his right lower extremity from Santosh K. Bahal, M.D., on February

20, 2003. Dr. Bahal noted that Fulayter complained of pain in his lower back and

experienced difficulty working because of progressive atrophy in his right foot. Dr. Bahal

also observed that Fulayter’s foot brace had become difficult to use, that Fulayter walked

with an “abnormal gait pattern,” and that the hardware originally implanted in Fulayter’s

pelvis had become loose. A.R. at 201. The right leg was described as shorter than the left

and as suffering from hair loss, while the right foot was described as cold, deformed,

discolored, and markedly everted. From these observations and the results of the nerve

conduction studies, Dr. Bahal found severe loss of nerve function throughout Fulayter’s right

lower extremity consistent with reflux sympathetic dystrophy (“RSD”), a condition involving

chronic, severe pain caused by an exaggerated response of the sympathetic nervous system

to injury.

Fulayter made a second visit to Dr. Bahal on March 3, 2003. He described the typical

feeling in his right leg as a burning, intractable pain that increased in severity with prolonged

activity or inactivity and cold weather. At its worst, the pain was “about 9 on a scale of

1:10.” A.R. at 211. Dr. Bahal noted that Fulayter managed to work despite the condition,

but, because of limited mobility, could “only function in an office situation where he could

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do phone calls, etc.” A.R. at 211. It was also explained that Fulayter required the use of a

cane to walk and often tripped because of the deformity in his right foot. Based on his

observations and a review of the medical record, Dr. Bahal diagnosed Fulayter with class IV

reflex sympathetic dystrophy. The following conclusions were also recorded:

In my opinion, this patient has severe involvement of the

autonomic and peripheral nervous system. 

In my opinion, this patient should apply for Social Security

Disability benefits and he should be approved. Reflex

sympathetic dystrophy is a very disabling condition that leaves

the patient with burning pain and inability to function. This

patient is very well-motivated and I am really surprised as to

how he has done the telephone and a desk job.

A.R. at 213. Because Fulayter was taking Neurontin, ibuprofen, Endocet, and Percocet for

pain, Dr. Bahal referred him to Bhupinder S. Bolla, M.D., for spinal cord stimulator

insertion, a pain-management treatment that could substitute for Fulayter’s substantial

reliance on medication.

During his subsequent visit to Dr. Bolla on April 1, 2003, Fulayter reported “sharp,

burning, shooting, knife-like, numbing, deep, achy pain” in his pelvis and right lower

extremity, but explained that his medication typically reduced his pain to the level of “1/10.”

A.R. at 227. Because Fulayter declined to receive a spinal cord stimulator insertion due to

a preference for oral pharmacological pain management, Dr. Bolla prescribed a patch

containing the powerful narcotic Fentanyl, continued use of Endocet and Neurontin as

needed, and six weeks of physical therapy. Fulayter later reported that the combination of

physical therapy and the Fentanyl patch improved the range of motion in his lower right leg

and reduced the leg’s sensitivity by at least fifty percent. 

B. Fulayter’s Employment

At the time of his accident, Fulayter was employed as a security manager for Patrick

Cudahy, Inc. (“Cudahy”), a subsidiary of Smithfield Foods, Inc., that supplies processed

meats to grocers. Due to his injuries, however, he became unable to meet the physical

demands of the job, which typically required him to walk substantial distances and stay on

his feet for lengthy periods of time.

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Fulayter obtained a position as a purchasing agent with Cudahy in early 1998 in an

effort to accommodate his new physical limitations. This position required him to negotiate

pricing and place orders with suppliers for labels and plastic wrappers. Fulayter was also

responsible for recording and maintaining inventory, an aspect of the job that required him

to walk substantial distances. To control his chronic pain, Fulayter continued to take

Neurontin, Endocet, and ibuprofen.

After approximately five years as a purchasing agent, Fulayter concluded that he was

no longer able to carry out his employment duties due to his physical condition. He stopped

working in February 2003, around the time when he started seeing Dr. Bahal. Soon

thereafter, the Social Security Administration found him disabled as of February 20, 2003,

and awarded $1,552 in monthly disability benefits. Fulayter officially ceased working at

Cudahy in May 2003 and moved with his wife permanently to Bullhead City, Arizona, to

escape the cold weather that often aggravated his condition in Wisconsin.

C. Fulayter’s Insurance Plan

Shortly before moving to Arizona, Fulayter filed for long-term disability benefits

under the Smithfield Foods, Inc., group disability insurance plan (“the Plan”) administered

and funded by Defendant Prudential Insurance Company of America (“Prudential”).

Fulayter was enrolled in the Plan at the time of his injury in 1997 and during his employment

as a purchasing agent. For the purposes of an initial benefits determination, the Plan defines

“disabled” as follows:

[An enrollee is] disabled when Prudential determines that:

! [he is] unable to perform the material and substantial

duties of [his] regular occupation due to [his] sickness or

injury; and

! [he has] a 20% or more loss in [his] indexed monthly

earnings due to that sickness or injury.

After an employee has been deemed to fall under this definition and has received 24 months

of disability payments, continued eligibility for payments is determined in accordance with

a narrower definition of “disabled.” According to this second definition, an employee is only

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disabled and entitled to benefits “when Prudential determines that due to the same sickness

or injury, [he is] unable to perform the duties of any gainful occupation for which [he is]

reasonably fitted by education training or experience.” A.R. at 39. Various components of

the two definitions are in turn defined as follows:

Material and substantial duties means duties that:

! are normally required for the performance of your

regular occupation; and

! cannot be reasonably omitted or modified, except that if

you are required to work on average in excess of 40

hours per week, Prudential will consider you able to

perform that requirement if you are working or have the

capacity to work 40 hours per week.

