National Truck Equipment Ass'n v. National Highway Traffic Safety Admin.

• Decision Date: 28 November 1990
• Docket Number: No. 89-3713,89-3713
• Citation: 919 F.2d 1148
• Parties: NATIONAL TRUCK EQUIPMENT ASSOCIATION, Petitioner, v. NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, United States Department of Transportation, and the United States of America, Respondents.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1148

919 F.2d 1148

NATIONAL TRUCK EQUIPMENT ASSOCIATION, Petitioner, v. NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, United States Department of Transportation, and the United States of America, Respondents.

No. 89-3713.

United States Court of Appeals Sixth Circuit.

Argued April 13, 1990.

Decided Nov. 28, 1990.

Mark M. Levin, Kimberly Madigan, Christopher Eric Hagerup, Irving P. Margulies (argued), Mark H. Sidman, Weiner, McCaffrey, Brodsky & Kaplan, Washington, D.C., for petitioner.

Stephen P. Wood, Enid Rubenstein (argued), Kenneth N. Weinstein, National Highway Traffic Safety Admin., Washington, D.C., for National Highway Traffic Safety Admin.

Jim J. Marquez, U.S. Dept. of Transp., Washington, D.C., for United States Dept. of Transp.

Richard L. Thornburgh, Atty. Gen., U.S. Dept. of Justice, Anti-Trust Div. Appellate Section, Washington, D.C., for U.S.

Before MERRITT, Chief Judge, and MARTIN and GUY, Circuit Judges.

MERRITT, Chief Judge.

The U.S. market is significant for custom-made trucks below 10,000 pounds gross vehicle weight range used for delivery and other purposes. It is estimated that in 1987 there were 240,000 such trucks manufactured. In order to manufacture custom-made trucks, a customizer or fabricator, called a "final-stage manufacturer," starts with a truck chassis with engine, drive train, and steering column in place purchased from a first-stage truck manufacturer like Ford or General Motors.

In 1985 the Secretary of the Department of Transportation, through its subordinate agency, the National Highway Traffic Safety Administration, approved a new steering column standard, Federal Motor Vehicle Safety Standard No. 204, governing the manufacture of trucks under 5,500 pounds unloaded vehicle weight and under 10,000 pounds gross vehicle weight range, which includes many custom-made trucks. The new rule requires that in a head-on collision the steering column "shall not be displaced more than 5 inches in a horizontal rearward direction parallel to the longitudinal axis of the vehicle." 49 C.F.R. Sec. 571.204-S4.2 (1989). ¹

The petitioner, a trade association said to represent 1,400 "final-stage manufacturers," does not have a problem with the substantive part of the 5-inch rearward displacement rule. It has a problem with the procedures for proving compliance. It claims, in effect, that certification procedures required for compliance are designed for mass-produced cars and trucks and that these procedures allow insufficient leeway for small-scale customizers without large engineering and testing departments to bring their individually-made trucks into compliance.

Thus, the petitioner claims, in this review proceeding brought under the National Traffic and Motor Vehicle Safety Act of 1966, 15 U.S.C. Sec. 1394(a)(1), ² that the compliance regulations are not "practicable," as required by 15 U.S.C. Sec. 1392(a) and (f)(3). ³ For the reasons given below, we agree and remand the case to the administrative agency for further rulemaking proceedings designed to correct the defects we find in the compliance procedures.

I

When the Administration in 1978 first proposed rules governing steering columns, windshields, and other parts, it exempted customized trucks by making its regulation applicable to vehicles with an unloaded vehicle weight of 4,000 pounds or less. It excluded these vehicles because it recognized that final-stage manufacturers would have difficulty complying with the steering column regulation in its proposed form. 44 Fed.Reg. 68,470, 68,471 (1979). Similar problems plagued the windshield regulations. Having worked out the compliance problems with the windshield regulations, the Administration then amended those regulations so that they would apply to vehicles of 5,500 pounds or less, an amendment which included within its scope many customized trucks.

The Administration then proposed to apply the 5-inch steering column displacement rule to the same vehicles having a weight of 5,500 pounds or less. The customized truck industry complains that there are only two ways to show compliance, neither of which is "practicable." Either the customizer must get a so-called "pass-through" certification from the chassis manufacturer, or run crash tests or elaborate engineering studies on the individual custom-made truck in question. The petitioner says that such manufacturer certifications are simply not available in most situations, and that conducting the crash tests or the engineering studies on each custom-made truck is so expensive that purchasers could not afford to buy a truck with these costs built in. We will explain the regulatory framework and the state of the administrative record on these issues of "practicability."

