United States v. Harley-Davidson, Inc. ( 2020 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
No. 16-cv-1687(EGS)
HARLEY DAVIDSON, INC., et al.,
Defendants.
MEMORANDUM OPINION
Pending before the Court is the United States’ Motion to
Enter Consent Decree (“Consent Decree Mot.”). The proposed
consent decree lodged with the Court resolves claims the United
States asserts against the defendants (collectively, “Harley-
Davidson”) for certain violations of the Clean Air Act (“CAA”),
42 U.S.C. §§ 7521 et seq. Three amici curiae, a group of state
and local governments (“SLG”), the Natural Resources Defense
Council and Conservation Law Foundation (“CLF/NRDC”), and the
Sierra Club oppose the entry of the consent decree. Upon careful
consideration of the motion, the arguments of Harley-Davidson
and amici curiae, the relevant law, and for the reasons set
forth below, the Court GRANTS the United States’ motion.
1
I. Background
A. Factual
The complaint alleges three types of CAA violations by the
defendants: (1) “Harley-Davidson manufactured and sold 12,682
motorcycles that were not certified by the [Environmental
Protection Agency (“EPA”)] as required by the Act”; (2) “Harley-
Davidson manufactured and sold over 339,392 ‘Super Tuners’ in
violation of the Act’s ‘defeat device’ prohibition”; and (3)
“Harley-Davidson’s sale of the Super Tuners caused 339,392
violations of the Act’s ‘tampering’ provision.” United States’
Motion to Enter Consent Decree (“Consent Decree Mot.”), ECF No.
7 at 3. Super Tuners, among other things, increase the power and
performance of motorcycles. Id. at 6.
With respect to the first type of violation, applicable
provisions of the CAA and its implementing regulations
“prohibit[] manufacturers of new motor vehicles from selling,
offering for sale, and introducing or delivering for
introduction into commerce such vehicles unless they are covered
by a Certificate of Conformity (“COC”) issued by EPA.” Id. at 4.
The complaint alleges that Harley-Davidson sold 12,682 new
motorcycles that were not covered by a COC. Id.
With respect to the second type of violation, applicable
provisions of the CAA “prohibit[] any person from manufacturing,
selling, offering for sale, or installing, any part or component
2
(referred to generally as a ‘defeat device’) where a principal
effect of the [defeat device] is to bypass, defeat, or render
inoperative any device or element of design installed on or in a
vehicle/engine in compliance with [applicable] regulations . . .
.” Id. at 5. The United States explains that the installation of
a defeat device “undermines the whole certification program[]
because the vehicle is no longer in a configuration that has
been demonstrated to meet emission standards.” Id. The complaint
alleges that Harley-Davidson’s manufacture and sale of the Super
Tuners resulted in at least 339,392 violations of the CAA’s
defeat device prohibition. Id. at 6.
With respect to the third type of violation, applicable
provisions of the CAA prohibit the “tampering” with “any device
or element of design installed on a motor vehicle in compliance
with the regulations promulgated under” the applicable
provisions of the CAA. Id. The complaint alleges that Harley-
Davidson violated the tampering provision by selling the Super
Tuners and that its “actions caused the installation of at least
339,392 [Super] Tuners in violation of the CAA’s tampering
provision.” Id. at 7. The government explains that such
tampering results in increased emissions. Id. at 8.
3
 B. Procedural
On August 18, 2016, the United States filed a three-count
complaint against Harley-Davidson, alleging violations of the
CAA. See generally Compl., ECF No. 1. On that same date, it
lodged a consent decree that had been agreed to and signed by
all parties. Notice of Lodging of Consent Decree, ECF No. 2. The
Court refers to this consent decree as the “superseded consent
decree.” The government requested that the Court take no action
pending publication of the consent decree in the Federal
Register and the running of the comment period, stating that it
would advise the Court of any action that may be required. Id.
at 1. Thereafter, on July 20, 2017, the United States filed a
new consent decree, ECF No. 6, and following publication in the
Federal Register and the running of the comment period, the
government on December 11, 2017 moved for an Order Entering
Consent Decree. See Consent Decree Mot., ECF No. 7. The Court
refers to the new consent decree as the “consent decree” or
“decree.” The consent decree is identical to the superseded
consent decree except that it no longer contains a mitigation
project. Amici oppose entering the consent decree because it no
longer contains that project nor an alternative mitigation
project.