Regular occupation means the occupation you are routinely

performing when your disability begins. Prudential will look at

your occupation as it is normally performed instead of how the

work tasks are performed for a specific employer or at a specific

location. 

Gainful occupation means an occupation, including self

employment, that is or can be expected to provide you with an

income equal to at least 55% of your indexed monthly earnings

within 12 months of your return to work. 

Sickness means any disorder of your body or mind, but not an

injury; pregnancy including abortion, miscarriage or childbirth.

Disability must begin while you are covered under the plan. 

Injury means a bodily injury that is the direct result of an

accident and not related to any other cause. Injury which occurs

before you are covered under the plan will be treated as a

sickness. Disability must begin while you are covered under the

plan. 

Id. To determine whether an enrollee is disabled under the relevant definition, Prudential

reserves the right to “require [an enrollee] to be examined by doctors, other medical

practitioners or vocational experts of [its] choice.” Id. An ERISA Statement that is attached

to the Group Insurance Certificate further provides that Prudential “as Claims Administrator

has the sole discretion to interpret the terms of the Group Contract, to make factual findings,

and to determine eligibility for benefits. The decision of the Claims Administrator,” the

Statement continues, “shall not be overturned unless arbitrary and capricious.” A.R. at 63.

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D. The Termination of Benefits

Prudential initially denied long-term disability coverage in a letter dated June 10,

2003, on the ground that Fulayter “possess[ed] the physical functional capabilities to perform

the material and substantial duties of [his] occupation.” A.R. at 264. This conclusion was

reached on the reasoning that because Fulayter worked as a purchasing agent from early 1998

to February 23, 2003, without interruption due to disability, and because there was no

indication that his condition had changed since that time, there was little reason to believe

that he could not continue to work. Fulayter appealed the decision on August 26, stating that,

at any given point, he was disabled either because of severe pain or the narcotic effects of his

medication. Fulayter cryptically added that he continued working from 1998 to 2003 only

because of “the circumstances of [his] accident,” not because he had healed. A.R. at 272.

Attached to the appeal was a letter from Dr. Bahal stating that Fulayter is “totally and

permanently disabled” and that Dr. Bahal did “not believe that [Fulayter] will be able to do

any type of work, even sedentary work due to side effects from medication, impaired

memory, and low back pain which increases with sitting.” A.R. at 271.

Prudential evaluated the appeal by reviewing Fulayter’s medical record and

descriptions of his employment. A letter obtained from Cudahy explained that Fulayter’s

position as a purchasing agent had required him to take “at least weekly trips to various

production areas” in a plant with “over 1.5 million square feet on four floors” and “no man

elevators and many stairs to climb.” A.R. at 276. Cudahy further explained that Fulayter had

to traverse a “significant distance” and navigate “a number of stairs” in order to reach his

work station from the parking lot. Id. Based on Cudahy’s input and the letter from Dr.

Bahal, Prudential reversed its initial denial of long-term disability benefits on October 27,

2003. The reversal entitled Fulayter to a monthly disability payment of $905.50,

retroactively effective as of May 25, 2003.

Fulayter had no further contact with Prudential for nearly two years after he moved

to Arizona. However, he continued to receive frequent medical attention, including an

ultrasound, a colonoscopy, cholesterol tests, and an eye exam. On June 11, 2004, Fulayter

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received an x-ray of his right foot. The report from this test states that although the “osseous

elements of the foot reveal no acute abnormality, there is “increasing sclerosis of the fifth

metatarsal with cortical thickening.” A.R. at 304. Further, it was noted that although no

“frank destructive process is identified . . . [d]egenerative changes are present at the first and

second metatarsal-tarsal joints.” Id. Fulayter’s physician concluded from these observations

that Fulayter has degenerative joint disease in his right foot and possibly Paget’s disease, a

condition in which an individual’s bone gradually becomes soft and weak, often leading to

bone pain, deformities, and fractures. In the summer of 2004, Fulayter also received an

orthotic device from his podiatrist to alleviate pain related to a small plantar heel spur in his

right foot. Pain in Fulayter’s left hip and right foot was reported as “uncontrolled but

improved” after his use of this new device. A.R. at 341. Fulayter’s lower back pain was

described as “chronic” but “controlled” with Oxycodone. Id. 

On January 14, 2005, Fulayter received another routine checkup for his various

conditions. The report from this visit, authored by Edna M. Harris, a family nurse

practitioner who supplied much of the information in Fulayter’s latest medical records, lists

Fulayter’s pain as “0” and indicates that Fulayter had a full range of motion in his

extremities. The record further indicates that all of Fulayter’s conditions were “stable except

. . . [that Fulayter had] been splitting [his] Percocet in half” to “take the edge of the pain off”

without becoming “dopey the next day.” A.R. at 329. Fulayter obtained a refill on his

Percocet prescription for “chronic low back/L hip/R foot pain” during this visit. Id. 

A claims manager at Prudential examined Fulayter’s file as part of a periodic case

review on January 28, 2005. The manager noted in an internal memorandum that because

Fulayter has “documented chronic intractable pain” and “all the conditions mentioned in his

medical records are progressive in nature,” he “would be extremely unlikely” to obtain

gainful employment “no matter what his education and experience.” A.R. at 285. For this

reason, the claims manager recommended approving the continued distribution of disability

benefits under the Plan’s initial, broad definition of “disabled.” 

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Fulayter’s fortune changed soon thereafter. On February 2, 2005, Prudential notified

him that, as provided in the Certificate of Insurance, his eligibility for disability benefits

would be determined in accordance with the narrow definition of “disabled” upon the

expiration of the 24-month payment period on May 24, 2005. Based on that definition and

in light of the latest medical records, Carrie Eccles, Prudential’s claim manager and a

registered nurse, concluded in an internal memorandum dated May 18, 2005, that there is “no

documented impairment that would prevent [Fulayter] from sitting on a continuous basis with

the capability for self-accommodation.” A.R. at 346. Eccles listed several points in support

of this conclusion: First, she explained there was “[n]o indication of any ambulation

abnormalities” or new documentation of the symptoms of reflux sympathetic dystrophy. Id.

