Daimler Trucks North America LLC v. Environmental Protection Agency ( 2013 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 11, 2013 Decided October 18, 2013
No. 12-1179
DAIMLER TRUCKS NORTH AMERICA LLC, ET AL.,
PETITIONERS
v.
ENVIRONMENTAL PROTECTION AGENCY,
RESPONDENT
NAVISTAR, INC.,
INTERVENOR
Consolidated with 12-1270
On Petitions for Review of a Final Agency Action by
The United States Environmental Protection Agency
2
Christopher T. Handman argued the cause for the
petitioners. R. Latane Montague, Sean Marotta, Kathryn L.
Lannon, Julie R. Domike and William F. Lane were on brief.
Alec C. Zacaroli entered an appearance.
Michele L. Walter, Attorney, United States Department
of Justice, argued the cause for the respondent. Michael J.
Horowitz, Attorney Advisor, United States Environmental
Protection Agency, was on brief.
Cary R. Perlman and Laurence H. Levine were on brief
for intervenor Navistar, Inc. in support of the respondent.
Before: HENDERSON, GRIFFITH and SRINIVASAN, Circuit
Judges.
Opinion for the Court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge: In January
2012, the United States Environmental Protection Agency
(EPA) promulgated an interim final rule (IFR) authorizing
EPA to issue certificates of conformity to diesel truck engine
manufacturers for 2012 and 2013 model-year engines
notwithstanding the engines did not conform to EPA’s
emission standard for nitrogen oxides (NOx), promulgated
under section 202(a) of the Clean Air Act (CAA), 42 U.S.C.
§ 7521(a)—provided the manufacturer paid the government a
non-conformance penalty (NCP) as established in the IFR.
Nonconformance Penalties for On-Highway Heavy Heavy-
Duty Diesel Engines, 77 Fed. Reg. 4678 (Jan. 31, 2012).
Pursuant to the IFR, EPA issued manufacturer Navistar, Inc.
four 2012 model year certificates of conformity (Certificates),
requiring payment of the NCP for each engine produced.
Four manufacturers of heavy-duty diesel engines and trucks—
petitioners Daimler Trucks North America LLC; Detroit
Diesel Corporation; Mack Trucks, Inc.; and Volvo Group
North America, LLC (collectively, Daimler)—petitioned for
review of the IFR on both procedural and substantive grounds
3
and, subsequently, for review of the four Certificates on the
ground that they were impermissibly issued pursuant to the
purportedly invalid IFR. In June 2012 this court vacated the
IFR on the ground it was unlawfully promulgated without
notice and opportunity for comment. Mack Trucks, Inc. v.
EPA, 682 F.3d 87, 96 (D.C. Cir. 2012). Three months later,
after notice and comment, EPA replaced the IFR with a final
NCP rule establishing new—and higher—NCPs (Final NCP
Rule). Nonconformance Penalties for On-Highway Heavy-
Duty Diesel Engines, 77 Fed. Reg. 54,384 (Sept. 5, 2012).
Thus, with the publication of the Final NCP Rule in
September 2012, the four Certificates ceased to require that
Navistar pay the NCPs established in the IFR—the subject of
Daimler’s challenge—and with their expiration at the end of
the 2012 model year, the Certificates ceased to have any
effect whatsoever. Accordingly, we conclude Daimler’s
challenge to the Certificates is moot and we dismiss the
petitions for review thereof.
I.
The CAA prohibits the introduction into commerce of
any new motor vehicle engine unless it is covered by a
certificate of conformity with emission standards prescribed
pursuant to CAA section 202(a), 42 U.S.C. § 7521(a). 42
U.S.C. § 7522(a) 1; see id. § 7525(a) (setting out procedure for
1
CAA section 203(a) provides in relevant part:
The following acts and the causing thereof are prohibited—
(1) in the case of a manufacturer of new motor
vehicles or new motor vehicle engines for distribution in
commerce, the sale, or the offering for sale, or the
introduction, or delivery for introduction, into commerce,
or (in the case of any person, except as provided by
regulation of the Administrator), the importation into the
United States, of any new motor vehicle or new motor
4
testing engines and issuing certificates of conformity). At the
same time, CAA section 206(g) authorizes EPA to issue a
certificate of conformity for a vehicle or engine
“notwithstanding the failure of such vehicles or engines to
meet such standard if such manufacturer pays a
nonconformance penalty as provided under regulations
promulgated by [EPA].” 42 U.S.C. § 7525(g)(1).
