FILED
                                                              United States Court of Appeals
                                                                      Tenth Circuit

                                                                   December 7, 2007
                     UNITED STATES COURT OF APPEALS Elisabeth A. Shumaker
                                                                      Clerk of Court
                            FOR THE TENTH CIRCUIT


    ANTHONY NIEDENS,

                Plaintiff-Appellant,

    v.                                                  No. 07-3113
                                                 (D.C. No. 05-CV-2176-CM)
    CONTINENTAL CASUALTY                                  (D. Kan.)
    COMPANY, a stock company,

                Defendant-Appellee.


                             ORDER AND JUDGMENT *


Before TACHA, Chief Judge, McCONNELL and GORSUCH, Circuit Judges.



         In this suit under the Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. § 1132(a), Anthony Niedens challenges the plan

administrator’s decision to terminate his long-term disability benefits. We have

jurisdiction under 28 U.S.C. § 1291, and we affirm.




*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
                                       ***

      Stryker Corporation employed Mr. Niedens as a medical salesperson.

Among the employment benefits Stryker provided Mr. Niedens was a long-term

disability plan funded by an insurance policy issued by Continental Casualty

Company. Under the terms of the policy, Stryker served as the plan

administrator, though it contracted with Continental, through CNA Group Life

Assurance Company, to provide administrative services. 1 By its terms, the plan

expressly provided the plan administrator and other plan fiduciaries with

“discretionary authority to interpret the terms of the Plan and to determine

eligibility for and entitlement to benefits in accordance with the Plan.” Jt. App.

at 219, 237.



1
       Both the benefits denial letter and the appeal denial letter are on the
letterhead of The Hartford. Jt. App. at 263, 270. While Mr. Niedens’s
administrative proceedings were pending, CNA Group Life Assurance Company
became a subsidiary of The Hartford Financial Services Group, Inc., and CNA’s
name changed to Hartford Life Group Insurance Company. The Hartford, through
Hartford Group Life Insurance Company, then provided administrative services
for the policy.

       In addition to Continental, The Hartford Financial Services Group, Inc.,
Stryker Corporation, and the plan itself were named as defendants in the district
court. In August 2006 the district court dismissed the Hartford company, Stryker,
and the plan as defendants, and thereafter Continental was the only defendant in
the district court. Continental is also the only appellee in this appeal. No party
argues that Continental is an incorrect defendant, that the other defendants were
erroneously dismissed, or that some other party or parties are at fault. For
convenience, in this order and judgment we will attribute all administrative
decisions to Continental.

                                         -2-
      Mr. Niedens ceased working on December 29, 2001, and applied for

disability benefits due to Crohn’s Disease and associated diarrhea. He reported

up to 9-10 bowel movements per day and alleged constant abdominal pain.

Mr. Niedens received short-term disability payments from January to March,

2002, and long-term disability benefits from March 2002 through March 2004

based on his inability to perform his own occupation.

      After that time, to be entitled to continued benefits, Mr. Niedens had to

establish that he was unable to engage in any “gainful occupation.” 

226. Any new job had to yield at least 60% of his indexed monthly earnings

within the first twelve months to be considered a “gainful occupation” under the

terms of the policy. 

Niedens earned more than $14,000 a month,

60% of his indexed monthly earnings was approximately $105,000 a year. Based

on medical reports, surveillance of Mr. Niedens, and a labor market survey

conducted by a third-party rehabilitation service, Continental determined that

Mr. Niedens could engage in a gainful occupation and terminated his long-term

disability benefits effective February 1, 2005.

      The labor market survey indicated that sufficiently high-earning jobs would

be available to Mr. Niedens given his medical limitations, including his need for

immediate access to a bathroom. Mr. Niedens argued to Continental that the

survey was incorrect to the point of being fraudulent and presented statements

from five persons named in the survey, as well as statements from himself and his

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counsel, suggesting that the rehabilitation firm never conducted the survey it

professed to have completed. In response, Continental asked the rehabilitation

firm to provide its calling log. After reviewing the firm’s calling log and a time

sheet showing the time the firm expended conducting the survey, Continental

ultimately concluded that the firm had conducted the labor market survey as

represented, and refused to disturb its decision denying benefits.