4
C. Consent Decree
The consent decree requires Harley-Davidson to:
(1) Cease manufacturing, selling, and/or
distributing for use in the United States any
Tuning Product that has`` not been authorized
by the California Air Resources Board (“CARB”)
or the EPA. Harley-Davidson has reported that
it has met this requirement;
(2) Offer to buy back Super-Tuners supplied
to its dealers but not yet sold to the ultimate
purchaser, and to destroy the illegal Tuners
bought back. Harley-Davidson has reported that
it has met this requirement;
(3) Deny warranty claims (and instruct its
dealers to do so as well) where the claim is
for a functional defect for a motorcycle tuned
by a Tuning Product described in paragraph
(1);
(4) For sales abroad, mark uncertified Tuning
Products as “Not Authorized For Use In, Or
Export To, The United States or its
Territories” and to agree to a reporting and
tracking system allowing EPA to monitor
whether Harley-Davidson sells large
quantities of the uncertified Tuning Products
to Canada and Mexico so that U.S. Citizens
could purchase them there and bring them back
to the U.S.;
(5) Conduct annual tailpipe emissions tests
on motorcycles that have been modified with
its most popular certified “kit” (tuning
product combined with aftermarket part(s));
(6) Obtain an EPA-issued COC before selling,
offering for sale, importing, introducing, or
delivering for introduction into commerce a
new motorcycle;
(7) Report semi-annually to assist the EPA in
monitoring compliance;
5
(8) Pay stipulated penalties for decree
violations; and
(9) Pay a civil penalty of $12 million.
Consent Decree Mot., ECF No. 7 at 9-12.
The consent decree does not contain a mitigation project
that would have required Harley-Davidson to pay $3 million to
non-party The American Lung Association of the Northeast
(“ALANE”) “to mitigate emissions of hydrocarbons and oxides of
nitrogen by replacing old, higher polluting woodstoves with
emissions-certified wood stoves.” Id. at 2. On June 5, 2017,
when the superseded consent decree was pending, and before the
United States moved for its entry, the-then Attorney General
issued a new policy entitled Prohibition on Settlement Payments
to Third Parties (“Third-Party Payment Policy” or “Policy”)
which prohibits, except for a payment that “directly remedies
the harm that is sought to be redressed, including, for example,
harm to the environment,” Department of Justice “attorneys from
entering into a civil or criminal settlement that ‘directs or
provides for a payment or loan to any non-governmental person or
entity that is not a party to the dispute.’” United States’
Resp. to Br. by Amici Curiae Opposed to the Consent Decree
(“Resp.”), ECF No. 16 at 6 (quoting Third-Party Payment Policy
at 1). The United States explains that after this policy was
issued, it became concerned about the inclusion of the
6
mitigation project in the superseded consent decree, sought to
renegotiate it, but was unable to negotiate an acceptable
revised or alternative project with Harley-Davidson. Consent
Decree Mot., ECF No. 7 at 14-15.
The United States notes that it held a 30-day public
comment period on the consent decree, received comments which it
carefully considered, and concluded that none of the comments
provides a basis for withholding its consent to the entry of the
decree. Id. at 3.
II. Standard for Entry of Consent Decree
The “generally applicable” standard for the review of a
consent decree in the District of Columbia Circuit is whether
the consent decree “‘fairly and reasonably resolves the
controversy in a manner consistent with the public interest.’”
Massachusetts v. Microsoft Corp., 373 F.3d 1199, 1206 n.1 (D.C.
Cir. 2004) (quoting New York v. Microsoft Corp., 231 F. Supp. 2d
203, 205 (D.D.C. 2002)) (citing Citizens for a Better Env’t v.
Gorsuch, 718 F.2d 111, 1126 (D.C. Cir. 1983)). “‘[P]rior to
approving a consent decree a court must satisfy itself of the
settlement’s overall fairness to beneficiaries and consistency
with the public interest.’” Citizens for a Better Env’t, 718
F.2d at 1126 (internal quotation marks and citation omitted).
“‘Approval of a settlement is a judicial act that is
committed to the informed discretion of the trial court.’”
7
United States v. Hyundai Motor Co., 77 F. Supp. 3d 197, 199
(D.D.C. 2015) (quoting U.S. v. District of Columbia, 933 F.
Supp. 42, 47 (D.D.C. 1996)). The Court is not to “substitute its
judgment” for that of the parties to the decree and “may not
modify but only approve or reject a consent decree.” United
States v. Akzo Coatings of America, Inc., 949 F.2d 1409, 1435
(6th Cir. 1991). “Naturally, the agreement reached normally
embodies a compromise; in exchange for the saving of cost and
elimination of risk, the parties each give up something they
might have won had they proceeded with litigation.” United
States v. Armour & Co., 402 U.S. 673, 681-82 (1971).
“The trial court in approving a settlement need not inquire
into the precise legal rights of the parties nor reach and
resolve the merits of the claim or controversy, but need only
determine that the settlement is fair, adequate, reasonable and
appropriate under the particular facts and that there has been
valid consent by the concerned parties.” Citizens for a Better
Environment, 718 F.2d at 1126 (citing Metropolitan Housing
Development Corp. v. Village of Arlington Heights, 616 F.2d
1006, 2014 (7th Cir. 1980)). “[I]t is precisely the desire to
avoid a protracted examination of the parties' legal rights
which underlies consent decrees. Not only the parties, but the
general public as well, benefit from the saving of time and
money that results from the voluntary settlement of litigation.