In January 2001, EPA promulgated the “2010 NOx
standard” requiring that NOx emissions from heavy-duty
diesel engines be reduced by 95 per cent—to .20 grams of
NOx per horsepower-hour—no later than model year 2010.
IFR, 77 Fed. Reg. at 4680-81; Mack Trucks, 682 F.3d at 89.
“By delaying the effective date until 2010, EPA gave industry
nine years to innovate the necessary new technologies.”
Mack Trucks, 682 F.3d at 89. Most diesel engine
manufacturers used the lag time to adopt, at substantial cost, a
technology known as “selective catalytic reduction,” which
converts NOx into nitrogen and water and has enabled them to
timely meet the 2010 NOx standard. Id. Navistar, however,
opted for an alternative technology—“exhaust gas
recirculation”—that turned out to be less effective. As a
result, Navistar’s NOx reductions fell short of the 2010 NOx
standard and when the standard took effect, Navistar was
vehicle engine, manufactured after the effective date of
regulations under this part which are applicable to such
vehicle or engine unless such vehicle or engine is covered
by a certificate of conformity issued (and in effect) under
regulations prescribed under this part . . . .
42 U.S.C. § 7522(a)(1).
5
forced to use its banked emission credits to continue
producing engines. 2
In October 2011, Navistar informed EPA that its
emission credits were due to run out sometime in 2012 and it
would then have to stop producing its engines. In response,
EPA “hurriedly promulgated” the IFR on January 31, 2012—
without notice or comment—“to make NCPs available to
Navistar.” Mack Trucks, 682 F.3d at 90 & n.3. Pursuant to
CAA section 206(g), the IFR authorized issuance of a
certificate of conformity for a non-conforming engine—
provided the manufacturer paid a NCP not to exceed $1,919
and its engine’s NOx emissions did not exceed an upper limit
of 0.50 grams of NOx per horsepower-hour—two-and-one-
half times the emissions permitted under the 2010 NOx
standard. Id.; 77 Fed. Reg. at 4682–83. To support its failure
to provide for notice and comment—required under the
Administrative Procedure Act (APA), 5 U.S.C. § 553(b)—
EPA invoked the statutory “good cause” exception, which
applies when an “agency for good cause finds . . . that notice
and public procedure thereon are impracticable, unnecessary,
or contrary to the public interest.” Id. § 553(b)(B).
Simultaneously with the IFR, EPA published a “parallel”
Notice of Proposed Rulemaking, which gave notice of, and
solicited comments on, a permanent final rule.
Nonconformance Penalties for On-Highway Heavy-Duty
Diesel Engines, 77 Fed. Reg. 4736 (Jan. 31, 2012). EPA
2
EPA’s “Averaging, Banking and Trading” program “allows
engine manufacturers who produce engines cleaner than those
required by the regulations to generate ‘credits’ that they may then
use to offset higher emitting engines (‘averaging’), save for future
use (‘banking’), or sell to other manufacturers (‘trading’).” Nat’l
Petrochem. & Refiners Ass’n v. EPA, 287 F.3d 1130, 1146 (D.C.
Cir. 2002) (citing 40 C.F.R. § 86.004-15).
6
expressly advised therein: “Should the Final Rule establish
different NCPs for heavy heavy-duty engines than the interim
NCPs, we could apply those new NCPs to any engines
produced on or after [the Final Rule’s likely effective date]
instead of the interim NCPs.” Id. at 4738. Daimler timely
petitioned for review of the IFR.
Pursuant to the IFR, EPA subsequently granted
Navistar’s applications for the four challenged Certificates—
two Certificates effective on February 13, 2012, one on April
11, 2012 and one on April 16, 2012. Each Certificate
remained in effect for the duration of the 2012 model year. 3
The cover letters accompanying the Certificates advised:
Please note that calculation of the [NCP] rate is to
be based on the interim final rule until such time as the
final rule is effective. Once the final rule becomes
effective, calculation of the NCP rate is to be based on
the formula contained therein.
Letters from EPA to Navistar, Inc. (Feb. 14, 2012; Apr. 12,
2012; Apr. 17, 2012) (JA 1, 9, 15). Daimler timely filed
petitions for review of each of the Certificates.
