USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit











No. 97-2190



                        MICHAEL F. TERRY,



                      Plaintiff, Appellant,



                                v.



                      BAYER CORPORATION and

                BAYER CORPORATION DISABILITY PLAN,



                      Defendants, Appellees.







           APPEAL FROM THE UNITED STATES DISTRICT COURT



                FOR THE DISTRICT OF MASSACHUSETTS



         [Hon. Reginald C. Lindsay, U.S. District Judge]







                              Before



                     Lynch, Circuit Judge, 

                                

           Coffin and Bownes, Senior Circuit Judges.

                                

                                





     James B. Krasnoo, with whom Richard Briansky and Law Offices

of James B. Krasnoo, were on brief, for appellant.

     William J. Klemick, with whom John J. Myers, Treazure R.

Johnson, and Eckert Seamans Cherin & Mellott, LLC, were on brief,

for appellees.











May 27, 1998







                                

                                



  BOWNES, Senior Circuit Judge.  In this appeal under the

Employee Retirement Income Security Act of 1974, as amended, 29

U.S.C.A.  1001 - 1461 (West Supp. 1998)("ERISA"), appellant

Michael F. Terry challenges the termination of his long-term

disability benefits.  The district court granted summary judgment

to the defendants.  We affirm.

                                I.

  As required under the summary judgment standard, we

recite the following undisputed facts in the light most favorable

to the non-movant Terry, drawing all reasonable inferences in his

favor.  August v. Offices Unlimited, Inc., 981 F.2d 576, 580 (1st 

Cir. 1993).

  Terry began working at Bayer Corporation ("Bayer") in

1982 as a computer software test auditor.  At some point during

the course of the next several years, Terry was moved to a new

position, involving the tracking of rejected computer materials,

and reporting his findings to the Bayer engineering and purchasing

departments.  

     On or about January 5, 1987, as he exited his apartment

building on the way to work, Terry slipped on ice and fell down

nine steps, injuring his knee.  He continued on to work that day,

but on arrival was sent to the hospital by Bayer's nurse.  Over the

course of the next several weeks, Terry was cared for by both his

primary care physician, Dr. Walter H. Jacobs, and an orthopedic

surgeon, Dr. George Ousler.  Dr. Ousler determined at the time that

Terry most likely had suffered a "medial lateral collateral

ligament injury strain or an internal derangement of the knee."

While Dr. Ousler's treatment plan was originally conservative, in

March, 1987, Terry underwent arthroscopic surgery in an attempt to

remedy persistent soreness and slight swelling.  Pain management

and physical therapy ensued for the next several months.

     Terry returned to work in August 1987.  He was promoted

in 1988 to a position maintaining desk-top computers.  In January

1990, as a result of budget cuts, Bayer transferred Terry to the

position of test technician.  This position involved the assembly

and testing of computer boards, and involved considerably more

physical activity than his previous positions; Terry was now

required to move containers of computer boards around the

workplace.  After having been in his new position for approximately

one month, Terry's knee buckled and he fell to the ground.  This

incident occurred outside of the workplace.

     As a result of this second injury, Terry did not return

to work at Bayer.  A second arthroscopic surgery was soon

performed, and torn cartilage and bone chips were removed from his

knee.  

     Terry's primary care physician, Dr. Jacobs, states that

Terry suffers from a degenerative knee condition which results in

bone-on-bone contact.  As a result of the condition, Terry is in

almost constant pain, and is unable to stand, sit, or otherwise

maintain a single stationary position for any extended period of

time.  Dr. Jacobs treats Terry's pain with a variety of anti-

inflammatories and painkillers. 

     In July, 1990, Bayer approved Terry's application for

long-term disability benefits.  The Summary Plan Description

("SPD") states that long-term disability benefits are provided

under the Bayer Long-Term Disability Plan ("Plan") when a

beneficiary is "unable to work at any job for which [they] are

qualified by education, training, or experience."

     As Plan Administrator, Bayer retained Northwestern

National Life Insurance Company ("Northwestern") to process and

manage claims made under the Plan.  As part of that service,

Northwestern assigned Anne Tacl to Terry's case to serve as

rehabilitation case manager.  Tacl's job was to monitor Terry's

medical condition in order to make sure that he continued to meet

the Plan's definition of total disability.  Tacl was also charged

with attempting to rehabilitate Terry, with the goal of returning

Terry to full-time employment.  These responsibilities were

consistent with Plan provisions.  Because Tacl was based in

Minnesota, Tacl hired Sandy Lowery to provide local rehabilitation

services to Terry.  

     In April, 1991, Tacl received a report from a Dr. Zarins,

an orthopedic surgeon whom Terry had consulted prior to the active

involvement of Northwestern.  That report opined that Terry's

accounts of pain did not correspond to the pathology observed in

his knee.  Dr. Zarins stated that Terry could return to part-time

work with certain significant restrictions.  Northwestern, however,

was unable to locate an appropriate job for Terry at Bayer.  Dr.

Zarins saw Terry again one year later, in April 1992, and again

determined that Terry could perform sedentary work on a part-time

basis.  Dr. Jacobs, for his part, however, continued to insist that

Terry was completely disabled.  

