Order Code RL33052
CRS Report for Congress
Received through the CRS Web
Homeland Security and Labor-Management
Relations: NTEU v. Chertoff
Updated August 14, 2006
Thomas J. Nicola and Jon O. Shimabukuro
Legislative Attorneys
American Law Division
Congressional Research Service ˜ The Library of Congress
Homeland Security and Labor-Management Relations:
NTEU v. Chertoff
Summary
The Homeland Security Act of 2002 provides the Secretary of Homeland
Security and the Director of the Office of Personnel Management (“OPM”) with the
authority to develop a separate human resources management system for the
employees of the Department of Homeland Security (“DHS”). On February 1, 2005,
final regulations to define and implement the new system were published in the
Federal Register. Shortly after the regulations were issued, the National Treasury
Employees Union (“NTEU”) and several other labor organizations filed a lawsuit,
alleging that DHS and OPM exceeded the authority granted to the agencies under the
Homeland Security Act. On August 12, 2005, a U.S. District Court for the District
of Columbia enjoined parts of the new regulations involving labor-management
relations and the Merit Systems Protection Board in NTEU v. Chertoff. The district
court on October 7, 2005, denied a motion by DHS and OPM to modify its injunction
of labor-management relations regulations. On June 27, 2006, the U.S. Court of
Appeals for the District of Columbia Circuit affirmed some conclusions of the
district court, reversed others, and remanded the case to the district court for further
proceedings consistent with its opinion. This report examines the opinions of the
district court and court of appeals.
Contents
Collective Bargaining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Homeland Security Labor Relations Board . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Role of the Federal Labor Relations Authority . . . . . . . . . . . . . . . . . . . . . . . 6
Merit Systems Protection Board Mitigation of Penalties . . . . . . . . . . . . . . . . 7
Merit Systems Protection Board Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 8
Scope of the Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Homeland Security and Labor-Management
Relations: NTEU v. Chertoff
The Homeland Security Act of 20021 provides the Secretary of Homeland
Security and the Director of the Office of Personnel Management (“OPM”) with the
authority to develop a separate human resources management system for the
employees of the Department of Homeland Security (“DHS”). On February 1, 2005,
final regulations to define and implement the new system were published in the
Federal Register.2 Shortly after the regulations were issued, the National Treasury
Employees Union (“NTEU”) and several other labor organizations filed a lawsuit,
alleging that DHS and OPM exceeded the authority granted to the agencies under the
Homeland Security Act. On August 12, 2005, a U.S. District Court for the District
of Columbia enjoined parts of the new regulations in NTEU v. Chertoff.3 The district
court on October 7, 2005, denied a motion from DHS and OPM to modify its
injunction relating to labor-management relations.4 The U.S. Court of Appeals for
the District of Columbia Circuit on June 27, 2006, affirmed some holdings of the
district court and reversed others.5 This report examines the opinions of the district
court and court of appeals.
At issue in NTEU were those sections of the new regulations that involve labor-
management relations and the role of the Merit Systems Protection Board (“MSPB”),
the agency that hears and adjudicates appeals by federal employees who have been
subject to adverse personnel actions. Other sections of the new regulations, including
those concerned with pay administration and performance management, were not
challenged.
In its initial decision, the district court concluded that subpart E of the new
regulations, which includes all of the labor-management sections, and section
9701.706(k)(6), which restricts the MSPB’s ability to modify penalties imposed by
DHS, must be enjoined. The court maintained:
As currently proposed, those provisions would violate certain specific
requirements established by Congress in the [Homeland Security Act]. They
would not ‘ensure collective bargaining,’ would fundamentally alter [Federal
1 P.L. 107-296, 116 Stat. 2135 (2002) (codified in relevant part at 5 U.S.C. §§ 9701 et seq.).
2 Department of Homeland Security Human Resources Management System, 70 Fed. Reg.
5272 (Feb. 1, 2005) (to be codified at 5 C.F.R. pt. 9701).
3 385 F.Supp.2d 1 (D.D.C. 2005).