We held this proceeding in abeyance pending a decision
in Mack Trucks, which issued on June 12, 2012, vacating the
IFR and remanding to EPA for further proceedings. We
rejected EPA’s reliance on the good cause exception to the
APA’s notice-and-comment requirement, concluding the IFR
3
The duration of the model year is not clear from the record
but under CAA section 202(b)(3), it had to end no later than the
close of calendar year 2012. See 42 U.S.C. § 7521(b)(3)(A)(i)
(“The term ‘model year’ with reference to any specific calendar
year means the manufacturer's annual production period (as
determined by the Administrator) which includes January 1 of such
calendar year. If the manufacturer has no annual production period,
the term ‘model year’ shall mean the calendar year.”).
7
did not fit any of the three statutory good-cause criteria as
notice and comment was not “impracticable, unnecessary, or
contrary to the public interest.” Mack Trucks, 682 F.3d at 93-
95. Indeed, we observed that “the only purpose of the IFR”
was, “as Petitioners put it, ‘to rescue a lone manufacturer
from the folly of its own choices.’ ” Id. at 93.
In light of our vacatur of the IFR, counsel for Daimler
requested that EPA “invalidate” the Certificates. Letter from
Kilpatrick Townsend & Stockton LLP to EPA at 1 (June 19,
2012); Letter from Hogan Lovells US LLP to EPA at 1 (Aug.
8, 2012). On August 31, 2012, EPA denied the requests in
light of the impending publication of its Final NCP Rule,
which established new, higher NCPs and by its terms
superseded the IFR. 77 Fed. Reg. at 54,385-87 (increasing
maximum 2012 NCP to $3,775—to “apply for all engines
introduced into commerce on or after September 5, 2012”).
Daimler subsequently petitioned for review of the Final NCP
Rule. See Daimler Trucks N. Am. LLC v. EPA, No. 12-1433
(D.C. Cir. Oct. 26, 2012).
II.
Daimler challenges the Certificates on the ground they
were improperly issued based on the invalid and now-vacated
IFR. In response, EPA argues, first, that the court is without
subject-matter jurisdiction—because Daimler lacks standing
under Article III of the United States Constitution and
because the challenge is now moot—and, on the merits, that
the Certificates remain valid until EPA revokes them pursuant
to its regulatory revocation process. We conclude Daimler’s
challenge is moot and therefore do not reach EPA’s
alternative arguments.
“Article III, Section 2 of the Constitution permits federal
courts to adjudicate only actual, ongoing controversies.”
United Bhd. of Carpenters & Joiners v. Operative Plasterers’
& Cement Masons’ Int’l Ass’n, 721 F.3d 678, 687 (D.C. Cir.
8
2013). Courts “may not decide questions that cannot affect
the rights of litigants in the case before them or give opinions
advising what the law would be upon a hypothetical state of
facts.” Chafin v. Chafin, 133 S. Ct. 1017, 1023 (2013)
(quotation marks and brackets omitted). Moreover, the case
“must remain live ‘at all stages of review, not merely at the
time the complaint is filed.’ ” United Bhd. of Carpenters, 721
F.3d at 687 (quoting Steffel v. Thompson, 415 U.S. 452, 459
n.10 (1974)); see also Lewis v. Cont’l Bank Corp., 494 U.S.
472, 477-78 (1990) (“Th[e] case-or-controversy requirement
subsists through all stages of federal judicial proceedings, trial
and appellate. To sustain our jurisdiction in the present case, it
is not enough that a dispute was very much alive when suit
was filed, or when review was obtained in the Court of
Appeals.” (alteration added)). “For that reason, if an event
occurs while a case is pending on appeal that makes it
impossible for the court to grant ‘any effectual relief
whatever’ to a prevailing party, the appeal must be
dismissed.” Church of Scientology of Cal. v. United States,
506 U.S. 9, 12 (1992) (quoting Mills v. Green, 159 U.S. 651,
653 (1895)). In addition, “the mootness doctrine requires a
federal court to refrain from deciding [a case] if events have
so transpired that the decision will neither presently affect the
parties’ rights nor have a more-than-speculative chance of
affecting them in the future.” LaRoque v. Holder, 679 F.3d
905, 907 (D.C. Cir. 2012) (quotation marks and brackets
omitted) (brackets added). In this case, two such events
combine to make us conclude that Daimler is unable to
demonstrate “a more-than-speculative chance” of obtaining
redress.
