Former Employees, Mara. Ashland Pipe Line v. Chao, 03-1556.

• Decision Date: 14 June 2004
• Docket Number: No. 03-1556.,03-1556.
• Citation: 370 F.3d 1375
• Parties: FORMER EMPLOYEES OF MARATHON ASHLAND PIPE LINE LLC, Plaintiffs-Appellees, v. Elaine CHAO, Secretary of Labor, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1375

370 F.3d 1375

FORMER EMPLOYEES OF MARATHON ASHLAND PIPE LINE LLC, Plaintiffs-Appellees, v. Elaine CHAO, Secretary of Labor, Defendant-Appellant.

No. 03-1556.

United States Court of Appeals, Federal Circuit.

June 14, 2004.

Marianne Rowden, Katten Muchin Zavis Rosenman, of Chicago, IL, argued for plaintiff-appellee. With her on the brief was James L. Sawyer.

Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellant. With her on the brief were Peter D. Keisler, Assistant Attorney General; and David M. Cohen, Director.

Before LOURIE, CLEVENGER, and BRYSON, Circuit Judges.

BRYSON, Circuit Judge.

This is a government appeal from an order of the Court of International Trade. The trial court directed the Secretary of Labor to certify eight former employees of Marathon Ashland Pipe Line LLC as eligible for statutory benefits that are available to employees who lose their jobs because of competition from imported goods. Because we conclude that substantial evidence supports the Secretary's determination that the former employees were not engaged in the production of crude oil, we reverse the trial court's ruling to the contrary.

I

Marathon Ashland Pipe Line is a subsidiary of Marathon Ashland Petroleum LLC, which is a partnership owned by Marathon Oil Company and Ashland Inc. The eight former employees worked as "gaugers" for Marathon Ashland Pipe Line. In that capacity, they were responsible for performing quality control on crude oil that was purchased from independent crude oil producers in the Illinois Basin oil field in Bridgeport, Illinois. Their main responsibility was to test the crude oil that had been gathered from the independent producers and stored in tanks. Once the crude oil was tested and verified for quality, it would be released for shipment to third-party purchasers or to the parent company's refinery in Robinson, Illinois.

In 1999, the division of Marathon Ashland Pipe Line for which the employees worked was sold. As a result of the sale, the eight employees lost their jobs. Because the sale occurred close in time to announcements that Marathon undertook to purchase crude oil from outside the United States, the employees contended that Marathon's increased importation of foreign crude oil contributed to the loss of their jobs.

Members of the employees' union filed with the United States Department of Labor a petition seeking benefits for the employees under chapter 2 of title II of the Trade Act of 1974, Pub.L. No. 93-618, 88 Stat.2019-30 (1975) (codified as amended at 19 U.S.C. §§ 2271-2395 (2000)). That statute provides that workers who lose their jobs because of competition from imported goods may be eligible for certain monetary, training, and employment service benefits, referred to collectively as "adjustment assistance." The statute assigns to the Secretary of Labor the responsibility to certify workers as eligible for adjustment assistance if the Secretary determines that a significant number of workers in a firm or subdivision have lost their jobs because of competition from imported goods and if certain other criteria are met. 19 U.S.C. § 2272 (2000).

The petition asserted that the employees lost their jobs because their employer's parent company increased its importation of crude oil and converted its Robinson, Illinois, refinery to process the imported crude oil, thereby reducing its need for crude oil from the Illinois Basin oil field. In response to the petition, the Secretary of Labor conducted an investigation, which consisted mainly of sending an inquiry to Marathon Ashland Pipe Line's human resources representative asking for information regarding the firm's organizational structure, sales, production, employment, and imports.

In December 1999, the Secretary issued a negative determination, in which the Secretary concluded that the employees were not eligible for adjustment assistance. In the denial notice accompanying the decision, the Secretary explained that the petitioning employees were not eligible for adjustment assistance because their company performed a service, namely "transporting crude oil and petroleum products via pipeline," rather than producing an article, as required by the statute. The Secretary explained that the employees of Marathon Ashland Pipe Line would be eligible for adjustment assistance only if "their separation was caused importantly by a reduced demand for their services from a parent firm, a firm otherwise related to the subject firm by ownership, or a firm related by control." In addition, the Secretary stated, "the reduction in demand for services must originate at a production facility whose workers independently meet the statutory criteria for certification and the reduction must directly relate to the product impacted by imports." According to the Secretary, those conditions were not met for the employees on whose behalf the petition had been filed.

