Former Employees of Kleinerts, Inc. v. Herman, Slip Op. 99-96.

• Decision Date: 14 September 1999
• Docket Number: Court No. 98-05-01438.,Slip Op. 99-96.
• Citation: 74 F.Supp.2d 1280
• Parties: FORMER EMPLOYEES OF KLEINERTS, INC., Plaintiffs, v. Alexis HERMAN, United States Secretary of Labor, Defendant.
• Court: U.S. Court of International Trade

74 F.Supp.2d 1280

FORMER EMPLOYEES OF KLEINERTS, INC., Plaintiffs, v. Alexis HERMAN, United States Secretary of Labor, Defendant.

Slip Op. 99-96.

Court No. 98-05-01438.

United States Court of International Trade.

September 14, 1999.

COPYRIGHT MATERIAL OMITTED

Roger E. Naghash, Santa Ana, CA, for plaintiffs.

David W. Ogden, Acting Assistant Attorney General, Civil Division, U.S. Department of Justice, Washington, DC; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, DC; Henry R. Felix, Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, DC; Of counsel, Marilyn W. Zola, Office of the Solicitor, U.S. Department of Labor, Washington, DC, for defendant.

OPINION

POGUE, Judge.

This matter is before the Court on Former Employees of Kleinerts, Inc.'s ("Plaintiffs") motion for judgment on the agency record pursuant to USCIT Rule 56.1. Plaintiffs challenge the Secretary of Labor's ("Labor") remand determination that Plaintiffs are not eligible for certification for trade adjustment assistance because increased imports did not contribute importantly to the workers' separation from employment within the meaning of Section 222 of the Trade Act of 1974. See 19 U.S.C. § 2272(a)(3)(1994). This Court has jurisdiction pursuant to 19 U.S.C. § 2395(c)(1994) and 28 U.S.C. § 1581(d)(1)(1994).

Background

The purpose of the trade adjustment assistance program is "to offer unemployment compensation, training, job search and relocation allowances, and other employment services to workers who lose their jobs because of import competition." Former Employees of Parallel Corp. v. United States Secretary of Labor, 14 CIT 114, 118, 731 F.Supp. 524, 527 (1990).

In order to certify a group of workers as eligible to apply for trade adjustment assistance, Labor must determine:

(1) that a significant number or proportion of the workers in such workers' firm or an appropriate subdivision of the firm have become totally or partially separated, or are threatened to become totally or partially separated,

(2) that sales or production, or both, of such firm or subdivision have decreased absolutely, and

(3) that increases of imports of articles like or directly competitive with articles produced by such workers' firm or an appropriate subdivision thereof contributed importantly to such total or partial separation, or threat thereof, and to such decline in sales or production.

19 U.S.C. § 2272(a).

In order to receive trade adjustment assistance benefits, Plaintiffs must satisfy all three requirements of 19 U.S.C. § 2272(a). See, e.g., Former Employees of Bass Enterprises Prod. Co. v. United States, 13 CIT 68, 70, 706 F.Supp. 897, 900 (1989); Abbott v. Donovan, 8 CIT 237, 239, 596 F.Supp. 472, 474 (1984).

On February 6, 1998, Kleinerts Inc. of Alabama ("Kleinerts"), a garment manufacturing company, closed its plant in Greenville, Alabama. As a result of the closing, Kleinerts terminated the Plaintiffs' employment. See Petition Screening and Verification, Conf. Rec. at 2. In anticipation of the closing of the Greenville plant, Plaintiffs, pursuant to 19 U.S.C. § 2271(a) (1994), filed a petition for certification of eligibility to apply for adjustment assistance on January 31, 1998. In their petition, Plaintiffs described the products manufactured at Greenville as "T-shirts" and "sweatshirts."¹ See Petition for Trade Adjustment Assistance, Jan. 31, 1998, Conf. Rec. at 1.

In response to the petition, Labor began an investigation of whether Plaintiffs were eligible to apply for adjustment assistance. On February 17, 1998, Labor sent a questionnaire to Bud Daniels, Director of Personnel at Kleinerts, inquiring: (1) about the organizational structure of Kleinerts Inc. and its Greenville plant; (2) about the company's sales, production, and employment; (3) about the company's imports; (4) whether the company transferred production to an offshore location; and (5) about its existing primary customers. See Feb. 17, 1998, Fax from Kleinerts, Conf. Rec. at 7-8.

In response, Mr. Daniels asserted that "Greenville is a satellite sewing plant of Kleinerts Inc. of Alabama[, which] is a wholly owned subsidiary of Kleinerts Inc." Id. at 7. In addition, Mr. Daniels identified the main products manufactured by the Greenville plant as "T-shirts" and "fleece tops." See id. Mr. Daniels further reported that neither Kleinerts nor its affiliates imported products competitive with those produced at the Greenville plant. See id. Mr. Daniels also noted that the Greenville plant layoffs occurred as a result of transferring production to the company's Elba, Alabama, facility, not to an offshore location. See id. at 8. Finally, Mr. Daniels indicated that the Greenville plant had one primary "declining" customer ("Primary Customer"), and that Primary Customer only purchased T-shirts from the Greenville facility.² See id.

