Former Employees of BMC Software, Inc. v. United States Secretary of Labor

Slip Op. 06-132

UNITED STATES COURT OF INTERNATIONAL TRADE

_______________________________________

:

FORMER EMPLOYEES OF

BMC SOFTWARE, INC., :

Plaintiffs, :

Court No. 04-00229

v. :

UNITED STATES SECRETARY OF LABOR, :

_______________________________________:

Defendant.

[Revised Determination on Remand, certifying workers as eligible to apply for Trade Adjustment

Assistance benefits, is sustained.]

Decided: August 31, 2006

Miller & Chevalier Chartered (Alexander D. Chinoy, Hal S. Shapiro, Myles S. Getlan,

Daniel Lewis, and Owen Bonheimer), for Plaintiffs.

Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director, Jeanne E.

Davidson, Deputy Director, and Patricia M. McCarthy, Assistant Director, Commercial Litigation

Branch, Civil Division, U.S. Department of Justice (Michael D. Panzera); Charles D. Raymond,

Associate Solicitor for Employment and Training Legal Services, Office of the Solicitor, U.S.

Department of Labor (Stephen R. Jones), Of Counsel; for Defendant.

OPINION

RIDGWAY, Judge:

In this action, former employees of Houston, Texas-based BMC Software, Inc. (“the

Workers”) contest the determination of the U.S. Department of Labor denying their petition for

certification of eligibility for trade adjustment assistance (“TAA”) benefits. See Letter to Court from

A. Blummer, dated June 1, 2004 (“Complaint”); 69 Fed. Reg. 6694, 6695 (Feb. 11, 2004) (notice

of receipt of petition and initiation of investigation); 69 Fed. Reg. 11,887, 11,888 (March 12, 2004)

Court No. 04-00229 Page 2

(notice of denial of petition); 69 Fed. Reg. 20,642 (April 16, 2004) (notice of denial of request for

reconsideration); A.R. 2-33, 44-45, 53, 56-59.1 Jurisdiction lies under 28 U.S.C. § 1581(d)(1)

(2000).2

Now pending before the Court is the Labor Department’s Notice of Revised Determination

on Remand (“Revised Remand Determination”), which certifies that:

All workers of BMC Software, Inc., Houston, Texas, who became totally or partially

separated from employment on or after December 23, 2002, through two years from

the issuance of this revised determination, are eligible to apply for Trade Adjustment

Assistance under section 223 of the Trade Act of 1974.

69 Fed. Reg. 76,783, 76,784 (Dec. 22, 2004). The Workers have advised that they are satisfied with

that certification, albeit with certain reservations.

Accordingly, with the observations and clarifications set forth below, the Labor

Department’s Revised Remand Determination is sustained.

1

The administrative record in this case consists of two parts – the initial Administrative

Record (which the Labor Department filed with the court after this action was commenced), and the

Supplemental Administrative Record (which was filed after the Labor Department’s post-remand

certification of the Workers).

The two parts of the administrative record are separately paginated; both parts include

confidential business information. Citations to the public record are noted as “A.R. ____” and

“S.A.R. ____,” as appropriate, while citations to the confidential record are noted as “C.A.R. ____”

and “C.S.A.R. ____.”

2

Except as otherwise indicated, all statutory citations are to the 2000 version of the United

States Code.

Court No. 04-00229 Page 3

I. Background

A. The Trade Adjustment Assistance Laws

Trade adjustment assistance (“TAA”) programs historically have been – and today continue

to be – touted as the quid pro quo for U.S. national policies of free trade. See generally Former

Employees of Chevron Prods. Co. v. U.S. Sec’y of Labor, 27 CIT ____, ____, 298 F. Supp. 2d 1338,

1349-50 (2003) (“Chevron III”) (summarizing policy underpinnings of trade adjustment assistance

laws).3

3

See also Erika Kinetz, “Trading Down: The U.S. Shortchanges Its Outsourced Workers,”

Harper’s Magazine, July 2005, at 62 (“Harper’s Magazine”) (“For more than forty years, [TAA’s]

real success has been as a political tool: it has kept America from the precipice of protectionism and

helped to preserve the root of the very injustice it was meant to heal. . . . For many Republicans,

economists, and corporate executives, [the cost of the TAA program] is a small price to pay for

keeping free trade politically feasible.”), 63 (in its inception, TAA “served a prominent political

function: it was created in order to win AFL-CIO support for the Trade Expansion Act of 1962,

which led to broad tariff reductions.”); Lori G. Kletzer and Howard Rosen, “Easing the Adjustment

Burden on U.S. Workers,” in The United States and the World Economy: Foreign Economic Policy

for the Next Decade 316-20 (2005) (“Kletzer & Rosen”) (noting, inter alia, that programs for

assistance to displaced workers have been motivated in part by “social and political factors,” that

Congress has used granting of trade negotiating authority as an “opportunity to compensate U.S.

workers potentially adversely affected by any resulting changes in foreign competition,” that the

U.S. Trade Representative “has long supported TAA as a means for winning congressional support

for trade negotiating authority,” that expansions of TAA programs historically “have been highly

correlated with congressional consideration of trade-liberalizing legislation,” that TAA has been

considered “as a quid pro quo for support on trade-liberalizing legislation,” and that the inclusion

of TAA reform measures in the Trade Act of 2002 – which renewed the President’s trade promotion

authority (an early, high priority of the then-new Administration) – “helped secure the votes

necessary to pass the Trade Act”); Mike Dorning, “Trade Assistance Programs Fall Short,” Chicago

Tribune, Oct. 8, 2005 (“Chicago Tribune”) (“During the election campaign and again this summer

as the Bush administration fought for a free trade agreement with Caribbean countries, the White

House regularly extolled its efforts [i.e., the availability of TAA] on behalf of American workers

who lose their jobs to foreign competition.”).

Although TAA was originally “created in order to win AFL-CIO support” for free trade

legislation, the program no longer enjoys the broad support of organized labor. A recent analysis

in Harper’s Magazine explained:

Court No. 04-00229 Page 4

As UAW v. Marshall explains, “much as the doctrine of eminent domain requires

compensation when private property is taken for public use,” the trade adjustment assistance laws

similarly reflect the country’s recognition “that fairness demand[s] some mechanism whereby the

national public, which realizes an overall gain through trade readjustments, can compensate the

particular . . . workers who suffer a [job] loss.” UAW v. Marshall, 584 F.2d 390, 395 (D.C. Cir.

1978).4

In short, absent TAA programs that are adequately funded and conscientiously administered,

“the costs of a federal policy [of free trade] that confer[s] benefits on the nation as a whole would

TAA has always been a political quid pro quo – a little TAA for a lot of trade – that

has worked to keep markets open.

But as job growth remains weak and the U.S. current-account deficit continues to

swell, this trade-off looks increasingly unfavorable to unionized labor, which has

long decried TAA as “burial insurance.”

Harper’s Magazine at 63-64. See also, e.g., Kletzer & Rosen at 317-18 (Unions “have always feared

that supporting TAA could be seen as weakening their position against trade liberalization. TAA’s

link to job loss and the modest amount of assistance have led unions to characterize TAA as ‘burial

insurance’”); Megan Barnett, “Starting Over,” U.S. News & World Report, May 31, 2004, at 49

(“TAA is a program with little political support. Because retraining displaced workers is an integral

part of trade policy, antitrade constituents like unions don’t actively advocate it.”).

4

See Brad Brooks-Rubin, “The Certification Process for Trade Adjustment Assistance:

Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. 797, 798 n.10 (2005) (“Certifiably Broken”) (and

sources cited there) (“The basic economic policy premise for TAA is to ease the costs borne by

certain workers as a result of trade liberalization. While trade liberalization provides significant

opportunities for many sectors of the American economy, inevitably certain sectors suffer. TAA

and other adjustment initiatives were created as a means to assist those bearing the burden of freer

trade.”); Chicago Tribune (“Although most economists believe that the nation as a whole benefits

from freer trade, as consumers gain access to cheaper imports and exporters gain larger markets, the

costs are high for workers who lose their jobs in the process. Partly to lighten the burden on those

put out of work for the greater good and partly to counter union opposition to free trade deals,

Congress has provided for some type of assistance to workers dislocated by foreign trade since the

1960s.”).

Court No. 04-00229 Page 5

be imposed on a minority of American workers” who lose their jobs due to increased imports and

shifts of production abroad. Id. See also Former Employees of Bell Helicopter Textron v. United

States, 18 CIT 323, 328-29 (1994) (summarizing policy underpinnings and legislative history of

TAA). Thus, as a recent article in Harper’s Magazine explained, “[w]hen he introduced TAA,

President Kennedy justified the program in moral terms”:

“Those injured by [trade] competition should not be required to bear the full brunt

of the impact. Rather, the burden of economic adjustment should be borne in part

by the federal government . . . [T]here is an obligation to render assistance to those

who suffer as a result of national trade policy.”

Harper’s Magazine at 63 (quoting Kennedy).

The trade adjustment assistance laws are generally designed to assist workers who have lost

their jobs as a result of increased import competition from – or shifts in production to – other

countries, by helping those workers “learn the new skills necessary to find productive employment

in a changing American economy.” Former Employees of Chevron Prods. Co. v. U.S. Sec’y of

Labor, 26 CIT 1272, 1273, 245 F. Supp. 2d 1312, 1317 (2002) (“Chevron I”) (quoting S. Rep.

No.100-71, at 11 (1987)). As expanded in 2002,5 today’s TAA program entitles eligible workers6

5

The TAA program was initially established by Congress and the Kennedy Administration

under the Trade Expansion Act of 1962 (Pub. L. 87-794), to provide assistance to workers who lost

their jobs due to increased import competition. The program was substantially modified by the

Trade Act of 1974 (Pub. L. 93-618), and – inter alia – eligibility requirements were relaxed to some

degree. In 1981, assistance was reduced – e.g., income support was reduced from the average

manufacturing wage to the prevailing unemployment insurance rate, and made conditional on

enrollment in training in certain circumstances (a requirement which was further tightened in 1988).

Then, in 1993, Congress enacted the North American Free Trade Agreement Implementation Act

(Pub. L. 103-182), creating a separate NAFTA-TAA program specifically targeting workers

displaced as a result of trade with Canada and Mexico. See generally GAO-04-1012, “Trade

Adjustment Assistance: Reforms Have Accelerated Training Enrollment, but Implementation

Challenges Remain,” Sept. 2004, at 6 (“GAO Report 04-1012”); GAO-01-838, “Trade Adjustment

Assistance: Experiences of Six Trade-Impacted Communities,” Aug. 2001, at 5 (“GAO Report 01-

Court No. 04-00229 Page 6

838”); Kletzer & Rosen at 316-18; Harper’s Magazine at 63; “Certifiably Broken,” 7 U. Pa. J. Lab.

& Emp. L. at 802 & n.25; United Shoe Workers of America, AFL-CIO v. Bedell, 506 F.2d 174, 181-

82 (D.C. Cir. 1973) (tracing legislative history of Trade Expansion Act of 1962); Fortin v. Marshall,

608 F.2d 525, 528 (1st Cir. 1979) (summarizing history of 1974 Act, in light of 1962 legislation).

However, the TAA Reform Act of 2002 (part of the Trade Act of 2002) effected what are

– by any measure – the most sweeping reforms of trade adjustment assistance since its inception in

1962. See Pub. L. 107-210, 116 Stat. 933 (2002). Among other things, the TAA Reform Act

consolidated the TAA and NAFTA-TAA programs into a single TAA program, reduced the time

for a Labor Department determination on a petition to 40 days, increased the maximum number of

weeks of TRA payments available (to match the maximum number of weeks of training available),

added new benefits (including the Health Coverage Tax Credit), and expanded eligibility to include

additional secondary workers and additional workers affected by shifts in production (beyond those

affected by trade with Canada and Mexico, some of whom were eligible for NAFTA-TAA benefits).

See generally GAO Report 04-1012 at 7-11 (including Table 1, “Major Changes in the TAA Reform

Act of 2002,” a side-by-side comparison of the existing TAA program with the provisions of the

predecessor TAA and NAFTA-TAA programs); Kletzer & Rosen at 319-21; Harper’s Magazine at

63; “Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 802.

In addition, the TAA Reform Act of 2002 established as a demonstration project a wage

insurance benefit for older workers, known as the Alternative Trade Adjustment Assistance

(“ATAA”) program. ATAA allows workers aged 50 or older, for whom retraining may not be

appropriate, to accept reemployment at a lower wage and receive a wage subsidy. Workers who

qualify for ATAA are eligible to receive 50% of the difference between their new and old wages,

up to a maximum of $10,000 over two years. See generally GAO Report 04-1012 at 2, 10. Older

trade affected workers are eligible for ATAA only if the TAA petition filed with the Labor

Department specifically requested ATAA certification. Id. The petition at issue here did not.

6

For a table succinctly summarizing “TAA Eligibility Requirements,” see GAO Report 04-

1012 at 12 (Table 2).

The criteria for TAA certification as “production workers” are codified at 19 U.S.C. § 2272:

(a) In general

A group of workers . . . shall be certified . . . as eligible to apply for adjustment assistance

. . . if the Secretary determines that –

(1) a significant number or proportion of the workers in such workers’ firm, or an

appropriate subdivision of the firm, have become . . . separated . . . ; and

Court No. 04-00229 Page 7

to receive benefits which may include employment services (such as career counseling, resume-

writing and interview skills workshops, and job referral programs), vocational training, job search

and relocation allowances, income support payments (known as “Trade Readjustment Allowance”

or “TRA” payments), and a Health Insurance Coverage Tax Credit. See generally 19 U.S.C. § 2272

(2) (A) (i) the sales or production, or both, of such firm or subdivision have

decreased absolutely;

(ii) imports of articles like or directly competitive with articles produced

by such firm or subdivision have increased; and

(iii) the increase in imports described in clause (ii) contributed

importantly to such workers’ separation or threat of separation and to

the decline in the sales or production of such firm or subdivision; or

(B) (i) there has been a shift in production by such workers’ firm or

subdivision to a foreign country of articles like or directly

competitive with articles which are produced by such firm or

subdivision; and

(ii) (I) the country to which the workers’ firm has shifted production

of the articles is a party to a free trade agreement with the

United States;

(II) the country to which the workers’ firm has shifted production

of the articles is a beneficiary country under the Andean

Trade Preference Act . . . , African Growth and Opportunity

Act . . . , or the Caribbean Basin Economic Recovery Act . .

. ; or

(III) there has been or is likely to be an increase in imports of

articles that are like or directly competitive with articles

which are or were produced by such firm or subdivision.

19 U.S.C. § 2272 (Supp. II 2002).

Trade-affected workers who are not eligible for certification as “production workers” under

19 U.S.C. § 2272(a) may be eligible for certification as “secondary workers” if they produced

component parts for another production firm that has experienced TAA-certified layoffs, or if they

performed final assembly or finishing work for such a firm. See 19 U.S.C. § 2272(b) (Supp. II

2002). Alternatively, displaced workers may be eligible for certification as “service workers.” See

n.15, infra (discussing criteria for certification as “service workers”); Abbott v. Donovan, 6 CIT 92,

100-01, 570 F. Supp. 41, 49 (1983) (discussing early history of TAA coverage for “service

workers”).

Court No. 04-00229 Page 8

et seq. (2000 & Supp. II 2002).7 Since 1974, the Labor Department has been entrusted with the

administration of the trade adjustment assistance program.8

7

The TAA Reform Act of 2002 established for the first time a trade adjustment assistance

program targeting farmers and fishermen, commonly known as “Agricultural TAA.” See generally

19 U.S.C. § 2401 et seq. (Supp. II 2002). That program is administered not by the Labor

Department, but by the U.S. Department of Agriculture.

