Former Employees of Comput. v. U.S. Sec. of Labor

Decision Date27 January 2006
Docket NumberCourt No. 04-00149.,Slip Op. 06-17.
Citation414 F.Supp.2d 1334
PartiesFORMER EMPLOYEES OF COMPUTER SCIENCES CORPORATION, Plaintiffs, v. UNITED STATES SECRETARY OF LABOR, Defendant.
CourtU.S. Court of International Trade

Sidley Austin Brown & Wood LLP, (Neil R. Ellis, Rajib Pal, and Sharon H. Yuan), Washington, DC, for Former Employees of Computer Sciences Corporation, plaintiffs.

Stuart E. Schiffer, Deputy Assistant Attorney General, David M. Cohen, Director, Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Delfa Castillo); Peter Nessen, Office of the Solicitor, United States Department of Labor, for United States Department of Labor, defendant, of counsel.

OPINION AND ORDER

TSOUCALAS, Senior Judge:

In this matter, Former Employees of Computer Sciences Corporation ("Plaintiffs"), challenge the second remand determination of the Department of Labor ("Labor") conducted pursuant to the Court's decision in Former Employees of Computer Sciences Corp. v. U.S. Secretary of Labor ("CSC I"), 29 CIT ___, 366 F.Supp.2d 1365 (2005), of which familiarity is presumed. Very briefly, Plaintiffs are former employees of Computer Sciences Corporation ("CSC") who were separated from their employment as information technology professionals. See CSC I, 29 CIT at ___, 366 F.Supp.2d at 1366. Labor initially denied Plaintiffs' eligibility for certification of Trade Adjustment Assistance ("TAA") under Title II of the Trade Act of 1974, as amended 19 U.S.C. § 2271 (West Supp.2004) (the "Trade Act"). See Negative Determination Regarding Eligibility To Apply for Worker Adjustment Assistance ("Negative Determination"), TAW-53,209 (Dep't Labor Oct. 24, 2003) Admin. R. 55-56; Notice of Determinations Regarding Eligibility To Apply for Worker Adjustment Assistance, 68 Fed.Reg. 66,877-78 (Dep't Labor Nov. 28, 2003); Notice of Negative Determination on Reconsideration for Computer Sciences Corporation, Financial Services Group ("FSG"), East Hartford, Connecticut ("Negative Reconsideration Determination"), Admin. R. 78-80 (Dep't Labor Feb. 3, 2004) published at 69 Fed.Reg. 8,488 (Dep't Labor Feb. 24, 2004); Notice of Negative Determination on Reconsideration on Remand for Computer Sciences Corporation, Financial Services Group, East Hartford, Connecticut ("Remand Negative Determination"), Supplemental Admin. R. 13-17 (Dep't Labor July 29, 2004) published at 69 Fed.Reg. 48,526 (Dep't Labor Aug. 10, 2004).1 In CSC I, the Court held that Labor's Negative Determination, Negative Reconsideration Determination and Remand Negative Determination were not supported by substantial evidence or in accordance with law. See CSC I, 29 CIT at ___, 366 F.Supp.2d at 1373. Accordingly, the Court remanded this case ordering Labor to "(1) explain why code, which is used to create completed software, is not a software component; (2) examine whether Plaintiffs were engaged in the production of code; (3) investigate whether there was a shift in production of code to India; (4) investigate whether code imported from India is like or directly competitive with the completed software or any component of software formerly produced by Plain tiffs; and (5) investigate whether there has been or is likely to be an increase in imports of like and directly competitive articles by entities in the United States...." Id., 366 F.Supp.2d at 1373. On remand, Labor again determined that Plaintiffs were not eligible for TAA certification because Plaintiffs do not produce an article under the Trade Act. See Notice of Negative Determination On Remand for Computer Sciences Corporation, Financial Services Group, East Hartford, Connecticut ("Second Remand Negative Determination"), 2Supp. Admin. R. 171, 175 (Dep't Labor Aug. 24, 2005) published at 70 Fed.Reg. 52,129, 52,130 (Dep't Labor Sept. 1, 2005).

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19 U.S.C. § 2395(c) (2000) and 28 U.S.C. § 1581(d) (2000).

