Former Employees of Ibm v. U.S. Sec. Labor, Slip Op. 05-92.

• Decision Date: 01 August 2005
• Docket Number: Slip Op. 05-92.,Court No. 03-00656.
• Citation: 387 F.Supp.2d 1346
• Parties: FORMER EMPLOYEES OF IBM CORP., GLOBAL SERVICES DIVISION, et. al., Plaintiffs, v. UNITED STATES SECRETARY OF LABOR Defendant.
• Court: U.S. Court of International Trade

387 F.Supp.2d 1346

FORMER EMPLOYEES OF IBM CORP., GLOBAL SERVICES DIVISION, et. al., Plaintiffs, v. UNITED STATES SECRETARY OF LABOR Defendant.

Slip Op. 05-92.

Court No. 03-00656.

United States Court of International Trade.

August 1, 2005.

Ivey, Smith & Ramirez, Michael G. Smith, (Jean-Claude Andre) for Plaintiffs.

Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, Patricia M. McCarthy, Assistant Director, (Michael D. Panzera), Trial Attorney, Michael F. Bahler, Trial Attorney, U.S. Department of Justice, Commercial Litigation Branch, Civil Division; Stephen Jones, Office of the Solicitor, U.S. Department of Labor, for Defendant, of counsel.

OPINION

BARZILAY, Judge.

This case concerns a number of software developers (also referred to as "software programmers"), including the 126 petitioning workers who became separated from their employment when their jobs were outsourced by IBM to Canada and India. These same workers, originally AT & T employees, had previously been transferred from the AT & T payroll to IBM with representations that "IBM is a leader in the outsourcing industry, and we believe our people will have good career opportunities there." Jeff May, Shipped Out — The Story of How AT & T Moved 3,500 Workers to a New "Career" at IBM — Knowing It Wouldn't Last, THE STAR LEDGER, August 25, 2002, Administrative Record ("A.R.") at 4. The first part of that statement proved more true than the second, unfortunately for the workers involved. When they were laid off by IBM, Plaintiffs filed for Trade Adjustment Assistance ("TAA") benefits with the United States Department of Labor ("Labor"). Labor denied certification, as it has before, on the ground that the workers' firm "does not produce an article as required for certification under Section 222 of the Trade Act of 1974." Notice of Determinations Regarding Eligibility To Apply for Worker Adjustment Assistance and NAFTA Transitional Adjustment Assistance, 68 Fed.Reg. 16,833 (April 7, 2003). Because the court finds that Labor's determination was not supported by substantial evidence on the record, this matter is remanded for further investigation.

I. Background

Plaintiffs are former employees of IBM who were separated from their employment with IBM Global Services Division in Piscataway, NJ and Middletown, NJ on (or about) May 9, 2002. On November 13, 2002, Plaintiff James Fusco ("Fusco") filed a petition with Labor for TAA on behalf of the former employees from the Piscataway facility. See Petition for Trade Adjustment Assistance on Behalf of Workers At IBM Corporation Global Services Division, A.R. at 2. On December 16, 2002, a group of former employees from IBM's Middletown facility also filed a petition with Labor for trade adjustment assistance. See Petition for Trade Adjustment Assistance on Behalf of Workers At IBM Corporation Global Services Division, A.R. at 15. In response to the petition, Labor initiated its investigation. See Notice of Investigation, 67 Fed.Reg. 78,021 (Nov. 29, 2002), A.R. at 7.

During its investigation, Labor obtained all of the factual information it relied on from two sources: Plaintiff Fusco and Lauren Landy ("Landy"), staff counsel at IBM Global Services. A.R. at 18-26. In an e-mail correspondence, Fusco stated that "our job functions were varied, but if I had to sum them up... we were involved in the analysis, development and testing of computer software and information systems." A.R. at 22. Fusco also submitted a newspaper article to support his allegation that the jobs went to Canada. Id. Labor then contacted Landy by telephone on March 18, 2003. Landy stated that

[ ] See Findings of the Investigation, Confidential Administrative Record ("C.A.R.") at 26. Labor's investigator made no further inquiry concerning the nature of the work done by Plaintiffs' firm.

On March 23, 2003, Labor denied Plaintiffs' certification for trade adjustment assistance on the ground that Plaintiff's firm did not produce "an article" as required under section 222 of the Trade Act of 1974. Notice of Determinations Regarding Eligibility To Apply for Worker Adjustment Assistance, 68 Fed.Reg. 16,834 (April 7, 2003)("Negative Determination"), A.R. at 28-29. On April 29, 2002, Plaintiffs filed a Request for Administrative Reconsideration of the Department's Denial of TAA. The Request for Reconsideration stated that "the negative decision for the petitioning worker group came as a result of an overly narrow and antiquated interpretation of production as stipulated in the Trade Act[, and] that software is different from services in that one does not need a software `worker' to operate software." Request for Admin. Reconsideration of the Dep't's Denial of TAA for Workers of IBM Corporation, A.R. at 40. Specifically, Plaintiff Fusco argued that

We believe that the Trade Act of 1974 was too narrowly interpreted in the initial determination. At the time the Trade Act of 1974 was written, computer software was not recognized as the commodity it is today. We also were not required to be physically present for the computer software to be used, as someone who performed a service would be.