8

For the first 12 years of the program’s existence, the International Trade Commission

(“ITC”) was charged with administering trade adjustment assistance. Congress transferred that

responsibility to the Labor Department in 1974, concerned that relatively few workers had been

certified as eligible for benefits by the ITC, and that “the program . . . often functioned in such a

manner that its objectives were frustrated.” See generally Patricia M. McCarthy, “Origins of

Judicial Review of Trade Adjustment Assistance Determinations,” Litigating Trade Adjustment

Assistance Cases Before the United States Court of International Trade, Customs & International

Trade Bar Association and American Bar Association seminar, Princeton Club, New York, NY,

April 19, 2005, at 2-4 (“McCarthy”) (tracing the history of TAA program) (citations omitted); UAW

v. Marshall, 584 F.2d at 395 (explaining that “[a] primary purpose of the Trade Act of 1974 was to

make worker adjustment assistance more readily available than it had been under the Trade

Expansion Act of 1962,” and that “[f]or the first seven years of the earlier [TAA] program, no

workers were found eligible for the program’s benefits.”) (footnotes omitted); Fortin v. Marshall,

608 F.2d at 528 & n.3 (noting that, due to determination by Congress that original TAA program

had been “ineffective,” 1974 legislation established new program and transferred administration to

Labor Department); Woodrum v. Donovan, 4 CIT 46, 49-51 & n.1, 544 F. Supp. 202, 204-05 & n.1

(1982) (discussing Labor Department’s assumption of ITC’s duties vis-a-vis TAA program; also

noting that jurisdiction over review of agency TAA determinations was transferred from U.S. Courts

of Appeals to U.S. Court of International Trade as of November 1, 1980).

Although the Labor Department’s portfolio has now included TAA for more than three

decades, some commentators have criticized the agency for treating the program as a “stepchild.”

See, e.g., Kletzer & Rosen at 318 (reporting that the Labor Department “has only reluctantly

administered the program and has never promoted expansion or reform”); “Analysis & Perspective:

Trade Court’s Critique of Labor Department Places Spotlight on Handling of TAA Claims,” BNA

Int’l Trade Reporter, May 6, 2004, at 797 (“Analysis and Perspective”) (quoting “former Democratic

Senate aide on trade issues” who described TAA as an “orphan program,” stating that “[t]he Labor

Department has big policy intentions with TAA but [the agency’s] implementation has been

inconsistent and weak.”).

One analysis attributes the Labor Department’s ambivalence at least in part to the fact that

“TAA requires higher levels of energy and resources to administer than other dislocated-worker

programs . . . , due to its petition and eligibility process and its wider range of assistance services.

Court No. 04-00229 Page 9

The trade adjustment assistance laws are remedial legislation and, as such, are to be

construed broadly to effectuate their intended purpose. UAW v. Marshall, 584 F.2d at 396 (noting

the “general remedial purpose” of TAA statute, and that “remedial statutes are to be liberally

construed”). See also Fortin v. Marshall, 608 F.2d at 526, 529 (same); Usery v. Whitin Machine

Works, Inc., 554 F.2d 498, 500, 502 (1st Cir. 1977) (emphasizing “remedial” purpose of TAA

statute).9

Moreover, both “[b]ecause of the ex parte nature of the certification process, and the

remedial purpose of the [TAA] program,” the Labor Department is obligated to “conduct [its]

investigation with the utmost regard for the interest of the petitioning workers.” Local 167, Int’l

Molders and Allied Workers’ Union, AFL-CIO v. Marshall, 643 F.2d 26, 31 (D.C. Cir. 1981)

(emphases added). See also Stidham v. U.S. Dep’t of Labor, 11 CIT 548, 551, 669 F. Supp. 432,

435 (1987) (citing Abbott v. Donovan, 7 CIT 323, 327-28, 588 F. Supp. 1438, 1442 (1984)

(quotations omitted)); IBM, 29 CIT at ____, 403 F. Supp. 2d at 1314 (quoting Stidham); Former

Employees of Computer Sciences Corp. v. U.S. Sec’y of Labor, 29 CIT ____, ____, 366 F. Supp.2d

From a purely administrative perspective, the [Labor Department] would prefer to administer a

single program for all workers regardless of the cause of dislocation.” Kletzer & Rosen at 318.

9

See also Former Employees of Computer Sciences Corp. v. U.S. Sec’y of Labor, 30 CIT

____, ____, 414 F. Supp. 2d 1334, 1343 (2006); Former Employees of International Business

Machines Corp., 29 CIT ____, ____ & n.3, 403 F. Supp. 2d 1311, 1314 & n.3 (2005) (citations

omitted) (“IBM”); Former Employees of Merrill Corp. v. United States, 29 CIT ____, ____, 387 F.

Supp. 2d 1336, 1342 (2005) (“Merrill Corp. II”); Former Employees of Electronic Data Sys. Corp.

v. U.S. Sec’y of Labor, 28 CIT ____, ____, 350 F. Supp. 2d 1282, 1290 (2004) (“EDS I”); Former

Employees of Ameriphone, Inc. v. United States, 27 CIT ____, ____, 288 F. Supp. 2d 1353, 1355

(2003) (citations omitted); Former Employees of Champion Aviation Prods. v. Herman, 23 CIT 349,

352 (1999) (“Champion Aviation I”) (citations omitted) (NAFTA-TAA statute is remedial

legislation, to be construed broadly); Chevron I, 26 CIT at 1274, 245 F. Supp. 2d at 1318 (citations

omitted) (same).

Court No. 04-00229 Page 10

1365, 1371 (2005)

Thus, while the Labor Department is vested with considerable discretion in the conduct of

its investigation of trade adjustment assistance claims, “there exists a threshold requirement of

reasonable inquiry.” Former Employees of Hawkins Oil & Gas, Inc. v. U.S. Sec’y of Labor, 17 CIT

126, 130, 814 F. Supp. 1111, 1115 (1993) (“Hawkins Oil & Gas II”); Former Employees of

Electronic Data Sys. Corp. v. U.S. Sec’y of Labor, 29 CIT ____, ____, 408 F. Supp. 2d 1338, 1342-

43 (2005); Merrill Corp. II, 29 CIT at ____, 387 F. Supp. 2d at 1345. Courts have not hesitated to

set aside agency determinations which are the product of perfunctory investigations.10 See generally

10

See, e.g., Ameriphone, 27 CIT at ____ n.3, 288 F. Supp. 2d at 1355 n.3 (cataloguing

numerous opinions criticizing Labor Department’s handling of TAA cases).

See also Former Employees of IBM Corp., Global Services Division v. U.S. Sec’y of Labor,

29 CIT ____, ____, ____, 387 F. Supp. 2d 1346, 1350-51, 1353 (2005) (“IBM I”) (agency’s

investigation was “merely perfunctory,” and petition was denied based on only “scant evidence”;

action remanded to agency with instructions to supplement “shockingly thin” record of

investigation); Former Employees of Murray Engineering, Inc. v. Chao, 28 CIT ____, ____, ____

n.10, 358 F. Supp. 2d 1269, 1274, 1275 n.10 (2004) (“Murray Engineering II”) (agency’s

determination both “betrays . . . [any] understanding of the industry it is investigating and the

requirements of the [TAA statute]” and “failed to make reference to relevant law . . . , including

Labor’s own regulations on the matter”; and, although agency was granted three extensions of time

to file results of second remand, remand results nevertheless still failed to comply with court’s

remand instructions); EDS I, 28 CIT at ____, 350 F. Supp. 2d at 1290 (in addition to grave flaws in

agency’s factual investigation, agency’s interchangeable use of distinctly different terms renders its

conclusion “hardly discernible” and “neither persuasive nor careful”); Former Employees of Tyco

Electronics v. U.S. Dep’t of Labor, 28 CIT ____, ____, 350 F. Supp. 2d 1075, 1089 (2004) (“Tyco

IV”) (“Labor repeatedly disregarded evidence of critical facts,” “refused to accept information

submitted by [the petitioning workers], which allegedly contradicted statements made by [company]

officials,” “rel[ied] on incomplete and allegedly contradictory information to support its position,”

and ultimately “failed to provide any analysis regarding the change in its position to certify [the

workers] as eligible”); Former Employees of Ericsson, Inc. v. U.S. Sec’y of Labor, 28 CIT ____,

____, 2004 WL 2491651 at * 5 (2004) (“Ericsson I”) (agency’s finding “is not only unsupported by

substantial evidence, but is . . . contradicted by the scant evidence” that exists); Former Employees

of Sun Apparel of Texas v. U.S. Sec’y of Labor, 28 CIT ____, ____, 2004 WL 1875062 at ** 6-7

(2004) (“Sun Apparel I”) (because “Labor never acknowledged its receipt of [the workers’] petition

Court No. 04-00229 Page 11

section II.E, infra (summarizing statistics concerning TAA actions filed with Court of International

Trade in recent years, and noting that – at least during four year period analyzed – Labor Department

never successfully defended a denial without at least one remand).

B. The Facts of This Case

The Workers’ former employer, BMC, is a “Fortune 1000” company, and one of the largest

software vendors in the world. Among other things, BMC designs, develops, produces and sells

business systems management software, which is distributed both in “object code” form and on a

“shrink-wrap” basis. BMC’s competitors include industry giants and household names such as IBM,

Computer Associates, Microsoft, Sun Microsystems, and Hewlett Packard. S.A.R. 33-36, 52-61;

C.S.A.R. 153; see also C.S.A.R. 488, 490-91, 492, 493 (relevant portions of Form 10-K for BMC

(for FY ended March 31, 2003)) (“BMC Form 10-K”).

The four former employees who filed the TAA petition at issue here were involved in the

production and distribution of BMC software products. Those products were mass-replicated at the

and wholly failed to initiate an investigation thereof,” “the displaced workers’ claims were ignored

for over three months”; once initiated, “[t]he entire investigation consisted of two communications

with only one individual, [the company’s] HR manager”; and even “the investigation upon [the

workers’ request for] reconsideration was perfunctory at best”); Chevron III, 27 CIT at ____, 298

F. Supp. 2d at 1348-49 (“[w]hether as a result of overwork, incompetence, or indifference (or some

combination of the three), the Labor Department – for almost four years – deprived the [w]orkers

. . . of the job training and other benefits to which they are entitled”); Ameriphone, 27 CIT at ____,

288 F. Supp. 2d at 1358-59 (“the entirety of the Labor Department’s initial investigation consisted

of forwarding the standard [form questionnaire]” to company official, with no follow-up by the

agency, “even though the company’s responses . . . were, in a number of instances, ambiguous or

inconsistent, and called for clarification”; “Moreover, the agency’s investigation conducted in

response to the Workers’ request for reconsideration was little more than a rubber-stamp of its initial

Negative Determination,” “consist[ing] – in toto – of two phone conversations with company

officials on a single day, which were in turn documented in two memoranda that, together,

constituted a mere three sentences”).

Court No. 04-00229 Page 12

Houston facility where they worked (as well as at several other BMC facilities), and were often

shipped on physical media including CD-ROMs, packaged with user manuals. See Complaint

(including attached photos); A.R. 53; S.A.R. 33-36, 52-61; C.S.A.R. 135, 149, 155, 157, 453, 711.

The Workers’ employment at BMC was terminated in early August 2003, as part of a round

of lay-offs in response to the company’s lackluster performance in the first quarter of its 2004 fiscal

year. Those lay-offs were reported in an article published in the Houston Chronicle:

BMC Software . . . reported a first-quarter loss and said it will slash about 900 jobs

worldwide to return to profitability.

The cuts come amid a weak spending environment for technology and amount to

about 13 percent of the Houston-based company’s work force of 6,825.

The maker of software for managing and monitoring large computer networks would

not say how many of its 1,800 workers in Houston would be affected by the

reductions, but it is closing facilities and consolidating offices across the globe in an

effort to shave $25 million to $30 million off expenses by the fourth quarter.

....

The company will spend $60 million this year to restructure. Jobs in sales, research

and development, information technology, and administration will be shed.

The company will offset some of the cuts by adding research and development jobs

and positions in information technology to offshore facilities in India and Israel,

making the net reduction more like 8 percent when all is done.

....

The company’s job cuts come on top of 230 earlier this year that were made as part

of a plan to discontinue a product line and reduce positions that didn’t relate to high-

priority projects.

“Weak Quarter Leads BMC to Cut 900 Jobs,” Houston Chronicle, July 29, 2003, at 1 (emphases

Court No. 04-00229 Page 13

added) (included at A.R. 5-7; S.A.R. 63-64).11

11

The Houston Chronicle article refers to the termination of 230 BMC employees earlier in

2003. A.R. 6; see also “BMC Software Lays Off 230, Including 104 in Houston,” Houston

Chronicle, March 1, 2003, at 2. It appears that those employees laid off in Spring 2003 filed their

own TAA petition with the Labor Department. See A.R. 34-35 (notes of agency investigation in this

case, referring to TAA petition TA-W-52,806); see also 68 Fed. Reg. 58,717 (Oct. 10, 2003) (notice

of receipt and notice of initiation of investigation of TAA petition TA-W-52,806).

Of course, the administrative record filed in this case gives no indication as to the nature and

extent of that earlier agency investigation. Presumably it was as pro forma as the investigation at

issue in this action. In any event, the Labor Department denied that petition as well, less than two

months before the Workers here filed their TAA petition. That denial was never appealed. See 68

Fed. Reg. 62,831, 62,832 (Nov. 6, 2003) (denying petition TA-W-52,806 on the grounds that “[t]he

workers firm does not produce an article” – the same grounds on which the Labor Department

denied the petition at issue here).

The Labor Department’s certification in this case puts that earlier denial in sharp relief, and

raises some troubling questions. At a minimum, the record compiled in this action demonstrates

clearly that the agency’s denial of the earlier petition was in error – for, as the Labor Department

here ultimately found, BMC is indeed engaged in “production” of an “article,” even under the

relatively

narrow definition of that concept that the agency was then applying. See generally n.27 (discussing

Labor Department’s recent change of position on the treatment of software and similar “intangible”

goods for purposes of TAA).

Moreover, it is easy to imagine that – had the Workers here known of the Labor

Department’s denial of the earlier petition filed by their coworkers – they might not have filed their

own TAA petition (which would, in turn, have compounded the effect of the agency’s error). See

generally “Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 801 (noting that result of problems

in Labor Department’s administration of TAA program may be “an effective absence of due process

altogether, as thousands of eligible workers may not even bother applying”).

In any event, the Workers’ success in this forum now ensures that the 104 Houston-based

BMC employees terminated earlier in 2003, among others, are eligible for TAA benefits. But if the

Labor Department had properly investigated TAA petition TA-W-52,806 and certified those 104

employees within the statutorily-mandated 40 days after the filing of their petition, they would have

been eligible to receive benefits as early as late September 2003 – and the Workers here (who would

have been covered by such a certification) would have been eligible to receive TAA benefits

promptly following their termination, and would never have had to file the petition at issue here, or

to pursue the Labor Department’s denial of that petition into court.

Court No. 04-00229 Page 14

A copy of the Houston Chronicle article was included with the petition for TAA benefits that

the Workers filed with the Labor Department in late December 2003. The petition alleged, inter

alia, that the company was shifting jobs “offshore to India and Israel.” A.R. 2-3, 5-7, 33. Appended

to the Workers’ petition were some 25 pages of announcements of job vacancies – primarily at BMC

facilities in India and Israel – printed out from the company’s website. A.R. 8-33.

In mid-January 2004, the Labor Department contacted BMC management concerning the

Workers’ TAA petition. Asked to “[b]riefly describe the business activities of BMC Software, Inc.,”

the company’s Senior Manager for Human Resources responded by parroting – verbatim – a

marketing pitch on BMC’s website:12

BMC Software, Inc. (NYSE: BMC), is a leading provider of enterprise management

software solutions that empower companies to manage their IT infrastructure from

a business perspective. Delivering Business Service Management, BMC Software

solutions span enterprise systems, applications, databases and service management.

C.A.R. 36.13

As section II.D (below) explains, the delays in TAA certification that result from agency

errors and failures like those in these two BMC cases can take a very real human toll.

12

The administrative record filed with the Court does not include a blank questionnaire, or

a memo or letter of any sort from the Labor Department forwarding questions to BMC for the

company to answer, or any other evidence of the Labor Department’s initial investigation – except

for BMC’s response (C.A.R. 36-37) to questions somehow communicated to the company by the

agency. Indeed, the administrative record includes no documentation whatsoever of the agency’s

initial contacts with BMC. See generally n.30, infra.