First, in September 2012, EPA replaced the IFR with the
Final NCP Rule—which adopted different NCPs from the
IFR. Nonconformance Penalties for On-Highway Heavy-
Duty Diesel Engines, 77 Fed. Reg. 54,384, 54,385, 54,387
(Sept. 5, 2012). From the start, Daimler had sought to prevent
9
EPA from allowing Navistar to market its nonconforming
engines by paying the IFR’s lower NCP—which, as noted,
Daimler contended (successfully) was improperly
promulgated (without the requisite notice and comment and in
disregard of EPA’s substantive NCP regulations). See
Nonbinding Statement of Issues To Be Raised at 2, Daimler
Trucks N. Am. LLC v. EPA, No. 12-1179 (D.C. Cir. Apr. 20,
2012) (seeking vacatur of Certificates “because they were
authorized solely on the basis of payment of nonconformance
penalties made available through the IFR”); Nonbinding
Statement of Issues To Be Raised at 1-2, Daimler Trucks N.
Am. LLC v. EPA, No. 12-1270 (D.C. Cir. July 26, 2012)
(“Pursuant to the Interim Final Rule, Navistar obtained
certificates of conformity that permitted it to produce and sell
the otherwise unlawful engines in return for paying the
penalty set by the Interim Final Rule. . . . [T]he certificates
of conformity issued to Navistar must be vacated because the
Interim Final Rule they were predicated on has been
vacated.”); Pet’rs’ Br. 16-18, Mack Trucks, Inc. v. EPA, Nos.
12-1078 et al. (D.C. Cir. Mar. 12, 2012). But as of September
5, 2012, when the Final NCP rule took effect—with new and
higher penalties—Daimler no longer faced any additional
injury from the IFR’s NCP regime. As of that date, Navistar
was subject instead to the new NCPs established in the Final
NCP Rule, which by its terms “appl[ied] for all engines
introduced into commerce on or after September 5, 2012.” 77
Fed. Reg. at 54,387; see id. at 54,385 (increasing maximum
2012 NCP to $3,775). And the Final NCP Rule, along with
its new NCPs, is the subject of a separate challenge pending
before the Court. See Daimler Trucks N. Am. LLC v. EPA,
No. 12-1433 (D.C. Cir. filed Oct. 26, 2012; oral argument
scheduled Oct. 22, 2013).
Second, the 2012 model year—the model year the
challenged Certificates covered—has ended. See 42 U.S.C.
§ 7521(b)(3) (providing “model year” ends no later than close
10
of applicable calendar year; see supra note 4). Thus, the
Certificates have now “expired”—as Daimler acknowledges,
Reply Br. 3. They can no longer profit Navistar or injure
Daimler.
Daimler contends the controversy is not moot “because a
decision voiding Navistar’s certificates will make it likely that
Petitioners will receive redress for their past economic
injuries”—either through an EPA enforcement action against
Navistar under CAA sections 204 and 205(a), 42 U.S.C.
§§ 7523, 7524(a), or in a citizen enforcement action brought
by Daimler under CAA section 304(a), 42 U.S.C. § 7604(a).
Reply Br. 17 (citing Reply Br. 14-16). According to Daimler,
those actions could result in the award of monetary penalties
against Navistar that would divest Navistar of any competitive
gain it would not have obtained in the absence of the
improperly issued certificates, thus providing redress to
Daimler and Navistar’s other competitors. Daimler’s
rationale fails to persuade us. Even assuming arguendo that
penalties awarded to the United States Treasury could qualify
as redress to Daimler, the prospect of such relief in an EPA
enforcement action or citizen suit by Daimler is unduly
speculative. See Univ. Med. Ctr. of S. Nev. v. Shalala, 173
F.3d 438, 442 (D.C. Cir. 1999) (where redressability depends
on prevailing in ensuing action, court would be required to
assess “how likely it was that [the party] would succeed in the
second suit”).