4 NTEU v. Chertoff, 394 F.Supp.2d 137 (D.D.C. 2005) (“NTEU II”).
5 NTEU v. Chertoff, 452 F.3d 839 (D.C. Cir. 2006).
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Labor Relations Authority] jurisdiction . . . and would create an appeal process
at MSPB that is not ‘fair.’6
The remaining sections of this report review the decisions of the district court and the
D.C. Circuit in greater detail.
Collective Bargaining
Although the Homeland Security Act grants the Secretary of Homeland Security
and the Director of OPM broad authority to develop a new personnel system, it
indicates that the system must meet certain conditions. For example, the new system
has to be “flexible,” “contemporary,” and may “not waive, modify, or otherwise
affect” various provisions of law.7 The Act identifies specific chapters of title 5, U.S.
Code, that may not be waived by the new system.8 While chapter 71 of such title,
which governs collective bargaining and labor-management relations for most federal
employees, is not identified and thus can be waived by the new system, the Act
includes other language that preserves some form of collective bargaining for DHS
employees:
[The new system] shall . . . ensure that employees may organize, bargain
collectively, and participate through labor organizations of their own choosing
in decisions which affect them, subject to any exclusion from coverage or
limitation on negotiability established by law.9
Congress did not define the term “collective bargaining” for purposes of the Act, and
the unions maintained that the personnel system established by the agencies lacked
the core elements of collective bargaining.10
The new regulations recognize that “each employee has the right to form, join,
or assist any labor organization.”11 At the same time, however, the regulations limit
the subjects that may be negotiated by the parties, restrict the powers and duties of
the Federal Labor Relations Authority (“FLRA”), and create a Homeland Security
Labor Relations Board (“HSLRB”) that will assume many of the FLRA’s functions.12
6 NTEU, 385 F.Supp.2d at 38.
7 See 5 U.S.C. § 9701(b)(1)-(3).
8 See 5 U.S.C. § 9701(c)(2).
9 5 U.S.C. § 9701(b)(4).
10 See NTEU, 385 F.Supp.2d at 25 (“The Plaintiff Unions argue that every system of
collective bargaining ever established by Congress has had three critical components: (1)
a requirement that labor and management bargain in good faith over conditions of
employment for purposes of reaching an agreement; (2) a provision that the agreements
reached as a result of bargaining are binding on both parties equally; and (3) the
establishment of a neutral forum for resolving disputes.”).
11 5 C.F.R. § 9701.507.
12 See CRS Report RL32255, Homeland Security: Final Regulations for the Department of
Homeland Security Human Resources Management System (Subpart E) Compared With
(continued...)
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In addition, the regulations allow DHS to issue binding agency-wide opinions
without regard to the terms of a collective bargaining agreement, and permit DHS
managers to “take whatever other actions may be necessary to carry out the
Department’s mission.”13 In their complaint, the unions argued: “[U]nder the new
regime, management possesses an unlimited unilateral right to issue agency-wide
directives to take what few matters remain negotiable off the bargaining table, and/or
to invalidate provisions of existing collective bargaining agreements.”14
Nevertheless, in response to the unions’ concerns, DHS and OPM insisted that the
regulations are necessary to ensure “maximum flexibility and accountability.”15
The Administrative Procedure Act permits a reviewing court to set aside formal
agency action if it is “arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.”16 In general, a court will review such action in accordance
with a two-part test established by the U.S. Supreme Court in Chevron U.S.A. v.
N.R.D.C.17 First, the court will consider whether Congress has spoken directly to the
precise question at issue. If Congress has spoken directly to the question at issue, the
court “must give effect to the unambiguously expressed intent of Congress.”18
Second, the court will analyze the reasonableness of the agency’s interpretation.
If Congress has failed to speak directly to the question at issue, and the statute
is silent or ambiguous, the court will attempt to determine if the agency’s actions are
based on a permissible construction of the statute.19 If the agency’s interpretation is
reasonable, the court may not substitute its own construction of the statutory
provision. However, deference is not owed to the agency’s actions if they construe
a statute in a way that is contrary to congressional intent or that frustrates
congressional policy.20
12 (...continued)
Current Law (comparing the final regulations with existing law).
