Former Employees of Electronic Data Systems Corp. v. United States Secretary of Labor

Slip Op. 06-169

UNITED STATES COURT OF INTERNATIONAL TRADE

______________________________________
FORMER EMPLOYEES OF ELECTRONIC :
DATA SYSTEMS CORP., :
:
Plaintiffs, : Court No. 03-00373
: Before: Barzilay, Judge
v. :
:
UNITED STATES SECRETARY OF LABOR, :
:
Defendant. :
______________________________________ :

MEMORANDUM ORDER

[Plaintiffs’ application for attorney fees and other expenses pursuant to the Equal Access to
Justice Act is denied.]

Decided: November 16, 2006

Yormick & Associates Co., L.P.A. (Jon P. Yormick) for Plaintiffs.

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

BARZILAY, Judge: The issue in this case is whether Plaintiffs, Former Employees of

Electronic Data Systems Corporation, qualify for attorney fees and other expenses pursuant to

the Equal Access to Justice Act (“EAJA”). 28 U.S.C. § 2412. To be eligible for attorney fees

under the Act, a plaintiff must be a “prevailing party.” See Buckhannon Bd. & Care Home, Inc.

v. W. Va. Dep’t of Health & H.R., 532 U.S. 598, 603 (2001) (“Buckhannon”); see also Perez-

Arellano v. Smith, 279 F.3d 791, 793 (9th Cir. 2002). Plaintiffs applied for attorney fees
Court No. 03-00373 Page 2

following this court’s affirmation of the Department of Labor’s (“Labor”) remand determination,

which certified them as eligible for TAA. See Former Employees of Elec. Data Sys. Corp. v.

U.S. Sec’y of Labor, 30 CIT __, __, 427 F. Supp. 2d 1359, 1360 (2006) (“EDS III”); see also

Electronic Data Systems Corporation, I Solutions Center, Fairborn, Ohio; Notice of Revised

Determination on Remand, 71 Fed. Reg. 18,355-02, 18,357 (Dep’t Labor Apr. 11, 2006)

(“Revised Determination on Remand”). Since Plaintiffs do not qualify as “prevailing parties,”

they cannot recover attorney fees and other expenses.

I. Procedural History

On February 5, 2003, Labor denied Plaintiffs’ petition for TAA benefits because the

facilities where Plaintiffs worked did not produce “articles” under Section 222 of the Trade Act

of 1974, 19 U.S.C. § 2272(a) (2000). See Notice of Determinations Regarding Eligibility to

Apply for Worker Adjustment Assistance and NAFTA Transitional Adjustment Assistance, 67

Fed. Reg. 64,922-01 (Dep’t Labor Oct. 22, 2002); see also Notice of Determinations Regarding

Eligibility to Apply for Worker Adjustment Assistance and NAFTA Transitional Adjustment

Assistance, 68 Fed. Reg. 6210-01, 6211 (Dep’t Labor Feb. 6, 2003). Specifically, Labor

determined that Plaintiffs’ production and distribution of software (an intangible good) through a

non-physical medium amounted to a service, not an “article.” See Electronic Data Systems

Corporation, I Solutions Center, Fairborn, OH; Notice of Negative Determination Regarding

Application for Reconsideration, 68 Fed. Reg. 20,180-01 (Dep’t Labor Apr. 24, 2003).

After Labor’s denial, Plaintiffs sought review in this Court. On December 1, 2004, the

court remanded the case to Labor to further explain its rationale for denying Plaintiffs TAA

benefits. See Former Employees of Elec. Data Sys. Corp. v. U.S. Sec’y of Labor, 28 CIT __, __,
Court No. 03-00373 Page 3

350 F. Supp. 2d 1282, 1293 (2004) (“EDS I”). Labor conducted an investigation into the nature

of EDS’ work and again concluded that Plaintiffs did not produce “articles.” See Electronic

Data Systems Corporation, I Solutions Center, Fairborn, OH, Notice of Negative Determination

on Remand, 70 Fed. Reg. 6730-01, 6732 (Dep’t Labor Feb. 8, 2005). Upon review of Labor’s

negative determination, the court remanded the case again and instructed Labor to further

investigate the nature of EDS’ work and “provide a reasoned explanation . . . why software not

sold to the client on a physical medium . . . is not an article.” See Former Employees of Elec.

Data Sys. Corp. v. U.S. Sec’y of Labor, 29 CIT __, __, 408 F. Supp. 2d 1338, 1347-48 (2005)

(“EDS II”).

During the second remand, Labor changed its policy to reflect a ruling in a separate TAA

case before this Court, which held that “Labor’s determination that software code must be

tangible to be an article under the Trade Act is not in accordance with law.” Former Employees

of Computer Scis. Corp. v. U.S. Sec’y of Labor, 30 CIT __, __, 414 F. Supp. 2d 1334, 1343

(2006) (“Computer Science”). Labor’s new policy treated software and other intangible goods

not embodied in a physical medium as “articles,” regardless of their method of transfer. See

Revised Determination on Remand, 71 Fed. Reg. at 18,356. Consequently, Labor certified

Plaintiffs as eligible for TAA benefits, id. at 18,357, and the court affirmed this determination.

See EDS III, 427 F. Supp. 2d at 1360.

Within thirty days of that judgment, Plaintiffs filed this application for attorney fees

under the EAJA. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 2412.
Court No. 03-00373 Page 4

II. Standard of Review

The Equal Access to Justice Act mandates that

a court shall award to a prevailing party other than the United States fees and other
expenses . . . incurred by that party in any civil action . . . brought by or against the
United States in any court having jurisdiction of that action, unless the court finds
that the position of the United States was substantially justified or that special
circumstances make an award unjust.

