Daimler Trucks N. Am. LLC v. Envtl. Prot. Agency

• Decision Date: 18 October 2013
• Docket Number: No. 12–1179.,12–1179.
• Citation: 745 F.3d 1212
• Parties: DAIMLER TRUCKS NORTH AMERICA LLC, et al., Petitioners v. ENVIRONMENTAL PROTECTION AGENCY, Respondent Navistar, Inc., Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

745 F.3d 1212

DAIMLER TRUCKS NORTH AMERICA LLC, et al., Petitioners

v.ENVIRONMENTAL PROTECTION AGENCY, Respondent

Navistar, Inc., Intervenor.

No. 12–1179.

United States Court of Appeals,District of Columbia Circuit.

Argued Sept. 11, 2013.

Decided Oct. 18, 2013.

On Petitions for Review of a Final Agency Action by The United States Environmental Protection Agency.

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. Non-conformance 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 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). Non-conformance 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 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 non-conformance 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 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. Non-conformance Penalties for On–Highway Heavy–Duty Diesel Engines, 77 Fed.Reg. 4736 (Jan. 31, 2012). EPA 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 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 U.S. 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.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, ––– U.S. ––––, 133 S.Ct. 1017, 1023, 185 L.Ed.2d 1 (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, 94 S.Ct. 1209, 39 L.Ed.2d 505 (1974)); see also Lewis v. Cont'l Bank Corp., 494 U.S. 472, 477–78, 110 S.Ct. 1249, 108...