13 5 C.F.R. §§ 9701.509(b), 9701.511(a)(2).
14 Complaint for Declaratory and Injunctive Relief at 3, NTEU v. Chertoff, 385 F.Supp.2d
1 (D.D.C. 2005).
15 70 Fed. Reg. at 5273.
16 5 U.S.C. § 706(2)(A).
17 467 U.S. 837 (1984).
18 Id. at 843.
19 Chevron, 467 U.S. at 842-43.
20 See Chevron, 467 U.S. at 843 n.9 (“The judiciary is the final authority on issues of
statutory construction and must reject administrative constructions which are contrary to
clear congressional intent . . . If a court, employing traditional tools of statutory
construction, ascertains that Congress had an intention on the precise question at issue, that
intention is the law and must be given effect.”).
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Citing congressional understanding of what constitutes “collective bargaining,”
as evidenced by the Federal Sector Labor Management Relations Act,21 and general
contract principles, the district court determined that the absence of an unmistakably
enforceable contract rendered the regulations impermissible:
The sine qua non of good-faith bargaining is an enforceable contract once the
parties reach agreement. The HR System does not lead to enforceable contracts
and thus fails to comply with the directions of Congress to ensure employee
collective-bargaining rights.
The Regulations fail because any collective bargaining negotiations pursuant to
its terms are illusory: the Secretary retains numerous avenues by which s/he can
unilaterally declare contract terms null and void, without prior notice to the
Unions or employees and without bargaining or recourse.22
The district court concluded that a system of “collective bargaining” that permits
the unilateral repudiation of agreements by one party is not collective bargaining at
all.23 Consequently, the district court maintained that no Chevron deference was due
to DHS and OPM because Congress spoke directly to the issue of collective
bargaining and directed the agencies to ensure collective bargaining for DHS
employees.
The D.C. Circuit, citing the definition of “collective bargaining” in the Federal
Sector Labor Management Relations Act, affirmed the district court’s holding that
the regulations failed to comply with the mandate in the Homeland Security Act,
codified at 5 U.S.C. § 9701(b)(4), that the new personnel system must “ensure that
employees may . . . bargain collectively.”24 It agreed with the district court that the
Department’s attempt to reserve to itself the right unilaterally to abrogate lawfully
negotiated and executed agreements was plainly unlawful because abrogating them
would nullify the Act’s specific guarantee of collective bargaining rights.25 The D.C.
Circuit emphasized that its holding related only to the power of DHS to abrogate
collectively bargained contracts that were executed pursuant to the human resources
management system; its holding did “nothing to undercut the Department’s authority
to . . . supersede labor contracts inherited from the previously independent agencies
that now constitute DHS.”26
Although the district court found that the new regulations failed to adequately
allow collective bargaining, it nevertheless maintained that limitations on the subjects
that could be bargained were permissible. Acknowledging the broad authority
granted to DHS and OPM by the Homeland Security Act, the court reasoned that the
21 5 U.S.C. §§ 7101 et seq.
22 NTEU, 385 F.Supp.2d at 25.
23 Id. at 30.
24 NTEU, 452 F.3d at 844.
25 Id. See also 452 F.3d at 858-60.
26 NTEU, 452 F.3d at 860.
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agencies were entitled to Chevron deference for their decisions that identified
subjects for collective bargaining.27
The D.C. Circuit reversed this holding insofar as it limited the scope of
bargaining to employee-specific personnel matters such as those that affect
discipline, discharge, and promotion.28 The district court erred, the D.C. Circuit
maintained, by giving precedence to the Department’s authority granted in the
Homeland Security Act to modify the provisions of chapter 71 of title 5 of the U.S.