13

Although the Government has included BMC’s response to the Government’s inquiry in

the Confidential Administrative Record, there is nothing remotely confidential about the “blurb” that

the BMC official provided to the Labor Department. See, e.g., BMC website (www.bmc.com), at

“Corporate Profile,” at “Investors,” and at “BMC Software Corporation Information Statement”

(where BMC “strongly encourages” the use of the quoted language “in all advertising, marketing,

technical, press-statements, Web-based and other materials . . . to describe the business of BMC

Software”).

Court No. 04-00229 Page 15

The Labor Department also asked BMC to advise whether the company’s Houston

employees “produce an article of any kind or . . . were engaged in employment related to the

production of an article.” There too the Senior Manager for Human Resources failed to respond

directly to the Labor Department’s inquiry, and instead proffered a “soundbite” plucked from the

company’s promotional materials:

BMC Software develops software solutions to proactively manage and monitor the

most complex IT environments, enabling around-the-clock availability of business-

critical applications. BMC also provides services to support its software products,

including support and implementation services.

C.A.R. 36-37.14

With no further inquiry, the Labor Department denied the Workers’ TAA petition on January

20, 2004 – although the Federal Register notice of the initiation of the investigation wasn’t

published till three weeks thereafter. Compare A.R. 44-45 (Negative Determination Regarding

Eligibility to Apply for Worker Adjustment Assistance, dated Jan. 20, 2004) with 69 Fed. Reg.

6694, 6695 (Feb. 11, 2004) (notice of receipt of petition and initiation of investigation). In effect,

the agency’s Federal Register notice of the initiation of the investigation invited the Workers to seek

a hearing on a petition that the agency had already denied.

The Labor Department’s official Negative Determination Regarding Eligibility to Apply for

Indeed, the quoted language is included in the very news release that BMC issued to

announce the “workforce reductions” that resulted in the Workers’ terminations at issue here. See

“BMC Software Reports First Quarter Results – Takes Action to Improve Profitability” (July 28,

2003) (news release).

14

See, e.g., BMC website (www.bmc.com), at “Press Releases” (including April 10, 2001

news release, “Brocade and BMC Software Expand Partnership to Deliver Application-Driven

Storage Management for Brocade-Based SANs”).

Court No. 04-00229 Page 16

Worker Adjustment Assistance ruled that the Workers “develop[ed] software solutions,” and thus

“[did] not produce an article” within the meaning of the TAA statute. A.R. 44-45.15 See also 69

Fed. Reg. at 11,888 (ruling that “[t]he workers firm does not produce an article as required for

certification [under the TAA statute]”).16

According to an undated internal agency memorandum documenting the “Findings of the

Investigation,” the Labor Department concluded – solely on the strength of the information supplied

by BMC’s Senior Manager for Human Resources – that the Workers were “engaged in the

development of” software, and thus “provide[d] development services.” To support the agency’s

conclusion that “[BMC] [w]orkers do not produce an article,” the agency memorandum erroneously

attributed a statement to that effect to BMC’s Senior Manager for Human Resources. See C.A.R.

15

The Negative Determination similarly concluded that the Workers were ineligible for

certification as service workers. According to that ruling:

Workers . . . may be certified [as service workers] only if their separation was caused

importantly by a reduced demand for their services from a parent firm, a firm

otherwise related to their firm by ownership, or a firm related by control.

Additionally, 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. These

conditions have not been met for workers at this firm.

A.R. 44-45. See also n.21, infra.

16

It is unclear why Federal Register publication of the notice of the denial of the Workers’

petition was delayed until March 11, 2004, when the petition had been denied almost seven weeks

earlier (on January 20, 2004). Compare A.R. 44-45 (Negative Determination Regarding Eligibility

to Apply for Worker Adjustment Assistance, dated Jan. 20, 2004) with 69 Fed. Reg. 11,887, 11,888

(March 12, 2004) (notice of denial of petition). Indeed, the official notice of the denial of the

Workers’ petition was not published in the Federal Register until more than a month after the

Workers filed their request for reconsideration of that ruling. See A.R. 53 (Workers’ request for

reconsideration of denial of petition, dated Feb. 9, 2004).

Court No. 04-00229 Page 17

42.17 The memorandum also stated that BMC’s “Standard Industrial Classification” (“SIC”) code

is 7371 (the code for “Computer Programming Services”), although the source of that information

was not specified, and the relevance and accuracy of the information are dubious at best. Id.18

Copies of the Labor Department’s Negative Determination were sent to the Workers under

cover of a standard form letter which advised them of their right to seek administrative

17

Contrary to the representation in the internal agency memorandum, BMC’s Senior Manager

for Human Resources in fact had not stated that the company does not produce a product. Compare

C.A.R. 42 (undated internal agency memorandum) with C.A.R. 36-37 (BMC’s responses to agency

questions in course of initial investigation).

As discussed above, in response to the Labor Department’s query whether the company

produced a product, BMC’s Senior Manager for Human Resources stated:

BMC Software develops software solutions to proactively manage and monitor the

most complex IT environments, enabling around-the-clock availability of business-

critical applications. BMC also provides services to support its software products,

including support and implementation services.

C.A.R. 36-37 (emphases added). That response cannot fairly be read as a statement that BMC does

not produce a product. To the contrary, as discussed in section II.A below, the response itself

expressly refers to BMC “products” (and, indeed, also refers – in contrast – to the company’s

provision of “services” as well, implicitly distinguishing the two).

18

See generally section II.C & n.54, infra (explaining, inter alia, that other sources identify

BMC’s SIC code as 7372). See also Former Employees of Murray Engineering, Inc. v. Chao, 28

CIT ____, ____, ____, 346 F. Supp. 2d 1279, 1284, 1289 (2004) (“Murray Engineering I”)

(criticizing agency’s reliance on former employer’s NAICS code in TAA investigation); Murray

Engineering II, 28 CIT at ____ n.8, 358 F. Supp. 2d at 1273 n.8 (same); Merrill Corp. II, 29 CIT at

____, 387 F. Supp. 2d at 1345. Cf. IBM I, 29 CIT at ____, 387 F. Supp. 2d at 1348-49.

As the Labor Department’s website explains, the Standard Industrial Classification (“SIC”)

system historically has been used by that agency and other parts of the federal government to

classify businesses by the industry in which they are engaged, for statistical and other purposes.

According to the website, the North American Industry Classification System (“NAICS”) replaces

the SIC system. For additional information, including a copy of the Standard Industrial

Classification Manual, see the Labor Department’s website.

Court No. 04-00229 Page 18

reconsideration by the agency. Incredibly, however, the Labor Department’s letter said nothing

about the Workers’ right to challenge the Negative Determination in this court. See A.R. 46-49.19

The Workers timely sought reconsideration of the denial. In their request for

reconsideration, the Workers emphasized that the Labor Department’s Negative Determination

erroneously stated that the investigation was initiated on October 9, 2003 – a date that was actually

several months before the petition was even filed. The Workers disputed the Labor Department’s

determination that BMC did not produce an article, and referred the agency to three specific

locations on BMC’s website, including “an online store for purchasing BMC products and product

lines.” A.R. 53 (emphases added). The Workers quoted the BMC website:

Now you’re ready to shop online with BMC Software. Browse through the store by

category or by the A-Z list below. If you know the name of your product, use the

Product Name Search field to locate your product quickly.

Id. (emphases added). The Workers explained that “[t]he use of the term ‘solutions’ is misleading.

Usage of the term ‘solutions’ within the BMC Software, Inc. web page and other places is

synonymous with ‘product lines.’” And the Workers again stated that BMC was shifting work “to

overseas companies as well as newly created BMC locations overseas.” The Workers added that

software was also being “imported to make up the products and product lines that BMC Software,

Inc. produces.” A.R. 53.

In response to the Workers’ request for reconsideration, a Labor Department staffer called

BMC’s Senior Manager for Human Resources (the same company official who had responded to

19

See also IBM, 29 CIT at ____, 403 F. Supp. 2d at 1321 (criticizing Labor Department’s

“fail[ure] to advise the Former Employees [of IBM] of the option of seeking judicial review instead”

of seeking administrative reconsideration of denial of TAA certification).

Court No. 04-00229 Page 19

the agency’s initial request for information). The BMC official reportedly stated flatly that “no

products are manufactured” by the company, and that the company’s software is not “recorded on

media disks,” nor is it “mass-produced” or “sold off-the-shelf.” She further stated that “most [of

BMC’s] software is customized for individual users,” and denied that jobs had been transferred

abroad. C.A.R. 55.

The agency staffer apparently failed to ask any follow-up questions concerning, for example,

the nature and volume of BMC software that is not “customized for individual users.” Similarly,

the staffer failed to explore with the BMC official the allegations of increased imports raised in the

Workers’ request for reconsideration. Indeed, the agency staffer did nothing to confront the BMC

official with any of the information provided by the Workers. Nor did the staffer make any other

effort to reconcile the evident discrepancies and inconsistencies in the information before the

agency.

Based on nothing more than its phone conversation with BMC’s Senior Manager for Human

Resources, the Labor Department denied the Workers’ request for reconsideration, ruling once again

that they were “not considered to have been engaged in production.”20 69 Fed. Reg. at 20,642.21

20

The Labor Department’s notice denying the Workers’ request for reconsideration further

stated: “The petitioner also alleges that imports impacted layoffs, asserting that because workers lost

their jobs due to a transfer of job functions overseas, petitioning workers should be considered

import impacted.” 69 Fed. Reg. at 20,642.

There are, however, at least two problems with that statement. First, as discussed

immediately above, the Labor Department investigator reviewing the request for reconsideration

failed to ask BMC about the Workers’ claims of increased imports. See C.A.R. 55. There is

therefore nothing in the record on the request for reconsideration to support an agency finding on

increased imports. And, second, the quoted statement improperly conflates two separate bases for

TAA certification – increased imports versus a shift in production – and is simply illogical.

Compare 19 U.S.C. § 2272(a)(2)(A) (Supp. II 2002) (increased imports) and 19 U.S.C. §

Court No. 04-00229 Page 20

2272(a)(2)(B) (Supp. II 2002) (shift in production) (both quoted in n.6, supra).

21

Similarly, the notice denying the request for consideration reiterated the agency’s prior

ruling that the Workers also could not be certified as “service workers” – albeit based on a rather

different rationale:

Only in very limited instances are service workers certified for TAA, namely the

worker separations must be caused by a reduced demand for their services from a

parent or controlling firm or subdivision whose workers produce an article and who

are currently under certification for TAA. The investigation revealed no such

affiliations.

69 Fed. Reg. at 20,642 (emphasis added).

Although the error is of no significance in this case (since the Workers here have now been

certified), it is worth noting that the formulation in the Labor Department’s notice denying the

Workers’ request for reconsideration (quoted immediately above) materially misstated the test for

certification as “service workers.”

In that formulation of the “service workers” test, the Labor Department would require that

the separations of the petitioning workers be attributable to a reduced demand for their services by

a facility “whose workers produce an article and . . . are currently under certification for TAA.” Id.

(emphasis added). In contrast, in its initial Negative Determination denying the Workers’ petition,

the agency accurately stated the “service workers” test – “the reduction in demand for [the

petitioning workers’] services must originate at a production facility whose workers independently

meet the statutory criteria for certification.” (Emphasis added.) See n.15, supra (quoting Negative

Determination Regarding Eligibility to Apply for Worker Adjustment Assistance, at A.R. 44-45).

See generally Chevron I, 26 CIT at 1285, 245 F. Supp. 2d at 1328 (citations omitted) (discussing

criteria for TAA certification as “service workers”).

As Chevron I explained, “The question is not whether there was a certification already in

effect. Instead, what the Labor Department must determine is whether workers at the relevant

production facility met the criteria for certification – whether or not they actually sought it.” Id.,

26 CIT at 1288, 245 F. Supp. 2d at 1331 (citing Former Employees of Marathon Ashland Pipeline,

LLC v. Chao, 26 CIT 739, 747-48, 215 F. Supp. 2d 1345, 1355 (2002) (“Marathon Ashland I”);

Champion Aviation I, 23 CIT at 354; Bennett v. U.S. Sec’y of Labor, 20 CIT 788, 792 (1996)).

The distinction between the two formulations of the “service workers” test (essentially

whether the workers at the relevant production facility must already be “certified” versus whether

they would be/would have been “certifiable”) may be subtle, but it can be quite significant –

particularly for the potentially large numbers of workers who qualify under the correct formulation

Court No. 04-00229 Page 21

of the test (“certifiable”), but not the other.

In correspondence in another recent TAA case (in which the Labor Department had made

the same mistake), the Court brought this issue to the attention of the Government. See Letter to

Counsel for Defendant from the Court (April 23, 2004), filed in Former Employees of IBM Corp.

v. U.S. Sec’y of Labor, Court No. 04-00079; see generally IBM, 29 CIT at ____, 403 F. Supp. 2d

at 1318 (discussing Labor Department’s clarification of “certified” versus “certifiable,” in context

of “service workers” test). That letter noted that initial research indicated that the Labor Department

had not been consistent in its formulation of the “service workers” test. The letter continued:

[O]ur initial research [also] has disclosed no discussion of a legal rationale for either

“certified” or “certifiable.” It is, in any event, unclear – at least at first blush –

whether there could be any legitimate policy basis for limiting service worker

coverage to those cases where the production workers are already “certified.” It

would, no doubt, be easier for the Labor Department to determine whether a group

of production workers was already certified than it would be to determine whether

they could be certified. But, in light of the remedial purpose of the trade adjustment

assistance laws, it is unclear whether mere administrative convenience would suffice

to justify limiting coverage of service workers.

Moreover, it seems clear that the remedial purpose of the laws would be better served

by covering service workers whenever the relevant group of production workers

could be certified (whether they actually have been certified, or not). For example,

it is possible to imagine a group of production workers displaced by imports who do

not need retraining (i.e., because their skill set makes them readily employable in

some other, non-trade impacted industry). The service workers who formerly

supported the production workers, on the other hand, may require retraining (if their

skills are not readily transferable).

Id. at 2-3; see generally IBM, 29 CIT at ____, 403 F. Supp. 2d at 1318. See also UAW v. Marshall,

584 F.2d at 396-97 (in construing provision of TAA statute, Labor Department’s “interpretation .

. . is to be shaped with[] reference to the general remedial purpose” of TAA statute; agency is

obligated to interpret provision so that it “best effectuates the [remedial] purposes of the [TAA

statute] in light of the circumstances of the individual case”).

In response to the Court’s letter in IBM, the Labor Department sought a voluntary remand

of that case, explaining that the test applied by the agency there (which purported to require that the

relevant production facility already be “certified”) “[did] not reflect Labor’s current interpretation”

of the TAA statute concerning certification of “service workers.” See [Defendant’s] Consent Motion

for Voluntary Remand (May 14, 2004), filed in Former Employees of IBM Corp. v. U.S. Sec’y of

Labor, Court No. 04-00079. According to the Government’s motion for remand in that case:

Court No. 04-00229 Page 22

The Labor Department summarized its rationale, emphasizing the concept of “tangibility”:22

Labor’s current interpretation [concerning certification of “service workers”]

eliminates any distinction between certified and certifiable workers and focuses

directly upon whether the petitioning worker group meets the statutory test for

eligibility for certification. As of April 2004, Labor will certify petitions from

workers who perform services for a firm or an appropriate subdivision of such firm

if the work of the petitioning workers is related to the firm’s production of a “trade-

impacted” article under 19 U.S.C. § 2272 and the workers otherwise satisfy

[statutory] eligibility criteria.

Id. at 4-5 (emphasis added). See also “DOL Planning More In-Depth Probes of Service Workers’

Eligibility for TAA,” BNA Int’l Trade Reporter, June 17, 2004, at 1019 (explaining that “[u]nder

the new policy, DOL will investigate whether service workers seeking TAA benefits performed

work ‘in support of any production’ and will ‘conduct further data collection in cases where related

production exists’”).

