Hill v. Volkswagen, AG (In re Volkswagen "Clean Diesel" Mktg., Sales Practices, & Prods. Liab. Litig.)

Citation894 F.3d 1030
Decision Date03 July 2018
Docket NumberNo. 16-17060,16-17060
Parties IN RE VOLKSWAGEN "CLEAN DIESEL" MARKETING, SALES PRACTICES, AND PRODUCTS LIABILITY LITIGATION, Jason Hill et al., Plaintiffs, and United States of America, Plaintiff-Appellee, v. Volkswagen, AG; Volkswagen Group of America, Inc.; Audi, AG; Audi of America, LLC; Porsche Cars North America, Inc.; Robert Bosch GMBH; Robert Bosch, LLC, Defendants-Appellees, v. Ronald Clark Fleshman, Jr., Proposed Intervenor, Movant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

James Ben Feinman (argued), Lynchburg, Virginia, for Movant-Appellant.

Brian C. Toth (argued), Washington, D.C., for Defendants-Appellees.

Sharon Nelles (argued), New York, New York, for Defendants-Appellees.

Before: A. Wallace Tashima, William A. Fletcher, and Marsha S. Berzon, Circuit Judges.

OPINION

BERZON, Circuit Judge:

Ronald Clark Fleshman, Jr., the disgruntled owner of a 2012 Volkswagen Jetta, appeals the denial of his motion to intervene in the federal government’s Clean Air Act suit against Volkswagen, AG and several of its subsidiaries (collectively Volkswagen or VW). The government’s suit arose from the car manufacturer’s installation in some of its cars of "defeat devices"—surreptitious pieces of software that allowed VW to cheat on emissions tests. Six months after filing suit, the parties reached a final proposed consent decree, and the government filed it with the court. Our question is whether Fleshman was entitled to intervene in the government’s enforcement action. We conclude that he was not.

I
A. The Clean Air Act

The Clean Air Act "protect[s] and enhance[s] 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).1 Toward that end, the Act directs the Environmental Protection Agency (EPA) Administrator to prescribe emissions standards for new automobiles. See § 7521(a)(1); Massachusetts v. EPA , 549 U.S. 497, 506, 127 S.Ct. 1438, 167 L.Ed.2d 248 (2007). Each model year of a manufacturer’s vehicles must carry a "certificate of conformity" (COC) establishing those vehicles’ compliance with the relevant emissions standards. § 7522(a)(1); 40 C.F.R. § 86.1848-01. The Act prohibits the installation in a new automobile of any device that bypasses or defeats the operation of emission control systems. § 7522(a)(3).

As to enforcement, the Act also grants "any person" the right to bring a civil action challenging the violation of "(A) an emission standard or limitation under this chapter or (B) an order issued by the [EPA] Administrator or a State with respect to such a standard or limitation." § 7604(a)(1). Such a suit may not be brought, however, "if the Administrator or State has commenced and is diligently prosecuting a civil action ... to require compliance with the standard, limitation, or order." § 7604(b)(1)(B). But "in any such action ... any person may intervene as a matter of right." Id.

B. State implementation plans (SIPs)

The Clean Air Act "ma[kes] the States and the Federal Government partners in the struggle against air pollution." Gen. Motors Corp. v. United States , 496 U.S. 530, 532, 110 S.Ct. 2528, 110 L.Ed.2d 480 (1990). Pursuant to that cooperative scheme, the EPA sets national ambient air quality standards, and the states develop state implementation plans (SIPs), subject to the approval of the EPA, to implement those standards. See id. at 532–33, 110 S.Ct. 2528 ; see also § 7410(a).

The SIPs work toward attainment of national air quality standards primarily by regulating "stationary sources" like power plants and factories. See Engine Mfrs. Ass’n v. EPA , 88 F.3d 1075, 1078–79 (D.C. Cir. 1996) ; Jensen Family Farms, Inc. v. Monterey Bay Unified Air Pollution ControlDist. , 644 F.3d 934, 938 (9th Cir. 2011). Regulation of "mobile sources" is the province of the federal government. In fact, the Act prohibits the states from setting emissions standards for new automobiles; only the EPA may do that.2 See Engine Mfrs. Ass’n , 88 F.3d at 1079 ; § 7543(a). With that exception, the Act "preserves the right of states ‘otherwise to control, regulate, or restrict the use, operation, or movement of registered or licensed motor vehicles.’ " Engine Mfrs. Ass’n , 88 F.3d at 1093 (quoting § 7543(d) ).