Code, which relates to labor-management relations, over the command in another
provision of the Act codified in 5 U.S.C. § 9701(b)(4), which ensures the right of
employees to bargain collectively.29 Because the final regulations render meaningless
“collective bargaining,” which the Homeland Security Act mandates that the
Department must observe, the appeals court held that they are not entitled to
deference.30
Homeland Security Labor Relations Board
The new regulations provide for the creation of a new entity, the HSLRB, that
will adjudicate disputes concerning the scope of bargaining and the duty to bargain
in good faith; conduct hearings and resolve complaints of specified unfair labor
practices; resolve exceptions to arbitration awards; and resolve negotiation
impasses.31 The unions argued that the HSLRB was “inconsistent with the traditional
concept of ‘collective bargaining.’”32 In particular, the unions questioned the
independence of the HSLRB, whose members are to be selected by the Secretary of
Homeland Security.
The district court concluded that the unions’ concerns with the HSLRB were
based on policy choices made by DHS and OPM, rather than the agencies’ failure to
appropriately implement the Homeland Security Act. The district court deferred to
the agencies and their ability to establish a new personnel system that includes a new
labor relations entity:
[B]y deliberately and clearly giving the Agencies the authority to establish an HR
system for DHS without reference to the FLRA or any other adjudicative system
for labor-management disputes, Congress left it to the Executive Branch to
formulate that system.33
Unlike the district court, the D.C. Circuit did not defer to the judgment of DHS
and OPM, but ruled that adjudicating the matter of the HSLRB at this time would be
27 NTEU, 385 F.Supp.2d at 29.
28 NTEU, 452 F.3d at 844, 861.
29 Id. at 861.
30 Id. at 864-65.
31 See 5 C.F.R. § 9701.509.
32 NTEU, 385 F.Supp.2d at 29.
33 Id.
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premature. It said that a decision on the Board’s role would have to wait until DHS
revises its Board regulation in light of the decisions of the district court and the court
of appeals relating to the role of the FLRA.34
Role of the Federal Labor Relations Authority
The new regulations provide that the FLRA may conduct hearings and resolve
complaints of specified unfair labor practices.35 In addition, the regulations require
the FLRA to review HSLRB decisions and issue final decisions.36 Under the
regulations, the FLRA must defer to the findings of fact and interpretations made by
the HSLRB and sustain the HSLRB’s decision unless the party requesting review
shows that the decision was either (1) arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law; (2) based on error in applying the HSLRB’s
procedures; or (3) unsupported by substantial evidence.37
The unions argued that DHS and OPM exceeded their statutory authority by
dictating to the FLRA, an independent agency, the “kinds of disputes it will or will
not adjudicate and how it will do so.”38 The unions emphasized that the FLRA’s
jurisdiction is established by statute, and that its role and functions are not subject to
the control of other executive branch agencies. Moreover, Congress did not confer
additional jurisdiction upon the FLRA in the Homeland Security Act.
Although the district court acknowledged that DHS and OPM could have
waived the application of chapter 71 of title 5, U.S. Code, and were not required to
use the FLRA, it concluded that the agencies could not “commandeer the resources
of an independent agency” and “fundamentally” transform its functions absent a
clearer indication of congressional intent.39 The district court found that the
regulations impose an appellate role that is foreign to the FLRA, and require a
deferential standard of review that is at odds with the FLRA’s status as an
independent agency.40 The district court noted that an agency’s interpretation of a
statute is not entitled to deference when it goes beyond the meaning that the statute
can bear.41 Here, the district court maintained that the regulations imposed changes
to the FLRA that exceeded the agencies’ statutory authority under the Homeland
Security Act to “modify” or “affect” chapter 71 of title 5, U.S. Code.
34 NTEU, 452 F.3d at 865.
35 70 Fed. Reg. at 5335 (§ 9701.510). The FLRA may conduct hearings and resolve
complaints of unfair labor practices under 5 C.F.R. § 9701.517(a)(1)-(4), (b)(1)-(4).
36 Id.
37 5 C.F.R. § 9701.508(h)(1).
38 Complaint, supra note 14 at 14.
39 NTEU, 385 F.Supp.2d at 32.
40 Id.
41 Id.
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The D.C. Circuit affirmed this holding, saying that nothing in the Homeland
Security Act authorizes the Department to regulate the jurisdiction and activities of
an independent agency.42
Merit Systems Protection Board Mitigation of Penalties
The unions challenged the authority of DHS and OPM in jointly issuing final
DHS regulations to change the standard by which the MSPB might mitigate the
penalty for employee misconduct. One of those regulations, codified at 5 C.F.R. §
9701.706(k)(6), provides that the Board may not modify a penalty imposed by DHS
unless it is “so disproportionate to the basis for the action as to be wholly without
justification” and that when a penalty is mitigated “the maximum justifiable penalty
must be applied.”