There is, thus, an important distinction between the criteria for certification as “service

workers” and those for certification as “secondary workers.” The express terms of the TAA statute

require that – to be eligible for certification as “secondary workers” – “the [petitioning] workers’

firm (or subdivision) . . . [must be] a supplier or downstream producer to a firm (or subdivision) that

employed a group of workers who received a certification of eligibility” for TAA benefits. 19

U.S.C. § 2272(b)(2) (Supp. II 2002) (emphasis added).

Finally, it is also worth noting that the Labor Department recently extended its coverage of

“service workers” to include certain so-called “leased workers.” See generally IBM, 29 CIT at

____, ____ n.38, 403 F. Supp. 2d at 1315-18, 1336 n.38 (summarizing history of “leased workers”

policy, and remanding matter to agency with instructions to, inter alia, publish a “public document”

setting forth agency’s policy); 71 Fed. Reg. 10,709, 10,712 (March 2, 2006) (Negative

Determination on Remand in IBM, the “public document” in which Labor Department sets forth its

“interim response” articulating its “leased workers” policy, and specifies “seven criteria that will

be applied to determine the extent to which a worker group engaged in activities related to the

production of an article by a producing firm is under the operational control of the producing firm”;

asserting that agency “retains the discretion to further revise this policy, so that the subject of

‘operational control’ can continue to receive close scrutiny as DOL undertakes rulemaking to update

the regulations”).

22

The Labor Department has advanced similar views – articulated in varying formulations

– in a number of cases filed with the court in recent years involving software and similar

“intangible” goods. Because BMC in fact sells its software “prepackaged” in “shrink wrap form”

as well as electronically (“in object code form”), the Workers in this case qualified for TAA

certification even under the criteria that the Labor Department was applying at the time. There is

Court No. 04-00229 Page 23

therefore no need here to reach the substantive merits of those criteria, except to note that the

Workers vigorously disputed them, and that the agency has since repudiated them. See nn.25 & 27,

infra.

See generally, e.g., Former Employees of Ericsson, Inc. v. U.S. Sec’y of Labor, Court No.

02-00809 (petitioning workers who “designed, wrote code for, and tested software programs”

ultimately certified based on Labor Department’s determination that they “supported production at

an affiliated software production facility”); Former Employees of Murray Engineering, Inc. v.

United States, Court No. 03-00219 (petitioning workers who produced custom designs for industrial

machinery which were embodied on physical media (CD Roms and paper) ultimately denied

certification, based on Labor Department’s determination that former employer had not shifted

design work abroad and that there had been no increase in imports of “like or directly competitive”

articles); Former Employees of Electronic Data Systems Corp. v. U.S. Sec’y of Labor, Court No.

03-00373 (petitioning workers who developed “financial applications software” as well as

enhancements, including new code, ultimately certified based on recent change in Labor Department

policy concerning definition of “article”); Former Employees of Mellon Bank, N.A. v. U.S. Sec’y

of Labor, Court No. 03-00374 (petitioning workers who “designed and developed computer software

applications . . . to provide financial services to [bank] customers” ultimately denied certification,

based on Labor Department’s (now repudiated) rationale that “informational products that could

historically be sent in letter form and that can currently be electronically transmitted” are not

“articles” for purposes of TAA, and the “the design and development of . . . software itself” does

not constitute “production”); Former Employees of Sun Apparel of Texas v. U.S. Sec’y of Labor,

Court No. 03-00625 (petitioning garment workers ultimately denied certification based on Labor

Department’s determination that “patterns and markers” produced by workers “were created by

using special computer programs,” “were neither stored nor transmitted in a physical medium, but

existed in an electronic form (such as a file on a computer server or an electronic mail),” “were

electronically manipulated,” and “were sent exclusively via electronic mail”); Former Employees

of IBM Corp., Global Services Division v. U.S. Sec’y of Labor, Court No. 03-00656 (petitioning

“software developers who write and test computer software”ultimately certified based on recent

change in Labor Department policy concerning definition of “article”); Former Employees of Merrill

Corp. v. United States, Court No. 03-00662 (in light of recent change in Labor Department policy

concerning definition of “article,” action presently on remand to agency for reconsideration of

agency’s prior denial of certification of workers who “created electronic documents for printing and

filing with the Securities and Exchange Commission,” where denial was based on, inter alia,

agency’s (now disavowed) reasoning that “electronic creations are not ‘articles’ for the purposes of

the Trade Act unless they are embodied in a physical medium”; remand results due to be filed Aug.

31, 2006); Former Employees of Computer Sciences Corp. v. U.S. Sec’y of Labor, Court No. 04-

00149 (petitioning workers who produced “financial software” ultimately certified based on recent

change in Labor Department policy concerning definition of “article”); Former Employees of Gale

Group, Inc. v. U.S. Sec’y of Labor, Court No. 04-00374 (petitioning workers who “created

electronic documents and performed electronic indexing services and occasionally wrote abstracts

Court No. 04-00229 Page 24

Software design and developing are not considered production of an article within

the meaning of [the TAA statute]. Petitioning workers do not produce an “article”

within the meaning of [that statute]. Formatted electronic software and codes are not

tangible commodities, that is, marketable products, and they are not listed on the

Harmonized Tariff Schedule of the United States (HTS), . . . which describes articles

imported to the United States.

To be listed in the HTS, an article would be subject to a duty on the tariff schedule

and have a value that makes it marketable, fungible and interchangeable for

commercial purposes. Although a wide variety of tangible products are described

as articles and characterized as dutiable in the HTS, informational products that

could historically be sent in letter form and that can currently be electronically

transmitted . . . are not listed in the HTS. Such products are not the type of products

that customs officials inspect and that the TAA program was generally designed to

address.

Id. (emphases added).23

This action ensued. In lieu of filing an Answer with the court, the Government sought and

was granted a voluntary remand to conduct a further investigation and to make a redetermination

as to the Workers’ eligibility for TAA benefits.24

of articles” ultimately certified based on recent change in Labor Department policy concerning

definition of “article”); Former Employees of Lands’ End Business Outfitters v. U.S. Sec’y of Labor,

Court No. 05-00517 (petitioning workers who “create[d] digitized embroidery designs from

customers’ logos” ultimately certified based on recent change in Labor Department policy

concerning definition of “article”).

23

The administrative record filed with the Court in this case includes letters transmitting the

notice of the denial of the request for reconsideration to only two of the four Workers who signed

the petition. See A.R. 60-61. It is unclear whether the Labor Department failed to send such letters

to the other two Workers, or whether it sent them but failed to include them in the administrative

record.

24

As grounds for the voluntary remand, the Government cited the Labor Department’s

“need[] to resolve an apparent conflict between information provided by company officials and

information provided by the petitioners” (specifically, whether BMC produces “products”).

However, as counsel for the Government candidly conceded, the “conflict” between information

Court No. 04-00229 Page 25

On remand, the Labor Department reiterated – and elaborated on – its test for “production”

of an “article” in the context of the software industry, further emphasizing the characteristic of

“tangibility”:

The Department has consistently maintained that the design and development of

software is a service. In order to be treated as an article, for TAA purposes, a

software product must be tangible, fungible, and widely marketed. The Department

considers software that is mass-replicated on physical media (such as CDs, tapes, or

diskettes) and widely marketed and commercially available (e.g., packaged “off-the-

shelf” programs) and dutiable under the Harmonized Tariff Schedule of the United

States to be an article. The workers designing and developing such products would

be considered to be engaged in services supporting the production of an article.

69 Fed. Reg. at 76,783 (emphasis added).25 Applying that analysis in the course of its remand

investigation here, the Labor Department “raised additional questions and obtained detailed

supplemental responses from the company.” Id.

The information provided by BMC in the course of the remand proceedings conflicted with

provided by the petitioners and that provided by BMC was “apparent” during the course of the

Labor Department’s investigation – long before the Workers filed their Complaint with the Court.

See [Defendant’s] Second Amended Motion for Voluntary Remand (July 6, 2004), at 3 (relying in

part on information provided with Worker’s “request for administrative reconsideration”). Cf. Letter

from the Court to Defendant (March 19, 2004), filed in Former Employees of Paradise Fisheries v.

United States, Court No. 03-00758 (rejecting Labor Department’s claim that TAA certification was

based on “new information” supplied to agency after Complaint was filed; “While it may be true that

the Labor Department had previously failed to make the connection, it cannot honestly be said that

the agency was ‘unable’ to make the connection before the Complaint was filed.”).

25

Again, as explained in note 22 above, there is no need here to reach the substantive merits

of the criteria for TAA certification of software workers that the Labor Department applied in this

case. But the Workers took strong exception to those criteria. In a letter to the Labor Department,

counsel for the Workers took pains to emphasize that, although they were providing the agency with

information to demonstrate that the Workers fulfilled the criteria articulated by the agency,

“[n]othing . . . [in the Workers’ communications] should be construed as acquiescence to the

Department of Labor’s view that a physical product listed in the Harmonized Tariff Schedule must

have been produced . . . in order for the[ ] former employees to be entitled to benefits under the

TAA.” S.A.R. 34 (emphases added).

Court No. 04-00229 Page 26

the information that the company had supplied earlier, and bore out the Workers’ claims, casting an

entirely new light on the merits of the Workers’ TAA petition. Reiterating its position that “to be

treated as an article . . . for TAA purposes, a software product must be tangible,” the Labor

Department explained:

[T]he new information showed that, in addition to software design and development,

the firm does, in fact, mass-replicate software at the subject facility. Further,

software produced by the firm at the subject facility includes not only custom

applications, but [also] packaged ‘off-the-shelf’ applications which are mass-

replicated on various media (CDs and tapes) at the subject facility.

69 Fed. Reg. at 76,783 (emphases added). Noting that BMC employees “are not separately

identifiable by product line,” the Labor Department concluded that the Workers here were, indeed,

“engage[d] in activity related to the production of an article.” Id.

On remand, the Labor Department also re-evaluated the Workers’ allegations that BMC had

shifted production overseas, to India and Israel. 69 Fed. Reg. at 76,783. The agency concluded that

“there was no shift in production, for TAA purposes.” Id. However, the agency did find that

“employment and production of packaged, mass-replicated software at the subject facility had

declined significantly from 2002 to 2003,” that “company imports of mass-replicated software

increased during the same period,” and that “the increase in company imports represented a

significant percentage of the decline in production at the subject facility during the relevant period.”

Id.26

26

As explained in greater detail above (and in notes 20 and 35), the Workers’ request for

reconsideration alleged an increase in imports of BMC products and product components. However,

the Labor Department made no effort to investigate that allegation until after this action was filed.

Compare A.R. 53 with C.A.R. 55 and A.R. 56-59. Cf. Sun Apparel I, 28 CIT at ____, 2004 WL

1875062 at * 2 (although “the record . . . contained no evidence to support its findings, Labor

nevertheless determined that [the subject company] did not increase its imports”).

Court No. 04-00229 Page 27

The Labor Department therefore determined on remand “that increases of imports of articles

like or directly competitive with those produced at BMC Software, Inc., Houston, Texas, contributed

importantly to the total or partial separation of a significant number of workers and to the decline

in sales or production at that firm.” Accordingly, nearly one full year after the TAA petition was

filed (and more than 16 months after the Workers here lost their jobs), the Labor Department

certified as eligible to apply for benefits all Houston-based BMC employees “who became totally

or partially separated from employment on or after December 23, 2002, through two years from the

issuance of [the] revised determination.” 69 Fed. Reg. at 76,783-84.

Moreover, the Labor Department has recently revised its position to recognize that – at least

for purposes of cases such as this – “there are tangible and intangible articles,” and that “the

production of intangible articles can be distinguished from the provision of services.” See, e.g.,

Computer Sciences Corporation: Notice of Revised Determination on Remand, 71 Fed. Reg. 18,355

(April 11, 2006) (emphasis added). Accordingly, “[s]oftware and similar intangible goods that

would have been considered articles for the purposes of the Trade Act if embodied in a physical

medium will now be considered to be articles regardless of their method of transfer.” Id. (emphasis

added). In short, as the Labor Department apparently now concedes, the Workers here would have

been entitled to TAA certification even if BMC’s software had not been “replicated on various

media (CDs and tapes)” – that is, even if it had not been in “tangible” form.27

27

The Labor Department’s revised policy is the culmination of a large body of caselaw

roundly criticizing the bankrupt logic of the agency’s longstanding position on the treatment of

software and similar “intangible” goods for purposes of TAA. See generally n.22, supra. In truth,

the agency’s new position is not a new “policy” at all. Nor is it based on some new interpretation

of law. In reality, the Labor Department’s recent change of position reflects nothing more than the

agency’s belated acknowledgment and correction of certain fundamental mistakes of fact on which

Court No. 04-00229 Page 28

II. Analysis

To be sure, the Workers are gratified by the Labor Department’s affirmative determination

granting their TAA petition. But they are also quite understandably bewildered that it took the

agency so long to grant them the relief to which they are entitled. And they are frustrated that they

had to haul the Labor Department into court to force the agency to take a hard look at their claim.

Moreover, while the Government is to be commended for recognizing the need for a voluntary

remand, the Labor Department’s “about-face” as a result of that remand simply underscores the fact

that the agency should have certified these Workers in the first place, within 40 days of receipt of

its longstanding position on “[s]oftware and similar intangible goods” was premised – mistakes to

which the agency had repeatedly turned a blind eye and deaf ear.

Already the Labor Department’s revised position has resulted in the agency’s certification

of a number of groups of workers whose TAA claims had been repeatedly denied, and who had

sought recourse in the court. See, e.g., Computer Sciences Corporation: Notice of Revised

Determination on Remand, 71 Fed. Reg. 18,355 (April 11, 2006); Electronic Data Systems

Corporation: Notice of Revised Determination on Remand, 71 Fed. Reg. 18,355 (April 11, 2006);

Lands’ End: Notice of Revised Determination on Remand, 71 Fed. Reg. 18, 357 (April 11, 2006);

IBM Corporation: Notice of Revised Determination on Remand, 71 Fed. Reg. 29,183 (May 19,

2006); Gale Group, Inc.: Notice of Revised Determination on Remand, 71 Fed. Reg. 43,213 (July

31, 2006).

The full extent of the damage attributable to the Labor Department’s protracted adherence

to its indefensible position is incalculable. To begin with, it in unclear whether the outcomes of any

other TAA cases filed with the court in recent years would have differed had the Labor Department

acknowledged and corrected its mistakes at an earlier date. But see n.79, infra. But, at a minimum,

it seems highly likely that, in recent years, the Labor Department has denied TAA petitions from

workers in the software industry that the agency would now agree should have been granted, and

which were never appealed in court. And it is a virtual certainty that there are workers in the

software industry who would have filed TAA petitions with the Labor Department, but were

deterred by the agency’s longstanding – and now repudiated – position. See generally “Certifiably

Broken,” 7 U. Pa. J. Lab. & Emp. L. at 801 (noting that result of problems in agency’s

administration of TAA program may be “an effective absence of due process altogether, as

thousands of eligible workers may not even bother applying”).

Court No. 04-00229 Page 29

their petition.

In this case, like so many others in recent years, the agency’s “investigation” was “a

shockingly cursory process.”28 In short, as discussed more fully below, it exalts form over substance

to characterize as an “investigation” the Labor Department’s superficial review of the Workers’

petition at the agency level.29

28

See Harper’s Magazine at 63 (explaining that, after a TAA petition is filed, the Labor

Department “initiates an investigation, which involves faxing the company a few generic forms and

sometimes making a follow-up phone call or two . . . . It is a shockingly cursory process”).

29

An “investigation” is defined as a “detailed examination” or “a searching inquiry,” “an

official probe.” Webster’s Third New International Dictionary (Unabridged) 1189 (2002). The

Labor Department’s track record in TAA cases in this court belies any suggestion that the agency’s

typical initial review of a TAA petition can fairly be described as an “investigation.” Indeed, one

senior government lawyer familiar with the Labor Department’s process has implicitly conceded as

much:

[A]lthough Congress has mandated that Labor conduct an “investigation,” with all

the active and exhaustive connotations which that term might imply, the reality is that

Congress also has appropriated a finite amount of resources for the conduct of these

investigations.

McCarthy at 14 (emphasis added). See generally 19 U.S.C. § 2271(a) (requiring Labor Department

to give notice that agency “investigation” has been initiated).