     In November of 1992, Tacl, as authorized by the Plan,

scheduled an independent medical evaluation ("IME") in an attempt

to resolve the conflicts in medical opinion.  The IME was performed

by Dr. Thomas King, who determined that Terry's pain was "out of

proportion to all physical findings," but wanted to rule out

"reflex sympathetic dystrophy" ("RSD").  Terry was referred to

another specialist, who determined that Terry was not suffering

from RSD.

     On the basis of these medical evaluations, Tacl decided

that Terry should participate in a work-hardening rehabilitation

program, with the goal of returning Terry to full-time employment. 

Terry was informed, pursuant to a Plan provision, that if he failed

to attend a rehabilitation program, his benefits would be

terminated.  Terry was given a choice among three institutions, and

he opted to attend Farnum Industrial Rehabilitation ("Farnum"). 

Dr. Jacobs eventually signed off on the referral to Farnum, but did

not think the program would be helpful to Terry.

     Dr. Robert Haile, the Medical Director at Farnum,

examined Terry upon his entry to the program.  Haile opined at the

time that, 

     [Terry's] degree of disability . . . appears

     to be out of proportion to the degree of

     findings in his knee.  I believe the patient

     has developed chronic pain syndrome, which

     refers primarily to the whole person effect of

     a chronic painful injury.  It involves in

     addition to local persistent pain the

     psychosocial effects of chronic pain.  I think

     the patient would be a good candidate for Work

     Hardening.



Dr. Haile did not doubt that Terry's pain was genuine.  Although

Terry's Farnum experience started out well enough, in the end Terry

had completed fourteen rehabilitation sessions and canceled

thirteen.  Terry states that the cancellations were due primarily

to complaints of severe pain, caused by the effort required to

attend and participate in the rehabilitation program.  

     At about the same time as he was participating in the

Farnum program, Terry was referred by Tacl to Deborah Veatch, a

local vocational rehabilitation consultant.  Although Terry was

initially receptive to Veatch's services, his interest and

participation in her services quickly waned.  Veatch eventually

communicated to Tacl that "[b]ased on Mr. Terry's obvious lack of

follow through with treatment and vocational activities, . . . Mr.

Terry is most likely not an appropriate candidate for vocational

rehabilitation services."  Veatch did conclude, however, that Terry

possessed transferable skills in the computer field.

     On January 20, 1994, Terry was discharged from the Farnum

program.  The Program Director, Cheryl Baldwin, reported in the

discharge summary: "Mr. Terry is capable of working full time,

although the amount of standing needs to be limited.  He is able to

sit for two to four hours with intermittent stretch breaks.  Mr.

Terry is currently at Sedentary-Light duty work capacity.  He has

full, unlimited use of his upper body."  Tacl thereafter requested

that Dr. Haile complete a Physical Capacities Evaluation.  Dr.

Haile did so, and released Terry to full-time work with

restrictions on continuous time in a sitting or standing position,

as well as lifting, bending, and crawling.

     Terry received a letter dated February 24, 1994 from Tacl

indicating that she was recommending that his benefits be

terminated.  The letter stated that "[b]ecause you have been

released to work with restrictions, you no longer meet the [Plan's]

definition of total disability."  Shortly thereafter, Terry

received a termination letter dated March 3, 1994.  The letter

stated that, "[d]isability is defined as your complete inability to

work in any job for which you[] are reasonably fitted by education,

training, or experience.  Based on a review of the medical and

vocational information in your file you are no longer totally

disabled from performing 'any occupation.'"  Terry was advised of

certain of his appeal rights, and benefits were terminated

retroactively to February 25, 1994.  Terry's benefit checks were

not continued during the pendency of his appeals. 

     Shortly after Terry's termination, Tacl received a letter

from Dr. Haile.  Dr. Haile apparently sent the letter after

receiving a phone call from Dr. Jacobs.  The Haile letter stated

that Haile had only been a consultant in a work-hardening program,

and if Tacl required a formal "work release," that release would

have to come from Dr. Jacobs.  

     Terry requested an appeal from Northwestern's decision. 

The "Northwestern ERISA Committee" was convened, reviewed his

entire file, and upheld the benefits termination.  Terry was

advised of this by letter dated March 25, 1994.  That letter stated

that "[a]lthough Dr. Jacobs provided us with a detailed historical

account of your problems with knee pain, he did not provide us with

objective evidence to support your total disability from alloccupations, as your LTD plan requires."  Terry was informed in the

letter that further requests for appeal should be directed to

Bayer. 

     On June 1, 1994, Terry   now represented by counsel  

sent a letter to Tacl demanding reinstatement of benefits.  Tacl

informed Terry that Bayer would handle any further appeal, and

notified Bayer of the receipt of the latest request from Terry.  By

letter dated July 18, 1994, Bayer's Benefits Manager Joyce

Fleischer notified Terry of the steps he needed to take in order to

perfect an appeal before the Bayer Benefit Administration Committee

("Benefit Committee").  Included in that letter was the requirement

that Terry file his appeal within sixty days.  A copy of the

relevant appeal procedure from the SPD was appended to Fleischer's

letter. 