The unions asserted that this regulation violates 5 U.S.C. § 9701(f)(2)(C), a
provision of the Homeland Security Act, which provides that any regulations issued
pursuant to section 9701 “shall modify procedures under chapter 77 [of title 5 of the
U.S. Code entitled “Appeals”] only insofar as such modifications are designed to
further the fair, efficient, and expeditious resolution of matters involving the
employees of the Department.”43
DHS and OPM countered that they were not constrained by the requirement in
section 9701(f)(2) because, they alleged, the mitigation standard is not derived from
chapter 77 of title 5, U.S. Code, which relates to appeals, but instead from chapter 75
“Adverse Actions,” which states that “an agency may take an adverse action against
an employee ‘only for such cause as will promote the efficiency of the [civil]
service.’”44 They argued in the alternative that modifying the mitigation authority of
the Board fully comports with statutory requirements as interpreted by the court that
reviews MSPB decisions, the Court of Appeals for the Federal Circuit.45
The district court rejected both contentions. The district court found that the
mitigation standard is derived from chapter 77, the appeals chapter of title 5, not
chapter 75, the adverse actions chapter, and, consequently, that any modification of
chapter 77 procedures, to comply with section 9701(f)(2)(C) of title 5, had to be “fair,
efficient, and expeditious.” The district court also observed that the contention by
DHS and OPM that the modification of the Board’s mitigation authority fully meets
statutory requirements as interpreted by the Court of Appeals for the Federal Circuit
was seriously flawed and that the cases cited by these agencies did not support this
contention.
The district court said that the mitigation standard in the final regulation violates
the congressional requirement in 5 U.S.C. § 9701(f)(2)(C) because that standard
modifies chapter 77 procedures in a manner that is not fair. The district court
42 NTEU, 452 F.3d at 865-66.
43 NTEU, 385 F.Supp.2d at 32.
44 Id. at 32-33.
45 Id. at 33-34.
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indicated that when Congress insisted on fairness, it did not intend that DHS could
discipline or discharge employees without effective recourse. The mitigation
standard in the DHS-OPM regulation that limits the ability of MSPB to mitigate a
penalty only found to be “so disproportionate” as to be “wholly without justification”
would render MSPB review “almost a nullity.”46 Because the decision of the MSPB
rather than the decision of the employing agency is subject to judicial review, the
court maintained that this mitigation standard “could effectively insulate DHS
adverse actions from review.”47
The district court said that this standard “fails to measure up to the sense of
Congress that ‘employees of the Department are entitled to fair treatment in any
appeals,’ 5 U.S.C. § 9701(f)(1)(A), or Congress’s express requirement that any
[modifications to chapter 77] procedures ‘further the fair . . . resolution of matters
involving the employees of the Department.’”48 The district court concluded that
because the agencies failed to apply the plain meaning of section 9701(f) of title 5,
U.S. Code, section 9701.706 of their regulations was not entitled to Chevron
deference and enjoined it.49
This holding was reversed by the D.C. Circuit. Adjudicating the fairness of the
Board’s penalty mitigation procedures would be premature at this time, i.e., the
matter was not ripe for review. A better time to review the fairness of these
procedures would be after the DHS has disciplined an employee and the penalty has
been appealed.50
Merit Systems Protection Board Procedures
The unions alleged that DHS and OPM exceeded authority granted by the
Homeland Security Act at section 9701(f)(2) of title 5, U.S. Code, when they
modified the Board’s procedural regulations for DHS employees. They challenged,
specifically, the following regulations: section 9701.706(k)(1), which shortens the
time for appeal to the Board; section 9701(k)(3), which limits discovery in MSPB
appeals; and section 9701.706(k)(5), which authorizes a summary judgment
procedure when there are no facts in dispute.