8
Thus, ‘[v]oluntary settlement of civil controversies is in high
judicial favor.’” Id. (quoting Autera v. Robinson, 419 F.2d
1197, 1199 (D.C. Cir. 1969)). That said, “[a] decree, even
entered as a pretrial settlement, is a judicial act, and
therefore the district judge is not obliged to accept one that,
on its face and even after government explanation, appears to
make a mockery of judicial power.” Microsoft Corp., 56 F.3d at
1462. “Finally, broad deference should be afforded to EPA’s
expertise in determining an appropriate settlement and to the
voluntary agreement of the parties in proposing the settlement.”
District of Columbia, 933 F. Supp. at 48 (citing In re Cuyahoga
Equip. Corp., 980 F.2d 110, 118 (2d Cir. 1992)).
III. Analysis
The Court must determine whether the government has met its
burden to demonstrate that the consent decree is fair,
reasonable and in the public interest. United States v. Davis,
11 F. Supp. 2d 183, 189 (D.R.I. 1998) (“The United States is
obliged to proffer sufficient facts and reasons to establish
that these factors have been satisfied and that approval is
warranted.”).
9
A. The Consent Decree is Fair
“A review of the fairness of a proposed consent decree
requires an assessment of the good faith of the parties, the
opinions of the counsel, and the possible risks involved in
litigation if the settlement is not approved.” District of
Columbia, 933 F. Supp. at 48 (quoting United States v. Hooker
Chem. & Plastics Corp., 607 F. Supp. 1052, 1057 (W.D.N.Y.
1985)). “Fairness incorporates both procedural and substantive
components.” United States v. Telluride Co., 849 F. Supp. 1400,
1402 (D. Colo. 1994). “An assessment of procedural fairness
involves looking ‘to the negotiating process and attempt[ing] to
gauge its candor, openness, and bargaining balance.’” District
of Columbia, 933 F. Supp. at 47 (quoting Telluride Co., 849 F.
Supp. at 1402). “A consent decree that is substantively fair
incorporates ‘concepts of corrective justice and accountability:
a party should bear the cost of harm for which it is legally
responsible.’” Id. at 47 (quoting United States v. Cannons Eng'g
Corp., 899 F.2d 79, 87 (1st Cir. 1990)).
The United States argues that the process was adversarial,
that the United States is the enforcer of the CAA and Harley-
Davidson vigorously defended itself, and that the parties
negotiated for over a year. Consent Decree Mot., ECF No. 7 at
15. Furthermore, the United States argues, both sides were
represented by experienced counsel and technical staff and
10
accordingly were fully equipped to determine the strengths and
litigation risks of their respective positions. Id. at 16.
The United States argues that the “settlement is
substantively fair because it imposes an appropriate civil
penalty and require[s] Harley-Davidson, an industry leader, to
stop selling the illegal Tuners and to implement the other
elements of a comprehensive, nationwide program of compliance
measures.” Consent Decree Mot., ECF No. 7 at 17. Thus, according
to the United States, it holds the defendants appropriately
accountable for their violations of law. Id.
Regarding the mitigation project, the United States states
that “[a]fter the parties were unable to reach agreement on an
alternative to the [mitigation] project, the United States
considered whether it was better to proceed with the consent
decree without the woodstove project or to forgo settling the
case and, instead, proceed to litigate its claims against
Harley-Davidson.” Id. Considering the litigation risks and
delays as compared with the injunctive relief and civil penalty,
all of which was immediately obtainable, the United States
decided to move forward with the revised consent decree. Id.
SLG argues that the consent decree is procedurally unfair
because the dealings that resulted in the elimination of the
mitigation project “lacked adversarial vigor” since “[t]he
United States obtained nothing of value in exchange for
11
eliminating the $3 million mitigation project.” Br. of State and
Local Gov’t Amici in Opp’n to United States’ Mot. to Enter
Consent Decree (“SLG Br.”), ECF No. 12 at 26. 1
There is nothing in the record to suggest that the removal
of the mitigation project was the result of any collusion
between the parties. Rather, the United States in its discretion
determined that the Third-Party Payment Policy prohibited the
inclusion of the project and approached Harley-Davidson to
renegotiate that aspect of the consent decree. When the parties
were unable to reach an agreement on an alternative to the
mitigation project, the United States determined that settling
the case without that provision—but going forward with the
injunctive relief and civil penalty—was preferable to forgoing
settling it and taking on the litigation risks that would
result. Given the narrow scope of this Court’s review, the Court
cannot say that the United States’ assessment was unreasonable.
United States v. Chevron, 380 F. Supp. 29 1104, 1112-13 (N.D.