Second, she noted that Fulayter reported no pain during two visits to doctors in August 2004

and January 2005. Third, she noted that Fulayter’s pain was likely manageable because he

had independently reduced his dosage of Percocet and had not ordered any refills since the

medication was last prescribed in January 2005. 

In light of Eccles’s assessment, Prudential concluded that Fulayter could perform “a

variety of sales occupations that involve prolonged standing/walking” and proceeded to

conduct an employability assessment based on his qualifications. A.R. at 349. An internal

memorandum authored by Gregg Schwartzkopf on May 24, 2005, stated that Fulayter’s

education and prior work experience had provided him with “transferrable skills” in

“planning/directing activities,” “making independent judgments,” “dealing with/influencing

people,” and “multitasking.” Id. Utilizing software that considered these skills to determine

job possibilities, Fulayter was found to be reasonably employable as either a telephone

solicitor at $14.06 per hour or a “supervisor/order taker” at $23.15 per hour for unidentified

businesses approximately 100 miles away in Las Vegas. Id. The joint effect of the Eccles

and Schwartzkopf memoranda was that Fulayter did not meet the narrow definition of

“disabled” in the insurance Plan. Prudential sent a letter to Fulayter to this effect on May 25,

2005, and terminated benefits. The letter explained:

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Our review of your medical records from the previous year and

into this year do not reveal any significant impairment. Your

physician does not document any physical examination findings

with the exception of the 1⁄2 inch height discrepancy on standing

of your right and left shoulders. On August 4, 2004 and January

5, 2005 you described your pain as zero out of ten. Your range

of motion was full at all examinations. No skin changes in color

of [sic] temperature were noted. There is no documentation of

Reflex Sympathetic Disorder (RSD). You decreased your dose

of Oxycodone/Acetaminophen 5 mg/325 mg to 1⁄2 the dose. This

was already a very lose dose of pain medication. There was no

indication of cognitive deficits or abnormal thought processes.

There was no mention of any ambulation abnormalities. . . . In

review the medical documentation does indicate that prolonged

walking or standing would be difficult and would not be

recommended. However, there is no medical documentation

that would support that you would be unable to perform a

sedentary job where you could get up as needed to be

comfortable.

A.R. at 352. 

Fulayter appealed Prudential’s decision on June 9, 2005, explaining that he could not

work because his medications made him sleepy, and because of varying levels of pain in his

pelvis, leg, and foot. Enclosed with the appeal was a statement from Edna Harris stating that

Prudential had terminated benefits based on a misinterpretation of the medical records.

Harris explained that although she did not document the pain in Fulayter’s back, right groin,

and right ankle at each visit, she only omitted that information because it was beyond the

scope and purpose of many of the visits, rather than because those conditions were no longer

present. Harris continued:

I also neglected to mention that patient only has full [range of

motion] of extremities when wearing the ankle brace. Further

when the [record] states pain is stable, it does not mean it is

controlled but that it is at a tolerable level only. . . . 

In an 8-hour work day the patient can stand walk [sic] about

15-20 min at one time for a total of 0-2 hrs due to pain to

patients [sic] back and right hip/groin, right ankle and to calluses

on the right foot increases [sic] and patient has to change from

standing to sitting and visa [sic] versa every 15-20 minutes due

to pain in the lower back and right hip. This restriction

precludes the patient from doing any job that does not allow him

the freedom of changing from sitting to standing position at least

every 20 min. . . . 

The patient would need assistance or direction to properly care

for his work, training, and/or educational affairs due to his pain

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medication (Oxycodone 5 MG/APAP 325 MG QID) causing

drowsiness, making it hard for him to concentrate, and starting

to affect the patient’s short-term memory.

A.R. at 356-57.

Prudential responded to the appeal by conducting an internal medical records review.

One of Prudential’s physician reviewers, identified only as “Dr. K,” opined on July 14, 2005,

that “there is a 60-70% chance that [Fulayter] . . . does have sufficient impairment from his

condition that would prevent him from performing his sedentary occ[upation].” A.R. at 377.

Two other physician reviewers concluded otherwise: Interpreting the medical record

authored by Edna Harris on January 14, 2005, one “Dr. Bachman” found that Fulayter’s

reflux sympathetic dystrophy “seems to have resolved” and that he has “no difficulty

ambulating.” A.R. at 378. Dr. Bachman concluded that “while [Fulayter] has multiple

medical conditions, none of them individually or combined rise to a level of medical

impairment that would preclude a sedentary occupation.” Id. An individual identified as

“Dr. Fallon” similarly found that there were no indications of “chronic changes” in Fulayter’s

condition and that the “intensity and frequency of treatment” did not support a finding of

impairment sufficient to preclude sedentary employment. A.R. at 385. Dr. Fallon’s

conclusions were based exclusively on the report from a CT scan performed by Dr. Mark

Ellis on July 7, 2005. A.R. at 369. Siding with Dr. Bachman and Dr. Fallon, Prudential

upheld the termination of benefits on August 12, 2005. 

Fulayter appealed again on August 29. In handling this second appeal, Prudential

made several efforts to ascertain further the nature of Fulayter’s condition. First, Prudential

required Fulayter to complete an Activities of Daily Living Questionnaire in September

2005. In complying with this request, Fulayter explained that he has “severe pains” in his

right foot, little strength in his ankle, and broken hardware and swelling in his pelvis that

creates problems when he sits. Other illuminating facts reported in the questionnaire are the

following: Fulayter needs help dressing and grooming; his short-term memory is impaired;

he takes two tablets of ibuprofen and two to three tablets of Endocet each day for pain; he

uses airport courtesy wheelchairs when he travels by air; he drives approximately four times

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per week, for distances of up to 50 miles; he takes out the trash; he requires the assistance

of a cane or grocery cart when he goes shopping; he reads books and watches television four

to six hours per day and plays cards for up to four hours at a time.