The district court found that Congress in section 9701(f)(2) of title 5, U.S. Code,
clearly authorized DHS and OPM to waive or modify provisions “within the purview
of chapter 77”of title 5 “Appeals,” and that there could be no doubt that the agencies
acted within their authority when they adopted these procedural regulations. Their
interpretation of the section was found to be reasonable and consistent with the
statutory purpose and, consequently, was entitled to deference under step two of the
Chevron case.
46 Id. at 35.
47 Id.
48 Id.
49 Id.
50 NTEU, 452 F.3d at 855.
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The unions also asserted that DHS and OPM exceeded authority granted in the
Homeland Security Act when they assigned an appellate role to MSPB to review
decisions of the Mandatory Review Panel in 5 C.F.R. § 9701.707(c). This regulation
provides that an employee who is discharged for a Mandatory Removal Offense will
receive advance notice, an opportunity to respond, and a written decision from
DHS.51 The DHS decision would be subject to review by the Mandatory Review
Panel, which would conduct a hearing and issue a written decision binding on DHS.
Appeals from Panel decisions could be reviewed by the Board, whose decision
would be based on the record without a second hearing, and would be appealable to
the Court of Appeals for the Federal Circuit pursuant to section 7703 of title 5, U.S.
Code.52 Under 5 C.F.R. § 9701.707(c)(1)(I), the Board would sustain a Panel
decision unless the Board finds it to be “arbitrary and capricious.” The Board is more
likely to sustain a Panel decision under the arbitrary and capricious standard than
under the one that the Board uses in a typical removal case in which an agency must
establish its case by a “preponderance of evidence.”53 The district court concluded
that DHS and OPM were entitled to Chevron deference in their interpretation of the
broad authority granted by the Homeland Security Act to issue this regulation. The
district court granted the motion by the agencies to dismiss the count relating to
MSPB procedures and denied the plaintiff’s motion for summary judgment on it.54
The D.C. Circuit affirmed this holding; it found that the Homeland Security Act
clearly authorizes DHS to modify procedures of the MSPB.55
Scope of the Injunction
The district court in August of 2005 enjoined in its entirety subpart E of the
final regulations, which relate to labor-management relations. The court found that
they failed to ensure that employees may bargain collectively and improperly
assigned an intermediate role of administrative appellate review to the Federal Labor
Relations Authority.56 The district court also enjoined a regulation in another subpart
which limited the authority of the MSPB to mitigate penalties on the ground that this
limitation did not comply with a provision of the Homeland Security Act which
required that procedures must be fair.57 The district court invited DHS and OPM, the
agencies that issued the regulations, to propose a revised order that would enjoin
some portions of subpart E without enjoining the entire subpart.58
51 See 5 C.F.R. § 9701.607(b).
52 See 5 C.F.R. § 9701.707(c).
53 See 5 U.S.C. § 7701.
54 NTEU, 385 F. Supp.2d at 37.
55 NTEU, 452 F.3d at 27.
56 NTEU, 385 F.Supp.2d at 30, 32, 38.
57 Id. at 35, 38.
58 Id. at 38.
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Responding to this invitation, the agencies subsequently filed a motion in the
district court to alter or amend the court’s judgment and asked the court to limit its
injunction of subsection E to five discrete sections of the subpart. They did not
request modification of the injunction relating to the other subpart. The district court
declined to alter or amend its injunction of all of subpart E, finding that the
provisions that the agencies proposed to separate were too closely intertwined with
those that were not.59
DHS and OPM appealed the district court’s denial of their motion to modify the
injunction; they asserted that enjoining subpart E, the labor-management subpart, in
its entirety swept too broadly. The D.C. Circuit rejected this assertion because its
decision invalidated a broader portion of subpart E than did the district court. The
district court had upheld limitations on the subjects of collective bargaining, but the
D.C. Circuit reversed that holding on the ground that the Homeland Security Act
does not authorize limiting them. The appeals court said that fashioning the scope
of the injunction should be left to the parties and the district court when the case is
remanded.
59 NTEU II, 394 F.Supp.2d at 145.