Calif. 2005). Furthermore, understood in this light, it is
apparent that the government did get something in return for the
1 SLG complains that the United States provided no details nor
declarations to support its assertion that the process was
adversarial. SLG Br., ECF No. 12 at 25. However, SLG points to
no authority indicating that the provision of such declarations
is required, and is able to cite only two examples where
declarations were provided.
12
removal of the mitigation project after the policy change—it
settled the case, obtained injunctive relief, and obtained a
civil penalty.
Next, SLG argues that the consent decree is procedurally
unfair because the United States did not consult with the states
regarding the removal of the mitigation project. SLG Br., ECF
No. 12 at 26. However, SLG concedes that there is no “absolute
requirement that the United States allow the States or other
third parties to participate directly in negotiations with a
defendant.” SLG Br., ECF No. 12 at 30. There is no indication
that the United States’ decision not to consult with the states
was done in bad faith. United States v. Cannons Eng’g Corp., 899
F.2d 79, 93 (1st Cir. 1990) (“So long as it operates in good
faith, the EPA is at liberty to negotiate the settlement with
whomever it chooses.”). This is especially so given that the
record does not indicate that the states were consulted
regarding the superseded consent decree.
Finally, SLG argues that the consent decree is procedurally
unfair because “the United States failed to . . . adequately
respond to comments and consider reasonable alternatives to the
mitigation project” submitted in response to the consent decree.
SLG Br., ECF No. 12 at 26. The record indicates that during the
30-day public comment period, comments were received objecting
to the removal of the mitigation project and suggesting
13
alternative projects. Consent Decree Mot., Ex. 1, ECF No. 7-1 at
13-60. The record further shows that the United States did not
substantively respond to those comments because they did not
address the provisions of the consent decree lodged with the
Court. Consent Decree Mot., Ex. 2, ECF No. 7-2 at 2-10.
The Court takes into consideration the United States’
failure to address the comments objecting to the removal of the
mitigation project and suggested alternatives. Although the
United States asserts a rationale for not responding to the
comments objecting to the removal of the mitigation project from
the consent decree, the United States should have done so. See
Akzo Coatings of America, Inc., 949 F.2d at 1435 (“The good
faith efforts of the parties to the decree are evidenced by the
voluminous record, the arms-length negotiation process and the
manifested willingness of EPA to thoroughly consider all oral
and written comments made with regard to the proposed decree.”).
But the Court cannot find that this failure, without more,
renders the decree procedurally unfair.
This is even more so because the Court has considered the
comments and amici make many of the same arguments in the
briefing before this Court. See United States v. City of
Waterloo, 2016 WL 254725 at *6 (N.D. Iowa Jan. 20, 2016)
(“courts must take under serious consideration any comments
received during [the public comment] period”). The Court has
14
also considered the United States’ detailed responses to the
comments that were received in the proceeding before this Court.
See Consent Decree Mot., ECF No. 7 at 19 (disagreeing with
commenters’ assertions that mitigation is a required element of
a settlement); 20-23 (disagreeing with commenters who asserted
that the settlement does not adequately compensate the public or
provide adequate punishment because the mitigation project was
removed); 24 (disagreeing with commenters who argued that the
penalty was too low); 27-32 (responding to objections to the
removal of the mitigation project).
With regard to considering reasonable alternatives to the
mitigation project, SLG argues that it would have been “simple”
to have ensured that the mitigation project did not run afoul of
the Third-Party Payment Policy by requiring that the mitigation
funds be spent nationwide, id. at 27; and propose a number of
alternatives to the mitigation project, id. at 17-29. The United
States notes that it “undertook significant efforts to negotiate
with Harley-Davidson to modify the proposed woodstove project or
agree upon an alternative project that would redress the harm
from Harley-Davidson’s violations in a manner that did not run
afoul of the Policy . . [but] the parties were unable to reach
agreement on a revised or alternative mitigation project.”
Consent Decree Mot., ECF No. 7 at 31. The United States points
out that “[it] cannot unilaterally dictate the terms of
15
settlement; both parties must agree.” Id. at 31 n.18. The
adoption of the Third-Party Payment Policy clearly put the
United States at a bargaining disadvantage when it sought to
renegotiate the mitigation project, but the Court cannot find
that this renders the consent decree procedurally unfair given
that the United States determined that the policy applied to the
decree.
NRDC/CLF argues that the consent decree is procedurally
unfair for a number of reasons. First, NRDC/CLF argues that the
government gave contradictory reasons for the removal of the
mitigation project, asserting that the government first delayed
seeking entry of the consent decree because of public comments
received, later conceded that the mitigation project was omitted
due to concerns about whether it would be barred by the Third-
Party Payment Policy, but now claiming that the initial delay
was unrelated to the issuance of that policy. Br. of Amici
Curiae Natural Resources Defense Council and Conservation Law
Foundation in Opp’n to Mot. for Entry of Consent Decree
(“NRDC/CLF Br.”), ECF No. 15 at 12-13. NRDC/CLF, however,
misunderstands the relevant portion of the record in this case.