     It was not until August 15, 1995   over one year later

  that Terry formally requested an appeal before the Benefit

Committee.  Additional materials were forwarded to Bayer, and

Bayer scheduled a meeting of the Committee to decide the appeal. 

Before the meeting, Bayer requested that Northwestern's ERISA

Committee also review the additional materials forwarded by Terry. 

The Northwestern Committee did so, and again affirmed its decision

to terminate benefits.  The Bayer Benefit Committee met on

December 6, 1995, reviewed Terry's file, and voted to uphold the

termination of benefits.  

     Terry was advised of the decision by a letter from

Bayer's employee benefits counsel dated December 21, 1995, stating

the Benefit Committee's reasons for upholding the termination. 

First, the Benefit Committee determined that Terry's appeal was

untimely, because it was not filed within the sixty-day time period

provided for in the Plan and communicated to Terry in the letter

from Fleischer.  The Committee went on "[a]s a courtesy to

[Terry]", to reach the merits of Terry's appeal.  The Benefit

Committee detailed the following.

        To assist the Bayer Corporation in making

     its determination, our agent, [Northwestern],

     has been extensively involved in evaluating

     Mr. Terry's medical condition as well as his

     ability to return to work.  With the approval

     of Dr. Jacobs, Mr. Terry was put in a "work

     hardening" program   which is an approved

     rehabilitation program under the terms of the

     Plan.  During the nine week period of the

     program, he attended fourteen sessions,

     canceled thirteen sessions and did not

     complete the program.  On February 1, 1994, at

     the end of the program, he was released to

     full-time, sedentary work by Dr. Haile.  Dr.

     Haile was the Medical Director and Physiatrist

     specializing in assessment of functional

     capacities in the work hardening program. 

     Based on Dr. Haile's release, as well as Mr.

     Terry's failure to participate to any

     meaningful extent in the work hardening

     program, the Committee would uphold the

     termination of Mr. Terry's benefits under the

     Plan even if his appeal was timely filed.



        It is also important to note that the

     Committee considered the information you

     supplied from Dr. Jacobs, Dr. Taylor, the

     Social Security Administration and Paul

     Blatchford but, as it is permitted to do under

     the terms of the Plan, concluded that the

     opinions of Dr. Haile and Debbie Veatch, a

     vocational expert, were more credible because

     those opinions are based on the objective

     medical testing performed during the work

     hardening program and Mr. Terry's medical

     status as of February 1, 1994.



        Dr. Jacobs is not a specialist but rather a

     generalist who has consistently prescribed

     narcotic medications to treat the pain

     associated with Mr. Terry's condition but has

     not been directly involved in any

     rehabilitative course of action for Mr.

     Terry's condition.  Although Dr. Taylor is a

     specialist, his report does not include any

     information regarding objective testing

     performed on Mr. Terry in determining his

     physical capabilities.  Also, the information

     provided by Dr. Taylor is based on his medical

     condition as of July 10, 1995   approximately

     seventeen months after his February 1, 1994

     release.  Similarly, Mr. Blatchford's report

     is based on Mr. Terry's medical condition as

     of October 20, 1995   approximately 20 months

     after his February 1, 1994 release   and is

     based on subjective medical complaints rather

     than objective testing.



     Terry filed suit under ERISA in Superior Court, Essex

County, Massachusetts, in February, 1996, alleging that the

benefits termination contravenes the Plan language.  The Bayer Plan

removed to federal court, see Metropolitan Life Ins. Co. v. Taylor,

481 U.S. 58, 63-67 (1987), and in due course moved for summary

judgment.  The district court, by margin order, granted summary

judgment in defendants' favor on all claims, finding no abuse of

discretion in the benefits termination.  This appeal followed.  

     Our standard of review over the district court's decision

on summary judgment is de novo. See Vartanian v. Monsanto Co., 131

F.3d 264, 266 (1st Cir. 1997).  We are directed to grant summary

judgment where "the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of law."  Fed. R. Civ. P. 56(c).  The Supreme Court has

stated that summary judgment is appropriate "against a party who

fails to make a showing sufficient to establish the existence of an

element essential to that party's case, and on which that party

will bear the burden of proof at trial."  Celotex Corp. v. Catrett,

477 U.S. 317, 322 (1986).  Here, Terry bears the burden of making

"a showing sufficient to establish" a violation of ERISA, namely,

that the benefit termination was unreasonable.

                              II.

     ERISA is a "comprehensive and reticulated statute,"

Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 361

(1980), which governs the rights and responsibilities of parties in

relation to employee pension and welfare plans, see generally New

York State Conference of Blue Cross & Blue Shield Plans v.

Travelers Ins. Co., 514 U.S. 645, 650-51 (1995).  This federal

statute includes a cause of action for plan participants, and other

beneficiaries, "to recover benefits due to him [or her] under the

terms of his [or her] plan."  29 U.S.C.A.  1132(a)(1)(B).  It is

under this statutory provision that claims, such as this one,

challenging denials and termination of employer-sponsored

disability benefits are brought. 