The employees requested reconsideration of the Secretary's noncertification decision, pointing out that in their capacity as gaugers they tested the crude oil produced by independent producers in the Illinois Basin field before it was transported in the Marathon Ashland pipeline. They also noted that the crude oil acquisition department of the parent company, Marathon Oil Company, worked directly with the gaugers in setting the parameters for the acceptance or rejection of the crude oil that was to be transported either to the Marathon refinery or to third-party purchasers. Finally, they argued that the employees' layoffs had been caused by a reduced demand for services by the parent company and that the employees qualified for adjustment assistance on that ground as well.

The Secretary denied reconsideration. The Secretary noted that amendments to the adjustment assistance statute made in 1988 extended the Act's coverage to workers engaged in exploring and drilling for crude oil and natural gas, but not to workers engaged in transporting crude oil or natural gas after its extraction. Reiterating the finding that the employees provided a service and did not produce an article, the Secretary explained that service workers may be certified for adjustment assistance "only if there is a reduced demand for their services from a parent firm, a firm otherwise related to the subject firm by ownership, or a firm related by control." Although some workers in the parent company, Marathon Oil Company, had been certified as eligible for adjustment assistance, the Secretary stated that the employees' firm, Marathon Ashland Pipe Line, did not serve the facilities where workers had been certified. Finally, the Secretary explained that the investigation had shown that the employees' separations were the result of the sale of firm assets, not the result of a reduction in demand for their services originating at a related company's production facility.

The employees sought judicial review of the Secretary's negative determination by commencing a civil action in the United States Court of International Trade pursuant to 19 U.S.C. § 2395(a). After the employees moved for judgment on the administrative record, the Secretary sought and obtained a voluntary remand to conduct a further investigation into whether the employees had supported crude oil production activities of Marathon Ashland Pipe Line's parent company, Marathon Oil Company. After a further inquiry to Marathon Ashland Pipe Line, the Secretary again denied the petition for adjustment assistance. The Secretary stated that the remand investigation had revealed that during the pertinent period, Marathon Ashland Pipe Line had transported crude oil that Marathon Oil Company and Marathon Ashland Petroleum had purchased from independent Illinois Basin producers, but that Marathon Ashland Pipe Line had not transported crude oil extracted by the parent company, Marathon Oil Company. For that reason, the Secretary concluded that the employees had not supported crude oil production of the parent company, Marathon Oil Company.

The employees then renewed their statutory review action before the Court of International Trade. After further briefing, the court ruled that the Secretary's decision was not supported by substantial evidence. Former Employees of Marathon Ashland Pipeline, LLC v. Chao, 215 F.Supp.2d 1345 (Ct. Int'l Trade 2002). The court determined that the Secretary had not conducted a reasonable inquiry because "the administrative record provides limited information discussing whether the Plaintiffs' duties as gaugers place them within the group of eligible import-impacted employees Congress intended to benefit" from adjustment assistance and that the Secretary "fail[ed] to offer any explanation of the analysis used to determine that Plaintiffs' work as gaugers did not constitute `producing' an article within the meaning of Section 2272." The court also determined that it was improper for the Secretary to rely entirely on representations by Marathon Ashland Pipe Line because "evidence presented by the petitioning workers stating that they were involved in more than the mere transportation of crude oil, directly contradicts the company officials' conclusions." The court further concluded that "[b]y failing to give a reasoned analysis for its determination that the gaugers did not participate in production, Labor neglected its duty to interpret the meaning of `production' under Section 2272."

Even assuming that the employees were service rather than production workers, the court ruled that the Secretary failed to investigate whether they were qualified for adjustment assistance on the ground that there was a "causal nexus" between increased imports and the loss of their jobs. Finally, the court determined that the Secretary "ignored the issue of whether Marathon Oil's decisions to purchase crude oil imported from Mexico...