On December 11, 2017, the Court granted the United States’
request for an extension of time to serve the Complaint until 30
days after such time, if any, that: (1) the Court disapproves a
motion by the United States for entry of a consent decree; or
16
(2) the United States notifies the Court that it no longer
supports the entry of a consent decree. Minute Order (Dec. 12,
2017). The United States has consistently stated that the
mitigation project was removed because of the Third-Party
Payment Policy.
Next, NRDC/CLF argues that the Third-Party Payment Policy
does not apply to the mitigation project, a position they assert
is confirmed by a January 9, 2018 Memorandum from the Acting
Assistant Attorney General providing guidance to attorneys in
the Environment and Natural Resources Division of the Department
of Justice (“ENRD Memorandum”) in implementing the policy.
NRDC/CLF Br., ECF No. 15 at 13-14. SLG and Sierra Club also
argue that the Third-Party Payment Policy does not apply to the
mitigation project. Specifically, SLG argues that the Third-
Party Payment Policy does not prohibit the mitigation project
and that the removal of the mitigation project is inconsistent
with EPA policy. SLG Br., ECF No. 12 at 19-23. Sierra Club
argues that the Third-Party Payment Policy does not apply to the
superseded consent decree, and even if it did, the mitigation
project falls within an exception to that policy. Br. of Amicus
Curiae Sierra Club in Opp’n to the United States’ Mot. to Enter
the Proposed Consent Decree (“Sierra Club Br.”), ECF No. 14 at
23-25.
17
The United States responds that it properly applied the
Third-Party Payment Policy to remove the mitigation project
because the superseded consent decree included a third-party
payment covered by the Policy—specifically payments by Harley-
Davidson to non-party ALANE, Resp., ECF No. 16 at 8; and that
the mitigation project did not fall within the policy’s limited
exception for payments that “directly remedy the harm” because
the alleged harms are widely dispersed throughout the United
States, whereas ALANE operates only in the Northeast and the
project would likely have been performed in only one state, id.
The United States further argues that guidance in the ENRD
Memorandum reinforces the conclusion DOJ had reached earlier
because, among other things, it provides that “excess emissions
nationwide could be addressed through a project that addresses
the relevant harm in areas in multiple regions of the United
states, or that otherwise would make widely distributed areas
eligible for mitigation . . .” Id. at 9 (quoting ENRD Memorandum
at 4).2 Given the narrow scope of this Court’s review, see
Chevron, 380 F. Supp. 29 at 1112-13; the United States’
2 Although the ENRD Memorandum was issued on January 9, 2018,
approximately six months after the consent decree was lodged,
the Court credits the United States’ argument that the guidance
in that memorandum was developed over time and ultimately signed
by the same Acting Assistant Attorney General who has authority
to approve the consent decree.
18
assessment of the applicability of the policy to the superseded
consent decree is not unreasonable. 3
Sierra Club also argues that the United States failed in
its motion for entry of the consent decree to “squarely assert”
that the Third-Party Payment Policy applies to the consent
decree, noting that the motion fails to justify the United
States’ reliance on the policy. Sierra Club Br., ECF No. 14 at
23, 26-28. However, in the motion pending before the Court, the
United States states that “[b]ecause the superseded consent
decree required [Harley-Davidson] to pay a non-governmental
third-party organization to carry out the project, the project
came within the prohibition against third party payments.”
Consent Decree Mot., ECF No. 7 at 29.
NRDC/CLF also argues that a robust, arms-length negotiation
regarding the mitigation project could not have taken place
because the Third-Party Payment Policy was issued on June 5,
2017, less than six weeks before the consent decree was filed on
July 20, 2017. The United States responds that this argument is
meritless because concerns about third-party payment practices
3
Sierra Club also asserts that the Third-Party Payment policy
“has no reasonable basis in the Clean Air Act, or any other law
or policy.” Sierra Club Br., ECF No. 14 at 28. The United States
responds—and the Court agrees—that the Attorney General has the
authority to supervise and direct the litigation of the United
States. 28 U.S.C. §§ 516, 519. Moreover, the policy is not
inconsistent with the CAA because it prohibits third-party
payments, not mitigation.
19
in settlements was identified as a concern when new leadership
joined the Department of Justice in 2017 and that “confidential
discussions [with Harley-Davidson] took place over several
months.” Resp., ECF No. 16 at 11. The Court finds the United
States’ explanation to be reasonable.