     Although Terry presents his arguments on appeal in a

variety of arrangements, his positions can be effectively stated as

follows.  First, Terry posits that this court should review the

decision of Northwestern, as opposed to that of the Bayer Benefit

Committee, in making the determination whether the disability

benefits were wrongfully terminated.  Next, Terry argues that,

regardless of which decision we review, that review should not be

conducted pursuant to the abuse of discretion standard adopted by

the district court, but instead should be conducted de novo; in

other words, Terry asks us to undertake an independent review of

the record and decide whether Terry is "disabled" within the

meaning of the Bayer Plan.  Finally, Terry urges us to determine

that, regardless of the standard applied, and regardless of the

decision we review, the benefits termination violated ERISA because

(1) Terry received defective notice of termination, and (2) he was,

and is, totally disabled within the meaning of the Plan.  We

address each position in turn.

                               A.

     As we have stated, Bayer contracted with a third party,

Northwestern, to provide administrative assistance to the Benefit

Committee.  The agreement between Bayer and Northwestern, entitled

"Administrative Services Only Agreement" ("ASO Agreement"),

stipulated that Northwestern was to, among other things,

"[i]nvestigate and process claims . . . [, e]valuate claims for

potential rehabilitation . . . [, and u]pon receipt of the Plan

Sponsor's final decision on claims appeals, make payment or issue

a denial notice in accordance with the Plan Sponsor's decision."

ASO Agreement  1(B)(1).  The ASO Agreement specifically disclaimed

any responsibility on Northwestern's part as a Plan Administrator. 

Id.  5(A).  The existence of this contractual arrangement between

Northwestern and the Benefit Committee was authorized by the

Benefit Committee's governing guidelines.  Miles, Inc. (Bayer)

Administrative Procedures for the Benefit Administration Committee

Art. VII,  2 ("Admin. Proc.").  

     Terry's argument that we should review the decision of

Northwestern, and ignore the later decision by the Benefit

Committee, is stated in his brief as follows: "The Plan vests

discretionary authority with Bayer Corporation, the Plan's

fiduciary.  Northwestern, however, not Bayer Corp., made the

initial decision to terminate Mr. Terry's benefits.  Bayer

delegated only its administrative duties to Northwestern, but

expressly reserved and thereby intentionally withheld any fiduciary

authority from Northwestern."  Appellant Br. at 22.  Terry argues

that, because the Plan itself did not grant Northwestern any

discretionary authority to interpret the meaning of the plan,

Northwestern's "initial decision" must be considered afresh under

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).

     In Firestone, the Supreme Court ended the debate over the

proper standard of review that courts should employ when examining

the out-of-court decisions of plan administrators to deny benefits. 

The Court stated that, "a denial of benefits challenged under

 1132(a)(1)(B) is to be reviewed under a de novo standard unless

the benefit plan gives the administrator or fiduciary discretionary

authority to determine eligibility for benefits or to construe the

terms of the plan."  Id.  Thus, Terry argues that because the Plan

does not grant the decision-maker the necessary authority to

resolve disputes, determinations made by that decision-maker are

reviewed de novo.  

     In making his argument, however, Terry ignores the fact

that the decision of Northwestern was but one step in the process. 

It was not the final and binding termination decision.  In Terry's

own words, it was the "initial decision."  We must focus, as in the

usual case, on the determinations of the final decision-maker,

which was the Bayer Benefit Committee.

     "ERISA contemplates actions against an employee benefit

plan and the plan's fiduciaries.  With narrow exception, however,

ERISA does not authorize actions against nonfiduciaries of an ERISA

plan."  Santana v. Deluxe Corp., 920 F. Supp. 249, 253 (D. Mass.

1996).  See Mertens v. Hewitt Assocs., 508 U.S. 248, 262-63 (1993);

Reich v. Rowe, 20 F.3d 25, 29 (1st Cir. 1994) (nonfiduciary

liability limited to those "who commit violations of ERISA or who

are engaged in an 'act or practice' proscribed by the statute"). 

Courts have determined that when the plan administrator retains

discretion to decide disputes, a third party service provider, such

as Northwestern, is not a fiduciary of the plan, and thus not

amenable to a suit under  1132(a)(1)(B).  See, e.g., HealthSouth

Rehab. Hosp. v. American Nat'l Red Cross, 101 F.3d 1005, 1008-09

(4th Cir. 1996), cert. denied, 117 S. Ct. 2432 (1997); Harris Trust

& Sav. Bank v. Provident Life & Accident Ins. Co., 57 F.3d 608,

613-14 (7th Cir. 1995); Kyle Rys., Inc. v. Pacific Admin. Servs.,

Inc., 990 F.2d 513, 516 (9th Cir. 1993); Baker v. Big Star Div. of

The Grand Union Co., 893 F.2d 288, 289-90 (11th Cir. 1989).  An

interpretive bulletin issued by the Department of Labor bears this

out, stating that an entity which merely processes claims "is not

a fiduciary because such person does not have discretionary

authority or discretionary control respecting management of the

plan."  29 C.F.R.  2509.75-8, D-2 (1997).  Thus, "[t]he proper

party defendant in an action concerning ERISA benefits is the party

that controls administration of the plan."  Garren v. John Hancock

Mut. Life Ins. Co., 114 F.3d 186, 187 (11th Cir. 1997).