      Mr. Niedens exhausted his administrative remedies, then sued under

ERISA. Relying on District of Kansas precedent, the district court allowed

Continental to supplement the administrative record by introducing an affidavit

from Cheryl Sauerhoff, appeal team leader for the Hartford Insurance Company,

to explain how and why Continental decided to terminate Mr. Niedens’s benefits

and particularly why Continental decided to rely on the labor market survey. The

district court found that Continental’s decision that Mr. Niedens can work in a

gainful occupation was not arbitrary and capricious and was supported by

substantial evidence.

                                        ***

      On appeal, Mr. Niedens argues that (1) the district court erred in

supplementing the administrative record with Ms. Sauerhoff’s affidavit, either

because it was not part of the administrative record or because it was not

competent evidence, and (2) the termination of benefits was arbitrary and

capricious and was not supported by substantial evidence, particularly in light of

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his challenge to the labor market survey. Because we find that the decision to

terminate benefits was not arbitrary and capricious and was supported by

substantial evidence even disregarding Ms. Sauerhoff’s affidavit, we need not

decide whether the district court erred in supplementing the record in this case or

whether the affidavit was competent evidence. See Fed. R. Civ. P. 61 (providing

that an error in admitting evidence is not a ground for disturbing a judgment

“unless refusal to take such action appears to the court inconsistent with

substantial justice. The court at every stage of the proceeding must disregard any

error or defect in the proceeding which does not affect the substantial rights of the

parties.”); First Am. Kickapoo Operations, L.L.C. v. Multimedia Games, Inc.,

, 1172 (10th Cir. 2005) (relying on Rule 61).

      We review the district court’s grant of summary judgment de novo. Fought

v. UNUM Life Ins. Co. of Am., 

, 1002 (10th Cir. 2004) (per curiam).

Where the ERISA plan, as here, “gives the administrator or fiduciary

discretionary authority to determine eligibility for benefits or to construe the

terms of the plan,” our review of the administrator’s decision, like the district

court’s, is limited to examining whether its action was arbitrary or capricious.

Firestone Tire & Rubber Co. v. Bruch, 

, 115 (1989); 

. However, where an administrator operates under a conflict of

interest, this court applies a “sliding scale approach” that decreases the level of




                                          -5-
deference in proportion to the level of conflict. Chambers v. Family Health Plan

Corp., 

, 825-26 (10th Cir. 1996).

      Under this less deferential standard, the plan administrator bears the
      burden of proving the reasonableness of its decision pursuant to this
      court’s traditional arbitrary and capricious standard. In such
      instances, the plan administrator must demonstrate that its
      interpretation of the terms of the plan is reasonable and that its
      application of those terms to the claimant is supported by substantial
      evidence.

(citations omitted). “Substantial evidence is of the sort

that a reasonable mind could accept as sufficient to support a conclusion.

Substantial evidence means more than a scintilla, of course, yet less than a

preponderance. The substantiality of the evidence is evaluated against the

backdrop of the administrative record as a whole.” Adamson v. UNUM Life Ins.

Co. of Am., 

, 1212 (10th Cir. 2006) (citations omitted).

      As discussed above, Stryker’s benefits plan expressly affords discretion to

the administrator. But, because it was both the administrator and the insurer of

the plan, Continental operated under an inherent conflict of interest. See Nance v.

Sun Life Assur. Co. of Canada, 

, 1269 (10th Cir. 2002). Thus, the

district court appropriately applied the arbitrary or capricious standard of review.

. With respect to the contours of this standard, we have

explained that

      [w]hen reviewing under the arbitrary and capricious standard, the
      Administrator’s decision need not be the only logical one nor even
      the best one. It need only be sufficiently supported by facts within

                                         -6-
      [his] knowledge to counter a claim that it was arbitrary or capricious.
      The decision will be upheld unless it is not grounded on any
      reasonable basis. The reviewing court need only assure that the
      administrator’s decision falls somewhere on a continuum of
      reasonableness–even if on the low end.

(alteration in original, quotation omitted).