In addition, Labor, in accord with its general practice, surveyed the Greenville plant's customers to determine whether the "contributed importantly" test was satisfied. On February 24, 1998, Labor sent a letter to the human resources department of Primary Customer, requesting that it report the total quantities of its domestic and foreign purchases of T-shirts similar to or like those produced by the Greenville plant. See Feb. 24, 1998, Letter from Labor, Conf. Rec. at 11. In response, Primary Customer asserted that it did not purchase imports and that its contract with Kleinerts ended because Kleinerts elected to discontinue the business relationship. See Mar. 12, 1998, Fax from Primary Customer, Conf. Rec. at 14.

Based on the information obtained from Kleinerts and Primary Customer, Labor concluded on March 19, 1998, that the reasons for Plaintiffs' dislocation from Kleinerts' Greenville plant did not satisfy the third requirement of the statutory test for group eligibility: that imports contribute importantly to the workers' separation. See Negative Determ. Regarding Eligibility, Mar. 19, 1998, Conf. Rec. at 18-19. Accordingly, Labor denied Plaintiffs' petition for trade adjustment assistance. See id.

On March 27, 1998, Plaintiffs requested reconsideration of Labor's negative determination. See Mar. 27, 1998, Letter from Plaintiffs, Conf. Rec. at 24. Plaintiffs' request reiterated that the Greenville plant produced fleece tops in addition to T-shirts. See id. Moreover, Plaintiffs alleged that Kleinerts transferred equipment from the Greenville plant to Honduras for the purpose of shifting fleece top production to Honduras. See id.

On April 15, 1998, Labor adhered to its denial of Plaintiffs' petition based on the following findings: (1) that Primary Customer reported no imports of T-shirts like those produced by the Greenville plant in 1996 and 1997, and (2) that the shift of machines from Greenville, Alabama, to Honduras did not form a basis for worker group certification. See Negative Determ. Regarding Application for Reconsideration, Apr. 15, 1998, Conf. Rec. at 27. Labor did not comment regarding the production of fleece tops at the Greenville plant. See id. at 26-28.

Plaintiffs challenged Labor's negative determination in this Court on June 1, 1998. On July 13, 1998, Labor requested a voluntary remand to conduct further investigation. This Court granted Labor's request.

Consequently, Labor asked for additional information from Kleinerts regarding: (1) the production of T-shirts and fleece tops at the Greenville plant during 1996 and 1997; (2) its contract with Primary Customer; (3) the transfer of equipment from the Greenville plant to Honduras; and (4) its production of fleece tops for a secondary customer ("Secondary Customer"). See July 7, 1998, Letter from Labor, Conf. Rec. at 30.

Again reporting on behalf of Kleinerts, Mr. Daniels responded that there was a decline in T-shirt production at Kleinerts' Greenville plant and an overall sales decline of fleece tops for the company as a whole. See July 20, 1998, Fax from Kleinerts, Conf. Rec. at 32. Moreover, Mr. Daniels asserted that fleece top production at the Greenville plant was a "fill-in" mechanism established to keep the Greenville plant open while negotiations for a new contract with Primary Customer were taking place. See id.; see also Mem. Regarding Telephone Conversation with Bud Daniels, Apr. 15, 1998, Conf. Rec. at 25. Finally, Mr. Daniels asserted that the equipment shipped from Greenville to Honduras was to be used for products different from those manufactured at the Greenville plant, and that Kleinerts was not using any foreign contractors to produce T-shirts or fleece tops. See id.

Labor continued its remand investigation by requesting from Secondary Customer the respective quantities of its fleece top purchases from (1) Kleinerts, (2) all domestic sources, and (3) foreign sources. See Aug. 6, 1998, Letter from Labor, Conf. Rec. at 39. Secondary Customer's representative responded that it purchased 975,000 units of fleece tops from Kleinerts in 1996 and 960,000 units in 1997. In addition, Secondary Customer reported 45,000 units of fleece top imports in 1997 alone. See Aug. 12, 1998, Fax from Secondary Customer, Conf. Rec. at 41.

Upon completing its investigation on remand, Labor again denied Plaintiffs' eligibility. See Negative Determ. on Reconsideration on Remand, Sept. 9, 1998, Conf. Rec. at 42-43. Labor based its third negative determination on the following findings: (1) Primary Customer reported no imports of like or directly competitive articles; (2) "[S]econdary [C]ustomer, which was used as [a] production fill-in at the [Greenville] facility, reported imports of less than six percent of like or directly competitive articles to those made by the [Greenville] facility[;]" and (3) Kleinerts did not use the transferred equipment to manufacture products like or directly competitive to those formerly produced at the Greenville plant. Id. at 43. Thus, on...