The bottom line, however, is that Congress has mandated that the Labor Department

“investigate” workers’ TAA claims – not that those claims be, for example, merely “considered,”

or “evaluated,” or “reviewed.” See Shoshone Indian Tribe v. United States, 364 F.3d 1339, 1347

(Fed. Cir. 2004) (and cases cited there) (In statute of limitations provision, “Congress’s choice of

the phrase ‘shall not commence to run’ instead of ‘tolls’ should be given effect. There exists a

strong presumption that ‘Congress expresses its intent through the language it chooses’ and that the

choice of words in a statute is therefore deliberate and reflective.”). Moreover:

[I]f the [Labor Department’s] resources are not adequate to enable it to meet its

statutory mandate, the remedy lies with Congress. The volume of claims filed with

the agency cannot serve to excuse it from fulfilling its legal obligations vis-a-vis the

legions of displaced workers. Indeed, if anything, the volume of claims filed serves

to underscore the vital nature of the agency’s mission.

Court No. 04-00229 Page 30

A. The Labor Department’s Failure to Identify and Resolve

Discrepancies and Inconsistencies in Information Provided to It

The entirety of the Labor Department’s initial investigation here consisted of a mere five

questions (all of which were either very basic, or conclusory, or both), posed to BMC’s Senior

Manager for Human Resources. C.A.R. 36-37.30 The record reveals that the agency made no effort

Ameriphone, 27 CIT at ____, 288 F. Supp. 2d at 1360.

30

As note 12 explains, the Labor Department omitted from the administrative record all

documentation of its initial contact with BMC.

The agency’s Petition Log Sheet (A.R. 1) indicates that BMC was contacted on January 12,

2004. But the administrative record includes no documentation of that contact. There are no notes

of the Labor Department’s initial telephone call(s) or e-mail message(s) to BMC – no indication as

to which agency staffer contacted BMC, no indication as to which BMC official(s) were contacted,

no indication as to the mode of communication, and no indication as to the substance of that

communication. The Petition Log Sheet also indicates that the agency issued a data request to BMC

that same day. See A.R. 1. But that data request, too, is missing from the administrative record.

Nor does the record include a copy of any Labor Department letter or memo to BMC communicating

its questions to the company. It is thus impossible to discern from the record whether the agency

forwarded to BMC the standard Business Confidential Data Request questionnaire that the agency

has typically used in TAA cases.

The sole evidence of the Labor Department’s contact with BMC in the course of the initial

investigation is BMC’s response to the agency’s inquiries, which consists of the company’s answers

to a mere five questions:

(1) What is the full legal name and address of your firm?

(2) Is your firm affiliated with another company? If so, name the affiliated company

(including address) and describe the affiliation.

(3) Briefly describe the business activities of BMC Software, Inc., Houston, TX (TA-

W-53,918).

(4) Do the workers in BMC Software, Inc., Houston, TX (TA-W-53,918) of your

firm produce an article of any kind or were they engaged in employment related to

the production of an article? If workers do produce an article, please explain, and

what is the product?

(5) Briefly explain the circumstances relating to separations at your firm that have

taken place in the last year.

Court No. 04-00229 Page 31

whatsoever to follow up with company officials (via telephone or otherwise) – even though the

company’s responses to the Labor Department’s few substantive questions were non-responsive,

ambiguous, and/or inconsistent with other information on the record, and thus begged for

clarification.

For example, as discussed in section I.B above, BMC’s Senior Manager for Human

Resources supplied “canned” marketing pitches in response to both the Labor Department’s request

for a description of the company’s business, and the agency’s inquiry as to whether BMC workers

“produce an article.” It would be, frankly, impossible for anyone – including the Labor Department

– to discern from BMC’s non-responsive answers whether or not the company’s software constitutes

a “product” within the Labor Department’s interpretation of the TAA laws at that time (that is,

whether BMC’s software is mass-replicated on physical media (such as CDs, tapes, or diskettes) and

is widely marketed and commercially available (e.g., packaged for “off-the-shelf” sale)).

Nevertheless, the Labor Department failed to seek any clarification – from either BMC or the

Workers.

C.A.R. 36-37. The Labor Department’s questions were simply much too vague and generalized, and

were not reasonably calculated to elicit the necessary information – at least not without agency

follow-up.

For example, although the Labor Department knew from the name of the corporation (as well

as the Workers’ TAA petition form) that BMC is a software company, the agency failed to inquire

whether BMC’s software is “tangible, fungible, and widely marketed,” or whether it is “mass-

replicated on physical media (such as CDs, tapes, or diskettes) and widely marketed and

commercially available (e.g., packaged ‘off-the-shelf programs’)” – the very criteria that the Labor

Department at the time professed to “consistently” apply in cases such as this. See 69 Fed. Reg. at

76,783. Similarly, the agency’s broad request for a brief explanation of “the circumstances relating

to separations” at BMC was no substitute for specific questions about factors such as increased

imports and shifts in production abroad.

Court No. 04-00229 Page 32

Indeed, in responding to the Labor Department’s query whether the company’s workers

“produce an article,” BMC’s Senior Manager for Human Resources herself actually used the term

“products” – i.e., “software products” – in describing BMC’s business. See C.A.R. 37 (emphasis

added). Yet, not only did the Labor Department fail to seek clarification of that ambiguous

reference, but the agency investigator even purported to rely on the company official’s statement

as the sole basis for the agency’s affirmative conclusion that BMC employees do not produce a

“product”:

According to company official, [the Senior Manager for Human Resources], the

workers at BMC . . . did not produce a product.

Compare C.A.R. 42-43 (undated internal agency memorandum) (emphases added) with C.A.R. 36-

37 (BMC’s responses to agency questions in course of initial investigation). The Labor Department

investigator thus impermissibly distorted what little information was supplied by the company in

response to the agency’s inquiries.31

Similarly, the Labor Department made no attempt to reconcile the discrepancy between

31

Regrettably, this is no isolated incident. The Labor Department has been criticized for

distorting and misrepresenting evidence in other cases as well. See generally IBM, 29 CIT at ____

& n.34, 403 F. Supp. 2d at 1334-35 & n.34 (Labor Department’s determination “spins” information,

with effect of “obscur[ing]” its true significance); Former Employees of Federated Merch. Group

v. United States, 29 CIT ____, ____, 2005 WL 290015 at * 5 (2005) (agency “mischaracteriz[ed]”

e-mail exchange in which company official explained reason for workers’ separation, resulting in

improperly “truncated” investigation); Sun Apparel I, 28 CIT at ____, 2004 WL 1875062 at ** 4,

8 (where employer stated only that patterns and markers were “shipped primarily” by electronic

means, agency erred by ignoring employer’s limiting use of “primarily” and instead drawing “the

much broader conclusion that [all] the patterns and markers were generated and shipped

electronically” and, on that basis, concluding that no “production” occurred); Former Employees

of Pittsburgh Logistics Sys., Inc. v. U.S. Sec’y of Labor, 27 CIT ____, ____, ____ n.9, 2003 WL

22020510 at ** 9, 13 n.9 (2003) (“Pittsburgh Logistics II”) (in one instance, Labor Department

“egregiously” quoted contract provision “out of context”; more generally, court took agency to task

for repeated use of “out-of-context quotations”).

Court No. 04-00229 Page 33

information supplied by the Workers in their TAA petition and the agency’s conclusion that “the

workers at BMC . . . did not produce a product.” For example, near the top of a number of the pages

of job vacancy announcements printed out from BMC’s website (and appended to the Workers’

TAA petition) is a banner consisting of six buttons, labeled “Home,” “Partners,” “Support,” “Store,”

“Education,” and – significantly – “Products & Solutions.” See, e.g., A.R. 12, 17, 21, 26, 31

(emphasis added). And the job vacancy announcements themselves included listings not only for

positions such as “Systems Programmers” and “Programmer Analysts,” but also for positions such

as “Product Developers” and “Sr. Product Developers.” See, e.g., A.R. 8-9, 11-14, 19, 22, 24-25,

27-30 (emphases added).

To be sure, an employer’s use of the term “product” is by no means conclusive, or binding

on the Labor Department. But it is equally clear that such a use warrants further inquiry by the

agency, and that – absent such further inquiry, accompanied by a reasoned explanation of the facts

(reconciling the company’s use of the term) – the agency is not free to conclude (as it did here) that

petitioning workers do not produce a product.

The Labor Department further failed even to acknowledge – much less seek to resolve –

apparent inconsistencies between other information provided by the Workers in their TAA petition

and that supplied by their former employer, BMC. For example, asked by the Labor Department

to “[b]riefly explain the circumstances relating to separations at [BMC],” the company’s Senior

Manager for Human Resources responded simply that the company had taken “significant

restructuring actions, including reductions in force, to reduce its ongoing operational expenses to

be in line with the revenue that [was then] currently being generated.” C.A.R. 37. The Labor

Department made no effort whatsoever to plumb the meaning of that wholly uninformative response.

Court No. 04-00229 Page 34

Certainly the agency made no effort to press BMC on the underlying causes of the layoffs,32

or the specifics of BMC jobs being moved overseas. Yet the Houston Chronicle article appended

to the Workers’ TAA petition reported that, while BMC jobs in Houston and elsewhere were being

slashed, the company planned to “offset some of the cuts” by adding positions “to offshore facilities

in India and Israel.” A.R. 5-6. And the vast majority of the listings in the 25 pages of BMC job

vacancy announcements included with the Workers’ TAA petition were for positions in India and

Israel. See A.R. 8-32. That and other critical information was either overlooked or simply ignored

in the Labor Department’s preparation of its “Findings of the Investigation” and in its initial

negative determination. C.A.R. 42-43; A.R. 44-45.

Adding insult to injury, the agency’s investigation conducted in response to the Workers’

request for reconsideration was little more than a rubber-stamp of its initial denial. The Labor

Department’s reconsideration consisted – in toto – of a single phone conversation with BMC’s

Senior Manager for Human Resources (the same company official who had responded to the

agency’s initial questions). That conversation was in turn documented by the agency investigator

32

BMC’s response to the Labor Department’s question (quoted above) was little more than

a tautology, not illuminating in the least. See C.A.R. 37. In essence, BMC responded that the

company laid off workers to reduce expenses, so that expenses would not exceed revenues. But it

is a virtual truism that companies strive to ensure that expenses do not exceed revenues, and that

laying off workers reduces expenses. For purposes of a TAA analysis, the salient question is

“why?”: Why were revenues down? For example, were lower revenues attributable in part to

increased imports?

See also C.A.R. 55 (internal agency memorandum documenting investigation pursuant to

Workers’ request for reconsideration, stating simply that “BMC is experiencing global reduction in

workforce, due to low earnings”).

Court No. 04-00229 Page 35

in a memorandum that consisted of a total of five sentences, in a mere five lines of text. C.A.R. 55.33

The Labor Department’s investigation in response to the Workers’ request for

reconsideration was also tainted by the same methodological flaws that plagued the agency’s initial

investigation. Thus, for example – notwithstanding the fact that the Workers’ request for

reconsideration insisted that BMC “does produce an article or articles in the form of products,” and

even though the Workers quoted language from the BMC website referring to “products” and

provided the agency with cites to locations on the BMC website where company products are sold

– the Labor Department investigator accepted at face value the BMC official’s statement that no

products were manufactured by the company. Compare A.R. 53 with C.A.R. 55.

Similarly, although the Workers’ request for reconsideration reiterated that BMC production

was being shifted “offshore,” and although the Workers’ TAA petition had included documentation

that appeared to support such allegations, the Labor Department investigator nevertheless accepted

without question the BMC official’s statement that “[t]here were no job transfers abroad.”34

33

In contrast to the initial investigation (where the Labor Department asked only the most

basic of questions – see note 30, above), at least the agency investigator handling the Workers’

request for reconsideration posed some specific questions addressing the criteria that the Labor

Department was then applying in TAA cases involving the software industry. Compare C.A.R. 36-

37 (BMC’s responses to agency questions in course of initial investigation) with C.A.R. 55

(indicating that, in reviewing Workers’ request for reconsideration, agency investigator inquired

whether BMC software was “recorded on media disks, . . . mass-produced . . . [or] sold off-the-

shelf”).

34

It is of little moment that the Labor Department ultimately determined that “there was no

shift in production, for TAA purposes.” See 69 Fed. Reg. at 76,783. What is significant is that, until

the Workers filed the instant appeal, the Labor Department made no attempt to reconcile (and,

indeed, failed even to acknowledge) the inconsistencies between BMC’s statements to the agency

and the information supplied by the Workers. If the agency had recognized – and sought to explore

and resolve – this and some of the other apparent discrepancies between the information provided

by the Workers and that provided by the company, the agency would have been alerted to the fact

Court No. 04-00229 Page 36

Compare A.R. 2-3, 5-32, 53 with C.A.R. 55.35

Only after this action was filed and the voluntary remand granted did the Labor Department

begin to seriously probe the merits of the Workers’ TAA petition, pressing BMC (for the first time)

to “provide detailed answers” supplying the “accura[te] and complete[ ]” information needed for the

agency to “conduct a comprehensive investigation” of the Workers’ claims (see S.A.R. 38-39) –

information that was at the time still so conspicuously absent from the agency’s files. Even a

cursory review of the administrative record here makes it clear that the Labor Department could –

and should – have elicited the necessary information much earlier, by scrutinizing the company’s

statements, seeking greater specificity and clarification, and reconciling the obvious inconsistencies

in the evidence before the agency.

B. The Labor Department’s Over-Reliance

on Employer-Provided Information

In its initial investigation of the Workers’ petition, the Labor Department asked BMC the

“ultimate question”:

Do the workers in BMC Software, Inc., Houston, TX . . . produce an article of any

kind or were they engaged in employment related to the production of an article? If

workers do produce an article, please explain, and what is the product?

that BMC’s Senior Manager for Human Resources was a less than reliable source.

35

As indicated in notes 20 and 26 above, the Workers’ request for reconsideration further

alleged for the first time that BMC products, and product components, were being imported to

replace those historically produced at BMC’s Houston facility. However, the Labor Department

made no attempt to investigate that allegation until after this action had been filed. Compare A.R.

53 with C.A.R. 55 and A.R. 56-59.

Court No. 04-00229 Page 37

C.A.R. 36-37.36 In effect, the agency sought to delegate to BMC’s Senior Manager for Human

Resources the power to decide the Workers’ TAA petition. But, “it is Labor’s responsibility, not

the responsibility of the company official, to determine whether a former employee is eligible for

benefits.” Federated Merch., 29 CIT at ____, 2005 WL 290015 at * 6 (citation omitted).

Accordingly, the Labor Department cannot rely on employers’ blanket assurances that

workers were, or were not, engaged in “production.” IBM I, 29 CIT at ____, 387 F. Supp. 2d at

1351-52 (Labor Department erred in “effectively substitut[ing] the [company official’s] opinion for

its own inquiry into whether the products produced . . . constituted ‘articles’ for the purpose of [the]

TAA statute”); IBM, 29 CIT at ____ & n.25, ____, 403 F. Supp. 2d at 1329-31 & n.25, 1336 (Labor

Department “may not rely on the legal conclusions of others as a substitute for its own analysis of

the relevant facts”; agency “cannot simply adopt as its own the legal conclusions of employers,” but

must instead “reach its own conclusions, based on its own thoughtful, thorough, independent

analysis of all relevant record facts”; “agency may not rely on conclusory assertions by company

officials – particularly not as to ‘ultimate facts’ and legal determinations entrusted to the agency, and

particularly not where those conclusory assertions are contradicted by detailed, specific statements

made by the [petitioning workers] under penalty of perjury”); EDS I, 28 CIT at ____, 350 F. Supp.

2d at 1292-93 (in relying on company official’s statement that company “did not produce articles,

36

The Labor Department thus failed to question BMC about the specific criteria that the

agency was assertedly applying at the time in cases such as this – i.e., whether the company’s

software is mass-replicated on physical media (such as CDs, tapes, or diskettes) and whether it is

widely marketed and commercially available (e.g., packaged for “off-the-shelf” sale). Compare

IBM I, 29 CIT at ____, 387 F. Supp. 2d at 1351 (because agency obviously knows “the sometimes

esoteric criteria” for TAA certification – “and the affected workers do not” – “it is incumbent upon

Labor to take the lead in pursuing the relevant facts”).