Prudential next hired the Research Consultants Group, Inc. (“Research Consultants”),

to investigate whether Fulayter’s daily activities were consistent with his claim of disability.

Video surveillance subsequently obtained by Research Consultants in the fall of 2005

revealed that Fulayter was at least capable of walking his dog within his yard, bending down

to retrieve his newspaper, and hauling his trash cans into his garage. According to one

surveillance report, Fulayter also had no outward signs of injury or disability. Neighbors

interviewed by Research Consultants erroneously reported that they had seen Fulayter mow

his lawn. Prudential did not follow up with Fulayter to ascertain the accuracy of these

reports.

Finally, Prudential hired Karyn J. Akey, M.D., a board-certified family practitioner,

to conduct an independent review of its decision terminating benefits. Dr. Akey concluded

that although the “medical data documents objectively that [Fulayter] has had persistent

limitations resulting from a lumbar plexus injury sustained in December, 1997,” there were

multiple reasons to doubt that his medical condition deteriorated since he left his job with

Cudahy. A.R. at 471. First, she explained, Fulayter’s symptoms were not reported as acute

in the January 15, 2003, medical report provided by Dr. Yorke. Second, Fulayter was

consistently unwilling to consider alternative treatment options and failed to continue a

successful physical therapy regimen. Third, he ceased using narcotic pain medication and

now only uses one half of a tablet of Percocet per day, practices which suggest that his pain

is not severe. Fourth, Akey continued, Fulayter has not made frequent office visits to his

primary care provider, and his latest medical records reflect that his pain is “0” on a 0-10

scale. Fifth, the activities reported in the Activities of Daily Living Questionnaire indicate

an ability to sit for prolonged periods and function mentally. For these reasons, Dr. Akey

concluded that “there is no evidence to support impairment due to low back pain, depression,

cognitive impairment or hypertension.” A.R. at 474.

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Prudential upheld its termination of benefits on February 14, 2006, in light of Dr.

Akey’s report, the surveillance, and the information provided in the questionnaire. Fulayter

brought this action to challenge Prudential’s decision under ERISA, as codified in 29 U.S.C.

§§ 1104 and 1132, and now moves for summary judgment under Federal Rule of Civil

Procedure 56.

II. Standard of Review

Typically, summary judgment is appropriate where there is no “genuine dispute of

material fact.” Fed. R. Civ. P. 56(c). “In ERISA actions, however, where the plaintiff is

challenging the plan administrator’s denial of benefits and . . . [the] abuse of discretion

standard of review applies, ‘a motion for summary judgment is merely the conduit to bring

the legal question before the district court and the usual tests of summary judgment, such as

whether a genuine dispute of material fact exists, do not apply.’” Farhat v. Hartford Life &

Accident Ins. Co., 439 F. Supp. 2d 957, 966 (N.D. Cal. 2006) (quoting Bendixen v. Standard

Ins. Co., 185 F.3d 939, 942 (9th Cir. 1999)). Because it is held below that Prudential’s

decision will be reviewed for an abuse of discretion, the proper inquiry will be whether

Prudential abused its discretion in light of the record evidence, not whether there is a genuine

dispute of material fact. 

III. Analysis

A. Standing

ERISA permits an employee insurance plan “participant or beneficiary” to bring a

civil action “to recover benefits due to him under the terms of his plan, to enforce his rights

under the terms of the plan, or to clarify his rights to future benefits under the terms of the

plan.” 29 U.S.C. § 1132(a)(1). “If [an individual] is not a ‘participant or beneficiary’ of [a

plan under ERISA], he lacks standing to bring . . . claims under 29 U.S.C. § 1132(a)(1).”

Chuck v. Hewlett Packard Co., 455 F.3d 1026, 1038 (9th Cir. 2006). ERISA defines

“participant” as “any employee or former employee who is or may become eligible to receive

a benefit of any type from an employee benefit plan . . . .” 29 U.S.C. § 1002(7). A

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“beneficiary” is “a person designated by a participant, or by the terms of an employee benefit

plan, who is or may become entitled to a benefit thereunder.” 29 U.S.C. § 1002(8). 

Although Plaintiffs invoke 29 U.S.C. § 1104, rather than § 1132(a)(1), as the basis for

their claim for breach of fiduciary duty, the language of the latter statute may be applied to

evaluate standing in actions under the former. See Pilkington PLC v. Perelman, 72 F.3d

1396, 1398-1401 (9th Cir. 1995). In this case, Plaintiff Sandra Fulayter, Bernard’s wife,

lacks standing because she is neither a “participant” nor a “beneficiary” within the meaning

of § 1132(a)(1). Mrs. Fulayter is not a “participant” because she is not an “employee or

former employee” of Smithfield Foods, Inc. 29 U.S.C. § 1002(7). Likewise, she cannot be

deemed a “beneficiary” because there is no indication that either Bernard Fulayter or the

terms of the Plan designated her as such. 29 U.S.C. § 1002(8). Because an ERISA plaintiff

“bears the burden of proving his entitlement to contractual benefits,” Horton v. Reliance

Standard Life Ins. Co., 141 F.3d 1038, 1040 (11th Cir. 1998), and Plaintiffs provide no basis

for concluding that Sandra Fulayter has standing to assert a claim, she cannot be a party in

Bernard Fulayter’s action for the recovery of unpaid disability benefits. 