     Similarly, as we recognized in Rowe, 20 F.3d at 32, ERISA

itself significantly limits the liability of service providers in

actions under the statute.  The Rowe panel refused to exercise its

power to fashion a common law remedy to generally extend "the

threat of liability over the heads of those who only lend

professional services to a plan without exercising any control

over, or transacting with, plan assets."  Id.  Such liability was

withheld in Rowe in recognition of, inter alia, the fact that it

would likely "deter such [service providers] from helping

fiduciaries navigate the intricate financial and legal thicket of

ERISA."  Id.; see also Buckley Dement Inc. v. Travelers Plan

Admins. of Ill., Inc., 39 F.3d 784, 790 (7th Cir. 1994)(approving

of Rowe reasoning). 

     Terry is correct when he points out that this line of

cases is concerned with service provider liability, and as such

does not necessarily foreclose the construct he suggests   to

review the decision of Northwestern but hold the Plan liable. 

Nevertheless, we find the precedent compelling.  We do not think it

supportable or reasonable for a court, when conducting this form of

inquiry, to examine an intermediate step in the internal review

process de novo.  After all, we have determined that a prerequisite

to obtaining judicial review under  1132(a)(1)(B) is that the

claimant have exhausted the internal administrative remedies

available to him.  Drinkwater v. Metropolitan Life Ins. Co., 846

F.2d 821, 825-26 (1st Cir. 1988).  Thus, if Terry had approached

the district court after having received the termination letter

from Northwestern, but prior to his appeal to Bayer, his case would

likely have been dismissed for failure to exhaust the internal

ERISA remedies.  See, e.g., Tarr v. State Mut. Life Assur. Co. of

Am., 913 F. Supp. 40, 43-45 (D. Mass. 1996)(relying on Drinkwater). 

It seems an odd proposition to now ignore the results of those

mandated internal administrative remedies, and focus de novo review

on the intermediate step taken by Northwestern.  We reject Terry's

argument that we review Northwestern's decision de novo.

     Terry argues that the fact that his benefits were

terminated by Northwestern (subject to appeal to Bayer) means that

Northwestern, not Bayer, was the real decision-maker.  The balance

of the record, however, convinces us otherwise.  The record amply

demonstrates that Bayer and the Committee retained   by written

instrument   the discretion to decide disputed claims.  There is

nothing to suggest that Northwestern was doing anything other than

applying the terms of the Plan as written to Terry's particular

situation.  Although it may have been imprudent for Northwestern to

terminate Terry's benefit checks as soon as it made the initial

decision, Terry has not demonstrated that he would not have been

entitled to a back payment of his disability benefits if his appeal

at Bayer were successful.  Indeed, the ASO Agreement specifically

requires Northwestern to adhere to the determinations of the

Benefit Committee.  Therefore, although we recognize the impression

generated by Northwestern's immediate termination, the remainder of

the record simply does not support the position Terry presses.

Bayer's Benefit Committee was the entity with the power to make,

and is the entity that actually made, the final decision to

terminate Terry's benefits.  It is therefore the decision of the

Benefit Committee which we shall review.

                               B.

     We next turn to the proper standard of review to apply in

examining the out-of-court decision of the Benefit Committee.  Two

issues need to be addressed in formulating the proper standard of

review.  First we determine whether the Plan expressly grants

discretionary authority to the plan administrator to determine a

claimant's eligibility.  Firestone, 489 U.S. at 115.  Second, we

decide whether the administrator has properly delegated that

discretionary authority to the Benefit Committee.  Rodriguez-Abreuv. Chase Manhattan Bank, N.A., 986 F.2d 580, 584 (1st Cir. 1993). 

We address each point in turn.

     As we have previously outlined in part A, supra, the

Supreme Court has determined that "a denial of benefits challenged

under  1132(a)(1)(B) is to be reviewed under a de novo standard

unless the benefit plan gives the administrator or fiduciary

discretionary authority to determine eligibility for benefits or to

construe the terms of the plan."  Firestone, 489 U.S. at 115; see

also Varity Corp. v. Howe, 516 U.S. 489, 513 (1996)("At present,

courts review [plan coverage] decisions with a degree of deference

to the administrator, provided that the benefit plan gives the

administrator or fiduciary discretionary authority . . . .")

(internal quotation marks omitted).  

     We have steadfastly applied Firestone to mandate de novo

review of benefits determinations unless "a benefits plan . . .

clearly grant[s] discretionary authority to the administrator." 

Rodriguez-Abreu, 986 F.2d at 583; see also Diaz v. Seafarers Int'l

Union, 13 F.3d 454, 456 (1st Cir. 1994); Allen v. Adage Inc., 967

F.2d 695, 697 (1st Cir. 1992); Bellino v. Schlumberger Techs.,

Inc., 944 F.2d 26, 29 (1st Cir. 1991).  Where the clear

discretionary grant is found, "Firestone and its progeny mandate a

deferential arbitrary and capricious standard of judicial review." 

Recupero v. New England Tel. and Tel. Co., 118 F.3d 820, 827 (1st

Cir. 1997) (internal quotation marks omitted).