II
A. Discovery of "defeat devices" & ensuing litigation

In May 2014, researchers at West Virginia University published a study showing that two of Volkswagen’s 2.0-liter "light diesel" models emitted significantly higher quantities of pollutants during normal road operation than during emissions testing.3 Following publication of the study, Volkswagen represented to the EPA and to the California Air Resources Board (CARB) that the identified discrepancies were caused by "technical issues and unexpected in-use [driving] conditions." Testing by the EPA and CARB demonstrated that Volkswagen’s explanations did not account for the disparate emissions levels. Unsatisfied, the two agencies threatened to withhold certificates of conformity for Volkswagen’s 2016 model year light diesel cars, without which the company could not sell the cars in the United States.

Under that pressure Volkswagen confessed: its 2.0-liter light diesel models released between 2009 and 2015 contained a "defeat device." The device was designed so that when it sensed—and only when it sensed—the precise driving conditions of an emissions compliance test, software in the car altered engine performance so the vehicle emitted permissible levels of nitrogen oxide (NOx). Nitrogen oxide reacts with other compounds in the atmosphere to form ozone and smog. When the cars equipped with a defeat device operated under normal "in-use" road conditions, they emitted between 10 and 40 times the EPA-compliant level of NOx.

On September 18, 2015, the EPA sent a "Notice of Violation" (NOV) to Volkswagen stating that VW’s installation of the defeat device on certain 2.0-liter VW diesel automobiles (the "affected vehicles") violated the Clean Air Act. Soon after, the EPA issued a press release, which contained the following message for vehicle owners:

Car owners should know that although these vehicles have emissions exceeding standards, these violations do not present a safety hazard and the cars remain legal to drive and resell. Owners of cars of these models and years do not need to take any action at this time.

(emphasis added).

The VW defeat device scheme became front page news across the country. By December 2015, hundreds of private lawsuits against Volkswagen, most of them class actions, were filed in or removed to federal court. See In re Volkswagen "Clean Diesel" Mktg., Sales Practices, and Prods. Liab. Litig. , 148 F.Supp.3d 1367, 1368 (J.P.M.L. 2015). The Judicial Panel on Multidistrict Litigation (JPML) transferred all pending defeat device-related cases to Judge Charles Breyer in the Northern District of California (district court or MDL court) for "coordinated or consolidated pretrial proceedings." Id. at 1370.

The government soon joined in. On January 4, 2016, the United States filed a civil enforcement action against VW, under Section 203 of the Clean Air Act, 42 U.S.C. § 7522, in the Eastern District of Michigan. The complaint alleged four violations of the Clean Air Act:

1. Certificates of conformity (COCs). VW imported and sold cars not covered by a certificate of conformity, because the vehicles equipped with defeat devices did not "conform in all material respects" to the specifications described in the applications for those vehicles’ certificates of conformity, in violation of Section 203(a)(1) of the Act, 42 U.S.C. § 7522(a)(1). Complaint at 8–9, 20–21, United States v. Volkswagen AG , No. 1:16-cv-10006, 2016 WL 674979 (E.D. Mich. Jan. 4, 2016) [hereinafter Gov’t Compl. ].
2. Defeat devices. VW manufactured and sold vehicles equipped with a "defeat device," in violation of Section 203(a)(3)(B) of the Act, 42 U.S.C. § 7522(a)(3)(B). Gov’t Compl. at 9–10, 21–22; seealso 40 C.F.R. § 86.1803-01 (defining "defeat device").
3. Tampering. VW’s defeat device was an "auxiliary emission control device" (AECD) that "ha[d] the effect of removing or rendering inoperative devices or elements of design" of its vehicles, in violation of Section 203(a)(3)(A) of the Act, 42 U.S.C. § 7522(a)(3)(A). Gov’t Compl. at 9–11, 23–24.
4. Reporting. VW violated its reporting obligations under the Act by not disclosing the AECD/defeat device in its applications for COCs, in violation of Section 203(a)(2) of the Act, 42 U.S.C. § 7522(a)(2). Gov’t Compl. at 11–12, 24–25.

The complaint covered both 2.0-liter and 3.0-liter diesel vehicles. The government sought (1) injunctive relief prohibiting VW from continuing to engage in the conduct alleged; (2) an order mandating appropriate steps by VW, including mitigation of NOx emissions, to remedy the violations of the Act; and (3) civil penalties for each violation of the Act. The JPML transferred the enforcement action to the MDL court on January 15, 2016.

B. The settlement process

Shortly after the government filed suit, the district court appointed Robert S. Mueller III as Settlement Master to "to facilitate settlement discussions among all parties to this multi-district litigation as soon as is feasible." The court selected lead counsel and a 22-member PlaintiffsSteering Committee (PSC) to manage consolidated pre-trial litigation for the class. A "government coordinating counsel" was appointed to represent the government’s interests during pretrial proceedings and settlement talks.4

The parties to the various cases reached an agreement in principle concerning the 2.0-liter vehicles. On June 28, 2016, the United States filed a proposed consent decree for this civil enforcement action, and the PSC filed a settlement agreement for preliminary approval in the class action. The consent decree established a program by which VW would buy back, permit the termination of...

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