United States of America v. Kohler Co. ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 UNITED STATES OF AMERICA, et al., Case No. 20-cv-00683-PJH 8 Plaintiffs, 9 v. ORDER GRANTING MOTIONS TO ENTER CONSENT DECREES 10 KOHLER CO., Re: Dkt. Nos. 12, 13 11 Defendant. 12 13 14 Before the court is plaintiffs The United States of America, on behalf of the United 15 States Environmental Protection Agency (“EPA”) and the People of the State of California 16 by and through the California Air Resources Board’s (“CARB” and, together with EPA, 17 “plaintiffs”) motion to enter consent decree. Also before the court is plaintiff CARB’s 18 motion to enter consent decree. The motions are unopposed. The matters are fully 19 briefed and suitable for decision without oral argument. Having read the parties’ papers 20 and carefully considered their arguments and the relevant legal authority, and good 21 cause appearing, the court hereby GRANTS both motions for the following reasons. 22 BACKGROUND 23 On January 30, 2020, plaintiffs EPA and CARB filed a complaint (“Compl.”) 24 against defendant Kohler Co. (“Kohler” or “defendant”) alleging violations of various 25 provisions of the federal Clean Air Act, 42 U.S.C. §§ 7533–24, 7547(d); regulations 26 codified at 40 C.F.R. parts 90, 1054, 1065, and 1068; various provisions of the California 27 Health and Safety Code sections 43016–17, 43154; and regulations codified at 13 1 seq. Dkt. 1. ¶¶ 1–2. The same day plaintiffs lodged two proposed consent decrees with 2 the court. Dkt. 3. The first consent decree is between the EPA, CARB, and Kohler (the 3 “Federal Consent Decree”). Dkt. 3-1. The second decree is only between CARB and 4 Kohler (the “State Consent Decree”). Dkt. 3-2. Together, the two proposed consent 5 decrees resolve all claims alleged in the complaint against Kohler under the Clean Air Act 6 and California law. Dkt. 3 at 2. As required by 28 C.F.R. § 50.7, the United States 7 published notice of lodging with the court on February 5, 2020. 85 Fed. Reg. 6,576 (Feb. 8 5, 2020). Section 50.7 requires each proposed judgment, i.e., consent decree, to be 9 lodged with the court thirty days prior to entry of judgment. Accordingly, plaintiffs filed 10 their motions to enter the consent decrees on March 13, 2020. Dkts. 12, 13. 11 The Federal Consent Decree requires defendant to forfeit 3,062,090 kilograms 12 (kgs) of EPA hydrocarbon plus nitrogen oxides (“HC + NOx”) credits and 271,834.720 13 kgs of CARB HC + NOx credits. Federal Consent Decree ¶¶ 26–27. The decree also 14 requires Kohler to implement several corporate compliance elements including an 15 independent environmental regulatory compliance team, annual compliance training for 16 engine division employees, an employee code of conduct and ethics hotline, and 17 convene semiannual meetings with certain personnel to discuss compliance with 18 applicable regulatory requirements. Id. ¶¶ 16–18. The decree further requires Kohler to 19 conduct annual audits and implement an emission testing validation plan and to submit 20 reports regarding compliance with this consent decree. Id. ¶¶ 19–20, 29. Finally, the 21 Federal Consent Decree imposes a civil penalty of $20,000,000 which will be divided 80 22 percent to the United States and twenty percent to the State of California. Id. ¶¶ 10–13. 23 Under the State Consent Decree, Kohler is required to pay a civil penalty to CARB 24 the sum of $200,000. State Consent Decree ¶ 10. The decree also requires Kohler to 25 undertake a mitigation project whereby Kohler will provide zero-emission solar powered 26 generators to low income residents in locations subject to public safety power shutoffs. 27 Id. ¶ 14. The cost of the project will be no less than $1,800,000. Id. The decree also 1 DISCUSSION 2 A. Legal Standard 3 Courts may approve a proposed consent decree when it is “fundamentally fair, 4 adequate and reasonable” and “conform[s] to applicable laws.” United States v. Oregon, 5 913 F.2d 576, 580 (9th Cir. 1990). Courts consider consent decrees in light of the public 6 policy favoring settlement. In re Volkswagen “Clean Diesel” Mktg., Sales Practices, & 7 Prod. Liab. Litig., No. MDL 2672 CRB (JSC), 2017 WL 2214655, at *4 (N.D. Cal. May 17, 8 2017) (citing Sierra Club v. McCarthy, No. 13-cv-03953-SI, 2015 WL 889142, at *5 (N.D. 9 Cal. Mar. 2, 2015)). “This policy is strengthened when a government agency charged 10 with protecting the public interest ‘has pulled the laboring oar in constructing the 11 proposed settlement.’” United States v. Montrose Chem. Corp. of Cal., 50 F.3d 741, 746 12 (9th Cir. 1995) (quoting United States v. Cannons Eng’g Corp., 899 F.2d 79, 84 (1st Cir. 13 1990)). Generally, “a district court reviewing a proposed consent decree ‘must refrain 14 from second-guessing the Executive Branch.’” Id. (quoting Cannons Eng’g Corp., 899 15 F.2d at 84). 16 The court has a duty to ensure that the proposed consent decree is “both (1) the 17 product of a procedurally fair process, and (2) substantively fair to the parties in light of a 18 reasonable reading of the facts.” Id. If the decree was the product of “good faith, arms- 19 length negotiations” which were not collusive, it is “presumptively valid and the objecting 20 party has a heavy burden of demonstrating the decree is unreasonable.” Oregon, 913 21 F.2d at 581 (internal quotations omitted). 22 B. Analysis 23 1. Procedural Fairness 24 Courts evaluate procedural fairness by “look[ing] to the negotiation process and 25 attempt[ing] to gauge its candor, openness, and bargaining balance.” Cannons Eng’g 26 Corp., 899 F.2d at 86. Here, all parties were represented by counsel and defendant has 27 not objected to the consent decrees. Mtn. at 7. The court finds that the consent decrees 1 2. Substantive Fairness 2 Substantive fairness means “a party should bear the cost of the harm for which it 3 is legally responsible.” Cannons Eng’g Corp., 899 F.2d at 87. Plaintiffs contend the 4 consent decrees recoup civil penalties for past violations, imposes injunctive relief in the 5 form of corporate compliance measures to prevent future violations, and ameliorates the 6 negative effects of excess air pollution through the forfeiture of emissions credits. Mtn. at 7 8. Plaintiffs also contend that the consent decrees protect the public interest and are 8 consistent with the Clean Air Act and the California Health and Safety Code. Id. Upon 9 review of the strength of the allegations in the complaint, the terms of the consent 10 decrees, and given the lack of opposition from defendant, the court agrees and finds the 11 consent decrees to be substantively fair. 12 CONCLUSION 13 For the foregoing reasons, plaintiffs EPA and CARB’s motion to enter consent 14 decree and plaintiff CARB’s separate motion to enter consent decrees are GRANTED. 15 The court will enter the consent decrees lodged with this court on January 30, 2020. 16 IT IS SO ORDERED. 17 Dated: April 6, 2020 18 /s/ Phyllis J. Hamilton PHYLLIS J. HAMILTON 19 United States District Judge 20 21 22 23 24 25 26 27