Court No. 04-00229 Page 38

but provided computer related services,” Labor Department improperly “substituted one . . .

employee’s opinion that the company did not produce ‘articles’ for [the agency’s] own legal

inquiry”); Ericsson I, 28 CIT at ____, 2004 WL 2491651 at * 7 (agency erred in relying on company

official’s “essentially legal conclusion” that workers “[did] not produce a product!”).37

Indeed, to the contrary, the Labor Department has an affirmative obligation to conduct its

own independent “factual inquiry into the nature of the work performed by the petitioners” to

determine whether or not that work constituted “production.” Ameriphone, 27 CIT at ____, 288 F.

Supp. 2d at 1359 (citing Chevron I, 26 CIT at 1284, 245 F. Supp. 2d at 1327-28 (quoting Former

Employees of Shot Point Servs. v. United States, 17 CIT 502, 507 (1993))).

Nor can the Labor Department rely on the unverified statements of company officials in the

face of factual discrepancies in the record, as it did in this case. See generally Former Employees

of Marathon Ashland Pipe Line, LLC v. Chao, 370 F.3d 1375, 1385 (Fed. Cir. 2004) (ruling that the

Labor Department is entitled to base TAA determinations on statements of company officials “if the

Secretary reasonably concludes that those statements are creditworthy” and if the statements “are

not contradicted by other evidence”; but – where there is a conflict in the evidence – the Labor

Department is “precluded . . . from relying on the representations by the employer” and is required

to “take further investigative steps before making [its] certification decision”) (emphasis added);

IBM, 29 CIT at ____, ____, 403 F. Supp. 2d at 1330-31, 1336 (Labor Department cannot “rely on

evidence which is fundamentally at odds with other record evidence (at least not without reconciling

37

See also Ameriphone, 27 CIT at ____, 288 F. Supp. 2d at 1359 (citing Marathon Ashland

I, 26 CIT at 744-45, 215 F. Supp. 2d at 1352-53 (Labor Department’s reliance on employer’s

conclusory assertions concerning “production” constituted impermissible abdication of agency’s

duty to interpret TAA statute and to define terms used in it)).

Court No. 04-00229 Page 39

discrepancies)”; agency cannot “accept at face value information provided by a source where either

(a) that information is contradicted by other evidence on the record, or (b) there is some other reason

to question the veracity of the information or the credibility of the source”).38 Cf. Int’l Molders and

Allied Workers’ Union, 643 F.2d at 31-32 (sustaining agency reliance on unverified employer

response absent “objective circumstances . . . suggesting that the company gave a less than truthful

response” and absent any indication “that the company would have financially benefitted from the

denial of certification”); Former Employees of Gateway Country Stores LLC v. Chao, 30 CIT ____,

____, 2006 WL 539129 at * 11 (2006) (Labor may reasonably “rely upon information supplied by

a company official where that information is not disputed by either party or, if there is a dispute, if

Labor conducts an adequate investigation into the reliability of that information”) (citations

omitted).

In the case at bar, as discussed in section I.B above, BMC’s Senior Manager for Human

Resources stated unequivocally that BMC software is not “recorded on media disks,” nor is it “mass-

produced” or “sold off-the-shelf,” when asked by the Labor Department investigator reviewing the

Workers’ request for reconsideration. See C.A.R. 55. The BMC official also denied that any jobs

38

Thus, statements “that are inconsistent, uncorroborated, not entirely based on personal

knowledge, and possibly biased do not constitute substantial evidence.” Former Employees of Tyco

Toys, Inc. v. Brock, 12 CIT 781, 782-83 (1988). See also IBM, 29 CIT at ____ n.27, 403 F. Supp.

2d at 1332 n.27; Ameriphone, 27 CIT at ____ n.8, 288 F. Supp. 2d at 1359 n.8; Chevron I, 26 CIT

at 1283 n.9, 245 F. Supp. 2d at 1326 n.9 (and cases cited there); Former Employees of Pittsburgh

Logistics Sys., Inc. v. U.S. Sec’y of Labor, 27 CIT ____, ____, 2003 WL 716272 at * 6 (2003)

(“Pittsburgh Logistics I”) (citing Former Employees of Shaw Pipe v. U.S. Sec’y of Labor, 21 CIT

1282, 1289, 988 F. Supp. 588, 592 (1997)); Former Employees of Oxford Auto. U.A.W. Local 2088

v. U.S. Dep’t of Labor, 27 CIT ____, ____ & n.14, 2003 WL 22282370 at * 5 & n.14 (2003)

(“Oxford Auto I”) (and cases cited there); Sun Apparel I, 28 CIT at ____, 2004 WL 1875062 at *

8.

Court No. 04-00229 Page 40

had been transferred abroad. Id. In fact, all of those statements were patently and demonstrably

false. It is impossible to definitively discern from the record here whether or not she knew that the

statements were false at the time she made them – although, candidly, it strains credulity to suggest

that the Senior Manager for Human Resources of a major multinational corporation could be so

ignorant of such basic information about the nature of her employer’s business, much less the overall

status of the company’s workforce at its facilities here at home in the U.S. versus abroad.39

Each of the false statements made by BMC’s Senior Manager for Human Resources was at

odds with information that the Workers had provided to the Labor Department. Yet the agency

never once contacted the Workers to attempt to reconcile the discrepancies, or to solicit information

from them (on this, or any other, subject) – not as part of the agency’s initial investigation, and not

even in response to the request for reconsideration. There can be no doubt that – if the Labor

Department had bothered to ask the Workers whether BMC’s software is mass-replicated on

physical media and is widely marketed and commercially available (e.g., packaged for “off-the-

shelf” sale) – the Workers would have provided to the agency the same photos of shrink-wrap

39

It is astonishing that, as late as the date of BMC’s return of the Confidential Data Request

(in the course of the remand proceedings), BMC’s Senior Manager for Human Resources was still

maintaining that BMC “create[s] software solutions not tangible products.” C.S.A.R. 92.

Other statements in BMC’s response to the Confidential Data Request are equally

mystifying. Incredibly, asked whether there had been layoffs, BMC’s Senior Manager for Human

Resources checked “unknown.” C.S.A.R. 92. In response to a request for the number of production

workers employed in 2002 versus 2003, she again stated that “BMC delivers software solutions not

a tangible product.” C.S.A.R. 93. Elsewhere, she reiterated that “BMC creates software solutions

not tangible products such as televisions or computer hardware.” C.S.A.R. 135. But she went on

to concede that BMC does “reproduce software on tangible media in the form of CDs, tapes and

paper at the subject plant (Houston, TX). Id. See also C.S.A.R. 157 (same).

Court No. 04-00229 Page 41

software that they appended to their Complaint filed with the court.40 But the Labor Department

never asked, and instead accepted as gospel truth the unsubstantiated representations of the BMC

human resources official.

As section I.A above observes, the methodology used to conduct TAA investigations is – as

a general principle – committed to the sound discretion of the agency. But it is difficult to fathom

why Labor Department investigators continue to rely so heavily on employers, virtually to the

exclusion of petitioning workers. A review of the administrative records in TAA cases filed with

the court reveals that agency investigators only relatively rarely contact petitioning workers to seek

additional information, documentation, or clarification.41 In contrast, investigators seem almost

40

The Labor Department emphasizes that, until the Complaint was filed, it had not seen the

Workers’ “photocopied pictures of [BMC’s] packaged software.” 69 Fed. Reg. at 76,783.

According to the Labor Department, it was those photos that caused the agency to “identif[y] the

need to resolve the apparent conflict between information provided by the petitioners and that

provided by the employer,” resulting in the agency’s request for a voluntary remand. Id.

As noted immediately above, however, the Labor Department would have had access to the

photos earlier, had it bothered to contact the Workers in the course of either its initial investigation

or its investigation in response to the Workers’ request for reconsideration. Even more to the point,

as discussed in note 24 and elsewhere, the record before the agency was replete with “apparent

conflict[s] between information provided by the petitioners and that provided by the employer” even

without the photos – as the Government itself conceded in requesting a voluntary remand from the

Court. See [Defendant’s] Second Amended Motion for Voluntary Remand (July 6, 2004). But those

conflicts were either ignored or overlooked by the agency, until the Workers sought recourse in this

forum.

41

In those rare cases where Labor Department investigators actually have contacted

petitioning workers, it has generally been only after an initial negative determination has been

rendered, and the workers have sought reconsideration or have filed a challenge in court. See, e.g.,

EDS I, 28 CIT at ____, 350 F. Supp. 2d at 1285 (noting that, in response to request for

reconsideration, agency investigator contacted one of the petitioning workers). But see IBM I, 29

CIT at ____, ____, 387 F. Supp. 2d at 1348, 1350 (indicating that agency had some minimal contact

with two of the petitioning workers in course of initial investigation).

Court No. 04-00229 Page 42

gullible in their willingness to accept at face value virtually anything an employer says – typically

without even confronting the employer with other, conflicting information provided by petitioning

workers (or sometimes the employer itself).42

In a nutshell, the Labor Department views employers as presumptively reliable sources, and

treats any information that they provide as though it “trumps” information provided by petitioning

workers. The agency maintains that an employer has no reason to lie, and has “[no] interest in the

outcome of [a TAA case] that might . . . be[ ] adverse to its former employees.” Former Employees

of Barry Callebaut v. Chao, 357 F.3d 1377, 1381 (Fed. Cir. 2004).43

Au contraire. The Labor Department’s position on the reliability of company statements is

simplistic and naive, at best – for, just as the Labor Department seems to impute to petitioning

42

See Harper’s Magazine at 63 (noting that, notwithstanding significant employer incentives

to be less than forthcoming about the circumstances surrounding layoffs, “the Labor Department

routinely privileges information from the company over information from workers”).

43

See also, e.g., Int’l Molders and Allied Workers’ Union, 643 F.2d at 31-32 (sustaining

agency reliance on unverified employer response absent “objective circumstances . . . suggesting

that the company gave a less than truthful response” and absent any indication “that the company

would have financially benefitted from the denial of certification”); Chevron I, 26 CIT at 1282 n.8,

245 F. Supp. 2d at 1325 n.8 (noting, then rejecting, Government’s claim that there was “no evidence

that [company] officials were uncooperative or less than forthright during Labor’s investigation”).

It is telling that, for example, in Chevron, one current company official feared retaliation by

his employer for the assistance he rendered to the petitioning workers. See Chevron I, 26 CIT at

1272, 245 F. Supp. 2d at 1320. See also, e.g., IBM I, 29 CIT at ____, 387 F. Supp. 2d at 1350-52

(employer apparently failed to complete and return agency TAA questionnaire, and was otherwise

“very dilatory”; Defendant’s Consent Motion for Voluntary Remand (Oct. 7, 2003), filed in Former

Employees of Mellon Bank, N.A., Court No. 03-00374 (expressing concern as to employer

responsiveness to agency inquiries for additional information); Whitin Machine Works, 554 F.2d

at 500 (expressing incredulity and describing as “bizarre” employer’s “attempt[ ] to terminate [a

TAA investigation] which could result in substantial benefits to many of its present and former

employees”).

Court No. 04-00229 Page 43

workers a motivation to stretch the truth in an effort to secure TAA benefits, so too employers have

certain inherent incentives to be less than candid and fully forthcoming as well. See, e.g., Tyco

Toys, 12 CIT at 782-83 (remand ordered, based on court’s finding that sole source on which agency

relied for information evidenced “a certain bias against provision of trade adjustment funds to the

claimants”).

Particularly in today’s social and political climate – a time when issuing pink slips,

padlocking factory doors, or outsourcing production to India or China may trigger a consumer

boycott, make a company the lead story on “Lou Dobbs Tonight,”44 or get the company’s chief

executive branded a “Benedict Arnold CEO”45 – some employers may be understandably reluctant

44

The recent Harper’s Magazine exposé of the Labor Department’s administration of the

TAA program questioned the agency’s blind reliance on information supplied by employers “despite

the fact that many executives, fearing nothing so much as the wrath of Lou Dobbs, are less than

eager to admit to shipping work overseas.” Harper’s Magazine at 63 (emphasis added).

For months, one of the most popular recurring segments on CNN’s “Lou Dobbs Tonight”

– titled “Exporting America” – covered issues such as free trade agreements, the U.S. trade deficit,

and “outsourcing,” shining an often-unwelcome spotlight on U.S. corporations reported to be

outsourcing jobs.

The TV program’s website (at www.cnn.com) includes a link to transcripts of past shows

(including segments on topics ranging from “Does Job Retraining Work?” and “Growing Backlash

Over Outsourcing,” to “Small and Medium-Size Business Now Exporting American Jobs

Overseas”). At one point, the website also featured a link captioned “Exporting America: List of

companies exporting jobs.” (BMC Software appears on the list, which is now archived at

http://www.cnn.com/CNN/Programs/lou.dobbs.tonight/popups/exporting.america/content.html (last

visited Aug. 31, 2006).) See generally “Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 821-22

n.110 (discussing Lou Dobbs’ focus on “Exporting America”).

See also GAO Report 04-1012 at 16-17 (reporting that trade-affected companies are

sometimes “unwilling” to provide lists of workers affected by layoffs).

45

In the course of the 2004 Presidential campaign, Democratic nominee Senator John Kerry

famously denounced as “Benedict Arnold CEOs” corporate executives who outsourced

Court No. 04-00229 Page 44

to acknowledge layoffs and the reasons for them. Thus, in Bell Helicopter, for example, the court

properly criticized the Labor Department’s reliance on information provided by company officials,

emphasizing that:

[Both company officials] had serious adverse interests to acknowledging or

confirming that the job losses were due to the fact that [the firm] could pay

Canadians less than Americans . . . [and] . . . intended to do just that. The public

relations implications alone were enough to cast a cloak of suspicion over [the

firm’s] responses, both in terms of veracity and completeness.

Bell Helicopter, 18 CIT at 326 (emphasis added).46

Similarly, employers have an incentive to downplay the circumstances surrounding layoffs

if they fear that the publicity that may accompany a full-blown TAA investigation (and possible

eventual certification) may be exploited by their competitors, or may negatively affect their stock

prices or financial ratings, or may have an adverse impact on their relationships with their suppliers

or their “downstream” finishers, by signaling that they may be having financial difficulties. Thus,

manufacturing operations, “tak[ing] American jobs and money overseas.” See, e.g., Hon. John

Kerry, Town Hall Meeting, Vinton, IA (Jan. 13, 2004) (transcript available at 2004 WL 62479).

46

No employer relishes headlines like “Shipped Out – The Story of How AT&T Moved 3,500

Workers to a New ‘Career’ at IBM – Knowing It Wouldn’t Last.” See IBM I, 29 CIT at ____, 387

F. Supp. 2d at 1347 (quoting headline of news article in The Star Ledger, August 25, 2002).

Similarly, the record in another, unrelated IBM case included a New York Times news clipping

reporting on a conference call in which “two senior I.B.M. officials told their corporate colleagues

around the world . . . that I.B.M. needed to accelerate its efforts to move white-collar . . . jobs

overseas even though that might create a backlash among politicians and its own employees.” See

IBM, 29 CIT at ____ n.26, 403 F. Supp. 2d at 1332 n.26.

See also “Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 821-22 n.110 (citing another

“example of the bad public relations associated with outsourcing on a local level”); id. (emphasizing

need for Labor Department to take measures to ensure “that the [former employer’s] answers [to

agency requests for information] are not tinged with concern for the company’s public image,”

particularly since “some companies have been wary to be seen as contributing to the ‘outsourcing’

trend”).