B. Abatie Review

A claims determination under an employee benefits plan governed by ERISA is by

default subject to de novo review. Kearney v. Standard Ins. Co., 175 F.3d 1084, 1089 (9th

Cir. 1999). However, where the plan “unambiguously provide[s] discretion to [its]

administrator” to interpret the terms of the plan and make final benefits determinations, the

determination is reviewed for an abuse of discretion. Abatie v. Alta Health & Life Ins. Co.,

458 F.3d 955, 963 (9th Cir. 2006). “The plan administrator bears the burden of showing the

plan gives it discretionary authority.” Ondersma v. Metro. Life Ins. Co., 2006 U.S. Dist.

LEXIS 85460, at *2 (N.D. Cal. Nov. 16, 2006). 

If plan language warrants de novo review, “[t]he court simply proceeds to evaluate

whether the plan administrator correctly or incorrectly denied benefits” in light of all the

evidence. Abatie, 458 F.3d at 963. However, if the language of the plan triggers review for

an abuse of discretion, three stages of analysis will remain. First, it must be determined

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whether the administrator in fact exercised its plan-authorized discretion in the course of

denying the benefits. If the administrator did not, the denial may be reviewed de novo. Id.

at 972. 

Second, if the administrator both possessed and actually exercised discretion in

denying benefits, the precise level of scrutiny with which to review the denial must then be

determined. A denial of benefits should be reviewed with greater scrutiny if a plan gives

discretion to an administrator that has a structural conflict of interest due to its status as both

administrator and funding source. Id. at 965. Other factors to consider in determining the

appropriate level of scrutiny include evidence of malice, self-dealing, “a parsimonious

claims-granting history,” inconsistent reasons for denial, inadequate investigation into a

claim, failure to credit a claimant’s reliable evidence, a history of denying “benefits to

deserving participants by interpreting plan terms incorrectly or by making decisions against

the weight of evidence in the record,” and procedural irregularities. Id. at 968, 972. Unlike

de novo review, review for an abuse of discretion is generally limited to the administrative

record before the plan administrator at the time of its decision. Id. at 970. 

Finally, after determining the appropriate level of scrutiny, that scrutiny must be

utilized in deciding whether the administrator actually abused its discretion in denying

coverage. An ERISA plan administrator abuses its discretion if (1) it renders a decision

without any explanation, (2) it construes provisions of the plan in a way that conflicts with

the plain language of the plan, or (3) it relies on clearly erroneous findings of fact in making

benefit determinations. Taft v. Equitable Life Assurance Soc’y, 9 F.3d 1469, 1472-73 (9th

Cir. 1993). “The mere fact that the plan administrator’s decision is contrary to some

evidence in the record does not show that the decision is clearly erroneous.” Snow v.

Standard Ins. Co., 87 F.3d 327, 331 (9th Cir. 1996). Rather, “review under the clearly

erroneous standard is significantly deferential, requiring a definite and firm conviction that

a mistake has been committed.” Id.

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1. The Language of the Plan

Prudential has satisfied its burden of showing its own discretionary authority under

the insurance Plan. The Plan states clearly that Prudential “as Claims Administrator has the

sole discretion to interpret the terms of the Group Contract, to make factual findings, and to

determine eligibility for benefits.” A.R. at 63. Plaintiff concedes as much by offering that

“the standard of review in this matter is abuse of discretion.” Doc. # 20 at 10. Thus,

Prudential’s termination of disability benefits will be reviewed for an abuse of discretion. 

2. Whether Prudential Exercised Discretion

Plaintiff also rightly concedes that Prudential actually exercised its Plan-established

discretion in handling his claim. Prudential terminated Fulayter’s disability payments on

May 25 after its claim manager, Carrie Eccles, examined the medical record and concluded

that no “impairment would prevent [Fulayter] from sitting on a continuous basis with the

capability for self-accommodation.” A.R. at 346. In handling Fulayter’s subsequent appeal,

Prudential weighed conflicting conclusions from three physicians who reviewed the claim.

Prudential then denied Fulayter’s second appeal after evaluating surveillance reports, a

questionnaire, and Dr. Akey’s report. During each of these stages of review, the decision not

to extend Fulayter’s disability payments flowed from Prudential’s unrestrained evaluation

of the factual record, rather than some preexisting rule or policy. This case is therefore

unlike others that have applied a standard other than abuse of discretion due to an insurance

carrier’s failure to exercise discretion clearly authorized in the employee insurance plan. See,

e.g., Boldon v. Humana Ins. Co., 2006 WL 3759459, at *8-9, 12 (D. Ariz. Dec. 13, 2006).

3. The Appropriate Level of Scrutiny

Several factors cumulatively warrant a high level of scrutiny in evaluating Prudential’s

decision to terminate Fulayter’s disability benefits. First, a high level of scrutiny is

supported, even if only marginally, by the structural conflict of interest created by

Prudential’s status as both the administrator of the Plan and its funding source. See Abatie,

458 F.3d at 965. This conflict creates an “incentive to pay as little in benefits as possible to

plan participants because the less money the insurer pays out, the more money it retains in

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the record indicates otherwise. See A.R. at 477 (“This decision is final and cannot be

appealed further to Prudential. If you still disagree with the above decisions, you may file

a lawsuit under the Employee Retirement Income Security Act (ERISA).”). 

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its own coffers.” Id. at 966. In this case, there is no evidence of malice, self-dealing, or a

parsimonious claims-granting history on the part of Prudential. Dr. Akey’s independent

review of the record also concurred with Prudential’s medical judgment. However, the

conflict of interest created by Prudential’s dual role is “inherent” and must be given some

weight “even if merely formal and unaccompanied by indicia of bad faith.” Id. The fact that

Dr. Akey agreed with the judgment that Fulayter can pursue sedentary employment cannot

fully obviate the conflict. See Sherry v. Hartford Life & Accident Ins. Co., 314 F. Supp. 2d

714, 722 (N.D. Ohio 2004). 