Regarding the substantive fairness of the consent decree,
the Court considers whether Harley-Davidson is being held
accountable and pays for the harm it allegedly caused. Cannons
Eng’g Corp., 899 F.2d at 87. Sierra Club questions the
substantive fairness of the decree because in removing the
mitigation project, “[t]he United States voluntarily abandoned a
substantial public benefit, without gaining any corresponding
substantive or procedural return.” Sierra Club Br., ECF No. 14
at 11. Sierra Club also argues that the $12 million penalty is
inconsistent with EPA’s penalty policy and does not recoup the
economic benefit Harley-Davidson gained as a result of selling
the illegal Tuners. Id. at 16-20. NRDC/CLF argues that the
“[c]onsent [d]ecree is not substantively fair because it does
not require Harley-Davidson to offset the harm for which it is
legally responsible” since it no longer contains the mitigation
project. NRDC/CLF Br., ECF No. 15 at 15.
The United States responds that there was no objection to
the $12 million penalty as being inadequate before the
mitigation project was removed, and that commenters are wrong to
20
suggest that the penalty is inadequate now that the $3 million
mitigation project has been removed because mitigation is not a
penalty. Consent Decree Mot., ECF No. 7 at 21-22. The United
States further responds that CAA settlements do not require the
inclusion of mitigation projects. Resp., ECF No. 16 at 5.
Pursuant to the narrow scope of the Court’s review, the
Court is persuaded that the consent decree is substantively
fair. Harley-Davidson has agreed to stop selling the illegal
tuners, it has agreed to a comprehensive compliance program, and
the penalty is commensurate with other mobile source
settlements, here amounting to “the largest civil penalty ever
obtained for the unlawful sale of aftermarket defeat devices.”
Resp., ECF No. 16 at 3-5. The Court is persuaded that the
removal of the mitigation project does not make the civil
penalty inadequate. And because mitigation is not a required
element of a CAA settlement agreement, the Court is not
persuaded that the removal of the mitigation project renders the
consent decree substantively unfair. The Court is unpersuaded by
Sierra Club’s argument that the United States “voluntarily
abandoned” the mitigation project. Rather, the United States
determined that the mitigation project was inconsistent with the
Third-Party Payment Policy. The adoption of that policy clearly
put the United States at a bargaining disadvantage when it
sought to renegotiate the mitigation project, but the Court
21
cannot find that this renders the consent decree substantively
unfair.
Accordingly, for all these reasons, the Court finds that
the consent decree is fair.
B. The Consent Decree is Reasonable
“‘In examining the reasonableness of a decree there
are three factors for the Court to consider: (1) whether the
decree is technically adequate to accomplish the goal of
cleaning the environment, (2) whether it will sufficiently
compensate the public for the costs of the remedial measures,
and (3) whether it reflects the relative strength or weakness
of the government's case against the environmental offender.’”
District of Columbia, 933 F. Supp. at 50 (quoting Telluride, 849
F. Supp. at 1402). “‘[T]he court must determine whether the
proposed consent decree is reasonable from an objective point of
view.’” Appalachian Voices v. McCarthy, 38 F. Supp. 3d 52, 56
(D.D.C. 2014) (quoting Environmental Defense v. Leavitt, 329 F.
Supp. 2d 55, 71 (D.D.C. 2004)).
The United States argues that the first factor has been met
because: (1) “it brings [Harley Davidson] into compliance with
the CAA . . . ensur[ing] that motorcycles with Harley-Davidson
tuning products meet applicable emissions standards;” (2)
“decreases the likelihood that Harley-Davidson’s illegal Tuners
will be sold in the United States; (3) “discourage[s] motorcycle
22
owners from tampering with their motorcycles;” and (4) “ensures
Harley-Davidson’s future compliance with the CAA”. Consent
Decree Mot., ECF No. 7 at 18.
The United States argues that the second factor has been
met because: (1) the civil penalty of $12 million was negotiated
in good faith as part of the overall settlement; (2) the
government considered the applicable statutory penalty factors
of “[a] the gravity of the violation, [b] the economic benefit
or savings (if any) resulting from the violation, [c] the size
of the violator’s business, [d] the violator’s history of
compliance with this subchapter, [e] action taken to remedy the
violation, [f] the effect of the penalty on the violator’s
ability to continue in business, and [g] such other matters as
justice may require,” 42 U.S.C. 7524(b); (3) Harley-Davidson’s
cooperation; and (4) the risks of litigation. Consent Decree
Mot., ECF No. 7 at 21.
The United States argues that the third factor has been met
because: (1) while it “believes its case on liability is strong
. . . Harley-Davidson ha[s] arguments why they believe they
would prevail in litigation;” (2) “there is uncertainty
concerning how the Court would analyze the various factors that
go into determining the penalty; and (3) even if the
government’s case is strong, litigation would still take a
23
number of years and significant discovery would be necessary.”
Id. at 25.
SLG disputes that factors (1) and (2) have been met because
of the removal of the mitigation project. SLG Br., ECF No. 12 at
17-18. NRDC/CLF argues that these factors have not been met
because the removal of the mitigation project means that there
will be no attempt to “restore the status quo by avoiding
additional air pollution of the same type that occurred as a
result of Harley-Davidson’s violations.” NRDC/CLF Br., ECF no.