Id.

Following Plaintiff's request for reconsideration of the negative determination, Labor consulted two additional sources of information: (1) the Harmonized Tariff Schedule of the United States (HTSUS) and (2) the North American Industry Classification System (NAICS). First, Labor contacted a National Import Specialist at U.S. Customs and Border Protection ("CBP")¹ who stated that software that is electronically generated and transferred is not a tangible commodity for customs purposes. Memo from Susan Worden, June 23, 2003, A.R. at 42. Second, Labor inquired with a nomenclature analyst at the United States International Trade Commission who also stated that software is only a commodity according to the "media" it is encoded on and that the software itself carries no value under HTSUS. Memo from Susan Worden, June 23, 2003, A.R. at 43. In addition, Labor relied on NAICS, published by the U.S. Department of Commerce, which designates all custom software applications as "Services." None of these sources addressed the points Fusco raised in his letter requesting reconsideration, and it appears that Labor has not attempted to answer them to this date. Based on this information, Labor issued its reconsideration determination, affirming the Negative Determination denying certification on June 26, 2003. IBM Corporation, Global Services Division, Picataway, NJ, and IBM Corporation, Global Services Division, Middletown, NJ; Notice of Negative Determination Regarding Application for Reconsideration ("Reconsideration Determination"), 68 Fed.Reg. 41,845 (July 15, 2003), A.R. at 46-50. Labor explained that "[s]oftware and associated information technology services are not listed in the HTSUS" and that "[s]uch products are not the type of employment work products that Customs officials inspect and that the TAA program was generally designed to address." Reconsideration Determination, A.R. at 48. Plaintiff Fusco and three others, on behalf of all similarly situated software workers, now challenge Labor's determination regarding their eligibility for TAA; specifically the finding that Plaintiffs' firm did not produce "articles" within the meaning of the Trade Act of 1974.

The three other named plaintiffs — Barbara Lisa Pineau, Dick Young, John F. Lake — are former employees of Computer Horizons in Irving, Texas who were denied TAA certification following Investigation No. TA-W-50,399. See 68 Fed.Reg. 5654 (Feb. 4, 2003). Before joining this action, the Computer Horizon plaintiffs did not file a request for reconsideration with Labor, and they did not appeal the negative determination to this court within the 60-day time period following the publication of the negative determination, as required by 28 U.S.C. § 2636(d).

II. Jurisdiction and Standard of Review

This Court has exclusive jurisdiction over civil actions arising from "any final determination by the Secretary of Labor ... with respect to the eligibility of workers for adjustment assistance." 28 U.S.C. § 1581(d)(1) (2000). Labor's factual findings shall be conclusive where supported by substantial evidence. 19 U.S.C. § 2395(b) (2000). Where they are not supported as such, the Court may remand to the Secretary of Labor to take further evidence. Id. Furthermore, this Court considers whether Labor's legal determinations are "in accordance with law," as outlined in the Administrative Procedure Act ("APA"). See Former Employees of Electronic Data Systems Corp. v. United States Sec'y of Labor, 28 CIT ___, 350 F.Supp.2d 1282 (2004) (citations omitted). Because Labor's interpretation of the statutory term "article" is akin to a letter ruling by Customs, see FEO Electronic Data Systems, 350 F.Supp.2d at 1287, any determination by Labor regarding this term is reviewed according to its "power to persuade" as outlined by the Supreme Court in Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944). Id. (citing United States v. Mead Corp., 533 U.S. 218, 235, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001)).

III. Discussion

Before this court can determine the issue of whether Labor correctly determined that plaintiffs do not produce an "article" within the meaning of 19 U.S.C. § 2272(a), it must first consider whether Labor conducted a "reasonable inquiry" into the nature of the Plaintiffs' employment. See Former Employees of Sun Apparel of Tex. v. United States Sec'y of Labor, 28 CIT ___, 2004 WL 1875062, *6 (Aug. 20, 2004) citing Former Employees of Hawkins Oil & Gas, Inc. v. United States Secretary of Labor, 17 CIT 126, 130, 814 F.Supp. 1111, 1115 (1993) (holding that where the administrative record lacked any meaningful discussion regarding the investigative measures undertaken by Labor, the investigation was inadequate and therefore, no deference was due to Labor's determinations)....