      Mr. Niedens contends that the decision was arbitrary or capricious because

Continental relied on the labor market survey despite knowing it had never been

completed as represented. Although Mr. Niedens’s challenge to the survey is

serious, we cannot say the administrator’s rejection of it was beyond the

“continuum of reasonableness–even if on the low end.” By way of example, of

the five affidavits from the persons named in the survey, only two are signed,

sworn, and notarized; the other three, thus, amount to hearsay that normally

would be inadmissible. At least one of the two sworn affidavits, moreover,

contains information which appears to be beyond the personal knowledge of the

affiant. See Jt. App. at 255. Mr. Niedens’s own affidavit is likewise in

significant part not based on his personal knowledge. See 

¶¶ 4, 13,

15-18. And the probative portions of his counsel’s affidavit are also hearsay. See

Meanwhile, the survey Mr. Niedens challenges was not conducted

by Continental but by a third-party firm with purported expertise in such matters

and the record contains a detailed phone log and time sheet purporting to

document many calls made and significant time spent by the firm conducting the

survey. Given all this, we cannot say the administrator’s decision to credit the

                                         -7-
labor survey in the face of Mr. Niedens’s challenge was, if not the only rational

decision available to it, an arbitrary or capricious act.

      Mr. Niedens also argues that he was denied the full and fair review that

ERISA requires because the denial letters do not “set out in opinion form the

rationale supporting [the] decision” so that Mr. Niedens could adequately prepare

his appeal to the federal courts. Aplt. Br. at 55 (quotation omitted). Particularly,

he complains that the denial letter did not address his evidence attacking the labor

market survey, explain what steps Continental had taken in response to his

materials, or otherwise address his challenge to the reliability of the survey.

      Under ERISA, an employee benefit plan must “provide adequate notice in

writing to any participant or beneficiary whose claim for benefits under the plan

has been denied, setting forth the specific reasons for such denial, written in a

manner calculated to be understood by the participant” and must “afford a

reasonable opportunity to any participant whose claim for benefits has been

denied for a full and fair review by the appropriate named fiduciary of the

decision denying the claim.” 29 U.S.C. § 1133(1) & (2). This court has stated

that a “full and fair review” requires “knowing what evidence the decision-maker

relied upon, having an opportunity to address the accuracy and reliability of the

evidence, and having the decision-maker consider the evidence presented by both

parties prior to reaching and rendering his decision.” Sage v. Automation, Inc.




                                           -8-
Pension Plan & Trust, 

, 893-94 (10th Cir. 1988) (quotation omitted);

see also 29 C.F.R. § 2560.503-1(h) (setting forth acceptable review procedures).

      Here, Continental informed Mr. Niedens in its initial denial letter of the

specific evidence on which it relied. Mr. Niedens was given, and availed himself

of, the opportunity to challenge that evidence. Further, the record indicates that

Continental considered Mr. Niedens’s challenge: Continental requested

additional information from the survey firm and the appeal denial letter

acknowledges the materials Mr. Niedens submitted. To be sure, the appeal denial

letter does not explain precisely why it rejected Mr. Niedens’s challenge to the

labor market survey and it does not include the other information his brief

identifies as omissions. But while it may be preferable for an administrator to

provide a claimant with as much information as possible, Mr. Niedens does not

identify any authority indicating that ERISA’s “full and fair review” requires the

taking of particular steps in response to a claimant’s challenge or requires a

detailed explanation thereof in an appeal denial letter. Moreover, we have held

that substantial, even if not complete, compliance with the requirements of § 1133

to be sufficient. 

, 895.

      Finally, Mr. Niedens argues that Continental’s decision to terminate

benefits is not supported by substantial evidence. However, the medical records

in this case indicate that Mr. Niedens can work at a sedentary occupation so long

as he has ready access to a bathroom. The surveillance reports suggest that,

                                         -9-
despite his medical condition, Mr. Niedens is able to conduct a great many daily

activities. And the labor market survey reflects that there are jobs which would

qualify as a “gainful occupation” under the policy. Continental’s decision to

terminate long-term disability benefits is, thus, supported by substantial evidence

– namely, evidence that, even if not unassailable, is of the sort “a reasonable mind

could accept as sufficient.” 

.

                                        ***

      The judgment of the district court is affirmed.


                                                    Entered for the Court



                                                    Neil M. Gorsuch
                                                    Circuit Judge




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