Court No. 04-00229 Page 45

for example, a company subject to a TAA investigation may harbor concerns that, if its suppliers

become skittish about the company’s solvency, they may impose more stringent payment terms on

the company, refuse to extend credit to it, or cease doing business with it altogether. And a

company’s “downstream” finishers may begin to contract with other sources of work to replace the

stream of work historically generated by the company, if they suspect that the company may be

beginning to scale back production or preparing to close its doors entirely.47

In other cases, company officials simply may not understand that the TAA program differs

from the unemployment compensation system, where an employer has a clear financial stake in

minimizing the amount paid to former employees on unemployment claims.48 Or companies may

47

See, e.g., GAO Report 04-1012 at 24-25 (reporting that “some trade-affected employers

are reluctant . . . to provide the names of suppliers that may also be affected by their shutdown or

reduced production. For example, [some state] officials . . . told [GAO] that employers are

sometimes hesitant to share this information because they do not want their suppliers to know that

they are having financial difficulties.”) (emphasis added). See also id. at 4 (noting that “trade-

affected companies may be reluctant . . . to provide lists of firms that supply them with component

parts”).

48

Employers typically are familiar with the unemployment compensation system, and may

assume (wrongly) that the TAA system operates in a similar fashion. The size of an employer’s

annual unemployment tax assessment is based, in significant part, on the amount that has been paid

out by the state to the company’s former employees on unemployment compensation claims.

Employers thus have a very real financial incentive to seek to minimize the payment of

unemployment compensation to their former employees. In contrast, an employer pays no part of

the assistance awarded to former employees under the TAA system. Cf. Jerome Hanifin, “A Short

History of a TAA Case: Former Employees of Oxford Automotive v. U.S. Department of Labor,”

Litigating Trade Adjustment Assistance Cases Before the United States Court of International Trade,

Customs & International Trade Bar Association and American Bar Association seminar, Princeton

Club, New York, NY, April 19, 2005, at 13 (“Hanifin”) (“Even though certification for TAA

benefits entails no added cost to the employer, in all too many cases the employer has provided

suspect or outright false information to Labor.”); IBM, 29 CIT at ____ n.37, 403 F. Supp. 2d at 1336

n.37 (directing that, “[t]o help ensure the completeness and accuracy of information obtained on

remand, the Labor Department shall expressly advise and assure all its contacts at [the former

employers] that – unlike regular unemployment compensation, for example – the TAA certification

Court No. 04-00229 Page 46

lack ready access to all the information that the Labor Department seeks.49 In some cases (and

perhaps this case), the company officials who respond to the Labor Department’s inquiries may not

intend to mislead the agency, but instead may simply lack the requisite knowledge of the company’s

product lines, markets, and operations. See, e.g., Sun Apparel I, 28 CIT at ____, 2004 WL 1875062

at * 7 (lambasting Labor Department for relying on information provided by employer’s human

resources manager which was “inconsistent, contradictory, and evidence[d] an apparent lack of

comprehension of the full array of operations, tasks, and activities” of company personnel)

(emphasis added); IBM, 29 CIT at ____, 403 F. Supp. 2d at 1322 (criticizing agency for relying on

information provided by company official who “later disclaimed ‘any firsthand knowledge of daily

work activities of the [petitioning workers],’ and recommended that ‘someone else at [the company]

should be contacted for additional information’”); Pittsburgh Logistics I, 27 CIT at ____, 2003 WL

716272 at * 7 (noting that “[t]he Court does not presume that the Employment Development

Specialist . . . located in Rochester [New York] who responded to the [agency] investigator’s

questions about the petitioners was ‘in a position to know’ the extent of the petitioners’ jobs in

Independence [Ohio]”).50

of the [petitioning workers] would involve no expense whatsoever on the part of the companies”).

49

See, e.g., GAO Report 04-1012 at 4 (“trade-affected companies may . . . find it difficult to

provide lists of firms that supply them with component parts”), 16-17 (reporting that trade-affected

companies are sometimes “unable” to provide lists of workers affected by layoffs), 24 (“some trade-

affected employers . . . find it difficult to provide the names of suppliers that may also be affected

by their shutdown or reduced production”), 25 (“smaller employers may find it difficult to provide

information on their suppliers or finishers because they do not have this information readily

available”).

50

In some cases, the problem may lie (at least in part) with the Labor Department’s usual

practice of using a generic, “one-size-fits-all” Business Confidential Data Request standard form

Court No. 04-00229 Page 47

In sum, for all these reasons and more, there is no apparent rational basis for treating

information supplied by employers as inherently and necessarily more reliable and authoritative than

that provided by petitioning workers – particularly where the employer’s information is unsworn,

unverified, and uncorroborated, or where it conflicts with information submitted by the petitioning

workers.51

questionnaire to attempt to elicit the requisite information from employers in TAA cases. See

generally S.A.R. 43-47 (blank Business Confidential Data Request questionnaire form, sent to BMC

by the Labor Department in the course of the remand proceedings in this case); “Certifiably

Broken,” 7 U. Pa. J. Lab. & Emp. L. at 818-19 (criticizing Labor Department’s employer

questionnaire process).

Because the agency’s standard form questionnaire is not tailored to any specific industry

(much less the particular company at issue in a particular case), it is difficult not to sympathize with

company officials who are confronted with the challenge of trying to complete the form as best they

can.

Of course, the Labor Department could undertake to develop specialized questionnaires for

particular industries. Cf. “Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 823-26 (proposing that

Labor Department convene inter-disciplinary working groups for various major industries, to – inter

alia – develop industry-specific definitions of “production”). However, particularly if the Labor

Department continues to use a generic standard form questionnaire for all employers, it is incumbent

on the agency to follow up on companies’ responses, to ensure that the information on which agency

determinations are based is accurate, and has not been distorted or misinterpreted due to the

agency’s reliance on a very generic form questionnaire. See generally United Glass & Ceramic

Workers v. Marshall, 584 F.2d 398, 404-05 (D.C. Cir. 1978) (noting that TAA program requires

Labor Department “to investigate a wide range of industries,” and that agency’s investigative

techniques must necessarily “vary with the structure of the industry, the available sources of

information, and the number of other causative factors at work”).

51

In the interests of accuracy and efficiency, Labor Department investigators would be well

advised to contact both the employer and the petitioning workers in the course of the agency’s initial

investigation. And, of course, investigators are obligated to seek clarification to resolve any

apparent conflicts or discrepancies in the record before them.

Moreover, while it may be true – as the Labor Department has argued elsewhere – that “there

is no requirement that any statement upon which Labor relies must be verified in accordance with

the requirements of 28 U.S.C. § 1746,” there can be little doubt that the information provided to the

Court No. 04-00229 Page 48

agency generally would be more accurate and more complete if respondents (companies and

petitioning workers alike) were required to file their submissions under oath. See Barry Callebaut,

357 F.3d at 1381. See also id. at 1383 (sustaining Labor Department’s claim that workers were not

entitled to TAA certification, largely on the strength of sworn employer affidavits submitted to the

agency, which – the appellate court emphasizes – included solemn oath acknowledging liability for

perjury; “those affidavits were sufficiently trustworthy to constitute substantial evidence”).

Indeed, company officials and displaced workers alike may be held liable for material false

statements made to the Labor Department in the context of a TAA investigation whether those

statements are oral or in writing, and even if they are not made under oath. See 18 U.S.C. § 1001

(subjecting to fine and/or imprisonment for up to five years anyone who “in any matter within the

jurisdiction of the executive, legislative, or judicial branch of the Government of the United States,

knowingly and willfully . . . makes any materially false, fictitious, or fraudulent statement or

representation”); United States v. Krause, 507 F.2d 113, 117 (5th Cir. 1975) (federal material false

statements statute applies “to oral as well as written statements and unsworn as well as sworn

statements”); IBM, 29 CIT at ____ n.37, 403 F. Supp. 2d at 1336 n.37 (citing federal material false

statements statute at 18 U.S.C. § 1001, and directing that – to “help ensure the completeness and

accuracy of information obtained on remand” – the Labor Department “shall caution all contacts

that they will be held personally accountable by the Court for all information that they provide in

the course of the agency’s investigation, whether their statements are oral or in writing, and even

if they are not made under oath”).

The reliability of information depends, in equal measure, both on the knowledge and

authority of the source of the information, and on that source’s honesty. If the Labor Department

believes that BMC’s Senior Manager for Human Resources actually did not know that her

statements were false, it is entirely unclear (based on its experience in this and many other such

cases) why the agency persists in treating employers’ human resources executives as authoritative,

knowledgeable sources in TAA investigations. If – on the other hand – the Labor Department

believes that BMC’s Senior Manager for Human Resources intentionally prevaricated, it is not only

unclear why the agency continues to treat employers’ human resources executives as presumptively

honest sources, but it is also unclear why the agency apparently routinely permits them to lie with

impunity. See, e.g., “Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 820-21 & n.106 (criticizing

Labor Department’s pattern of relying on companies’ human resources personnel, observing that

“the Human Resources department appears to be [the Labor Department’s] primary source in

investigations,” and emphasizing that “[i]n most cases, the data they provide is lacking in some

respect”); Sun Apparel I, 28 CIT at ____, 2004 WL 1875062 at * 5 (agency sought to defend its

reliance on information provided by employer’s Human Resources manager, based on official’s

“credibility” and “position within the company”).

In any event, it is possible that, had the Labor Department required BMC’s Senior Manager

for Human Resources to submit her responses to the agency’s questions under oath, she would have

Court No. 04-00229 Page 49

answered truthfully and accurately, or – if she were uncertain as to the answers – she would have

referred the agency’s inquiries to some other company official for their response. (It is interesting

to note that, in its initial contact with BMC after the Court remanded the case to the agency, the

Labor Department pointedly admonished that “the company official who signs the CDR

[Confidential Data Request questionnaire response] will be responsible for the accuracy and

completeness of the information contained therein.” See S.A.R. 39 (emphasis added). That warning

– as much as anything – may be the reason that this matter was kicked up to the office of BMC’s

General Counsel, and finally got the attention that it deserved. See C.S.A.R. 50 (letter from BMC’s

Senior Legal Counsel, assuring Labor Department that “BMC Software is very interested in

cooperating” with agency investigation).)

Certainly a referral to the U.S. Attorney for potential prosecution under 18 U.S.C. § 1001

of a corporate executive for material false statements made to the Labor Department in the course

of a TAA investigation would get the attention of other employers elsewhere across the country, and

send a strong message to company officials everywhere about the importance of responding to the

agency’s inquiries accurately and completely.

Ultimately, of course, it falls to the Labor Department to decide how best to ensure the

reliability of the information on which its TAA determinations are based. See generally Former

Employees of CSX Oil & Gas Corp. v. United States, 13 CIT 645, 651-52, 720 F. Supp. 1002, 1008

(1989); Hawkins Oil & Gas II, 17 CIT at 130, 814 F. Supp. at 1115.

The agency may – for example – choose in the future to channel its inquiries to employers

through the companies’ general counsels’ offices (which, in this post-Enron era, are likely to be

uniquely sensitive to the importance of accuracy and completeness in responding to federal

investigations). See generally “Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 820-22

(recommending that Labor Department “direct all questionnaires to in-house counsel, or if there are

none, to the company’s outside legal counsel,” theorizing that agency could then “rely on the

standards of legal professional ethics in demanding that information be provided in a complete and

accurate manner”), 820 n.106 (observing that “the Human Resources department appears to be [the

Labor Department’s] primary source in investigations,” but that “[i]n most cases, the data they

provide is lacking in some respect”); IBM I, 29 CIT at ____, ____, 387 F. Supp. 2d at 1348, 1350-52

(noting that agency investigator contacted company’s in-house counsel).

Or the agency may choose to caution all respondents (including company officials and

petitioning workers alike) that they may be subject to prosecution for material false statements; or

the agency may choose to require that all information provided to it be submitted under oath. See,

e.g., U.S. Department of Agriculture, Form FSA-229, “Application for Trade Adjustment Assistance

(TAA) for Individual Producers” (Ag-TAA Application) (cautioning Ag-TAA applicants that, inter

alia, “[t]he provisions of criminal and civil fraud statutes, including 18 USC 286, 287, 371, 641,

651, 1001; 15 USC 714m; and 31 USC 3729, may be applicable to the information provided”);

Court No. 04-00229 Page 50

The court’s reach may or may not extend to employers who provide incomplete, false, or

misleading information to the Labor Department; but clearly the Labor Department is well within

its grasp. And the agency’s persistent failure to verify the accuracy of the information on which it

relies – as well as its pattern of turning a blind eye to obvious inconsistencies and discrepancies in

the record before it – is beginning to verge on contempt for administrative and judicial process, and

“Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 821 n.109 (citing source “suggesting as an

improvement to TAA that [the Labor Department] demand ‘accurate information’ from corporate

management”). See also 19 U.S.C. § 2321 (authorizing Labor Department to “subpena the

attendance of witnesses and the production of evidence necessary . . . to make a determination” on

a TAA petition, and authorizing judicial enforcement of such subpoena); Whitin Machine Works,

554 F.2d 498 (upholding subpoena issued in TAA investigation by Labor Department, compelling

employer to produce to agency “sales, production, and inventory data for three years, separately

identified by product; employment data, including average weekly and monthly employment; data

as to quantity and value of [employer’s] imports, identified by product lines; and the percentage of

production and sales accounted for by [employer’s] exports”).

Or the agency may choose to verify all information on which it relies by seeking independent

corroboration. See, e.g., Sun Apparel I, 28 CIT at ____, 2004 WL 1875062 at * 8 (castigating Labor

Department for agency’s failure “to require any documentary or other evidence to support the HR

manager’s assertions, to verify the company’s responses, or to otherwise ensure the truthfulness of

the HR manager’s claims” which conflicted with information provided by petitioning workers);

“Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 822-23 (asserting that agency investigations

should be required to include, in addition to information supplied by employer, “objective, third

party evidence” such as “trade-specific publications, trade data for an industry, consultations with

industry experts, etc.”). But cf. Int’l Molders and Allied Workers’ Union, 643 F.2d at 31-32

(sustaining agency reliance on unverified employer response absent “objective circumstances . . .

suggesting that the company gave a less than truthful response” and absent any indication “that the

company would have financially benefitted from the denial of certification”).

Or the agency may devise other suitable means to protect the integrity of its process. What

the Labor Department emphatically may not do is ignore or dismiss the statements of petitioning

workers while treating as gospel the conflicting, unsworn, and uncorroborated statements of

company officials (who may not even necessarily be speaking to matters within their competence).

Court No. 04-00229 Page 51

does a grave disservice to the hardworking men and women of this country.52

C. The Labor Department’s Failure to Consult

Other Publicly-Available Sources of Information

52

The persistent problems that the Court of International Trade has identified in recent years

apparently are nothing new.

More than a decade ago, an audit of the TAA program conducted by the U.S. General

Accounting Office (now known as the “Government Accountability Office”) (“GAO”) concluded

that “[p]roblems in the TAA certification process raise questions about how Labor determines

worker eligibility. Flaws in Labor’s petition investigations . . . may result in petitions not being filed

or erroneous decisions to approve or deny assistance to workers.” GAO/HRD-93-36, “Dislocated

Workers: Improvements Needed in Trade Adjustment Assistance Certification Process,” Oct. 1992,

at 3 (“GAO Report 93-36”).

The GAO audit found that “flawed investigations were conducted in 63 percent of the

petitions filed” during the period under review, and that “[a]s a result of these flaws, workers entitled

to TAA benefits may have been denied needed assistance.” Id.

Of particular moment here, the GAO identified as a “major” problem the Labor Department’s

practice of relying on “incomplete, inaccurate, or unsubstantiated” information provided by

employers. Id. at 5. The GAO report explained:

For example, in one case, Labor relied on unsubstantiated information regarding the

parent company’s import practices and denied the petition. Only after union officials

intervened on behalf of the workers did Labor learn that the company was importing

goods from its foreign operation. As a result, Labor reversed its position and

certified the workers.

Labor’s reliance on unsubstantiated company testimonial evidence . . . has also been

questioned by the U.S. Court of International Trade. For example, the court

remanded one case to Labor for further investigation because Labor had “. . . relied

on questionable data including inconsistent sources, and uncorroborated and possibly

biased testimony.”

Id. Incredibly, more than a dozen years after the GAO condemned the practice, the Labor

Department still routinely bases its TAA certification determinations on “incomplete, inaccurate,

[and] unsubstantiated” information provided by employers.