15 at 16.
SLG makes three additional arguments that it contends
weighs against a finding of reasonableness. First, that the
consent decree reduces the original $15 million by 20% because
of the removal of the $3 million mitigation project. Id. at 18.
Second “because it does not include the $3 million mitigation
project, which the parties, based on good faith arms-length
negotiations and the strengths and weaknesses of the
government’s case, had included in the original Consent Decree,
or an equivalent substitute for the mitigation project.” Id. at
23. Third, because the sole mitigation project in the decree was
removed and not replaced with a reasonably equivalent
substitute. SLG Br., ECF No. 12 at 19. 4
4
In a footnote, SLG also suggests that it was inappropriate for
the United States to revise the consent decree based on the
24
The United States points out that mitigation is not a
required element of a CAA settlement, Consent Decree Mot., ECF
No. 7 at 19; that there was no objection to the $12 million
penalty as being inadequate before the mitigation project was
removed, and that commenters are wrong to suggest that the
penalty is inadequate now that the $3 million mitigation project
has been removed because mitigation is not a penalty. Id. at 21-
22.
The Court’s role is to assess whether the consent decree is
reasonable from an objective point of view. Appalachian Voices,
38 F. Supp. 3d at 56. On this record, it appears that the
consent decree is technically adequate to accomplish the goal of
cleaning the environment. The decree brings Harley-Davidson into
compliance with the CAA and ensures its future compliance with
the CAA. Furthermore, the decree decreases the likelihood that
the illegal tuners will be sold in the United States and
discourages motorcycle owners from tampering with their
motorcycles.
As to “whether [the consent decree] will sufficiently
compensate the public for the costs of the remedial measures,”
District of Columbia, 933 F. Supp. at 50; the $12 million civil
Third-Party Payment Policy rather than in response to public
comment. SLG Br., ECF No. 12 at 19 n.4. However, the parties may
agree to modify a consent decree before the Court approves it as
an order of the court.
25
penalty was negotiated in good faith taking into account
applicable statutory factors as well as Harley-Davidson’s
cooperation and the risks of litigation. The penalty is
commensurate with other mobile source settlements. The removal
of the mitigation project from the consent decree does not
change this analysis because mitigation is an element of
injunctive relief rather than a civil penalty.
The final factor in the reasonableness inquiry is “whether
[the consent decree] reflects the relative strength or weakness
of the government's case against the environmental offender.”
District of Columbia, 933 F. Supp. at 50. SLG complains that the
United States has “offered only generalities regarding the
strengths and weaknesses of its case.” SLG Br., ECF No. 12 at
16. However, “[i]t is almost axiomatic that voluntary compliance
on an issue where there is a potential disagreement is a better
alternative than the uncertainty of litigation over that issue.”
District of Columbia, 933 F. Supp. at 51. SLG also argues that
the consent decree is “a fortiori, unreasonable given the
absence of any change in the strength of the Government’s case.”
SLG Br., ECF No. 12 at 17. This argument is unpersuasive. A
consent decree naturally embodies compromise. In this case,
after the superseded consent decree was lodged, but before the
United States sought approval of the Court, the Third-Payment
Policy, which affected a provision of the parties’ agreement,
26
went into effect. Although this negatively impacted the United
States’ bargaining position when it sought to renegotiate the
mitigation project, that does not result in a finding that the
decree is unreasonable.
Accordingly, for all of these reasons, the Court finds that
the consent decree is reasonable.
C. The Consent Decree is in the Public Interest
“A settlement agreement which seeks to enforce a statute must
be consistent with the public objectives sought to be attained
by Congress.” Stewart v. Rubin, 948 F. Supp. 1077, 1087 (D.D.C.
1996). The purpose of the CAA is “to protect and enhance the
quality of the Nation’s air resources so as to promote the
public health and welfare and the productive capacity of its
population.” 42 U.S.C. § 7401(b)(1). The Court’s inquiry is
limited. “[P]rior to approving a consent decree a court must
satisfy itself of the settlement’s ‘overall fairness to
beneficiaries and consistency with the public interest.’” United
States v. Trucking Employers, Inc., 561 F.2d 313, 317 (D.C. Cir.
1977) (quoting United States v. Allegheny-Ludlum Industries, 517
F.2d 826, 850 (5th Cir. 1975)). “‘ [T]he [district] court’s
function is not to determine whether the resulting array of
rights and liabilities is the one that will best serve society,
but only to confirm that the resulting settlement is within the
reaches of the public interest.’” United States v. Microsoft
27
Corp., 563 F.3d 1448, 1460 (D.C. Cir. 1995) (quoting United
States v. Western Elec. Co., 900 F.2d 283, 325 (D.C. Cir.