Second, a high level of scrutiny is warranted because Prudential’s final decision on

February 14, 2006, utilized information freshly gleaned from the Activities of Daily Living

Questionnaire and the Research Consultants surveillance reports to assert entirely new

justifications for terminating benefits. The decision letter explained that those sources

revealed “several inconsistencies” that undermined Fulayter’s claim, including his supposed

ability to perform yard work, shop, play poker, watch movies and television, drive an

automobile, and walk without a brace. A.R. at 476. Prudential had not previously relied on

any of these stated reasons, as the decision letters from May 25 and August 12 focused

exclusively on Fulayter’s medical record. See A.R. at 352, 388. In addition, because the

February 14 decision was final,1

 Fulayter had no opportunity to respond. Prudential’s

reliance on the questionnaire and reports in such circumstances constituted a procedural

irregularity that supports a more skeptical abuse-of-discretion review. See Abatie, 458 F.3d

at 974 (“When an administrator tacks on a new reason for denying benefits in a final

decision, thereby precluding the plan participant from responding to that rationale for denial

at the administrative level, the administrator violates ERISA procedures.”).

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Finally, and perhaps most significantly, a high level of scrutiny is supported by

Prudential’s failure to conduct an even-handed investigation of Fulayter’s condition. While

Prudential repeatedly second-guessed or otherwise failed to credit trustworthy evidence of

Fulayter’s chronic pain and injury, it uncritically accepted even questionable evidence to the

contrary. Eccles, a registered nurse, based her May 18, 2005, recommendation to terminate

benefits exclusively on a review of Fulayter’s “most recent” medical records, omitting any

consideration of older records that had led Prudential to grant disability benefits under the

broad definition of “disabled” and find only four months earlier that because of “documented

chronic intractable pain” and the “progressive” nature of “all the conditions mentioned in

Fulayter’s medical records,” Fulayter “would be extremely unlikely” to obtain gainful

employment, “no matter what his education and experience.” A.R. at 285. Those older

records showed that Dr. Bahal diagnosed class IV RSD and found Fulayter to be so “totally

and permanently disabled” as to be incapable of “any type of work, even sedentary work due

to side effects from medication, impaired memory, and low back pain which increases with

sitting.” A.R. at 271. The older records also documented Dr. Bolla’s prescription of the

powerful narcotic Fentanyl upon Fulayter’s complaint of “sharp, burning, shooting, knifelike, numbing, deep, achy pain” in his pelvis and right extremity. A.R. at 227. Prudential

provides no explanation as to how a fair evaluation of Fulayter’s claim could have possibly

disregarded such evidence of disability. 

Eccles also failed to credit evidence of Fulayter’s disability within more recent

medical records, including the very same records that served as the basis for her

recommendation. The documents from August 2004 and January 2005 in which Fulayter

purportedly “describes his pain as 0/10” show that Fulayter obtained refills on his Percocet

prescription for “chronic low back/L hip/R foot pain” and that he used the Percocet to “take[]

the edge of the pain off.” A.R. at 329, 337. Eccles, however, did not credit either of these

unfavorable facts. Nor did she discuss a document dated July 7, 2004, in which it is

explained that Fulayter suffers from pain in his left hip, lower back, and right foot. A.R. at

341. In concluding that there was “[n]o indication of any ambulation abnormalities,” Eccles

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similarly failed to credit evidence of unevenness in the height of Fulayter’s hips, A.R. at 329,

pain from a heel spur in his right foot, A.R. at 343-44, his use of a cane, A.R. at 271, his use

of a foot brace, A.R. at 323, and Dr. Bahal’s statement that Fulayter has “impaired mobility,”

A.R. at 271. 

Physician reviews subsequently conducted by Dr. Bachman, Dr. Fallon, and Dr. Akey

similarly cherry picked helpful pieces of information while failing to credit substantial

documentation showing the severe nature of Fulayter’s condition. To reach the conclusion

that Fulayter is not disabled, Dr. Bachman only examined one record authored by Edna

Harris on January 14, 2005, and Dr. Fallon only interpreted the record from a CT scan

performed by Dr. Mark Ellis on July 7, 2005. These two reviewers disregarded relevant

evidence from nearly a dozen prior medical visits, including the conclusions reached by Dr.

Bahal and Dr. Bolla based on their direct observation of Fulayter’s condition. In finding that

Fulayter’s reflux sympathetic dystrophy “seems to have resolved” and that he has “no

difficulty ambulating,” Dr. Bachman also failed to credit the statement from Edna Harris, the

author of the document on which Dr. Bachman’s determination was based, that any silence

in the record pertaining to Fulayter’s pain and ability to walk should not be construed to

mean that his conditions had resolved. A.R. at 356-57. Dr. Akey’s independent review was

similarly defective, as it highlighted that Dr. Yorke did not report Fulayter’s symptoms as

acute in January 2003, but gave no apparent weight to the subsequent observations and

diagnoses of Dr. Bahal and Dr. Bolla. Despite these obvious limitations, Prudential readily

relied on the conclusions of these reviewers. 

Prudential’s partisan treatment of the record evidence is perhaps best illustrated by the

contrasting manner in which the company considered the recommendation of Dr. K and the

surveillance report from Research Consultants. After Dr. K, Prudential’s own physician

reviewer, found that “there is a 60-70% chance” that Fulayter is incapable of performing a

sedentary occupation, Prudential arranged for additional case reviews by Dr. Bachman and

Dr. Fallon. Once those two physicians concluded that Fulayter was not disabled, Prudential

upheld its decision terminating benefits. In contrast, Prudential ultimately found Fulayter

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disabled in part due to hearsay evidence that Fulayter’s neighbor had seen him mowing his

front lawn. Prudential readily accepted this evidence without conducting any inquiry to

verify its accuracy. If Prudential had asked Fulayter about the neighbor’s statement, it would

have learned that the statement could not have been true because Fulayter does not even have

a lawn in his yard. In conjunction with Defendant’s structural conflict of interest and the

procedural irregularity noted above, such disparate treatment of the evidence based on its

tendency to support or undermine the termination of benefits suggests a grave lack of

objectivity that warrants close scrutiny approaching de novo review.