Court No. 04-00229 Page 52

Even apart from the Labor Department’s blind faith in information provided by employers,

the agency’s failure to solicit information from petitioning workers, and its willingness to ignore

apparent inconsistencies in the record before it, there is yet another problem with the agency’s

investigations: Here, as elsewhere, Labor Department investigators failed to make use of valuable

sources of information that are readily available to them.53

For example, the Labor Department’s standard form Petition for Trade Adjustment

Assistance asks that petitioning workers supply the web address for their former employer. The

Workers here complied with that request. See A.R. 2 (providing company web address,

www.bmc.com).

Agency investigators apparently never consulted the company’s website, however. Had they

done so, they would have discovered that the website states that BMC’s “SIC” code – “Standard

Industrial Classification” code – is 7372, which is the classification code for “Prepackaged

Software.” (Emphasis added.)54 The agency investigators also would have been able

53

See, e.g., Letter from the Court to Counsel for Defendant (March 19, 2004), filed in Former

Employees of Paradise Fisheries v. United States, Court No. 03-00758 (criticizing Labor Department

for six-month delay in TAA certification of workers, which resulted from failure of agency

personnel to perform simple search of online version of Federal Register); Ericsson I, 28 CIT at

____, 2004 WL 2491651 at * 5 (faulting Labor Department for failure to review information on

corporate website of petitioning workers’ former employer).

54

See, e.g., BMC website, “BMC Software Vendor Fact Sheet” (identifying BMC’s SIC code

as 7372).

As noted in section I.B above, the internal agency memorandum documenting the Labor

Department’s initial investigation in this case indicates that BMC’s SIC code is 7371 – the code for

“Computer Programming Services.” See C.A.R. 42-43. However, there are several problems with

that statement.

First, the Labor Department’s statement has no apparent basis in the administrative record.

Court No. 04-00229 Page 53

The source of the information simply is not cited.

Second, as this note details, the accuracy of the Labor Department’s statement is subject to

question. Whatever the source of the agency’s information (which is not disclosed in the record),

both BMC’s own website and the website of the U.S. Securities and Exchange Commission identify

BMC’s SIC code as 7372 – “Prepackaged Software.” See generally section I.B & n.18, supra

(explaining SIC system). In the context of a TAA investigation the distinction between “production

of an article” and “delivery of services” may be critical.

And, third (and most importantly), not only is an employer’s SIC (or NAICS) code not

determinative in a TAA case, it is essentially irrelevant. Thus, for example, the Labor Department

itself now has determined that the employer in this case, BMC, is engaged in the production of an

article – even though both SIC codes 7371 and 7372 are, in fact, “services” codes under the Standard

Industrial Classification system. See also Merrill Corp. II, 29 CIT at ____, 387 F. Supp. 2d at 1345

(stating that “[s]ources such as the SIC ‘do not speak to the definition of the word “article” as used

in the [Trade] Act, but rather to the categorization of industries for entirely other purposes,’” and

that “[t]he SIC code Labor deemed applicable to [the company’s] business is irrelevant” in such a

situation) (quoting Murray Engineering II, 28 CIT at ____ n.8, 358 F. Supp. 2d at 1273 n.8); Murray

I, 28 CIT at ____, 346 F. Supp. 2d at 1289 (holding that an employer’s NAICS code is “not

relevant” in a TAA case). Cf. IBM I, 29 CIT at ____, 387 F. Supp. 2d at 1348-49 (finding that

NAICS failed to address issues raised by petitioning workers).

It bears noting that the case at bar is not an isolated case. There have been discrepancies in

SIC and NAICS codes in other cases as well. For example, in reaching its negative determination

in Merrill, the Labor Department identified Merrill’s SIC code as 7334 – “Photocopying &

Duplicating Services,” a “services” code under the Standard Industrial Classification system. See

Merrill Corp. II, 29 CIT at ____, 387 F. Supp. 2d at 1345. However, the SEC’s website states that

the SIC code for Merrill is 2750 – “Commercial Printing,” which is a “manufacturing” code (i.e.,

“Manufacturing – Printing, Publishing, and Allied Industries”).

The Labor Department’s use of SIC and NAICS codes in TAA cases was ill-conceived from

the start. Contrary to the agency’s implication, “[v]arious Federal government agencies maintain

their own lists of business establishments, and assign classification codes based on their own

programmatic needs.” See “Ask Dr. NAICS” (available on website of U.S. Census Bureau).

Accordingly, as the Census Bureau’s website makes clear: “There is no central government agency

with the role of assigning, monitoring, or approving NAICS codes for [business] establishments.

Individual establishments are assigned NAICS codes by various agencies for various purposes using

a variety of methods.” Id. (emphasis added). A company’s classification codes therefore “will vary

by agency.” Id. Indeed, “some agencies assign more than one NAICS code” to a single company,

with some agencies “accept[ing] up to 5 or 10 classification codes” per company. Id. Moreover,

“NAICS was designed . . . in such as way as to allow business establishments to self-code.” Id.

Court No. 04-00229 Page 54

to access BMC’s Form 10-K for the Fiscal Year Ended March 31, 2003 (filed in mid-June 2003) –

the most recent report as of the date of the Workers’ termination. That report describes the work

of BMC’s Houston facility as “manufacturing,” and explains that the company sells its software both

“in object code form” and “on a shrink wrap basis.”55 Of course, the fact that BMC sells

“prepackaged software” in “shrink wrap form” was critical to the merits of the Workers’ TAA

petition, under the criteria that the Labor Department was applying at the time.

By regulation, the Labor Department is required “to marshal all relevant facts to make a

determination” on TAA petitions. 29 C.F.R. § 90.12.56 In light of that obligation, the agency’s

failure to avail itself of resources such as company websites and Form 10-Ks in cases such as this

is utterly incomprehensible.57 Here, a few quick clicks of a computer mouse by a Labor Department

(emphasis added). And, finally, “NAICS was developed specifically for the collection and

publication of statistical data to show the economic status of the United States. The NAICS

categories and definitions were not developed to meet the needs of . . . regulatory applications” such

as the TAA program at issue here. Id. (emphasis added).

55

See BMC Form 10-K, at C.S.A.R. 490-91 (stating that “[p]roduct manufacturing and

distribution for the Americas are based in Houston” and in California), 493 (stating that BMC

software is distributed both “in object code form” and “on a shrink-wrap basis”); see also id. at 488

(noting that, beginning with Form 10-K for Fiscal Year ending March 31, 2003, all of BMC’s SEC

filings are being posted on company website).

56

All references to regulations herein are to the 2003 version of the Code of Federal

Regulations.

57

The SEC’s website offers free access to the 10-K forms (which identify, inter alia, SIC

codes) of those companies that are required to file with the agency. It is an extremely quick and

easy search. A researcher simply types in the name of the subject company, presses “search,” and

voila! Up pops a menu of the complete text of the company’s SEC filings from 1993 to date,

available online through the agency’s “EDGAR” database.

See also Hanifin at 6-7 (discussing submission of employer’s Form 10-K to Labor

Department in a TAA case to substantiate validity of petitioning workers’ claims).

Court No. 04-00229 Page 55

investigator would have sufficed to expose the falsity of the information provided to the agency by

BMC’s Senior Manager for Human Resources, and would have resolved at least some of the issues

central to the agency’s analysis of the Workers’ right to TAA certification.58 See generally

“Certifiably Broken,” 7 U. Pa. J. Lab. & Emp. L. at 822-23 (asserting that Labor Department

investigations should be required to include, in addition to information supplied by employer,

“objective, third party evidence” such as “trade-specific publications, trade data for an industry,

consultations with industry experts, etc.,” and arguing that the absence of corroboration by such

“third party sources” should be deemed “prima facie evidence that [the Labor Department] did not

conduct a reasonable investigation”).

D. The Impact of the Labor Department’s Cavalier Approach to Remands

This case is troubling enough viewed in isolation. But it is even more disturbing when it is

viewed in the context of other TAA cases appealed to the court in recent years. As Ameriphone

noted, the Labor Department’s modus operandi increasingly is to seek a voluntary remand in TAA

cases that are appealed to the court. Ameriphone, 27 CIT at ____, 288 F. Supp. 2d at 1359.59

Requests for voluntary remands have become all but routine.60

58

See Oxford Auto I, 27 CIT at ____ & n.14, 2003 WL 22282370 at * 5 & n.14 (“Labor erred

by failing to verify the statements [of a company official] that seemed at odds with [the company’s]

Form 10-K”) (citations omitted).

59

See also Hanifin at 3 (noting that “[i]t seems to be standard operating procedure in TAA

cases for the Department of Justice attorney representing Labor to immediately ask for a voluntary

remand when a case challenging a denial is filed”).

60

The statistics reported in one analysis are striking: “From January 2001 through October

2004, seventy-four TAA appeals were filed with the Court of International Trade; in forty-two of

them, lawyers for the Labor Department requested a ‘voluntary remand,’ apparently so that they

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Counsel for the Government have elsewhere sought to defend the agency’s knee-jerk filing

of motions for voluntary remand as “a reasonable and efficient opportunity for Labor to conduct

further investigation as to whether the [denial of] certification . . . is supported by substantial

evidence.”61 But that reflects a curiously perverted view of the administrative and judicial processes.

The Labor Department is obligated by statute to thoroughly investigate all TAA petitions and to

compile complete records to support its determinations before cases reach the court. And the

“substantial evidence” test is to be applied not by the agency, but – rather – by the court.

Moreover, there are a number of significant concerns inherent in the Labor Department’s

practice of routinely seeking (and, for that matter, the court’s practice of reflexively granting)

voluntary remands in TAA cases.

One concern is that voluntary remands effectively enable the Labor Department to paint a

misleading portrait of the calibre of its investigations and the bases for its determinations. By

definition, a voluntary remand affords the Labor Department an opportunity to “doctor” the record

of its initial investigation, by eliciting information that the agency should have obtained previously,

and then using that information to “beef up” the administrative record before the agency’s

determination is subjected to judicial review. By doing so, the Labor Department avoids much of

the harsh criticism it would have drawn had a court reviewed the agency’s determination based

solely on the record developed in the initial investigation.

could have more time to investigate and substantiate a case that should already have been thoroughly

considered.” See Harper’s Magazine at 63. A more recent analysis of TAA cases filed with the

court confirms that voluntary remands are even more common now, and – indeed – are sought in the

vast majority of cases. See section II.E, infra.

61

See McCarthy at 14.

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However critical of the Labor Department the TAA case law has been to date, there can be

little doubt that it would be even more blistering if – in lieu of granting agency motions for voluntary

remand – the courts instead denied such requests, forced the agency to attempt to defend its

determinations on the basis of the meager record compiled in the course of its initial investigations,

and based their first opinions in every case solely on that record, cataloguing the flaws and

deficiencies in the investigation that the agency would have sought to cure had a voluntary remand

been granted.62 In sum, the reported decisions of the court do not accurately reflect the Labor

Department’s administrative processes. Through the procedural vehicle of voluntary remands, the

agency is able to sweep much of the worst of its dirt under the rug.

Delay is another critical issue. The Government’s position on the acceptability of routine

requests for voluntary remands suggests that it believes that there is “no harm, no foul” inherent in

such an approach. Nothing could be further from the truth. It is no answer for the Labor

62

As the Court of Appeals has noted, where an agency “request[s] a remand (without

confessing error) in order to reconsider its previous position,” “the reviewing court has discretion

over whether to remand.” SKF USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001)

(citations omitted).

Indeed, in SKF, the Court of Appeals expressly recognized that a remand “may be refused

if the agency’s request is frivolous or in bad faith”:

For example, in Lutheran Church-Missouri Synod v. Fed. Communications Comm’n,

141 F.3d 344, 349 (D.C. Cir. 1998), the Court of Appeals for the District of

Columbia Circuit refused the FCC’s “novel, last second motion to remand,” noting

that the remand request was not based on a confession of error and was instead based

on a prospective statement which would not bind the FCC. See id. The court added

that “the Commission has on occasion employed some rather unusual legal tactics

when it wished to avoid judicial review, but this ploy may well take the prize.”

SKF, 254 F.3d at 1029 (emphasis added).

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Department to “wait and see” whether a denial of TAA certification is challenged in the courts, and

then – if it is – to seek a voluntary remand to belatedly conduct the thorough probe to which all

petitioning workers are entitled by law at the administrative level.

The Labor Department simply cannot pretend that certifying workers after a court case has

been filed, and after a supplemental investigation has been conducted in the course of a voluntary

remand, can ever even begin to make those workers whole and put them in the same position that

they would have been in had the agency conducted a proper initial investigation and granted the

workers timely relief, within the 40 days mandated by statute. Marathon Ashland aptly noted:

“TAA cases are different from most litigation before this court. This is not a situation, such as in

customs or antidumping duty cases, where a bond can be posted to cover anticipated cost and reduce

liability.”63 Former Employees of Marathon Ashland Pipeline, LLC v. Chao, 27 CIT ____,

63

Workers who are belatedly awarded TAA benefits receive no interest or other

compensation for the delay that they suffer. At best, such workers receive – months (or even years)

after the fact – the same funds and training that they were entitled by statute to receive much earlier.

Worse yet, all too often, delay effectively operates to reduce (and conceivably even eliminate)

benefits to which workers are otherwise entitled by law.

For example, training is perhaps the key TAA benefit for most displaced workers. However,

federal funds for TAA-related training are administered on a state-by-state basis; and (due to

problems in the design and administration of the system, coupled with demand attributable to the

overall state of the economy) many states have run out of training funds in recent years. In such

cases, workers who would have been able to receive training if they been timely certified by the

Labor Department may instead be deprived of training benefits because the agency failed to conduct

an adequate initial investigation of the workers’ petitions – and, by the time the workers were

finally certified (e.g., after actions were filed in court, and proper agency investigations conducted

on remand), training funds in their states were depleted.

Moreover, in many cases, workers who have been forced to defer their training due to such

funding shortfalls have exhausted much (if not all) of their stream of TAA income support payments

(“Trade Readjustment Allowance” or “TRA” payments) by the time additional training funds

become available. With few or no TRA payments forthcoming (to help cover their living expenses

Court No. 04-00229 Page 59

while they are enrolled in training), the workers often are forced either to forego training entirely,

or to drop out of their training programs as soon as their TRA payments end. See, e.g., Kletzer &

Rosen at 317 n.4 (explaining that “[w]orkers receive [TAA] training only if there are adequate funds

available. Most states exhaust training funds . . . well before the end of the [fiscal] year, denying

workers the opportunity to enroll in training”); GAO Report 04-1012 at 4, 31-33 (reporting that 19

states discontinued training for TAA-eligible workers due to shortfalls in funding at some point

between 2001 and 2003, and that six states already had been forced to do so in 2004 as of the date

of GAO’s survey); Harper’s Magazine at 63 (same); “Certifiably Broken,” 7 U. Pa. J. Lab. & Emp.

L. at 799 n.11 (and sources cited there) (documenting funding shortfalls and waiting lists for TAA

training); Chicago Tribune (profiling worker who was certified for TAA but denied benefits due to

funding shortfall; citing results of GAO study, and noting that, “[i]n many cases, states did not

receive enough funding to provide training even for workers deemed eligible”).

Under the NAFTA-TAA statute (which was repealed/superseded as part of the TAA Reform

Act of 2002), the consequences of botched Labor Department investigations were even more

onerous. As a practical matter, any protracted delay in a NAFTA-TAA case could render workers’

eventual certification a largely pyrrhic victory.

Generally, a worker must be enrolled in training in order to receive TRA payments covering

that period (because, in principle, such payments are intended to help workers cover basic living

expenses so that they may engage in training). Under the Labor Department’s interpretation of the

statute and regulations, the agency may waive the training requirement where certification is delayed

(e.g., due to litigation), so that workers may retroactively receive TRA payments for periods even

though they were not enrolled in training – except in NAFTA-TAA cases.

The Labor Department read the NAFTA-TAA statute as specifically precluding the agency

from waiving the training requirement. The effect was to deny the payment of basic TRA benefits

under NAFTA-TAA to workers who were not both (1) certified by the Labor Department, and (2)

participating in approved training within the 104-week period beginning “with the first week

following the week in w

This text is long and has been trimmed here. Open the source document for the complete record.