1990)).
The government argues that the consent decree serves the
public interest because it: (1) “furthers the Congressional
goals embodied in the Clean Air Act. By requiring Harley-
Davidson to cease the sale of uncertified motorcycles and
illegal Tuners, the settlement protects air quality and promotes
public health and welfare without litigation delays or costs;”
and (2) “send[s] a clear deterrent signal to the industry that
the Clean Air Act’s mobile source emission standards and defeat
device prohibitions will be vigorously enforced.” Consent Decree
Mot., ECF No. 7 at 27.
SLG disputes that the Consent Decree is in the public
interest because the mitigation project was eliminated, arguing
that since the mitigation project that was included in the
superseded consent decree served the purposes of the CAA, the
removal of the mitigation project or an appropriate equivalent
“deprives the public of the benefits of the mitigation project.”
SLG Br., ECF No. 12 at 23-24. Similarly, NRDC/CLF argues that
without the mitigation project, the injuries caused by Harley-
Davidson’s alleged violations will not be directly addressed.
NRDC/CLF Br., ECF No. 15 at 17.
28
Sierra Club argues that the consent decree is not fair,
reasonable, adequate, or in the public interest because it
contains neither a buyback provision nor the mitigation project,
both of which would have mitigated the alleged excess emissions.
Sierra Club Br., ECF No. 14 at 13. Sierra Club also argues that
the United States has not explained why the penalty provision
provides a fair and reasonable resolution of the alleged
violations given that the mitigation project has been
eliminated. Id. at 16.
The United States responds that the various arguments that
the removal of the mitigation project diminishes the public
interest conceives of the public interest as too narrow, and
that the injunctive relief secured by the decree combined with
“the largest civil penalty ever obtained for the unlawful sale
of aftermarket defeat devices” satisfy the fair, reasonableness
and public interest standards for Court approval of the decree.
Resp., ECF No. 16 at 3-5.
The Court is satisfied with the decree’s “overall fairness
to beneficiaries and consistency with the public interest.”
Trucking Employers, Inc., 561 F.2d at 317 (citations omitted).
The settlement protects air quality and promotes public health
and welfare by requiring Harley-Davidson to cease the sale of
aftermarket products that contain defeat devices, to
disincentivize their continued use, and to confirm its
29
compliance with what it has agreed to. Given that the decree
contains “the largest civil penalty ever obtained for the
unlawful sale of aftermarket defeat devices,” it sends a strong
deterrence signal. And while the superseded decree containing
the mitigation project might have been the “best” resolution of
Harley-Davidson’s alleged violations, the Court cannot say that
the decree lodged before the Court is not within “the reaches of
the public interest.” Microsoft Corp., 563 F.3d at 1460.
Furthermore, the United States has provided a consistent
and reasonable explanation for its decision to renegotiate the
decree following the announcement of the Third-Party Payment
Policy. The adoption of that policy negatively impacted the
United States’ bargaining position when it sought to renegotiate
that aspect of the consent decree. SLG requests that the Court
decline to enter the consent decree and “advise[] the parties
that it will not provide its approval unless the parties lodge a
modified agreement that includes the mitigation project or a
substantially equivalent project.” SLG Br., ECF No. 12 at 24.
The Court declines to do so. See Akzo Coatings of America, Inc.,
949 F.2d at 1435 (the Court “may not modify but only approve or
reject a consent decree”). As my colleague, Judge Tanya S.
Chutkan recently reasoned when declining to require the United
States to renegotiate a proposed consent decree so that it could
include a project not included in the proposed decree, “[i]t
30
would not benefit the public to jeopardize this agreement and
potentially mire the government and Defendants in lengthy
litigation with unpredictable results, while simultaneously
delaying the implementation of corrective measures.” Hyundai
Motor Co., 77 F. Supp. 3d at 2015.
IV. Conclusion
The Court is sympathetic to amici’s preference for the
substitute consent decree over the one lodged before the Court.
However, this Court is to give “broad deference . . . to EPA’s
expertise in determining an appropriate settlement and to the
voluntary agreement of the parties in proposing the settlement.”
Microsoft Corp., 56 F.3d at 1462 (citing In re Cuyahoga Equip.
Corp., 980 F.2d 110, 118 (2d Cir. 1992)). Moreover, the Court
cannot “substitute its judgment for that of the parties to the
decree.” Akzo Coatings of America, Inc., 949 F.2d at 1435. And
the Court cannot say that the consent decree lodged with the
Court “appears to make a mockery of judicial power.” Microsoft
Corp., 56 F.3d at 1462.
31
Accordingly, for the reasons explained above, the Motion to
Enter Consent Decree is GRANTED. A signed Order Entering Consent
Decree and the Consent Decree accompanies this Memorandum
Opinion.
SO ORDERED.
Signed: Emmet G. Sullivan
United States District Judge
September 14, 2020
32