     The record in this case demonstrates that the Plan grants

discretionary authority to the Plan Administrator to make the

necessary judgment calls concerning claimant eligibility.  First

the Plan names "The Company"   Bayer   as Plan Administrator,

before going on to state that,

     The Company shall have the exclusive right to

     make any finding of fact necessary or

     appropriate for any purpose under the Plans

     including, but not limited to, the

     determination of the eligibility for and the

     amount of any benefit payable under the Plans. 

     The Company shall have the exclusive

     discretionary right to interpret the terms and

     provisions of the Plans and to determine any

     and all questions arising under the Plans or

     in connection with the administration thereof,

     including, without limitation, the right to

     remedy or resolve possible ambiguities,

     inconsistencies, or omissions, by general rule

     or particular decision.



Miles Inc. Disability Plans  8.4 ("Plan").  Rodriguez-Abreucounsels that the grant of discretionary authority must be clear. 

986 F.2d at 583.  We think the language quoted above admits of no

other interpretation.  In Cooke v. Lynn Sand & Stone Co., we

determined that the plan language was insufficient to satisfy

Firestone. 70 F.3d 201, 204 (1st Cir. 1995).  There, the plan

language stated only that the administrator had "exclusive control

and authority over administration of the Plan."  In contrast,

Bayer's Plan specifically allocates to the Company the right to

find necessary facts, determine eligibility for benefits, and

interpret the terms of the Plan. 

     The next step in the process is to determine whether

there has been an effective delegation of that discretionary

authority from the Plan Administrator to the Benefit Committee. 

"ERISA allows named fiduciaries to delegate responsibilities,"

Rodriguez-Abreu, 986 F.2d at 584, by "expressly provid[ing] for

procedures . . . for named fiduciaries to designate persons other

than named fiduciaries to carry out fiduciary responsibilities

(other than trustee responsibilities) under the plan," 29 U.S.C.A.

 1105(c)(1)(B).  Here, the Bayer Plan states that "The Company may

appoint one or more individuals to act on its behalf, in which case

every reference herein made to the Company shall be deemed to mean

or include the individuals as to matters within their

jurisdiction."  Plan  8.3.  Bayer took the Plan up on its offer,

and formed the "Benefit Administration Committee" which was

designed to "act on behalf of the Corporation by assisting the

Corporation in fulfilling its administrative duties which are set

forth in the employee benefit plans."  Admin. Proc. Art. I,  1. 

Part of the Committee's duties included responsibility for the

initial review of claims (or delegation thereof), and the impartial

review of claim denials.  Admin. Proc. Art. VII,  2.

     We think this constitutes an effective delegation of

discretionary authority from the Company to the Benefit Committee. 

Our conclusion is supported by the fact that vested within the

Committee, and pursuant to the Plan, was the responsibility to deny

a claim "only if there [was] a reasonable basis for the denial," as

well as the responsibility to "conduct a complete and adequate

review before making a decision upholding the denial of a

claimant's benefit."  Id.  The Committee had been given the

authority to make "reasonable" decisions, an inherently

discretionary function.  In Rodriguez-Abreu, 986 F.2d at 584, we

stated that reliance on "inferences from the circumstances

. . .[was] insufficient to prove delegation of discretionary

authority."  No inferences need be drawn where we discern a clear

and direct delegation   by written instrument   from the Plan

Administrator to the Benefit Committee.

     What emerges from the record is that: (i) the Plan

granted Bayer the discretionary authority to interpret and apply

the terms of the Plan; (ii) the Plan authorized Bayer to delegate

duties and authority; and (iii) Bayer delegated the discretionary

authority to review claims and appeals to the Committee.  The

decisions of the Committee are, therefore, entitled to deferential

review.

     We reject Terry's argument that the "Limitations" clause

of the Administrative Procedures document alters this equation. 

The clause states that "The Committee and its Members . . . shall

not have any independent fiduciary duties under the employee

benefit plans."  Admin. Proc. Art. VII,  1.  Terry argues that

this means that the Committee had no fiduciary responsibilities

whatsoever, and therefore no discretionary authority attached to

its decisions.  This argument, of course, ignores the import of the

word "independent."  That the Committee is deemed not to have any

"independent fiduciary duties" does not mean that they have none. 

Rather, we think the most plausible reading of the Limitations

clause is that the Committee's fiduciary responsibilities do not

extend beyond those required to carry out the duties assigned to

it.  This conclusion is supported by the very nature of ERISA

fiduciary responsibility.  "[F]iduciary status is not an all or

nothing proposition; the statutory language indicates that a person

is a plan fiduciary only 'to the extent' that he possesses or

exercises the requisite discretion and control."  Beddall v. State

St. Bank & Trust Co., 137 F.3d 12, 18 (1st Cir. 1998) (quoting 29

U.S.C.  1002(21)(A)).  As a result, the clause has no effect, for

our purposes, on Bayer's delegation to the Committee, and by

extension, no effect on the standard of review to be employed.

                               C.