STANDARD OF REVIEW

In reviewing a challenge to Labor's determination of eligibility for trade adjustment assistance, the Court will uphold Labor's determination if it is supported by substantial evidence on the record and is otherwise in accordance with law. See 19 U.S.C. § 2395(b); Woodrum v. Donovan, 5 CIT 191, 193, 564 F.Supp. 826, 828 (1983), aff'd, Woodrum v. United States, 737 F.2d 1575 (Fed.Cir.1984). "Substantial evidence is something more than a `mere scintilla,' and must be enough reasonably to support a conclusion." Ceramica Regiomontana, S.A. v. United States, 10 CIT 399, 405, 636 F.Supp. 961, 966 (1986), aff'd, 810 F2d 1137 (Fed.Cir. 1987); see also. Consol. Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938). Additionally, when reviewing Labor's conclusions of law, the Court will consider whether they are "in accordance with the statute and not be arbitrary and capricious, and for this purpose the law requires a showing of reasoned analysis." Former Employees of Rohm & Haas Co. v. Chao, 27 CIT ___, ___, 246 F.Supp.2d 1339, 1346 (2003) (quoting Int'l Union v. Marshall, 584 F.2d 390, 396 n. 26 (D.C.Cir.1978)). Under this standard, the Court will "sustain the agency's interpretation of the statute where it has a rational basis in law, even though the court might have reached a different interpretation." Abbott v. Donovan, 6 CIT 92, 100-01, 570 F.Supp. 41, 49 (1983). The Court, however, will "reject the agency's interpretation or application of a statute when it is inconsistent with the legislative purpose of the statute or frustrates Congress' intent." Id. at 101, 570 F.Supp. at 49. "[I]t is for the courts, to which the task of statutory construction is ultimately entrusted, to determine whether or not administrative interpretations are consistent with the intent of Congress and the words of the Act." Woodrum 5 CIT at 194, 564 F.Supp. at 829.

Moreover, although "the nature and extent of the investigation are matters resting properly within the sound discretion of [Labor,]" Former Employees of Galey & Lord Indus. v. Chao, 26 CIT ___, ___, 219 F.Supp.2d 1283, 1286 (2002) (quoting Former Employees of CSX Oil & Gas Corp. v. United States, 13 CIT 645, 651, 720 F.Supp. 1002, 1008 (1989) (citation omitted)), good cause to remand exists if Labor's "chosen methodology is so marred that [Labor's] finding is arbitrary or of such a nature that it could not be based on substantial evidence." Id. The Court's review of Labor's determination denying certification of eligibility for TAA benefits is confined to the administrative record before it. See 28 U.S.C. § 2640(c); see also Int'l Union v. Reich, 22 CIT 712, 716, 20 F.Supp.2d 1288, 1292 (1998).

DISCUSSION
I. Contention of the Parties
A. Plaintiffs' Contentions

Plaintiffs argue that Labor's determination that they are ineligible for TAA benefits is not based on substantial evidence in the record, is arbitrary and capricious, and is not in accordance with law. See Comments Pls.' Former Employees Computer Sciences Corp. Regarding Redetermination Results Filed Dep't Labor Aug. 24, 2005 ("Pls.' Comments") at 4. Plaintiffs request that the Court vacate Labor's second remand determination and remand this case with instructions to certify Plaintiffs because substantial evidence on the record indicates that Plaintiffs have fulfilled the eligibility requirements for TAA certification. See Pls.' Comments at 3-4. Specifically, Plaintiffs argue that Labor's determination that software code is not an article is arbitrary and capricious, ignoring recent Customs rulings. See id. at 5. Rather, Plaintiffs assert that producing software or software code, a component of software, is an article within the meaning of the Trade Act. See id. Plaintiffs cite HQ 114459, wherein Customs determined that software modules, (source and/or binary code), are objects of trade and commerce in their ordinary use but exempt from duty under General Note 3(e) of the Harmonized Tariff Schedule of the United States ("HTSUS"). See Pls.' Comments at 5-6. Since all goods are subject to a duty unless exempted under a specific provision, Plaintiffs argue that HQ 114459 indicates that software code is an article under the HTSUS. See id. Plaintiffs contend that because Labor is obligated to follow Customs' interpretation of the HTSUS, which governs the definition of articles, and software is an article under the HTSUS, it is also an article under the Trade Act. See id. at 6-7. Plaintiffs also contend that Labor errs in requiring an article to be tangible under the Trade Act. See id. at 8. Even if tangibility is a requirement, however, Plaintiffs argue that software is tangible because it can be possessed or realized, unlike a service. See id. Plaintiffs maintain that software code is a component of completed software, although such a conclusion is unnecessary here because software code is itself an article under the Trade Act. See id. at 9-10.

Furthermore, Plaintiffs assert that substantial record evidence shows there has been a shift of production of software code to India. See id. at 11. On remand, Labor's investigation determined that the software code written in India is similar to the software code formerly written by the Plaintiffs in the United States. See id. at 12. Thus, Plaintiffs contend that the shift in production was of like or directly competitive articles as required by the Trade Act. See Pls.' Comments at 12. Plaintiffs finally argue that there has been or is likely to be an increase in imports of software code. See id. Plaintiffs maintain that regardless of the mode of entry, i.e. whether on a physical medium or electronic transmission, software code brought into the United States from India constitutes an importation for purposes of TAA. See id. at 12-13. Plaintiffs emphasize that the mode of entry of an article, especially software, into the United States is not an issue with Customs, as expressed in HQ 114459, or with the ...

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