4. Whether Prudential Abused its Discretion

a. The finding that Fulayter can perform sedentary

 employment

Applying the high level of scrutiny required by the findings above, Prudential abused

its discretion by terminating Fulayter’s benefits based on a clearly erroneous interpretation

of the medical record. In part, Prudential denied benefits on the reasoning that “there [was]

no documentation of Reflex Sympathetic Disorder” and “no mention of any ambulation

abnormalities” in Fulayter’s record. A.R. at 352. Yet the record plainly indicates otherwise:

Dr. Bahal diagnosed Fulayter with class IV RSD on March 3, 2003. A.R. at 211. In light

of the pain related to this condition, Dr. Bolla prescribed Fentanyl for Fulayter one month

later. A.R. at 227. In the summer of 2004, Fulayter received an x-ray that revealed

degenerative changes in his right foot that require to him to wear an orthotic device. A.R.

at 304. The report from Fulayter’s visit with Edna Harris in January 2005 describes chronic

pain in his pelvis and right extremity and uneven hip placement. A.R. at 329. The record

also demonstrates that Fulayter used one-half to one whole tablet of Percocet more than once

on a daily basis in 2005, id., that Fulayter currently takes two tablets of ibuprofen and two

to three tablets of Endocet per day, A.R. at 413, that Dr. K found a 60-70% likelihood of

disability, A.R. at 377, that Fulayter’s conditions are progressive in nature, A.R. at 201, and

that Edna Harris found Fulayter only able to stand or walk “about 15-20 min at one time for

a total of 0-2 hours due to pain,” A.R. at 356-57. One of Prudential’s own claim managers

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concluded on this record that Fulayter has “documented chronic intractable pain” due to

“progressive” medical conditions. A.R. at 285. 

Faced with such evidence, Prudential focused on the absence of detailed descriptions

of Fulayter’s conditions in his latest medical records to conclude that those conditions must

not exist. It was for two reasons an abuse of discretion to terminate Fulayter’s benefits on

such reasoning in this case. First, Prudential knew that Fulayter had been diagnosed with

RSD and understood the nature of the condition. All of the record evidence indicated that

Fulayter’s RSD was, in Prudential’s own words, “progressive in nature.” A.R. at 285. This

was the conclusion reached by physicians who directly observed Fulayter’s condition, and

it suggested that his disability would not resolve over time. Prudential had no reason to

discount this evidence. Second, the June 6, 2005, letter from Edna Harris to Prudential

explained that any silence pertaining to Fulayter’s condition in his recent medical records

should not be construed to mean that Fulayter’s condition has resolved. Harris explained

from her observation that Fulayter’s RSD in fact persists and that she simply chose not to remeasure parameters at each visit because the condition is chronic. Prudential could only

conclude that there was no indication of disability by disregarding Harris’s explanation of

the record. 

In support of its determination that the record failed to document disability, Prudential

also asserted that Fulayter (1) had a full range of motion on January 14, 2005, (2) described

his own pain level as “0/10” on the same date, and (3) voluntarily reduced his dosage of

Percocet due to a lack of severe pain. Prudential’s reliance on these pieces of information

was also clearly erroneous in light of a broader context of persuasive, contrary evidence.

Responding to the first point, Edna Harris clarified that Fulayter “only has full [range of

motion] of extremities when wearing [his] ankle brace,” A.R. at 356, and Fulayter reports in

the September 2005 Daily Living Questionnaire that he still has difficulty walking due to loss

of muscle in his right leg, hip and ankle pain, and muscle cramps, A.R. at 410. Moreover,

range of motion has no necessary connection with Fulayter’s pain while sitting or

standing–the crucial inquiry in determining whether Fulayter can perform sedentary

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employment. Pertaining to Prudential’s second point, the January 2005 record on which

Prudential relied to conclude that Fulayter experiences no pain clearly shows that he has

chronic pain and used Percocet to “take the edge of the pain off.” A.R. at 329. Prudential’s

exclusive emphasis on an unexplained notation of “0” pain in the vitals section of the record

is simply another illustration of its tendency to seize upon any conceivably favorable

information without regard to context or contrary evidence. Fulayter would have had no

reason to report chronic pain or request a refill on his pain medication if he no longer

experienced pain in the first place. Finally, with regard to Prudential’s last point, the record

does indicate that Fulayter reduced his dosage of Percocet. However, he explains the

decision as an attempt to avoid adverse cognitive side effects, rather than a consequence of

diminishing pain. In the questionnaire from September 27, 2005–the last document to

discuss his pain level–Fulayter continues to report that he has “severe pain” in his right foot,

little strength in his ankle, and broken hardware in his pelvis that creates discomfort when

he sits. A.R. at 410. He also reports use of ibuprofen and two to three tablets of Endocet per

day. A.R. at 413. Crucially, the only medical personnel who made any direct observations

pertaining to Fulayter’s leg, ankle, and hip pain consistently described it as chronic and

disabling. A.R. at 227, 271, 356. 