  Turning to the merits of the case, Terry first argues

that the notice of termination did not comply with ERISA.  The

statute specifies that a plan "shall 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."  29 U.S.C.A.  1133(1).  The interpretative

regulations go on to require that the notice contain, 

    (1)  The specific reasons for the denial; 

    (2)  Specific reference to pertinent plan

  provisions on which the denial is based; 

    (3)  A description of any additional

  material or information necessary for the

  claimant to perfect the claim and an

  explanation of why such material or

  information is necessary; and 

    (4)  Appropriate information as to the

  steps to be taken if the participant or

  beneficiary wishes to submit his or her claim

  for review.



29 C.F.R.  2560.503-1(f).  Terry argues that because neither

Northwestern nor Bayer ever informed him of the specific

documentation or medical reports needed to obtain a favorable

decision, both entities failed to comply with ERISA's notice

requirements.

  To be sure, the letters Terry received merely directed

him to forward "any information which may affect the decision to

terminate your claim."  Terry therefore argues that, under 29

C.F.R.  2560.503-1(f)(3), supra, he was entitled to a more

detailed description of materials necessary for a successful

appeal.  We are not convinced, however, that the regulatory

standard quoted above necessarily requires an administrator (or

agent thereof) to inform Terry of "what additional information Mr.

Terry should include in order to win his appeal."  Appellant Br. at

41 (emphasis added).  Instead, the regulations mandate that the

administrator describe what is required to "perfect the claim." 

Terry has not convinced us that "perfect the claim" is synonymous

with "win the appeal."  Indeed, it would seem to us that in the

instant case, neither Northwestern nor Bayer contended that Terry's

claim was deficient.  The decision was simply that the lack of

objective findings, together with the failure to participate more

fully in the work hardening program, did not support a finding of

total disability.  Regardless, however, of whether Bayer and

Northwestern failed to comply formally with the regulations, and we

do not imply any such failure, precedent in this circuit and others

is to the effect that ERISA's notice requirements are not meant to

create a system of strict liability for formal notice failures.  

     This court has recently concluded "that allowing a claim

for relief because of inadequacy of formal notice without any

showing that a precisely correct form of notice would have made a

difference would result in benefit claims outcomes inconsistent

with ERISA aims of providing secure funding of employee benefit

plans."  Recupero, 118 F.3d at 840.  Similarly, the Seventh Circuit

has stated:

     Not all procedural defects . . . will upset a

     fiduciary's decision.  Substantial compliance

     with the regulations is sufficient.  In

     determining whether there has been substantial

     compliance, the purpose of 29 U.S.C.  1133

     and its implementing regulations, 29 C.F.R.

      2560.503-1(f), serves as our guide: "was the

     beneficiary supplied with a statement of

     reasons that, under the circumstances of the

     case, permitted a sufficiently clear

     understanding of the administrator's position

     to permit effective review."



Donato v. Metropolitan Life Ins. Co., 19 F.3d 375, 382 (7th Cir.

1994)(citations omitted)(quoting Halpin v. W.W. Grainger, Inc., 962

F.2d 685, 690 (7th Cir. 1992)). 

     The record reveals that Terry was, in fact, "permitted a

sufficiently clear understanding of the administrator's position to

permit effective review."  Id.  He submitted additional medical and

vocational information to the Benefit Committee which directly

addressed the question whether he was disabled from performing

"any" job.  His actions demonstrate that he was well aware of the

reasons for the decision, and was submitting additional evidence on

the crucial point.  Moreover, he was on notice that a critical

issue was the lack of objective medical testing in support of his

claim, having been informed of that deficiency in the letter from

Northwestern's ERISA Committee.  Finally, he has failed to

demonstrate the prejudice that Recupero requires.  Terry has not

presented any evidence that implies that a different outcome would

have resulted had the notice been in formal compliance with the

regulations.  As a result, Terry has not shown that the alleged

defect abridged his right to "a full and fair review by the

appropriate . . . fiduciary."  29 U.S.C.A.  1133(2). 

     We now turn to the heart of this appeal, and determine

whether the decision of the Benefit Committee was arbitrary and

capricious.  It is, of course, the hallmark of such review that "a

court is not to substitute its judgment for that of the [decision-

maker]."  Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto Ins.

Co., 463 U.S. 29, 43 (1983).  Rather, in the ERISA context, it has

been stated that under the arbitrary and capricious standard, "a

fiduciary's interpretation of a plan will not be disturbed if

reasonable."  DeWitt v. Penn-Del Directory Corp., 106 F.3d 514, 520

(3d Cir. 1997).

     The Benefit Committee gave two reasons for its decision

to uphold the termination of benefits.  The first was that Terry

had failed to perfect his appeal within the proper sixty-day time

limit.  The second was that Terry no longer met the Plan's

definition of disability.  Terry fails to present evidence to

demonstrate that either decision was unreasonable.

     It was not improper for the Benefit Committee to have

held Terry to the sixty-day appeal period.  Drinkwater mandates

that a claimant must have exhausted the plan's administrative

remedies before bringing suit to recover benefits.  846 F.2d at

825-26.  This court is not alone in so holding.  See, e.g.,

Communications Workers of Am. v. AT&T, 40 F.3d 426, 431-34 (D.C.

Cir. 1994); Makar v. Health Care Corp., 872 F.2d 80, 82-83 (4th

Cir. 1989); Amato v. Bernard, 618 F.2d 559, 566-68 (9th Cir. 1980). 