First, with respect to the possibility of an EPA
enforcement action, EPA has already rejected Daimler’s
request to revoke the certificates, concluding that revocation
is “not appropriate or necessary” in light of the issuance of the
Final NCP Rule. Pet’rs’ Br. A34. In that light, it is difficult
to suppose that EPA would bring an enforcement action
against Navistar. Indeed, the statute would require a court to
take into account, inter alia, “the gravity of the violation” in
considering whether, and in what amount, to grant relief. 42
11
U.S.C. § 7524(b). In its brief here, EPA notes that Navistar
“relied in good faith” on the challenged certificates and that
any enforcement action by EPA would be “highly unlikely.”
Resp. Br. 29. The circumstances thus are unlike those in
Bennett v. Donovan, 703 F.3d 582 (D.C. Cir. 2013), on which
Daimler relies. In Bennett, this Court concluded that the
plaintiffs established redressability because, if they prevailed,
the defendant agency—there HUD—could subsequently take
certain actions on its own to provide relief, thereby rendering
relief “likely, as opposed to merely speculative.” Id. at 589
(emphasis in original).
Second, regarding Daimler’s possible pursuit of a citizen
suit, the likelihood of monetary penalties is likewise
speculative. Assuming that Daimler could in fact pursue a
citizen suit under CAA section 304(a) in these
circumstances—an issue we need not resolve—EPA could
intervene in the action and present its views on the propriety
of imposing penalties (presumably against their imposition).
See 42 U.S.C. § 7604(c)(2). In assessing whether to award
relief, the court in an action under section 304(a) considers,
inter alia, “the violator’s full compliance history and good
faith efforts to comply,” the “seriousness of the violation,” the
“duration of the violation” and any other “factors as justice
may require.” 42 U.S.C. § 7413(e)(l). Here, to the extent
Navistar could be found to have violated the CAA by
operating under certificates that subsequently were found to
have been issued improperly by EPA, Navistar acted in good
faith reliance on the validity of the certificates, EPA’s brief
acknowledges that it considers Navistar to have acted in good
faith, the violation stemmed from the agency’s failure to
follow its own procedural requirements and any violation took
place for a limited time before issuance of the Final Rule. Cf.
Illinois v. Krull, 480 U.S. 340, 356-57, 360 (1987) (officer’s
reliance on state statute later declared unconstitutional was
“objectively reasonable” and in “objective good faith”).
12
In support of its redress-through-penalties theory,
Daimler relies on the United States Supreme Court’s recent
decision in Decker v. Northwest Environmental Defense
Center, 133 S. Ct. 1326 (2013). See Rule 28(j) Letter,
Daimler Trucks N. Am, LLC v. EPA, Nos. 12-1179 & 12-1270
(filed Apr. 9, 2013). Its reliance thereon is misplaced.
In Decker, the respondent environmental association
brought a citizen action under section 505(a) of the Clean
Water Act (CWA), 33 U.S.C. § 1365(a)—the CWA’s analog
to CAA section 304(a)—against logging and paper-products
companies, as well as state and local governments and
officials, alleging they violated EPA’s “Industrial Stormwater
Rule”—and consequently the CWA—by causing stormwater
runoff to be discharged into two waterways without obtaining
permits. Decker, 133 S. Ct. at 1333. The petitioners argued
that the controversy was mooted by an amendment to EPA’s
Industrial Stormwater Rule (promulgated three days before
the scheduled oral argument), which clarified that permits
were not in fact required for the discharges at issue. The
Supreme Court rejected the mootness argument, reasoning
that, “despite the recent amendment, a live controversy
continue[d] to exist regarding whether [the defendants] may
be held liable for unlawful discharges under the earlier
version of the Industrial Stormwater Rule.” Id. at 1335. The
Court explained that on remand the district court “might order
some remedy for their past violations,” noting that the CWA
“contemplates civil penalties of up to $25,000 per day, as well
as attorney’s fees for prevailing parties.” Id. (citing 33 U.S.C.
§§ 1319(d), 1365(d)). Moreover, the Court observed, the
plaintiff requested “injunctive relief for both past and ongoing
violations, in part in the form of an order that petitioners incur
certain environmental-remediation costs to alleviate harms
attributable to their past discharges.” Id. Under such
circumstances, the Court concluded, “the cases remain[ed]
live and justiciable, for the possibility of some remedy for a
13
proven past violation is real and not remote.” Id. As already
explained, here, unlike in Decker, the prospect of redress for
any past violation is remote and speculative.
For the foregoing reasons, we dismiss the petitions for
review as moot.
So ordered.