28 U.S.C. § 2412(d)(1)(A). Thus, the court must award attorney fees under the Act if the

moving party satisfies four criteria: “(i) the claimant [must be] a ‘prevailing party’; (ii) the

government’s position [must] not [have been] substantially justified; (iii) no ‘special

circumstances [must] make an award unjust’; and (iv) the fee application [must be] timely

submitted and supported by an itemized statement.” Libas, Ltd. v. United States, 314 F.3d 1362,

1365 (Fed. Cir. 2003) (quoting 28 U.S.C. § 2412(d)(1)(A)-(B)). If the movant cannot satisfy

each criterion, its application must fail.

III. Discussion

A. “Prevailing Parties” Under the EAJA

To qualify as a “prevailing party” for the purpose of collecting attorney fees under the

EAJA, the Supreme Court requires a moving party to have either “received a judgment on the

merits, or obtained a court-ordered consent decree.” Buckhannon, 532 U.S. at 605 (internal

citation omitted). The Court expressly rejected the “catalyst theory” of recovery, which allows a

plaintiff to prevail when the defendant voluntarily initiates a change in conduct. In other words,

the Court was concerned that a plaintiff could prevail “where there is no judicially sanctioned

change in the legal relationship of the parties.” Id. The Court wanted to preclude the possibility

that a “plaintiff could recover attorney’s fees if it established that the ‘complaint had sufficient
Court No. 03-00373 Page 5

merit to withstand a motion to dismiss for lack of jurisdiction or failure to state a claim on which

relief may be granted.’” Id. (citation omitted). Permitting a plaintiff to prevail under the

“catalyst theory” would therefore encourage favorable EAJA judgments on claims with

insufficient legal merit. Id.

Accordingly, there must be some form of judicial action that arises from the merits of the

case at bar and compels a defendant to change its conduct toward the plaintiff. Intervening

events that change the law during judicial proceedings do not amount to a judgment on the

merits. See id. at 600-02; see also Former Employees of IBM Corp., Global Servs. Div. v. U.S.

Sec’y of Labor, 30 CIT __, Slip Op. 06-146 (Oct. 3, 2006) (not reported in Fed. Supp.). In

Buckhannon, a statute enacted during a court proceeding which changed the applicable law and

granted plaintiffs their desired relief was insufficient to bestow “prevailing party” status. See

Buckhannon, 532 U.S. at 600-02. The Court explained that “[a] defendant’s voluntary change in

conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit,

lacks the necessary judicial imprimatur on the change.” Id. at 605.

These principles also apply to administrative proceedings. When a court retains

jurisdiction over a remand proceeding, and the plaintiff’s status as a “prevailing party” depends

on the “successful completion of the remand proceeding before the [agency,] . . . . [the

proceeding] should be considered part and parcel of the [judicial] action for which fees may be

awarded.” Sullivan v. Hudson, 490 U.S. 877, 887-88 (1989). However, in cases “where [the]

administrative proceedings are intimately tied to the resolution of the judicial action,” a court

ordered remand, in itself, does not impart “prevailing party” status to a plaintiff. Id. at 888; see

Former Employees of Motorola Ceramic Prods. v. United States, 336 F.3d 1360, 1366 (Fed. Cir.
Court No. 03-00373 Page 6

2003) (“Motorola”). To attain “prevailing party” status on remand requires the following:

When there is a remand to the agency which remand grants relief on the merits
sought by the plaintiff, and the trial court does not retain jurisdiction, the securing
of the remand order is itself success on the merits. When there is such a remand, and
the trial court retains jurisdiction, the claimant is a prevailing party only if it
succeeds before the agency.

Motorola, 336 F.3d at 1366.

B. Plaintiffs Are Not “Prevailing Parties” Under Buckhannon

In this case, the court retained jurisdiction during both remand proceedings. See EDS II,

408 F. Supp. 2d at 1347-48; EDS I, 350 F. Supp. 2d at 1293. Plaintiffs, however, did not prevail

before Labor due to any action or event in the litigation it instituted. Although Plaintiffs

ultimately received TAA benefits, the determination of whether to treat the production of

software transferred through a non-physical medium as an “article” did not stem from an

evaluation of their claims. Instead, Labor altered its position because of a legal ruling contrary

to their existing policy. See Computer Science, 414 F. Supp. 2d at 1343. The Computer Science

decision constituted an intervening event that prompted Labor to voluntarily update its policy.

Since the Supreme Court rejected the “catalyst theory” of recovery, Plaintiffs do not qualify as

“prevailing parties.” See Buckhannon, 532 U.S. at 605; see also Perez-Arellano, 279 F.3d at

795.

Moreover, this court’s affirmation of Labor’s determination merely ended the remand

proceedings. See EDS III, 427 F. Supp. 2d at 1360. Without a judgment in favor of Plaintiffs

based on the merits of their claim, the judicial affirmation “lacks the necessary judicial
Court No. 03-00373 Page 7

imprimatur.” Buckhannon, 532 U.S. at 605. Because Plaintiffs cannot achieve “prevailing

party” status under Buckhannon, their claim for attorney fees fails. Plaintiffs’ motion is denied.

November 16, 2006 /s/ Judith M. Barzilay
Dated:________________________ ___________________________
New York, NY Judith M. Barzilay, Judge