II

When a company needs a specialized truck, like a delivery truck for bakery goods, it cannot go to its local truck dealer and order a bread delivery truck. Because this kind of vehicle is specialized, the large automobile and truck companies generally do not make them. The gap in the market is filled by small companies, final-stage manufacturers, that do nothing but outfit trucks for specialized uses. These smaller companies take chassis in various forms from the big truck makers and put on the required equipment, e.g. racks to hold loaves of bread for delivery. To buy a specialized vehicle, a customer goes to a local dealer of one of the big manufacturers and purchases a chassis of some sort. He or she can buy one of basically three forms of chassis: a chassis-cab, which has a completed passenger compartment area; a cutaway, which has a complete cab except that it lacks a back wall; or a stripped chassis, which has no cab compartment at all. The customer picks one of these depending upon his or her needs and the advice he or she receives from the dealer. The dealer then refers the customer to a final-stage manufacturer, who equips the truck according to the customer's needs.

The manufacturer of a motor vehicle must certify that the finished product complies with all applicable Federal Motor Vehicle Safety Standards. 15 U.S.C. Sec. 1397(a)(1) (1988). A final-stage manufacturer is a manufacturer of motor vehicles for the purposes of this statute. 15 U.S.C. Sec. 1391(5) (1988) (" 'Manufacturer' means any person engaged in the manufacturing or assembling of motor vehicles or motor vehicle equipment...."). If a manufacturer fails to comply with the applicable standards, it faces stiff penalties. Each unit produced in violation of the standards represents a $1,000 fine. 15 U.S.C. Sec. 1398(a) (1988) ($1,000 penalty for each violation up to $800,000). In addition, failure to certify that a vehicle conforms to all applicable standards can expose the manufacturer to a product liability action by an injured customer. 15 U.S.C. Sec. 1397(k) (1988) (conformance with standards does not exempt manufacturer from common law liability); Sklaren, The Effect of Current NHTSA Regulations and Enforcement Policy on Products Liability in the Motor Vehicle Industry, 21 Tort & Ins.L.J. 464 (1986). The fine provisions do not apply to "any person who establishes that he did not have reason to know in the exercise of due care that such vehicle or item of motor vehicle equipment is not in conformity with applicable Federal motor vehicle safety standards...." 15 U.S.C. Sec. 1397(b)(2) (1988); see also 15 U.S.C. Sec. 1397(a)(1)(C) (illegal to fail to issue a certificate or to "issue a certificate to the effect that a motor vehicle ... conforms to all applicable Federal motor vehicle safety standards, if such person in the exercise of due care has reason to know that such certificate is false or misleading in a material respect....").

In the case of a customized truck, the vehicle is started by the chassis manufacturer and finished by the final-stage manufacturer. Under the Administration's regulations, both of these manufacturers share some responsibility for the certification of the final product. The Administration has no regulation detailing who must certify that a motor vehicle assembled in two or more stages complies with all applicable safety standards. Instead, it has labeling requirements that implicitly describe the division of responsibility. Incomplete manufacturers must supply with their chassis an incomplete vehicle document fulfilling one of three conditions listed in 49 C.F.R. Sec. 568.4(a)(7) with respect to each safety standard. The chassis manufacturer can supply "[a] statement that the vehicle when completed will conform to the standard if no alterations are made in identified components of the incomplete vehicle." 49 C.F.R. Sec. 568.4(a)(7)(i) (1989). Or the chassis manufacturer can supply "[a] statement of specific conditions of final manufacture under which the manufacturer specifies that the completed vehicle will conform to the standard." 49 C.F.R. Sec. 568.4(a)(7)(ii) (1989). Or the chassis manufacturer can simply provide "[a] statement that conformity with the standard is not substantially affected by the design of the incomplete vehicle, and that the incomplete vehicle manufacturer makes no representation as to conformity with the standard." 49 C.F.R. Sec. 568.4(a)(7)(iii) (1989). This information constitutes what the Administration refers to as the "envelope" of the chassis--i.e. the limitations that the chassis manufacturer places on the performance of the chassis.

The Administration's regulations consider all types of chassis as incomplete vehicles. " 'Incomplete vehicle' means an assemblage consisting, as a minimum, of frame and chassis structure, power train, steering system, suspension system, and braking system, to the extent that those systems are to be part of the completed vehicle, that requires further manufacturing operations ... to become a completed vehicle." 49 C.F.R. Sec. 568.3 (1989). Chassis-cabs constitute a distinct subset of incomplete vehicles. " 'Chassis-cab' means an incomplete vehicle, with a completed occupant...