A claimant is required to attend to the plan's internal appeal

process first, unless "the administrative route is futile or the

remedy inadequate."  Drinkwater, 846 F.2d at 826 (quoting Amato,

supra).  Terry has not attempted to make any showing of futility or

inadequacy. 

     We have not yet had the opportunity to apply the

Drinkwater exhaustion requirement to the situation here where a

claimant files an appeal, but does so late.  In such a circumstance

the claimant, while ostensibly availing himself of the internal

review process, has procedurally defaulted as a result of the late

filing.  The same principles which inform the ERISA exhaustion

requirement also counsel that part of that internal administrative

process includes the responsibility on the claimant's part to file

appeals in a timely fashion.  Cf. Counts v. American Gen. Life and

Acc. Ins. Co., 111 F.3d 105, 108 (11th Cir. 1997) (observing that

attorney's letters contesting aspects of benefit denial sent four

and ten months after sixty-day appeal period expired constitutes

failure to exhaust administrative remedies).  As the Fourth Circuit

reasoned in Makar,

     Congress' apparent intent in mandating these

     internal claims procedures was to minimize the

     number of frivolous ERISA lawsuits; promote

     the consistent treatment of benefit claims;

     provide a nonadversarial dispute resolution

     process; and decrease the cost and time of

     claims settlement.  It would be anomalous if

     the same reasons which led Congress to require

     plans to provide remedies for ERISA claimants

     did not lead courts to see that those remedies

     are regularly utilized.



872 F.2d at 83 (quotation marks and citations omitted).  It would

hardly make sense to permit the filing of an appeal over one year

late in light of the internal claims procedures' aims of

consistency and economy.  Haphazard waiver of time limits would

increase the probability of inconsistent results where one claimant

is held to the limitation, and another is not.  Similarly,

permitting appeals well after the time for them has passed can only

increase the cost and time of the settlement process. 

     This would be, of course, a different case if Terry's

procedural default was caused by improprieties on the part of the

Plan.  Instead, Terry's lapse was egregious because Bayer's

Benefits Manager, Ms. Fleischer, took affirmative steps to inform

Terry of exactly how to pursue an appeal.  A letter was sent to

Terry which informed him of the sixty-day time period, appended to

which was a copy of the relevant appeal provisions from the SPD. 

Yet Terry did not bother to request an appeal until over one year

later, despite the fact that he was represented by counsel at the

time the Fleischer letter was received.  We therefore do not think

it unreasonable for the Benefit Committee to have denied Terry's

appeal on the basis that it was not filed on time.  

     Nor do we think the Benefit Committee would have been

unreasonable if its sole basis for rejecting the appeal was that

Terry was no longer unable to perform "any job for which [Terry

was] qualified by education, training, or experience."  There was

evidence before the Committee that: (i) several doctors (including

Dr. Jacobs) had at various times determined that Terry could

perform either part-time or full-time sedentary work; (ii) Terry

was trained to be a computer technician; (iii) Terry possessed

transferable skills in the computer field; and (iv) based on

observations at Farnum (the rehabilitation center), Terry was

capable of working full time, so long as his job did not entail

certain physical tasks, and he was permitted accommodations to

alleviate his knee pain.  We also note that Terry failed to

participate fully in the work hardening program.  On such a record,

we think it to be a reasonable interpretation to say that Terry was

no longer precluded from performing "any job," as the Plan

requires.  After all, Terry was trained and experienced in computer

technology and software, which can be readily adapted to a

sedentary worker's needs.  That there were contradictory opinions

before the Committee does not render the Committee's decision

arbitrary or capricious.  The Benefit Committee was charged with

the duty of resolving disputes concerning claimant eligibility, and

their determination in this regard is supported by substantial

evidence.  See Miller v. United Welfare Fund, 72 F.3d 1066, 1072

(2d Cir. 1995)(noting that decision unsupported by substantial

evidence would be arbitrary and capricious).  

     Finally, Terry asserts that he was "set up" by

Northwestern in that Northwestern forced him into a rehabilitation

program that was designed to result in a release to work  

regardless of his capacity to do so.  Thus, the argument goes, the

record relied upon by the Benefit Committee (and generated by this

"set up") was unreasonably biased against him, and as such failed

to afford him an impartial appeal.  We fail to see the evidentiary

basis for the argument.  Our review of the record reveals only

good-faith efforts to determine whether Terry continued to meet the

Plan's definition of disability.  The record discloses that Tacl

decided upon the rehabilitation course only after being confronted

with conflicting medical opinions concerning the extent of Terry's

disability.  Both the IME and the rehabilitation program were

specifically authorized by Plan documents.  See SPD at 11.  There

is nothing in the record to suggest that the Farnum program was a

sham.  We therefore do not think Terry has adduced sufficient

evidence on this argument to survive summary judgment. 

     On the record before us, we cannot say that the decision

of the Benefit Committee to uphold the termination of Terry's long-

term disability benefits constitutes an arbitrary or capricious

decision.  As a result, summary judgment was properly entered

against Terry.

     For the reasons stated, the decision of the district

court is affirmed.  Costs awarded to appellee.