Prudential also terminated benefits because the surveillance report and Activities of

Daily Living Questionnaire indicated that Fulayter “perform[s] yard work, shop[s] at WalMart, Home Depot, etc., landscape[s his] back yard, mow[s his] lawn, and play[s] poker on

a regular basis.” A.R. at 476. Again, under the strict form of abuse-of-discretion review

currently operative, the conclusion drawn from this evidence was clearly erroneous. The

reports that Fulayter performs yard work, mows his lawn, and landscapes his back yard are

based on inaccurate hearsay statements from one of Fulayter’s neighbors. In addition, in

light of the clinical findings of Dr. Bahal, Dr. Bolla, Edna Harris, and Dr. K, all of which

support a finding of disability, the fact that Fulayter is capable of playing poker and going

shopping cannot be seen as reasonable bases for concluding that he can carry out sedentary

employment, particularly when Fulayter’s pain prevents him from living according to a

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routine. A.R. at 411. From the premise that Fulayter feels well enough for some non-taxing

activities on an intermittent basis it does not follow that Fulayter can sustain the demands of

a standard work schedule, particularly in light of the facts that Fulayter needs help with

routine tasks such as dressing and grooming, has an impaired short-term memory, and

continues to experience severe pain. 

The conclusions of Dr. Bachman, Dr. Fallon, and Dr. Akey do not vindicate

Prudential’s decision. The first two physicians had no contact with Fulayter, reviewed only

one record each, and disregarded all of the findings of Dr. Bahal and Dr. Bolla–two

physicians who directly observed Fulayter’s condition. Dr. Akey’s opinion, although

independent, relied on some of the factual errors noted above in connection with Fulayter’s

purported lack of pain in January 2005 and supposed ability to perform yard work. She also

failed to place any apparent weight on Dr. Bahal’s diagnosis, the letter from Edna Harris, or

the statements from Fulayter relating to his pain and lack of mobility. To the extent that Dr.

Akey articulated additional reasons for denying benefits, they were not relied on or even

apparently considered by Prudential. 

In sum, Prudential abused its discretion by concluding that Fulayter can perform

sedentary employment. Closely scrutinized, that conclusion was clearly erroneous. The

central defect in Prudential’s determination was that it exclusively valued indicia of nondisability, however inaccurate or incomplete or plainly suspect those indicia may have been,

and disregarded a broader context of contrary evidence. The evidence disregarded informs

the proper interpretation of the evidence on which Prudential relied and establishes that

Fulayter is incapable of sedentary employment. 

b. The finding that Fulayter can work as a solicitor or supervisor

 in Las Vegas

Fulayter also implies without authority or explanation that Prudential abused its

discretion by terminating benefits after finding that Fulayter’s education, training, and

experience reasonably fitted him to work as a telephone solicitor for $14.06 per hour or

“supervisor/order taker” for $23.15 per hour in Las Vegas, approximately one hundred miles

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away from Fulayter’s home in Bullhead City, Arizona. The basis for this argument appears

to be Fulayter’s belief that the Plan only allows Prudential to terminate benefits after it has

found that gainful employment is actually available. 

Given that working in Las Vegas would entail an approximately 200 mile commute

each day, that Fulayter cannot sit for more than fifteen minutes at a time, A.R. at 356, and

that the cost of travel would substantially consume Fulayter’s relatively meager wage, the

two jobs identified by Prudential cannot reasonably be deemed available. However, “[w]hen

a plan does not specifically state that the employer has the duty of ensuring the availability

of an alternative job, the court cannot impose such a requirement.” Block v. Pitney Bowes,

Inc., 705 F. Supp. 20 (D.D.C. 1989), aff’d, 952 F.2d 1450 (D.C. Cir. 1992); see also Duhon

v. Texaco, Inc., 15 F.3d 1302, 1309 (5th Cir. 1994) (finding that a similar plan was “not a

form of employment insurance” and that “it was not necessary . . . that the administrator

‘insure the availability of an alternative job’” prior to terminating benefits). In this case,

there is no argument that the Plan’s definition of “disabled” hinges upon the empirical

availability of suitable employment, rather than Fulayter’s theoretical capacity to carry out

the duties of such employment. Moreover, even if the Plan required the actual availability

of a “gainful occupation” prior to the termination of benefits, Fulayter carries the burden of

showing that no such occupation was reasonably available. See Horton v. Reliance Standard

Life Ins. Co., 141 F.3d 1038, 1040 (11th Cir. 1998) (noting that a plaintiff suing to recover

contractual benefits under ERISA “bears the burden of proving his entitlement” to those

benefits). Having received no evidence from Fulayter concerning the possible unavailability

of qualifying occupations in Bullhead City, the effective unavailability of gainful

employment in Las Vegas is of little consequence. Thus, although Prudential abused its

discretion in concluding that Fulayter can carry out sedentary employment, it cannot be held

that Prudential also abused its discretion by only offering to Fulayter information concerning

employment in Las Vegas. 

IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Summary Judgment (Doc.

# 20) is GRANTED, except that Plaintiff Sandra Fulayter is dismissed from this action. 

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IT IS FURTHER ORDERED that the parties submit a form of judgment by February

20, 2007, that provides for past benefits in a stated amount and future benefits at stated rates.

In the event of disagreement concerning the judgment, the parties shall submit supporting

memoranda to allow the court to make a proper determination.

DATED this 6th day of February 2007.

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INDEX

I. Background .........................................................1

A. Fulayter's Disability .............................................1

B. Fulayter's Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

C. Fulayter's Insurance Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

D. The Termination of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

II. Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

III. Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

A. Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

B. Abatie Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1. The Language of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2. Whether Prudential Exercised Discretion . . . . . . . . . . . . . . . . . . . . . . . 15

3. The Appropriate Level of Scrutiny . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

4. Whether Prudential Abused Its Discretion . . . . . . . . . . . . . . . . . . . . . . 19

a. The finding that Fulayter can perform sedentary employment . 19

b. The finding that Fulayter can work as a solicitor or supervisor

 in Las Vegas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Case 3:06-cv-01435-NVW Document 27 Filed 02/06/07 Page 25 of 25